Wrap Text
FY18 Results for the year ended 30 June 2018
Harmony Gold Mining Company Limited
("Harmony" or "Company")
Incorporated in the Republic of South Africa
Registration number 1950/038232/06
JSE share code: HAR NYSE share code: HMY
ISIN: ZAE000015228
FY18 RESULTS
FOR THE YEAR ENDED 30 JUNE 2018
KEY FEATURES
- Embedding our safety culture through our various training and awareness campaigns
- Production guidance achieved for third consecutive year; produced 1.228Moz of gold at an all-in sustaining
cost of R508 970/kg (US$1 231/oz)
- 8% increase in underground recovered grade (six consecutive years of increasing grade)
- Hidden Valley delivers re-investment plan on schedule and within budget
- Successful integration of Moab Khotsong operations
- 31% increase in SA underground resources
- 11.6% increase in SA underground reserves
- R1.8 billion (US$141 million) generated in cash flow through effective hedging strategy
Year ended Year ended %
June 2018 June 2017 Variance
Gold produced - kg 38 193 33 836 13
- oz 1 227 934 1 087 852 13
Cash operating costs - R/kg 421 260 436 917 4
- US$/oz 1 018 1 000 (2)
Gold sold - kg 37 692 34 150 10
- oz 1 211 826 1 097 944 10
Underground grade - g/t 5.48 5.07 8
Total costs and capital(1) - R/kg 499 028 510 006 2
- US$/oz 1 207 1 167 (3)
All-in sustaining costs(2) - R/kg 508 970 516 687 1
- US$/oz 1 231 1 182 (4)
Gold price received - R/kg 570 709 570 164 -
- US$/oz 1 380 1 304 6
Production profit - R million 5 356 4 452 20
- US$ million 416 327 27
Basic earnings/(loss) per share - SAc/s (1 003) 82 >(100)
- USc/s (78) 4 >(100)
Headline earnings - R million 763 1 306 (42)
- US$ million 59 93 (37)
Headline earnings per share - SAc/s 171 298 (43)
- USc/s 13 21 (38)
Exchange rate - R/US$ 12.85 13.60 (6)
(1) Excludes investment capital for Hidden Valley
(2) Excludes share-based payment charge
HARMONY'S ANNUAL REPORTS
Harmony's Integrated Annual Report and its annual report filed on a Form 20F with the United States' Securities and Exchange
Commission for the financial year ended 30 June 2018 will be available on our website (www.harmony.co.za/invest) on
25 October 2018. Mineral resource and reserve information as at 30 June 2018 is included in this report.
SHAREHOLDER INFORMATION
Issued ordinary share capital at 30 June 2018 500 251 751
(post share placement on 5 June 2018)
Issued ordinary share capital at 30 June 2017 439 957 199
MARKET CAPITALISATION
At 30 June 2018 (ZARm) 10 615
At 30 June 2018 (US$m) 774
At 30 June 2017 (ZARm) 9 538
At 30 June 2017 (US$m) 728
HARMONY ORDINARY SHARES AND ADR PRICES
12-month high (1 July 2017 - 30 June 2018) R28.80
for ordinary shares
12-month low (1 July 2017 - 30 June 2018) R19.24
for ordinary shares
12-month high (1 July 2017 - 30 June 2018) for ADRs US$2.50
12-month low (1 July 2017 - 30 June 2018) for ADRs US$1.52
FREE FLOAT 100%
ADR RATIO 1:1
JSE LIMITED HAR
Range for year (1 July 2017 - 30 June 2018 closing prices) R19.24 - R28.80
Average daily volume for the year 1 678 662 shares
(1 July 2017 - 30 June 2018)
Range for the previous year R20.68 - R66.65
(1 July 2016 - 30 June 2017 closing prices)
Average daily volume for the previous year 2 121 251 shares
(1 July 2016 - 30 June 2017)
NEW YORK STOCK EXCHANGE
HMY
including other US trading platforms
Range for year (1 July 2017 - 30 June 2018 closing prices) US$1.52 - US$2.50
Average daily volume for the year 3 933 313
(1 July 2017 - 30 June 2018)
Range for the previous year US$1.59 - US$4.81
(1 July 2016 - 30 June 2017 closing prices)
Average daily volume for the previous year 5 257 929
(1 July 2016 - 30 June 2017)
Investors' calendar
Release of Harmony's Integrated Annual Report 25 October 2018
of FY18
Annual General Meeting 23 November 2018
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the safe harbor
provided by Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended, with respect to our financial condition,
results of operations, business strategies, operating efficiencies, competitive positions, growth
opportunities for existing services, plans and objectives of management, markets for stock and
other matters. These include all statements other than statements of historical fact, including,
without limitation, any statements preceded by, followed by, or that include the words
"targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would",
"should", "could", "estimates", "forecast", "predict", "continue" or similar expressions or
the negative thereof.
These forward-looking statements, including, among others, those relating to our future
business prospects, revenues and income, wherever they may occur in this report and the
exhibits to this report, are essentially estimates reflecting the best judgment of our senior
management and involve a number of risks and uncertainties that could cause actual results to
differ materially from those suggested by the forward-looking statements. As a consequence,
these forward-looking statements should be considered in light of various important factors,
including those set forth in this presentation. Important factors that could cause actual results
to differ materially from estimates or projections contained in the forward-looking statements
include, without limitation: overall economic and business conditions in South Africa, Papua New
Guinea, Australia and elsewhere, estimates of future earnings, and the sensitivity of earnings
to the gold and other metals prices, estimates of future gold and other metals production
and sales, estimates of future cash costs, estimates of future cash flows, and the sensitivity of
cash flows to the gold and other metals prices, statements regarding future debt repayments,
estimates of future capital expenditures, the success of our business strategy, development
activities and other initiatives, estimates of reserves statements regarding future exploration
results and the replacement of reserves, the ability to achieve anticipated efficiencies and other
cost savings in connection with past and future acquisitions, fluctuations in the market price
of gold, the occurrence of hazards associated with underground and surface gold mining, the
occurrence of labor disruptions, power cost increases as well as power stoppages, fluctuations
and usage constraints, supply chain shortages and increases in the prices of production imports,
availability, terms and deployment of capital, changes in government regulation, particularly
mining rights and environmental regulation, fluctuations in exchange rates, the adequacy of
the Group's insurance coverage and socio-economic or political instability in South Africa and
Papua New Guinea and other countries in which we operate.
For a more detailed discussion of such risks and other factors (such as availability of credit
or other sources of financing), see the Company's latest Integrated Annual Report and
Form 20-F which is on file with the Securities and Exchange Commission, as well as the Company's
other Securities and Exchange Commission filings. The Company undertakes no obligation to
update publicly or release any revisions to these forward-looking statements to reflect events or
circumstances after the date of this presentation or to reflect the occurrence of unanticipated
events, except as required by law.
COMPETENT PERSON'S DECLARATION
In South Africa, Harmony employs an ore reserve manager at each of its
operations who takes responsibility for the compilation and reporting
of mineral resources and mineral reserves at their operations. In
Papua New Guinea, competent persons are appointed for the mineral
resources and mineral reserves for specific projects and operations.
The mineral resources and mineral reserves in this report are based on
information compiled by the following competent persons:
Resources and reserves of South Africa:
Jaco Boshoff, BSc (Hons), MSc, MBA, Pr. Sci. Nat, MSAIMM, MGSSA,
who has 23 years' relevant experience and is registered with the South
African Council for Natural Scientific Professions (SACNASP) and
a member of the South African Institute of Mining and Metallurgy
(SAIMM).
Mr Boshoff is Harmony's Lead Competent Person.
Jaco Boshoff
Physical address: Postal address:
Randfontein Office park PO Box 2
Corner of Main Reef Road and Ward Avenue Randfontein
Randfontein 1760
South Africa South Africa
Resources and reserves of Papua New Guinea:
Gregory Job, BSc, MSc, who has 30 years' relevant experience and is a
member of the Australian Institute of Mining and Metallurgy (AusIMM).
Greg Job
Physical address: Postal address:
Level 2 PO Box 1562
189 Coronation Drive Milton, Queensland
Milton, Queensland 4064 4064
Australia Australia
Both these competent persons, who are full-time employees of
Harmony Gold Mining Company Limited, consent to the inclusion in
the report of the matters based on the information in the form and
context in which it appears.
MESSAGE FROM THE CHIEF EXECUTIVE OFFICER
HARMONY DELIVERS
Since joining Harmony as CEO in January 2016, the Harmony team has
been committed to building a track record of delivery.
Production guidance was achieved for the third consecutive year
in financial year 2018 (FY18).
The performance of the South African (SA) operations has been
consistent. Increased flexibility or availability of stoping panels and
fewer unplanned engineering stoppages due to focused asset
management and maintenance have improved the predictability of our
production performance. Our disciplined grade management approach
has also been important in delivering on guidance and managing cost
inflation.
Our growth aspiration to produce 1.5 million ounces and improve the
quality of our asset portfolio was set out at the end of the financial
year 2016 (FY16). Since, Harmony has invested in Hidden Valley and
acquired Moab Khotsong in FY18. These operations will increase
annual production by 450 000 to 500 000 ounces at an average life of
mine all-in sustaining unit cost of below US$950/oz.
The successful hedging strategy has generated cash flow of R3.6 billion
(US$276 million) since implementation, securing cash flow margins and
enabling Harmony to repay debt and fund our quality growth strategy.
SAFETY
Safety at our operations is paramount and we recognise that more
needs to be done in ensuring a safe working place for all our employees.
Sadly, we had 13 fatalities in FY18. I extend my personal, heartfelt
condolences to their families, colleagues and friends.
Key aspects of our safety approach include:
- To stop significant unwanted events by focusing on critical control
management
- Active leadership and promoting a proactive culture
- Culture transformation through continuous employee engagement,
safety awareness and training and positive behaviour reinforcement
- Improving system monitoring and analysis to improve risk
management
Doornkop achieved 3 million fatality free shifts on 24 February 2018.
The Hidden Valley re-investment was delivered safely, with no fatalities
and no lost time injuries reported during FY18.
On 17 August 2018 the Minerals Council of South Africa launched the
National Day of Safety and Health in Mining 2018 campaign as part of
its re-commitment to the shared goal of Zero Harm and ensuring that
all employees can go to work in the knowledge that they will return
home, every day, unharmed. Harmony is one of the Minerals Council's
66 members who will be hosting Safety and Health Days at each of
our operations to recommit to and reaffirm the industry's commitment.
YEAR-ON-YEAR OPERATIONAL RESULTS (FY18)
Harmony's operations achieved gold production of 1.228 million
ounces, exceeding annual production guidance of 1.18 million
ounces. The South African operations recorded a 14% increase in
gold production, of which Moab Khotsong produced 105 900 ounces
(contributing 10% of the increase in SA gold production) for the four
months the operation has been included in Harmony's asset portfolio
(since 1 March 2018).
Underground recovered grade increased by 8% to 5.48g/t, the sixth
consecutive year of increasing grade.
The Hidden Valley investment in the stage 5 and 6 cutback and related
plant and processing upgrades was delivered on schedule and below
budget (US$175 million (net) spent compared to net-investment
planned of US$180 million). Commercial levels of production were
achieved in the June 2018 production month. Stripping of the cutbacks
will continue for the next three years to deliver an average life of mine
all-in sustaining cost of below US$950/oz.
The performance from our SA operations is summarised below:
SA underground
- Tshepong operations: gold produced increased by 6%, mainly as a
result of a 5% increase in recovered grade to 5.47g/t;
- Bambanani: gold produced increased by 3% as a result of the 2%
increase in recovered grade to 12.11g/t and 1% increase in tonnes
milled;
- Joel: gold produced decreased by 27%, due to a 18% decrease
in recovered grade to 3.60g/t and 12% decrease in tonnes milled.
The Joel decline project is nearing completion and development in
the footwall areas has commenced. Development is expected to
continue for 12 to 18 months, where after grades are expected
to increase to reserve grade;
- Doornkop: gold produced increased by 28%, due to an 18% increase
in recovered grade to 4.93g/t and a 9% increase in tonnes milled.
Doornkop's excellent safety performance enhanced the performance
of the operation in FY18;
- Target 1: gold produced increased by 7%, due to a 17% improvement
in recovered grade to 4.2g/t, which offset the 9% decrease in tonnes
milled. The operation improved on its FY17 performance, where
production was hampered by unfavourable mining conditions in the
higher grade areas;
- Kusasalethu: gold produced increased by 1% as a result of the 10%
increase in tonnes milled, offsetting the 9% decrease in recovered
grade to 6.61g/t. Encouraging development grades indicate that
recovery grades are expected to improve in FY19;
- Masimong: gold produced increased by 3%, due to a 2% increase in
recovered grade to 4.05g/t and 1% increase in tonnes milled;
- Unisel: gold produced decreased by 20%, due to a 16% decrease
in recovered grade to 3.40g/t and a 5% decrease in tonnes milled.
As reported in December 2017, mining of the Leader Reef was
stopped to accelerate mining of the higher grade Basal Reef pillar
areas. The operation was successfully restructured during the
March 2018 quarter. An improved performance is expected from
Unisel during FY19.
SA surface
- Phoenix: gold produced decreased by 20% as a result of the 11%
decrease in tonnes milled, and 9% decrease in recovered grade to
0.124g/t;
- Central Plant Reclamation: The inaugural annual performance
from the operation was successful. The operation produced 502kg
(16 139oz), processed 3.8 million tonnes at an all-in sustaining cost
of R420 016/kg (US$1 017/oz);
- Waste rock dumps: gold produced increased by 2% as a result of the
2% increase in recovered grade to 0.383g/t due to the higher grades
of the Moab waste rock dumps processed;
- Kalgold: gold produced increased by 4% as a result of the 3%
increase in tonnes milled, and 1% increase in recovered grade to
0.806g/t.
Production profit for FY18 increased by 20% to R5.356 billion
(US$416 million), when compared to the R4.452 billion
(US$327 million) recorded in FY17. This was mainly due to the inclusion
of the Moab Khotsong operations from 1 March 2018, further
demonstrating the quality of the operation. The overall improved
operational performance of the South African operations contributed
positively to the increased production profit.
In FY18, Harmony achieved an all-in sustaining unit cost of R508 970/kg
(US$1 231/oz), beating annual guidance of R520 000/kg and the all-in
sustaining unit cost of R516 687/kg (US$1 182/oz) reported for the
June 2017 financial year.
Capital expenditure for FY18 increased by 16% to R4.280 billion (23%
to US$333 million), of which R1.563 billion (US$121 million) was spent
at Hidden Valley as planned. Capital expenditure for South African
operations increased by 16% or R366 million (22% or US$38 million),
mainly due to increased capital expenditure at the Tshepong operations
related to improving ventilation and environmental conditions as well
as increased ongoing development expenditure.
YEAR-ON-YEAR FINANCIAL RESULTS
Revenue
Revenue increased by 6% in FY18 to R20 359 million (12% to
US$1 583 million), mainly due to the 6% increase in gold sold
(excluding capitalised gold sales from Hidden Valley) with the inclusion
of the Moab Khotsong operations from 1 March 2018.
The average gold price received in Rand terms (including the gold
hedge realised) remained steady at R570 709/kg (FY17: R570 164/kg).
In US$ terms, the average gold price received increased by 12% to
US$1 380/oz due to the higher average US dollar gold price in FY18.
The Rand gold hedges, included as part of revenue realised gains of
R1 197 million (US$93 million) in FY18 (realised gains of R728 million
or US$54 million in FY17).
Impairment of assets
The life-of-mine plans form the basis for assessing whether any
impairment against the carrying value of an asset is required. These
values are informed by a number of factors, including estimates of
future gold prices and exchange rates and operating and capital cost
estimates. An impairment of R5.3 billion (US$386 million) was recorded
at Harmony's Tshepong Operations, Target 1, Joel, Kusasalethu, Unisel,
Masimong, Doornkop, and the Target North undeveloped property.
The impairments were mainly driven by forecasted cost inflation and a
subdued gold price of R535 000/kg ($1 250 at R/$13.30) applied in the
life-of-mine plans and the resultant impact on margins. Furthermore, in
the case of Target North and Doornkop, lower resource multiples were
applied to estimate the value of the resources. The values per resource
ounce have decreased substantially as a result of the low levels of
merger and acquisition activity of resource companies in South Africa,
and more specifically gold mining companies.
Refer to note 8 for a detailed discussion on impairments
recognised.
Net profit/(loss) for the year
The net loss for the year ended 30 June 2018 was R4 473 million
(US$321 million), compared to a profit of R362 million (US$17 million)
for the comparative period. The loss in FY18 is mainly attributable
to the impairment recognised, translation loss of R669 million on
US$ denominated debt at 30 June 2018 and lower derivative gains
recognised in FY18 of R99 million (US$8 million) compared to
R1 025 million (US$75 million) recognised in FY17.
Headline earnings
Headline earnings per share for FY18 amounted to 171 SA cents per
share (13 US cents per share) compared with 298 SA cents per share
(21 US cents) for FY17.
Accounting for the Moab Khotsong acquisition
Harmony acquired the Moab Khotsong operations and related
infrastructure from AngloGold Ashanti Limited on 1 March 2018.
Goodwill arising from the acquisition of R272 million (US$23 million)
was recognised in intangible assets.
Refer to note 7 for further details.
Borrowings
Borrowings as at 30 June 2018 include US$325 million drawn on
Harmony's US$ facilities, R500 million drawn on the Nedbank Rand
facility and the remaining US$50 million on the bridge facility raised for
the Moab Khotsong transaction.
Refer to note 13 for further details.
Net debt increased to R4 908 million (US$356 million) at the end of
30 June 2018 from R887 million (US$68 million) at the end of 30 June
2017. The increase in net debt is a result of Harmony's strategy to
increase its quality ounces and by subsequently pursuing the investment
in the Hidden Valley stage 5 and 6 cut back (which commenced in
FY17) and the acquisition of Moab Khotsong during FY18.
Hedging activity
Realised gains from all hedging programmes amounted to R1 817 million
(US$141 million) in FY18 (R1 705 million (US$129 million) in FY17).
Management continue to top-up these programmes when the market
presents attractive opportunities to do so.
Refer to notes 3 and 9 for further detail.
GROWING OUR MINERAL RESOURCES AND MINERAL
RESERVES
The acquisition of Moab Khotsong contributed a 13% increase year
on year in Harmony's attributable gold and gold equivalent mineral
resources at 117.9Moz as declared at 30 June 2018. The total gold
contained in the mineral resources at the South African operations
represents 60% of our total resources, with the PNG operations
representing 40% of Harmony's total gold and gold equivalent mineral
resources.
Total attributable gold and gold equivalent mineral reserves amounted
to 36.9Moz. Mineral reserves at our South African underground
operations as at 30 June 2018 increased by 11.6% year on year to
10.1Moz with the underground reserve grade increasing from 5,61g/t
to 6,02g/t. South African gold reserve ounces now represent 46% of
our total gold reserves, whilst PNG gold and gold equivalent ounces
represent 54%. See page 8 for our resources and reserves statement.
2018 WAGE NEGOTIATIONS
The 2018 round of wage negotiations in the gold sector began on
11 July 2018 between the Mineral Council South Africa (representing
four gold mining companies) and the four trade unions: Association
of Mine Workers and Construction Union (AMCU), National Union
of Mine Workers (NUM), UASA and Solidarity. We believe the offer
made to unions is credible and discussions are ongoing. Refer to
www.goldwagenegotiations.co.za for more details.
WAFI-GOLPU UPDATE(1)
Engagement by the Wafi-Golpu Joint Venture (WGJV) with the PNG
government on the application for a special mining lease (SML) for the
Wafi-Golpu project is progressing well.
Key highlights in FY18 include:
- Updated feasibility study released on 19 March 2018, proposing a
larger mine and increased production profile, resulting in a 33%
increase in net present value to US$2.6 billion (applying a real
discount rate of 8.5%).
- Updated proposal for development submitted to the PNG
government on 20 March 2018.
- On 25 June 2018 the WGJV submitted an Environmental Impact
Statement (EIS) for the Wafi-Golpu Project to the relevant Papua New
Guinean regulatory authority, the Conservation and Environment
Protection Agency (CEPA).
Permitting of the Wafi-Golpu project will continue to be a key focus
area in FY19.
(1) All figures represented on a 100% basis. Harmony and Newcrest Mining Limited each
currently own 50% of Wafi-Golpu through the Wafi-Golpu Joint Venture.
FY19 PRODUCTION AND COST GUIDANCE
In the next year, we plan to produce approximately 1.45Moz at an all-in
sustaining cost of about R515 000/kg. We will continue our trajectory
of operational excellence and meeting guidance in FY19.
IN CONCLUSION
Harmony's teams remain committed to delivering on our strategy
to produce safe, profitable ounces and increasing margins. Key
focus areas in FY19 will be safety, repaying debt, delivering on our
operational plans and substantially progressing the permitting of the
Wafi-Golpu project.
Peter Steenkamp
Chief executive officer
KEY FOCUS AREAS IN FY19
Strategy Strategic pillars Focus areas
Operational - Improve safety performance
Safe, profitable excellence - Realise synergies of Moab Khotsong operations
ounces - Deliver on Hidden Valley plan
and Cash - Exceeding operational plans (generate free cash flow)
certainty - Focus on repaying debt
- Continue hedging strategy
Increasing
margins Effective capital - Secure Wafi-Golpu permitting and funding
allocation - Evaluate organic growth opportunities
SUMMARY UPDATE OF HARMONY'S MINERAL RESOURCES AND
MINERAL RESERVES AS AT 30 JUNE 2018
Harmony's statement of mineral resources and mineral reserves as at
30 June 2018 is produced in accordance with the South African Code
for the Reporting of Mineral Resources and Mineral Reserves (SAMREC)
and the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (JORC). It should be noted that the mineral
resources are reported inclusive of the mineral reserves.
This report provides a summary of the update, while the detailed
statement of the mineral resources and mineral reserves will be
available on our website as from 21 August 2018 and published in
the Integrated Report on 25 October 2018, which will be available at
www.harmony.co.za/invest. Refer to the website (www.harmony.co.za)
for the updated reserves and resources tables as at 30 June 2018.
Harmony uses certain terms in the summary such as 'measured',
'indicated' and 'inferred' resources, which the United States' Securities
and Exchange Commission guidelines strictly prohibit companies
registered in the United States from including in their filings with
the commission. United States investors are urged to consider the
disclosure in this regard in our Form 20-F which will be available on our
website at www.harmony.co.za/invest/annual-reports on 25 October
2018.
Introduction
Harmony's strategy is to produce safe, profitable ounces and increase
margins. This includes delivering safely on our operational plans,
reducing costs and improving productivity. Harmony's growth journey
entails acquiring higher grade assets. In FY17, Harmony invested in
the life of mine extension at Hidden Valley and in FY18 acquired and
integrated the higher grade Moab Khotsong operations.
Harmony - Total
The company's attributable gold and gold equivalent mineral resources
are declared as 117.8Moz as at 30 June 2018, a 13.0% increase year
on year from the 104.3Moz declared as at 30 June 2017. The total
gold contained in the mineral resources at the South African operations
represents 60% of the company total, with the PNG operations
representing 40% of Harmony's total gold and gold equivalent
mineral resources as at 30 June 2018. Harmony's attributable gold
and gold equivalent mineral reserves amounts to 36.8Moz, a 0.3%
increase from the 36.7Moz declared at 30 June 2017. The gold reserve
ounces in South Africa represent 46%, while the PNG gold and gold
equivalent ounces represent 54% of Harmony's total mineral reserves
as at 30 June 2018.
South Africa
South African underground operations
The company's mineral resources at the South African underground
operations as at 30 June 2018 are 61.3Moz (216.7Mt at 8.79g/t), an
increase of 31% year on year from the 46.6Moz (159.4Mt at 9.10/t)
declared as at 30 June 2017. This increase is due to resources added
from the Moab Khotsong acquisition and resources added from the
Kimberley Reef at Doornkop. The company's mineral reserves at
the South African underground operations as at 30 June 2018 are
10.1Moz (52.4Mt at 6.02g/t), an increase of 11.6% year on year
from the 9.1Moz (50.4Mt at 5.61g/t) declared as at 30 June 2017.
The increase in ounces and grade is due to the reserves added from the
Moab Khotsong acquisition.
South African surface operations, including Kalgold
The company's mineral resources at the South African surface
operations as at 30 June 2018 are 9.4Moz (1 071Mt at 0.27g/t).
There was an increase of 6.9% due to surface sources added from
the Moab Khotsong acquisition. The company's mineral reserves at
the South African surface operations as at 30 June 2018 are 6.8Moz
(814.2Mt at 0.26g/t), a decrease of 5.6% due to depletion.
Papua New Guinea (PNG)
Papua New Guinea operations
The company's attributable gold and gold equivalent mineral resources
at the PNG operations as at 30 June 2018 are 47.1Moz, a decrease of
3.5% year on year from the 48.8Moz declared as at 30 June 2017.
This decrease is mainly due to depletion and the new commodity prices
used affecting the gold equivalent ratio negatively. The company's
gold and gold equivalent mineral reserves at the PNG operations as at
30 June 2018 are 19.9Moz, a decrease of 2.7% year on year from the
20.5Moz declared as at 30 June 2017.
ASSUMPTIONS
In converting the mineral resources to mineral reserves, the following
commodity prices and exchange rates were applied:
- A gold price of US$1275/oz.
- An exchange rate of R/US$13.42
- The above parameters resulted in a rand gold price of R550 000/kg
for the South African assets. The ore reserves were also tested at
a gold price of R535 000/kg.
- The Hidden Valley mine and the Golpu project used commodity
prices of US$1275/oz Au, US$17.00/oz Ag, US$7.00/lb Mo and
US$3.00/lb Cu at an exchange rate of US$0.76 per A$.
- Gold equivalent ounces are calculated assuming US$1275/oz Au,
US$3.00/lb Cu and US$17.00/oz Ag, and assuming a 100%
recovery for all metals.
Independent review
Harmony's South African mineral resources and reserves at the
Tshepong Operations, Surface Sources, and Target as well as the group
SAMREC statement were independently reviewed by The Mineral
Corporation for compliance to SAMREC.
Note: Au = gold; Cu = copper; Ag = Silver, Mo = Molybdenum,
Moz = million ounces.
SUMMARY UPDATE OF HARMONY'S MINERAL RESOURCES AND
MINERAL RESERVES (CONTINUED) AS AT 30 JUNE 2018
Mineral resources: Measured Indicated Inferred Total
gold and gold Tonnes Gold Tonnes Gold Tonnes Gold Tonnes Gold
equivalents (Mt) g/t '000oz (Mt) g/t '000oz (Mt) g/t '000oz (Mt) g/t '000oz
SA underground 66.3 8.33 17 741 80.0 9.21 23 684 70.4 8.76 19 840 216.7 8.79 61 265
SA surface incl Kalgold 276.9 0.30 2 634 732.0 0.26 6 142 61.9 0.32 635 1 070.8 0.27 9 411
Total South Africa 343.2 20 375 812.0 29 827 132.3 20 475 1 287.5 70 676
Hidden Valley 1.9 0.92 57 84.1 1.45 3 925 3.2 1.19 123 89.3 1.43 4 105
Wafi-Golpu system* - - - 400.7 0.86 11 051 99.2 0.74 2 359 499.9 0.83 13 410
Kili Teke - - - - - - 237.0 0.24 1 810 237.0 0.24 1 810
Total Papua New
1.9 57 484.9 14 977 339.3 4 292 826.1 19 326
Guinea
Total gold Resources 345.1 20 432 1 296.9 44 803 471.6 24 767 2 113.6 90 002
Hidden Valley - gold
equivalent ounces 1.9 13 81.7 1 020 3.0 39 86.6 1 072
Wafi-Golpu - gold
equivalent ounces* - - 344.0 19 365 87.8 3 213 431.8 22 578
Kili Teke - gold
equivalent ounces - - - - 237.0 4 157 237.0 4 157
Total gold equivalent
resources** 1.9 13 425.7 20 385 327.7 7 410 755.4 27 807
Total Harmony gold
and gold equivalent
resource** 345.1 20 445 1 296.9 65 188 471.6 32 176 2 113.6 117 809
Mineral resources: Measured Indicated Inferred Total
silver and copper
(used in equivalent Tonnes Silver Tonnes Silver Tonnes Silver Tonnes Silver
calculations) (Mt) g/t '000oz (Mt) g/t '000oz (Mt) g/t '000oz (Mt) g/t '000oz
Hidden Valley 1.9 19.61 1 193 81.7 27.50 72 256 3.0 29.21 2 791 86.6 27.38 76 240
Measured Indicated Inferred Total
Tonnes Copper Tonnes Copper Tonnes Copper Tonnes Copper
(Mt) % 'Mlb (Mt) % 'Mlb (Mt) % 'Mlb (Mt) % 'Mlb
Golpu* - - - 344.0 1.09 8 232 67.9 0.85 1 273 411.9 1.05 9 505
Nambonga* - - - - - - 19.9 0.21 94 19.9 0.21 94
Kili Teke - - - - - - 237.0 0.34 1 767 237.0 0.34 1 767
Total - - - 344.0 1.09 8 232 324.8 0.44 3 133 668.8 0.77 11 365
Proved Probable Total
Mineral reserves: Tonnes Gold Tonnes Gold Tonnes Gold
gold and gold equivalents (Mt) g/t '000oz (Mt) g/t '000oz (Mt) g/t '000oz
SA underground 37.5 6.14 7 400 14.9 5.72 2 739 52.4 6.02 10 139
SA surface incl Kalgold 180.6 0.31 1 795 633.6 0.24 4 984 814.2 0.26 6 779
Total South Africa 218.0 9 195 648.5 7 723 866.6 16 918
Hidden Valley 1.9 0.92 57 23.8 1.63 1 250 25.7 1.58 1 306
Wafi-Golpu system* - - - 202.3 0.86 5 573 202.3 0.86 5 573
Total Papua New Guinea 1.9 57 226.1 6 823 228.0 6 880
Total gold reserves 220.0 9 252 874.6 14 546 1 094.6 23 797
Hidden Valley - gold equivalent ounces 1.9 17 23.3 340 25.2 357
Wafi-Golpu - gold equivalent ounces* - - 202.3 12 686 202.3 12 686
Total gold equivalent reserves** 1.9 17 225.6 13 026 227.5 13 043
Total Harmony gold and gold equivalent
reserves** 220.0 9 269 874.6 27 572 1 094.6 36 840
Mineral reserves: Proved Probable Total
silver and copper Tonnes Silver Tonnes Silver Tonnes Silver
(used in equivalent calculations) (Mt) g/t '000oz (Mt) g/t '000oz (Mt) g/t '000oz
Hidden Valley 1.9 19.61 1 193 23.3 32.12 24 083 25.2 31.18 25 276
Proved Probable Total
Tonnes Copper Tonnes Copper Tonnes Copper
(Mt) % 'Mlb (Mt) % 'Mlb (Mt) % 'Mlb
Golpu* - - - 202.3 1.21 5 393 202.3 1.21 5 393
* Represents Harmony's equity portion of 50%.
**In instances where individual deposits may contain multiple valuable commodities with a reasonable expectation of being recovered (for example gold and copper
in a single deposit) Harmony computes a gold equivalent to more easily assess the value of the deposit against gold-only mines. Harmony does this by calculating
the value of each of the deposits commodities, then dividing the product by the price of gold. For example, the gold equivalent ounces for the copper portion of a
deposit would be calculated as follows: (copper pounds x copper price per pound)/gold price per ounce. All gold equivalent calculations are done using metal prices
and parameters as stipulated above.
EXPLORATION
Our exploration strategy is to pursue brownfields exploration targets
close to existing infrastructure. This will drive short to medium term
organic ore reserve replacement and growth to support our current
strategy of increasing quality ounces and to mitigate the risk of a
depleting ore reserve base. Key work streams underpinning the FY18
exploration program include:
- brownfield exploration at Hidden Valley and Kalgold to optimise
existing open pit operations and extend mine life; and
- brownfield exploration at our underground operations in
South Africa.
South Africa
B-Reef
High grade B Reef areas have been identified at Tshepong which will
become part of the life of mine plan. B Reef exploration commenced
at Phakisa during FY18.
Doornkop
The seismic survey and 3D modelling completed for Doornkop results
in geological model that significantly improves the confidence in the
structure of the ore body.
Kalgold
A total of 15 829m of drilling was completed for the Kalgold Phase
1 exploration programme. Drill results have been very encouraging
and a mineral resource update and prefeasibility study to optimise
the Kalgold operation based on the results of the exploration drilling
is underway.
Target North
Three exploration boreholes are planned for FY19.
ADMINISTRATIVE INFORMATION FOR PROFESSIONAL
ORGANISATIONS
SACNASP - THE LEGISLATED REGULATORY BODY FOR
NATURAL SCIENCE PRACTITIONERS IN SOUTH AFRICA
Private Bag X540, Silverton, 0127
Gauteng Province, South Africa
Telephone: +27 (12) 841 1075
Facsimile: +27 (86) 206 0427
http://www.sacnasp.org.za/
SAIMM - THE SOUTHERN AFRICAN INSTITUTE OF MINING
AND METALLURGY
PO Box 61127, Marshalltown, 2107
Gauteng Province, South Africa
Telephone: +27 (011) 834 1273/7
Facsimile: +27 (011) 838 5923/8156
http://www.saimm.co.za/
AUSIMM - THE AUSTRALASIAN INSTITUTE OF MINING AND
METALLURGY
PO Box 660, Carlton South, Vic 3053
Australia
Telephone: +61 3 9658 6100
Facsimile: +61 3 9662 3662
http://www.ausimm.com.au/
LEGAL ENTITLEMENT TO THE MINERALS BEING REPORTED
UPON
Harmony's South African operations operate under new order mining
rights in terms of the Minerals and Petroleum Resources Development
of Act of 2002 (Act No. 28, of 2002) (MPRDA). In PNG, Harmony
operates under the Independent State of Papua New Guinea Mining
Act 1992. All required operating permits have been obtained, and are
in good standing. The legal tenure of each operation and project has
been verified to the satisfaction of the accountable Competent Person.
OPERATING RESULTS - YEAR ON YEAR (RAND/METRIC)
South Africa
Underground production Surface production
Central Total
Year Tshepong Moab Total plant Total South Hidden Total
ended operations Khotsong Bambanani Joel Doornkop Target 1 Kusasalethu Masimong Unisel Underground Phoenix reclamation Dumps Kalgold Surface Africa Valley(1) Harmony
Ore milled - t'000 Jun-18 1 716 327 233 454 696 680 670 647 376 5 799 5 962 3 810 2 821 1 550 14 143 19 942 2 499 22 441
Jun-17 1 695 - 231 514 641 745 607 640 394 5 467 6 729 - 2 810 1 506 11 045 16 512 2 889 19 401
Yield - g/tonne Jun-18 5,47 10,08 12,11 3,60 4,93 4,20 6,61 4,05 3,40 5,48 0,124 0,132 0,383 0,806 0,252 1,77 1,36 1,76
Jun-17 5,21 - 11,90 4,37 4,17 3,58 7,24 3,97 4,05 5,07 0,136 - 0,375 0,800 0,288 1,87 1,07 1,77
Gold produced - kg Jun-18 9 394 3 296 2 821 1 635 3 429 2 854 4 429 2 623 1 280 31 761 737 502 1 081 1 250 3 570 35 331 2 862 38 193
Jun-17 8 828 - 2 750 2 246 2 673 2 669 4 394 2 538 1 595 27 693 918 - 1 055 1 205 3 178 30 871 2 965 33 836
Gold sold - kg Jun-18 9 338 3 165 2 804 1 656 3 404 2 828 4 301 2 609 1 272 31 377 739 508 1 074 1 231 3 552 34 929 2 763 37 692
Jun-17 8 816 - 2 745 2 280 2 712 2 642 4 498 2 539 1 590 27 822 932 - 1 064 1 213 3 209 31 031 3 119 34 150
Gold price received - R/kg Jun-18 577 058 528 387 576 398 576 023 575 077 576 316 577 313 576 729 576 222 571 727 537 547 576 829 567 737 576 630 565 838 571 128 550 956 570 709
Jun-17 574 165 - 574 227 573 986 572 494 570 091 572 376 571 870 575 650 573 193 549 777 - 572 172 573 010 565 984 572 447 544 442 570 164
Revenue (R'000) Jun-18 5 388 567 1 672 345 1 616 221 953 894 1 957 562 1 629 821 2 483 024 1 504 687 732 955 17 939 076 397 247 293 029 609 750 709 832 2 009 858 19 948 934 408 809 20 357 743
Jun-17 5 061 837 - 1 576 252 1 308 688 1 552 605 1 506 180 2 574 548 1 451 978 915 284 15 947 372 512 392 - 608 791 695 061 1 816 244 17 763 616 1 499 938 19 263 554
Cash operating (R'000) Jun-18 3 828 757 1 036 677 904 761 909 825 1 418 186 1 333 591 2 091 272 1 160 903 773 518 13 457 490 326 142 191 328 449 688 565 456 1 532 614 14 990 104 227 900 15 218 004
cost Jun-17 3 676 803 - 874 042 927 796 1 223 571 1 356 071 2 018 699 1 115 342 838 543 12 030 867 363 974 - 458 624 556 754 1 379 352 13 410 219 1 214 270 14 624 489
Inventory (R'000) Jun-18 (30 197) (84 193) (8 740) 10 019 (7 176) (15 190) (65 234) (6 723) (2 634) (210 068) 575 3 536 (3 563) (12 438) (11 890) (221 958) 6 007 (215 951)
movement Jun-17 (5 027) - (3 245) 7 718 17 079 (11 105) 61 779 (2 354) (740) 64 105 8 067 - 8 591 7 408 24 066 88 171 99 196 187 367
Operating costs (R'000) Jun-18 3 798 560 952 484 896 021 919 844 1 411 010 1 318 401 2 026 038 1 154 180 770 884 13 247 422 326 717 194 864 446 125 553 018 1 520 724 14 768 146 233 907 15 002 053
Jun-17 3 671 776 - 870 797 935 514 1 240 650 1 344 966 2 080 478 1 112 988 837 803 12 094 972 372 041 - 467 215 564 162 1 403 418 13 498 390 1 313 466 14 811 856
Production profit (R'000) Jun-18 1 590 007 719 861 720 200 34 050 546 552 311 420 456 986 350 507 (37 929) 4 691 654 70 530 98 165 163 625 156 814 489 134 5 180 788 174 902 5 355 690
Jun-17 1 390 061 - 705 455 373 174 311 955 161 214 494 070 338 990 77 481 3 852 400 140 351 - 141 576 130 899 412 826 4 265 226 186 472 4 451 698
Capital expenditure (R'000) Jun-18 1 008 390 173 193 63 545 250 459 273 925 309 451 288 781 128 680 84 711 2 581 135 3 075 22 318 2 529 107 644 135 566 2 716 701 1 563 355 4 280 056
Jun-17 716 139 - 76 759 242 503 242 649 323 699 288 850 119 160 77 864 2 087 623 5 129 156 104 6 745 95 573 263 551 2 351 174 1 334 534 3 685 708
Cash operating - R/kg Jun-18 407 575 314 526 320 724 556 468 413 586 467 271 472 177 442 586 604 311 423 711 442 526 381 131 415 993 452 365 429 304 424 276 287 028 421 260
costs Jun-17 416 493 - 317 833 413 088 457 752 508 082 459 422 439 457 525 732 434 437 396 486 - 434 715 462 037 434 031 434 395 466 847 436 917
- R/tonne Jun-18 2 231 3 170 3 883 2 004 2 038 1 961 3 121 1 794 2 057 2 321 55 50 159 365 108 752 390 741
Jun-17 2 169 - 3 784 1 805 1 909 1 820 3 326 1 743 2 128 2 201 54 - 163 370 125 812 500 772
Cash operating - R/kg Jun-18 514 919 367 072 343 249 709 654 493 471 575 698 537 379 491 644 670 491 504 979 446 699 425 590 418 332 538 480 467 277 501 169 403 747 499 028
cost and Capital(2) Jun-17 497 615 - 345 746 521 059 548 530 629 363 525 159 486 407 574 550 509 822 402 073 - 441 108 541 350 516 961 510 557 503 475 510 006
All-in sustaining - R/kg Jun-18 514 537 420 286 360 462 661 921 508 065 582 200 554 302 513 197 678 436 516 420 446 268 420 016 417 462 552 032 470 458 509 878 466 256 508 970
cost Jun-17 507 368 - 357 025 477 484 562 907 651 833 541 247 500 938 591 913 518 940 404 685 - 445 451 558 731 476 431 514 333 543 186 516 687
Operating free % Jun-18 10 28 40 (22) 14 (1) 4 14 (17) 11 17 27 26 5 17 11 24 11
cash flow margin(3) Jun-17 13 - 40 11 6 (12) 10 15 - 11 28 - 24 6 10 11 27 12
(1) Ore milled for Hidden Valley includes 1 914 000 tonnes (Jun-17: 461 000t) that has been capitalised as part of pre-stripping of stages 5 and 6.
Production for Hidden Valley includes gold produced of 2 068 kilograms (Jun-17: 364kg) and sold of 2 021 kilograms (Jun-17: 364kg)
that has been capitalised.
(2) Excludes investment capital for Hidden Valley of R1.471 billion (Jun-17: R1.239 billion).
(3) Excludes run of mine costs for Kalgold (Jun-18: R3.082 million, Jun-17: -R0.254 million) and Hidden Valley (Jun-18: R8.283 million, Jun-17: R212.419 million) as
well as Hidden Valley's investment capital as per note 2.
CONDENSED CONSOLIDATED INCOME STATEMENTS (RAND)
Year ended
30 June 30 June
2018 2017
Figures in million Notes (Reviewed) (Audited)
Revenue 20 359 19 264
Cost of sales 2 (23 503) (19 639)
Production costs (14 991) (14 812)
Amortisation and depreciation (2 570) (2 519)
Impairment of assets (5 336) (1 718)
Other items (606) (590)
Gross loss (3 144) (375)
Corporate, administration and other expenditure (813) (517)
Exploration expenditure (135) (241)
Gain on derivatives 3 99 1 025
Other operating expenses 4 (667) (886)
Operating loss (4 660) (994)
Gain on bargain purchase - 848
Share of profit/(loss) of associates 38 (22)
Loss on liquidation of subsidiaries - (14)
Acquisition related costs 7 (98) -
Investment income 343 268
Finance cost (330) (234)
Loss before taxation (4 707) (148)
Taxation 5 234 510
Current taxation (204) (488)
Deferred taxation 438 998
Net profit/(loss) for the year (4 473) 362
Attributable to:
Owners of the parent (4 473) 362
Earnings/(loss) per ordinary share (cents) 6
Basic earnings/(loss) (1 003) 82
Diluted earnings/(loss) (1 004) 79
The accompanying notes are an integral part of these condensed consolidated financial statements.
The condensed consolidated provisional financial statements (condensed consolidated financial statements) for the year ended
30 June 2018 have been prepared by Harmony Gold Mining Company Limited's corporate reporting team headed by Boipelo
Lekubo CA(SA). This process was supervised by the financial director, Frank Abbott CA(SA) and approved by the board of Harmony
Gold Mining Company Limited on 21 August 2018. These condensed consolidated financials have been reviewed by the group's
external auditors, PricewaterhouseCoopers Incorporated (see note 21).
CONDENSED CONSOLIDATED INCOME STATEMENTS
(RAND)
Year ended
30 June 30 June
2018 2017
Figures in million Notes (Reviewed) (Audited)
Revenue 20 359 19 264
Cost of sales 2 (23 503) (19 639)
Production costs (14 991) (14 812)
Amortisation and depreciation (2 570) (2 519)
Impairment of assets (5 336) (1 718)
Other items (606) (590)
Gross loss (3 144) (375)
Corporate, administration and other expenditure (813) (517)
Exploration expenditure (135) (241)
Gain on derivatives 3 99 1 025
Other operating expenses 4 (667) (886)
Operating loss (4 660) (994)
Gain on bargain purchase - 848
Share of profit/(loss) of associates 38 (22)
Loss on liquidation of subsidiaries - (14)
Acquisition related costs 7 (98) -
Investment income 343 268
Finance cost (330) (234)
Loss before taxation (4 707) (148)
Taxation 5 234 510
Current taxation (204) (488)
Deferred taxation 438 998
Net profit/(loss) for the year (4 473) 362
Attributable to:
Owners of the parent (4 473) 362
Earnings/(loss) per ordinary share (cents) 6
Basic earnings/(loss) (1 003) 82
Diluted earnings/(loss) (1 004) 79
The accompanying notes are an integral part of these condensed consolidated financial statements.
The condensed consolidated provisional financial statements (condensed consolidated financial statements) for the year ended
30 June 2018 have been prepared by Harmony Gold Mining Company Limited’s corporate reporting team headed by Boipelo
Lekubo CA(SA). This process was supervised by the financial director, Frank Abbott CA(SA) and approved by the board of Harmony
Gold Mining Company Limited on 21 August 2018. These condensed consolidated financials have been reviewed by the group's
external auditors, PricewaterhouseCoopers Incorporated (see note 21).
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (RAND)
Year ended
30 June 30 June
2018 2017
Figures in million Notes (Reviewed) (Audited)
Net profit/(loss) for the year (4 473) 362
Other comprehensive income/(loss) for the year, net of income tax (660) 818
Items that may be reclassified subsequently to profit or loss: (647) 821
Foreign exchange translation gain/(loss) 83 (322)
Remeasurement of Rand gold contracts 9
Unrealised gain on Rand gold contracts 273 2 172
Released to revenue (1 197) (728)
Released to gains on derivatives - (16)
Deferred taxation thereon 194 (285)
Items that will not be reclassified to profit or loss: (13) (3)
Remeasurement of retirement benefit obligation
Actuarial loss recognised during the period (11) (1)
Deferred taxation thereon (2) (2)
Total comprehensive income/(loss) for the year (5 133) 1 180
Attributable to:
Owners of the parent (5 133) 1 180
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN EQUITY (RAND)
for the year ended 30 June 2018
Figures in million Accumulated Other
Share capital loss reserves Total
Balance - 30 June 2017 28 336 (4 486) 5 441 29 291
Issue of shares(1) 1 004 - - 1 004
Share-based payments - - 374 374
Net loss for the year - (4 473) - (4 473)
Other comprehensive loss for the year - - (660) (660)
Reclassification from other reserves - 10 (10) -
Dividends paid(2) - (154) - (154)
Balance - 30 June 2018 (Reviewed) 29 340 (9 103) 5 145 25 382
Balance - 30 June 2016 28 336 (4 409) 4 252 28 179
Share-based payments - - 371 371
Net profit for the year - 362 - 362
Other comprehensive income for the year - - 818 818
Dividends paid(3) - (439) - (439)
Balance - 30 June 2017 (Audited) 28 336 (4 486) 5 441 29 291
(1) Includes the issue of 55 million shares in an accelerated bookbuild in June 2018. Refer to note 11 for further information.
(2) Dividend of 35 SA cents declared on 15 August 2017.
(3) Dividend of 50 SA cents declared on 15 August 2016 and dividend of 50 SA cents declared on 31 January 2017.
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS (RAND)
At At
30 June 30 June
2018 2017
Figures in million Notes (Reviewed) (Audited)
ASSETS
Non-current assets
Property, plant and equipment 8 31 001 30 044
Intangible assets 8 515 603
Restricted cash 77 64
Restricted investments 7 3 271 2 658
Investments in associates 84 46
Trade and other receivables 253 185
Derivative financial instruments 9 84 306
Inventories 46 38
Other non-current assets 11 4
Total non-current assets 35 342 33 948
Current assets
Inventories 10 1 759 1 127
Restricted cash 38 18
Trade and other receivables 1 139 1 003
Derivative financial instruments 9 539 1 541
Cash and cash equivalents 706 1 246
Total current assets 4 181 4 935
Total assets 39 523 38 883
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 11 29 340 28 336
Other reserves 5 145 5 441
Accumulated loss (9 103) (4 486)
Total equity 25 382 29 291
Non-current liabilities
Deferred tax liabilities 5 1 147 1 702
Derivative financial instruments 9 10 -
Provision for environmental rehabilitation 7 3 309 2 638
Provision for silicosis settlement 12 925 917
Retirement benefit obligation 186 179
Trade and other payables 41 13
Borrowings 13 4 924 299
Total non-current liabilities 10 542 5 748
Current liabilities
Borrowings 13 690 1 834
Derivative financial instruments 9 205 -
Trade and other payables 2 704 2 010
Total current liabilities 3 599 3 844
Total equity and liabilities 39 523 38 883
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(RAND)
Year ended
30 June 30 June
2018 2017
Figures in million Notes (Reviewed) (Audited)
Cash flow from operating activities
Cash generated by operations 4 289 4 346
Interest received 82 75
Interest paid (180) (79)
Income and mining taxes paid (307) (538)
Cash generated by operating activities 3 884 3 804
Cash flow from investing activities
Increase in restricted cash (32) (1)
Decrease in amounts invested in restricted investments - 7
Cash on acquisition of Hidden Valley - 459
Consideration paid for the acquisition of Moab Khotsong operations (3 474) -
Proceeds from disposal of property, plant and equipment 2 42
Additions to property, plant and equipment 15 (4 571) (3 890)
Cash utilised by investing activities (8 075) (3 383)
Cash flow from financing activities
Borrowings raised 13 6 937 699
Borrowings repaid 13 (4 063) (710)
Proceeds from the issue of shares(1) 11 1 003 -
Dividends paid (154) (439)
Cash generated/(utilised) by financing activities 3 723 (450)
Foreign currency translation adjustments (72) 19
Net decrease in cash and cash equivalents (540) (10)
Cash and cash equivalents - beginning of year 1 246 1 256
Cash and cash equivalents - end of year 706 1 246
(1) Net of share issue costs of R50 million.
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
for the year ended 30 June 2018 (Rand)
1 Accounting policies
Basis of accounting
The condensed consolidated financial statements for the year ended 30 June 2018 are prepared in accordance with the requirements of
the JSE Limited Listings Requirements for provisional reports and the requirements of the Companies Act no. 71 of 2008 of South Africa.
The Listings Requirements require provisional reports to be prepared in accordance with the framework concepts and the measurement
and recognition requirements of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board (IASB) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by
IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the condensed consolidated financial statements
are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements.
The amendment to IAS 7, Statement of Cash Flows has been adopted with effect 1 July 2017 and had no impact on the results of the
group (other than disclosure within the full financial statements) in the current period.
As of 1 July 2018, IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers will become effective for the
group. The impact of these two standards are discussed below.
Impact of the adoption of IFRS 9 – Financial Instruments
This standard on classification and measurement of financial assets and financial liabilities will replace IAS 39, Financial Instruments:
Recognition and Measurement. IFRS 9 has two measurement categories: amortised cost and fair value. The group has performed an
assessment of the impact of the adoption of IFRS 9 based on its position at 30 June 2018.
Recognition and measurement
The group does not expect the new guidance to have a significant impact on the classification and measurement of its financial assets for
the following reasons:
- The equity instruments that are currently classified as available-for-sale financial assets appear to satisfy the conditions for classification
as at fair value through other comprehensive income and hence there will be no change to the accounting for these assets;
- A fair value through other comprehensive income (FVOCI) election is available for the equity instruments which are currently classified
as available-for-sale;
- Equity investments currently measured at fair value through profit or loss (FVPL) will likely continue to be measured on the same basis
under IFRS 9; and
- Debt instruments currently classified as held-to-maturity and measured at amortised cost appear to meet the conditions for classification
at amortised cost under IFRS 9.
There will be no impact on the group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial
liabilities that are designated at fair value through profit or loss and currently the group’s financial liabilities are all measured at amortised
cost.
The derecognition rules have been transferred from IAS 39 Financial Instruments: Recognition and Measurement and have not been
changed.
Impairment
The impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred
credit losses as is the case under IAS 39. The impact of the new impairment requirements is not expected to be material for the following
reasons:
- The group does not generally carry significant assets that are subject to the new impairment requirements; and
- The group expects to make use of practical expedients when measuring expected credit losses on trade receivables.
Hedge accounting
The new hedge accounting rules will align the accounting for hedging instruments more closely with the group’s risk management
practices. As a general rule, more hedge relationships might be eligible for hedge accounting, as the standard introduces a more
principles-based approach. However, at this stage the group does not expect to identify any new hedge relationships. The group’s existing
hedge relationships appear to qualify as continuing hedges upon the adoption of IFRS 9. As a consequence, the group does not expect a
significant impact on the accounting for its hedging relationships.
Disclosure
Extensive disclosures are required, including reconciliations from opening to closing amounts of the ECL provision, assumptions and
inputs and a reconciliation on transition of the original classification categories under IAS 39 to the new classification categories in IFRS.
These are expected to change the nature and extent of the group’s disclosures about its financial instruments particularly in the year of the
adoption of the new standard.
The group expects to apply the standard prospectively without restating any comparative figures. The difference between the carrying
amount of financial instruments before the adoption of IFRS 9 and the new carrying amount calculated in accordance with the standard at
the beginning of the annual reporting period that includes the date of initial application will be recognised directly in the opening balance of
equity in the annual reporting period that includes the date of initial application.
Impact of the adoption of IFRS 15 – Revenue from Contracts with Customers
The group has performed an assessment of the impact of the adoption of IFRS 15 based on its position at 30 June 2018. Revenue is
currently recognised when the goods are delivered and a certificate of sale is issued by the customer, which is taken to be the point in
time at which the customer accepts the goods and the related risks and rewards of ownership transfer. Revenue is recognised at this point
provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable and there is no continuing
management involvement with the goods.
Under IFRS 15, revenue will be recognised when a customer obtains control of the goods. The group expects that the certificate of sale
will continue to drive revenue recognition as this is the point when control of the goods effectively transfers to the customer.
However, on adoption of IFRS 15, the group will disclose revenue from all contracts with customer, including by-products in revenue.
Currently, revenue from by-products is disclosed as a credit to cost of sales. The change in classification will result in a consequential
increase in costs of sales, and therefore will not have an impact on previously reported gross profit or loss.
The group expects to apply the standard retrospectively to each prior reporting period presented in accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors.
If IFRS 15 was applied retrospectively from 1 July 2017 to the earliest comparative period presented, it is expected to have the following
impact on revenue and cost of sales:
Year ended
30 June 30 June
2018 2017
Figures in million (Reviewed) (Reviewed)
Revenue 20 359 19 264
By-product revenue(1) 93 230
Revenue (restated) 20 452 19 494
% Change - 1%
Cost of sales 23 503 19 639
By-product revenue 93 230
Cost of sales (restated) 23 596 19 869
% Change - 1%
(1) By product revenue relates to silver and uranium sales
2 Cost of sales
Year ended
30 June 30 June
2018 2017
Figures in million (Reviewed) (Audited)
Production costs - excluding royalty(1) 14 840 14 597
Royalty expense 151 215
Amortisation and depreciation 2 570 2 519
Impairment of assets(2) 5 336 1 718
Rehabilitation expenditure(3) 69 23
Care and maintenance cost of restructured shafts 128 109
Employment termination and restructuring costs(4) 208 74
Share-based payments 244 391
Other (43) (7)
Total cost of sales 23 503 19 639
(1) Production costs for 2018 include R1 billion related to Moab Khotsong operations. Production costs related to Hidden Valley were R1 billion lower than the
comparative period. Refer to note 8 for further information.
(2) Impairments during the year are an outcome of forecast cost inflation as compared to a subdued gold price and the resultant impact on margins. Refer to
note 8 for further information.
(3) Included in the total for 2018 is a credit of R27 million (2017: R109 million) relating to the change in estimate following the annual reassessment of the
provision for environmental rehabilitation.
(4) The increase in 2018 relates to the extension of the voluntary severance programme.
3 Gains on derivatives
Gains on derivatives include the fair value movements of derivatives which have not been designated as hedging instruments for hedge
accounting purposes, the amortisation of day one gains and losses for hedging instruments and hedging ineffectiveness.
Year ended
30 June 30 June
2018 2017
Figures in million (Reviewed) (Audited)
Derivative gain(1) 136 1 103
Hedge ineffectiveness - 16
Day one loss amortisation (37) (94)
Total gains on derivatives 99 1 025
(1) Relates primarily to the foreign exchange hedging contracts. Refer to note 9.
4 Other operating expenses
Year ended
30 June 30 June
2018 2017
Figures in million (Reviewed) (Audited)
Social investment expenditure 73 74
Profit on sale of property, plant and equipment (2) (42)
Loss on scrapping of property, plant and equipment 1 140
Foreign exchange translation loss/(gain(2) 682 (194)
Silicosis settlement (reversal of provision)/provision 12 (68) 917
(Reversal of provision)/provision for ARM BEE loan(1) (43) 13
Other operating expenses/(income) 24 (22)
Total other operating expenses 667 886
(1) The provision was reversed following an increase in African Rainbow Minerals (ARM) Limited's share price and dividends paid in the period between July
2017 and June 2018, which form part of the recoverability test at 30 June 2018.
(2) Refer to note 13 for the foreign exchange translation loss/(gain) on the US$ borrowings.
5 Taxation
The lower current taxation expense for the year ended 30 June 2018 compared to the previous year relates to a decrease in gains on
derivatives and a foreign exchange translation loss compared to the comparative period.
The deferred tax credit for the year ended 30 June 2018 relates to a reversal of temporary differences on fixed assets as a result of the
impairment. Contributing further to the deferred tax credit in the current and comparative period is a reduction in the weighted average
deferred tax rates for most of the South African companies as a result of decreased profitability of the operations. The deferred tax rates
for Freegold (consisting of Tshepong operations, Bambanani and Joel) decreased from 12.5% to 8.7% (2017: 20.0% to 12.5%) and for
Randfontein (consisting of Doornkop and Kusasalethu) decreased from 3.8% to 1.8% (2017: 10.1% to 3.8%).
6 Earnings per ordinary share
Year ended
30 June 30 June
2018 2017
(Reviewed) (Audited)
Weighted average number of shares (million) 446 438
Weighted average number of diluted shares (million) 465 459
Total earnings per share (cents):
Basic earnings/(loss) (1 003) 82
Diluted earnings/(loss) (1 004) 79
Headline earnings 171 298
Diluted headline earnings 163 284
Reconciliation of headline earnings:
Net profit/(loss) (4 473) 362
Adjusted for:
Impairment of assets 5 336 1 718
Taxation effect on impairment of assets (99) (26)
Profit on sale of property, plant and equipment (2) (42)
Taxation effect on profit on sale of property, plant and equipment - 7
Loss on scrapping of property, plant and equipment 1 140
Taxation effect on loss on scrapping of property, plant and equipment - (19)
Gain on bargain purchase(1) - (848)
Loss on liquidation of subsidiary(1) - 14
Headline earnings 763 1 306
(1) There is no taxation effect on these items.
7 Acquisition of Moab Khotsong
Effective 1 March 2018 the group acquired the Moab Khotsong and Great Noligwa mines and related infrastructure as well as gold-
bearing tailings and the Nufcor uranium plant (collectively the Moab Khotsong operations) from AngloGold Ashanti Limited on a going
concern basis. The addition of the Moab Khotsong operations will increase the group's production ounces, free cash flows and average
underground gold recovery grade. The combined assets acquired and liabilities assumed constitute a business as defined by IFRS 3
Business Combinations.
For the four months ended 30 June 2018, the Moab Khotsong operations contributed revenue of R1.7 billion and profit of
R308 million to the group's results. If the acquisition had occurred on 1 July 2017, the group’s unaudited consolidated revenue would have
increased by a further R3.4 billion and unaudited consolidated profit would have increased by a further R603 million.
Consideration transferred
The cash consideration paid to acquire the Moab Khotsong operations amounted to R3 474 million (US$300 million).
Acquisition related costs
The group incurred acquisition related costs of R98 million on advisory and legal fees. These costs are recognised as acquisition related
costs in the income statement.
Identifiable assets acquired and liabilities assumed
The purchase price allocation (PPA) has been prepared on a provisional basis in accordance with IFRS 3. If new information obtained
within one year of the acquisition date, about facts and circumstances that existed at the acquisition date, then the accounting for the
acquisition will be revised. The values measured on a provisional basis include, inter alia , Property, plant and equipment, deferred tax and
the finalisation of the effective date tax values.
The fair value of the identifiable net assets acquired was determined on the expected discounted cash flows based on the life-of-mine
plans of the Moab Khotsong operations at post-tax real discount rates ranging between 8.20% and 11.30%, exchange rates ranging
between R/US$11.86 and R/US$15.82, gold prices ranging between US$1 249/oz and US$1 302/oz and uranium prices ranging between
US$30.44/lb and US$37.47/lb. The valuation was performed as at 1 March 2018.
The fair values as at the effective date are as follows:
At
1 March
2018
Figures in million (Reviewed)
Property, plant and equipment 3 723
Environmental rehabilitation trust funds 382
Inventories 72
Deferred tax liabilities (77)
Provision for environmental rehabilitation (663)
Retirement benefit obligation (10)
KOSH deep groundwater pollution liability (37)
Leave liabilities (140)
Other payables (48)
Total fair value of identifiable net assets acquired 3 202
Goodwill
Goodwill arising from the acquisition has been recognised as follows:
At
1 March
2018
Figures in million (Reviewed)
Consideration paid 3 474
Fair value of identifiable assets (3 202)
Goodwill 272
The goodwill has been provisionally allocated to the Moab Khotsong operations. The goodwill is attributable mainly to the skills and
technical talent of the Moab Khotsong operations' work force and the synergies expected to be achieved from integrating the Moab
Khotsong operations into the group's existing mining activities. None of the goodwill recognised is expected to be deductible for tax
purposes.
8 Property, plant and equipment and intangible assets
(a) Acquisition of Moab Khotsong operations
Refer to note 7 for details on the property, plant and equipment acquired as part of the Moab Khotsong acquisition.
(b) Impairment of property, plant and equipment
The recoverable amount of mining assets is determined utilising real discounted future cash flows or resource multiples in the case of
undeveloped properties and Doornkop's Kimberley reef resources. One of the most significant assumptions that influence the group's
operations' life-of-mine plans, and therefore impairment, is the expected gold price. During this year's planning and testing, commodity
price and exchange rate assumptions as per the table below were used. Post-tax real discount rates ranging between 8.35% and
10.25% (2017: 8.98% and 11.92%), depending on the asset, were used to determine the recoverable amounts (fair value less costs to
sell).
Year ended
30 June 30 June
2018 2017
(Reviewed) (Audited)
Gold price (US$/oz) 1 250 1 200
Silver price (US$/oz) 17.00 17.00
Exchange rate (R/US$) 13.30 13.61
Exchange rate (PGK/US$) 3.17 3.16
Rand gold price (R/kg) 535 000 525 000
Values of US$25.00, US$8.00 and US$2.80 per ounce were used for measured, indicated and inferred resources, respectively. For
Hidden Valley, US$5.84 per ounce was used for indicated and inferred resources.
(b) Impairment of property, plant and equipment continued
The impairment of assets consists of the following:
Year ended
30 June 30 June
2018 2017
Figures in million (Reviewed) (Audited)
Tshepong operations (a) 988 255
Joel (a) 160 -
Other Freegold assets (a) 174 -
Target 1 (b) 699 785
Unisel (c) 487 -
Masimong (c) 329 -
Other Harmony assets (c) 145 -
Kusasalethu (d) 579 678
Doornkop (e) 317 -
Target North (e)(1) 1 458 -
Total impairment 5 336 1 718
(1) Target North has not been allocated to a segment. Refer to note 19 for further information.
(a) Goodwill of R326 million was impaired on Tshepong operations which has a recoverable amount of R7.4 billion. Goodwill of
R41 million was impaired on Joel which has a recoverable amount of R876 million. Other Freegold assets assessed have a
recoverable amount of R187 million. The updated life-of-mine for Tshepong operations, Joel and other Freegold assets
presented a marginal decrease in recovered grade.
(b) Target 1 has a recoverable amount of R1.2 billion. Exploration drilling during the year resulted in lower grade estimates for
certain blocks that had previously been included in the life-of-mine plan but have now subsequently been excluded.
(c) Unisel has a recoverable amount of R38 million. Masimong has a recoverable amount of R58 million and other Harmony
assets have a recoverable amount of R249 million. The impairment at Unisel was driven by a reduced remaining life-of-mine
and a focus on the higher grade Basal Reef, whilst the impairment at Masimong was as a result of the depletion of the higher
grade B Reef and subsequent reduced resources footprint.
(d) Kusasalethu has a recoverable amount of R2.1 billion. The old mine at the operation was excluded in the FY19 life-of-mine
plan.
(e) Doornkop has a recoverable amount of R2.7 billion. Target North has a recoverable amount of R3.7 billion.
The impairments of Doornkop and Target North are primarily as a result of a decrease in resource values. During the year, the
resource multiples were reassessed in order to be reflective of current market conditions using multiples derived from past
transactions with an adjustment for the gold price. The transactions were used to derive US$/oz multiples for resources. The
resource per ounce values have decreased substantially as a result of the low levels of merger and acquisition activity
influencing the marketability of resource companies in South Africa, and more specifically gold mining companies.
The recoverable amounts for these assets were determined on a fair value less costs to sell basis using assumptions above in the
discounted cash flow models and attributable resource values. These are fair value measurements classified as level 3.
Sensitivity analysis
A 10% decrease or increase in the gold price and resource values used (with all other variables held constant) would have resulted in
the following impairment as at 30 June 2018:
Year ended
30 June 2018
10% 10%
Figures in million decrease increase
Unisel 525 433
Masimong 386 59
Doornkop 2 052 -
Kusasalethu 2 716 -
Bambanani 222 -
Tshepong operations 5 174 -
Joel 882 -
Moab Khotsong 1 636 -
Target 1 1 684 -
Target 3 141 -
Other mining assets 540 -
Target North 1 826 1 090
Hidden Valley 752 -
(c) Hidden Valley
Hidden Valley underwent a planned plant shutdown in order to upgrade processing infrastructure and simultaneously develop the
stage 5 and 6 cut back. The planned shutdown commenced in August 2017 and production costs of R1 billion were capitalised to
property, plant and equipment (PPE). Capitalisation of production costs ceased in June 2018 when commercial levels of production
were achieved. A further R114 million of borrowing costs were capitalised to PPE during the year.
(d) Intangible assets
The movement in the net carrying value of goodwill within intangible assets is as follows:
Year ended
30 June 30 June
2018 2017
Figures in million (Reviewed) (Audited)
Opening balance 591 846
Acquisition of Moab Khotsong operations 272 -
Impairment - Tshepong operations (326) (255)
Impairment - Joel (41) -
Total Goodwill 496 591
9 Derivative financial instruments
At At
30 June 30 June
2018 2017
Figures in million (Reviewed) (Audited)
Non-current 74 306
Rand gold forward sale contracts (a) 60 298
US$ commodity contracts (b) 11 8
Forward exchange hedging contracts (c) 3 -
Current 334 1 541
Rand gold forward sale contracts (a) 410 1 080
US$ commodity contracts (b) 63 12
Foreign exchange hedging contracts (c) (139) 449
Total derivative financial instruments 408 1 847
(a) Harmony has entered into rand gold forward sale derivative contracts to hedge the risk of lower rand/gold prices. Cash flow hedge
accounting is applied to the majority of these contracts, resulting in the effective portion of the unrealised gains and losses being
recorded in other comprehensive income (other reserves). During the year ended 30 June 2018, the contracts that matured realised a
gain of R1 197 million (June 2017: R744 million), which has been included in revenue (June 2017: R728 million). There was no
ineffective portion in the current year (June 2017: R16 million). The unamortised portion of the day one gain or loss amounted to
R11 million on 30 June 2018 (June 2017: R34 million). The gains and losses from non-hedge accounted rand gold forward sale
contracts are included in gains on derivatives.
(b) During May 2017, Harmony began a hedging programme for Hidden Valley by entering into commodity hedging contracts. The
contracts comprise US$ gold forward sale derivative contracts as well as silver zero cost collars which establish a minimum (floor) and
maximum (cap) silver sales price. Hedge accounting is not applied and the resulting gains and losses are recorded in gains on
derivatives in the income statement. The gain amounted to R35 million (June 2017: R20 million gain).
(c) Harmony maintains a foreign exchange hedging programme in the form of zero cost collars, which establish a floor and cap US$/Rand
exchange rate at which to convert US dollars to Rands, and foreign exchange forward contracts. As hedge accounting is not applied,
the resulting gains and losses have been recorded in gains on derivatives in the income statement. These gains amounted to
R113 million (June 2017: R1 082 million).
The following table shows the open position at the reporting date:
FY19 FY20 TOTAL
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
US$ZAR
Zero cost collars
US$m 94 53 45 60 - - - - 252
Floor 14.09 14.14 13.14 13.09 - - - - 13.69
Cap 15.09 15.08 13.80 13.77 - - - - 14.54
Forward Contracts
US$m 8 59 69 65 18 18 18 18 273
FEC 13.55 13.50 13.63 13.76 14.59 14.76 14.94 15.12 13.95
Total US$ZAR
US$m 102 112 114 125 18 18 18 18 525
R/gold
'000 oz 54 51 53 41 43 34 15 9 300
R'000/kg 697 621 630 614 622 643 631 655 639
US$/gold
'000 oz 24 24 20 18 6 4 - - 96
US$/oz 1 288 1 291 1 335 1 338 1 370 1 400 - - 1 318
Total gold
'000 oz 78 75 73 59 49 38 15 9 396
US$/silver
'000 oz 240 240 90 90 90 - - - 750
Floor 17.10 17.10 17.30 17.30 17.40 - - - 17.19
Cap 18.10 18.10 18.30 18.30 18.40 - - - 18.19
Refer to note 14 for details on the fair value measurements.
10 Inventories
Current inventories include an increase of R241 million related to an increase of Hidden Valley's run of mine stock piles. In addition the
balance at year end includes R101 million in stores and R48 million in gold stock as a result of the acquisition of the Moab Khotsong
operations during the 2018 financial year. Refer to note 7 for details on the inventory acquired as part of the Moab Khotsong acquisition.
11 Share capital
Harmony conducted a placement of new ordinary shares to qualifying investors to raise up to R1.26 billion (US$100 million), which
represented approximately 15 per cent of the group’s existing issued ordinary share capital prior to the placement. The placement was
conducted through an accelerated bookbuilding process.
The net proceeds of the placement were used to pay down part of the outstanding bridge loan raised for the acquisition of the Moab
Khotsong operations.
During June 2018, a total of 55 055 050 new ordinary shares were placed with existing and new institutional investors at a price of R19.12
per share, raising gross proceeds of approximately R1.05 billion (US$82 million). Transaction costs of R50 million were incurred.
African Rainbow Minerals Limited (ARM) has agreed to subscribe for an additional 11 032 623 shares at R19.12 a share that will maintain
its shareholding of 14.29% post the placement of shares. ARM's participation was subject to Harmony shareholder approval, which was
obtained subsequent to year-end. Refer to note 20 for details on events subsequent to year end.
Additional share capital movements relate to shares issued as part of the group's employee share schemes.
12 Provision for silicosis settlement
Harmony and certain of its subsidiaries (Harmony group), together with other mining companies, are named in a class action for silicosis
and tuberculosis which was certified by the Johannesburg High Court in May 2016.
A gold mining industry working group which includes Harmony (the working group) was formed in November 2014 to address issues
relating to the compensation and medical care for occupational lung diseases in the gold mining industry in South Africa. The working
group engaged all stakeholders on these matters and on 3 May 2018, the working group announced that they have reached an
agreement with the lawyers representing the claimants in the silicosis class action litigation. The settlement is subject to certain
suspensive conditions, including the agreement being approved by the South Gauteng High Court.
Harmony has provided for the estimated cost of the settlement based on actuarial assessments. At 30 June 2018, management had
estimated Harmony's share as R925 million (pre-tax). The time value of money recognised for the year ended 30 June 2018 is
R76 million and the change in estimate is a gain of R68 million due to a change in the timing of expected cashflows.
13 Borrowings
During the year ended 30 June 2018:
- R300 million was repaid on the R1 billion Nedbank revolving credit facility (RCF) in September 2017. R500 million was drawn down on
the same facility in April 2018.
- US$140 million (R1 847 million) was repaid on the US$250 million RCF in August 2017. On 28 July 2017, Harmony concluded an
agreement for a new three-year syndicated facility of US$350 million (US$175 million term loan plus US$175 million RCF). The facility
was negotiated on similar terms to the previous facility. US$175 million (R2 309 million) was drawn down on the term loan in August
2017. US$40 million (R547 million) was drawn down on the RCF during November 2017. A further $110 million
(R1 271 million) was drawn down on the same facility in February 2018.
- On 18 October 2017, Harmony concluded an agreement for a new 12 month bridge loan of US$200 million. The facility was concluded
with similar terms and covenants as the existing loan facilities. US$200 million (R2 310 million) was drawn down on the bridge loan in
February 2018. US$50 million (R596 million) was repaid in April 2018 and a further US$100 million (R1 242 million) was repaid in June
2018. Refer to note 20 for details on transactions subsequent to year-end.
US$ bridge US$ term
loan loan US$ RCF Rand facility
Figures in million US dollar US dollar US dollar SA rand
Borrowings summary at 30 June 2018
Facility 200 175 175 1 000
Drawn down 50 175 150 500
Undrawn committed borrowing facilities - - 25 500
Maturity October July July February
2018 2020 2020 2020
Interest rate LIBOR + LIBOR + LIBOR + JIBAR +
2.5% - 3.00% 3.15% 3.00% 3.15%
13 Borrowings continued
Moab Khotsong operations acquisition
US$100 million of the cash consideration was financed through the existing US$350 million syndicated facility and the remaining
US$200 million was financed through a new US$200 million bridge loan. As a condition for obtaining the bridge loan, Harmony requested
the covenant ratio of the tangible net worth to total net debt be relaxed from 6 times to 4 times for the duration of the loan. The request
was granted. US$150 million was repaid on the bridge loan using proceeds from a share placement, the group's operating cash flows and
undrawn debt facilities. For details on the share placement refer to note 11.
There were no breaches of the loan covenants for the 2018 and 2017 financial years.
The foreign exchange translation movements on the US$ loan are as follows:
Year ended
30 June 30 June
2018 2017
Figures in million (Reviewed) (Audited)
Translation gain/(loss) on US$ borrowings (669) 215
Rand/US$ exchange rate:
Closing/spot 13.81 13.11
Average 12.85 13.60
14 Financial risk management activities
Foreign exchange risk
Harmony's revenues are sensitive to the R/US$ exchange rate as all revenues are generated by gold sales denominated in US$. During
2016 Harmony started a foreign currency hedging programme in order to manage the foreign exchange risk. The limit currently set by the
Board is approximately 25% of the group's foreign exchange risk exposure for a period of 24 months. Refer to note 9 for the details of the
contracts. The audit and risk committee reviews the details of the programme quarterly.
Commodity price sensitivity
The profitability of the group’s operations, and the cash flows generated by those operations, are affected by changes in the market price
of gold, and in the case of Hidden Valley, silver as well. Harmony entered into derivative contracts to manage the variability in cash flows
from the group’s production, in order to create cash certainty and protect the group against lower commodity prices. The limits currently
set by the Board are for 20% of the production from gold and 25% from silver over a 24-month period. Management continues to top-up
these programmes as and when opportunities arise to lock in attractive margins for the business, but are not required to maintain hedging
at these levels. The audit and risk committee reviews the details of the programme quarterly.
Refer to note 9 and the fair value determination section below for further detail on these contracts.
Fair value determination
The fair value levels of hierarchy are as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets;
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset, either directly or indirectly (that is, as
prices) or indirectly (that is derived from prices);
Level 3: Inputs for the asset that are not based on observable market data (that is unobservable inputs).
The following table presents the group's assets and liabilities that are measured at fair value at reporting date:
Fair value At At
hierarchy 30 June 30 June
level 2018 2017
(Reviewed) (Audited)
Available-for-sale financial assets (1) Level 3 8 4
Investment in financial assets
Fair value through profit or loss financial assets (2) Level 2 913 839
Restricted investments (3) Level 2 408 1 847
Derivative financial instruments
(1) Level 3 fair values have been valued by the directors by performing independent valuations on an annual basis.
(2) The majority of the level 2 fair values are directly derived from the Top 40 index on the JSE, and are discounted at market interest rate. This relates to equity-
linked deposits in the group's environmental rehabilitation trust funds. The balance of the environmental trust funds is held to maturity and therefore not
disclosed here.
(3) The mark-to market remeasurement of the following contracts is derived from:
- Forex hedging contracts (zero cost collars and FECs): a Black-Scholes valuation technique, derived from spot rand/US$ exchange rate inputs, implied
volatilities on the rand/US$ exchange rate, rand/US$ inter-bank interest rates and discounted at market interest rate (zero-coupon interest rate curve).
- Rand gold hedging contracts (forward sale contracts): spot Rand/US$ exchange rate, Rand and dollar interest rates (forward points), spot US$ gold
price, differential between the US interest rate and gold lease interest rate which is discounted at market interest rate.
- US$ gold hedging contracts (forward sale contracts): spot US$ gold price, differential between the US interest rate and gold lease interest rate and
discounted at market interest rate.
- Silver hedging contracts (zero cost collars): a Black-Scholes valuation technique, derived from spot US$ silver price, strike price, implied volatilities, time
to maturity and interest rates and discounted at market interest rate.
For all other financial instruments, fair value approximates carrying value.
15 Net additions to property, plant and equipment
Year ended
30 June 30 June
2018 2017
Figures in million (Reviewed) (Audited)
Capital expenditure - operations 2 619 2 354
Additions resulting from development at Hidden Valley (1) 1 563 1 335
Capital and capitalised exploration and evaluation expenditure for Golpu 288 197
Additions resulting from stripping activities 98 77
Other 3 (73)
Net additions 4 571 3 890
(1) June 2018 includes expenditure of R2 609 million net of capitalised revenue of R1 046 million.
16 Commitments and contingencies
At At
30 June 30 June
2018 2017
Figures in million (Reviewed) (Audited)
Capital expenditure commitments:
Contracts for capital expenditure 273 369
Authorised by the directors but not contracted for 1 719 789
1 992 1 158
This expenditure will be financed from existing resources and, where appropriate, borrowings.
Contingent liabilities
For a detailed disclosure on contingent liabilities refer to Harmony's annual financial statements for the financial year ended
30 June 2017. There were no significant changes in contingencies since 30 June 2017.
17 Related parties
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of
the group, directly or indirectly, including any director (whether executive or otherwise) of the group.
(a) Movement in shares owned by directors/prescribed officers for year ended 30 June 2018:
Shares Shares sold Performance
purchased in open shares
in open market vested and
market retained
Name of director/prescribed officer
Frank Abbott (Financial director)(1) - - 141 075
Beyers Nel (Chief Operating Officer: SA) (1) - - 24 933
Phillip Tobias (Chief Operating Officer: new business) (1) - - 31 166
Johannes van Heerden (Chief executive officer (South East Asia)) - - 50 000
(1) These shares have been voluntarily locked-up in terms of the minimum shareholding requirement of the 2006 Share Plan but remains beneficially owned.
18 Segment report
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker
(CODM). As of 1 July 2017, Tshepong and Phakisa, previously two separate segments have been integrated. As a result, they now form
one segment, Tshepong operations, and the results for the 2017 year have been re-presented for this change. The shafts have been
integrated to take advantage of their close proximity, which allows for existing infrastructure to be optimised. From this date, the CODM
has reviewed the single segment information.
The segment report follows below.
19 Reconciliation of segment information to condensed consolidated income statements and balance sheets
The "Reconciliation of segment information to condensed consolidated financial statements" line item in the segment report is broken
down in the following elements, to give a better understanding of the differences between the financial statements and segment report.
Year ended
30 June 30 June
2018 2017
Figures in million (Reviewed) (Audited)
Reconciliation of production profit to gross profit
Total revenue per income statements 20 359 19 264
- Total segment revenue 20 358 19 264
- Revenue not included in segments 1 -
Total production costs as per income statements (14 991) (14 812)
- Total segment production costs (15 002) (14 812)
- Production cost adjustments not included in segments 11 -
Production profit 5 368 4 452
Amortisation and depreciation (2 570) (2 519)
Impairments of assets (5 336) (1 718)
Other items (606) (590)
Gross loss as per income statements (1) (3 144) (375)
(1) The reconciliation was done up to the first recognisable line item on the income statement. The reconciliation will follow the income statement after that.
Reconciliation of total segment mining assets to consolidated property, plant and
equipment
Property, plant and equipment not allocated to a segment
Mining assets 982 1 234
Undeveloped property (1) 3 681 5 139
Other non-mining assets 103 177
Wafi-Golpu assets (2) 2 137 1 790
6 903 8 340
(1) Comprises Target North resources.
(2) This is an asset under development and disclosed separately from the group's segments.
20 Subsequent events
(a) On 12 July 2018, shareholders approved the special resolution to issue 11 032 623 new ordinary shares to African Rainbow Minerals
Limited at the placing price of R19.12 to raise a total of R211 million (US$16 million). The proceeds raised from the ARM Placing were to
be used to repay part of the outstanding bridge loan raised for the acquisition of Moab Khotsong.
(b) On 18 July 2018, the remaining outstanding balance of US$50 million (R670 million) was repaid on the US$200 million bridge loan.
21 Review conclusion
These condensed consolidated financial statements for the year ended 30 June 2018 have been reviewed by PricewaterhouseCoopers
Inc., who expressed an unmodified review conclusion thereon. A copy of the auditor's review conclusion is available for inspection at the
company's registered office, together with the financial statements identified in the auditor's report.
Segment report (Rand/Metric) (Reviewed)
For the year ended 30 June 2018
Revenue Production cost Production profit/(loss) Mining assets Capital expenditure# Kilograms produced* Tonnes milled*
30 June 30 June 30 June 30 June 30 June 30 June 30 June
2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
R million R million R million R million R million kg t'000
Continuing operations
South Africa
Underground
Tshepong operations (a) 5 389 5 062 3 799 3 671 1 590 1 391 8 078 8 466 1 008 717 9 394 8 828 1 716 1 695
Moab Khotsong 1 672 - 952 - 720 - 3 702 - 173 - 3 296 - 327 -
Bambanani 1 616 1 576 896 871 720 705 659 745 64 77 2 821 2 750 233 231
Joel 954 1 309 920 936 34 373 995 909 250 243 1 635 2 246 454 514
Doornkop 1 958 1 553 1 411 1 241 547 312 2 721 2 979 274 243 3 429 2 673 696 641
Target 1 1 630 1 506 1 318 1 345 312 161 1 260 2 021 309 324 2 854 2 669 680 745
Kusasalethu 2 483 2 575 2 026 2 080 457 495 2 151 2 846 289 289 4 429 4 394 670 607
Masimong 1 505 1 452 1 154 1 113 351 339 57 433 129 119 2 623 2 538 647 640
Unisel 733 915 771 838 (38) 77 38 529 85 78 1 280 1 595 376 394
Surface
All other surface operations 2 009 1 816 1 521 1 404 488 412 553 486 136 261 3 570 3 178 14 143 11 045
Total South Africa 19 949 17 764 14 768 13 499 5 181 4 265 20 214 19 414 2 717 2 351 35 331 30 871 19 942 16 512
International
Hidden Valley (b) 409 1 500 234 1 313 175 187 3 884 2 290 1 563 1 335 2 862 2 965 2 499 2 889
Total international 409 1 500 234 1 313 175 187 3 884 2 290 1 563 1 335 2 862 2 965 2 499 2 889
Total operations 20 358 19 264 15 002 14 812 5 356 4 452 24 098 21 704 4 280 3 686 38 193 33 836 22 441 19 401
Reconciliation of the segment
information to the consolidated income
statement and balance sheet (refer to
note 19) 1 - (11) - 12 - 6 903 8 340
20 359 19 264 14 991 14 812 5 368 4 452 31 001 30 044 4 280 3 686 38 193 33 836 22 441 19 401
# Capital expenditure for international operations excludes expenditure spent on Wafi-Golpu of R288 million (2017: R197 million).
(a) Tshepong and Phakisa were two separate segments for the 2017 financial year. As of 1 July 2017, they have been integrated into Tshepong operations and have been treated as one segment for the 2018 financial year. June
2017 amounts have been re-presented as a result of the integration.
(b) Capital expenditure for the year 2018 comprises of expenditure of R2 609 million net of capitalised revenue of R1 046 million. Refer to note 8(c) for further information.
* Production statistics are unaudited and not reviewed.
DEVELOPMENT RESULTS
FOR THE YEAR ENDED 30 JUNE 2018
METRIC IMPERIAL
Channel Channel
Reef Sampled Width Value Gold Reef Sampled Width Value Gold
Meters Meters (Cm's) (g/t) (Cmg/t) Feet Feet (Inch) (oz/t) (In.oz/t)
Tshepong Tshepong
Basal 800 764 8.62 164.71 1 420 Basal 2 624 2 507 3.00 5.43 16
B Reef 423 410 147.71 12.39 1 831 B Reef 1 388 1 345 58.00 0.36 21
All Reefs 1 223 1 174 57.19 27.33 1 563 All Reefs 4 013 3 852 23.00 0.78 18
Phakisa Phakisa
Basal 1 935 1 952 44.59 27.48 1 225 Basal 6 350 6 404 18.00 0.78 14
All Reefs 1 935 1 952 44.59 27.48 1 225 All Reefs 6 350 6 404 18.00 0.78 14
Doornkop Doornkop
Main Reef - 171 209.79 0.89 187 Main Reef - 561 83.00 0.03 2
South Reef 1 478 1 506 68.51 15.48 1 061 South Reef 4 849 4 941 27.00 0.45 12
All Reefs 1 478 1 677 82.91 11.72 972 All Reefs 4 849 5 502 33.00 0.34 11
Kusasalethu Kusasalethu
VCR Reef 776 668 64.55 23.33 1 506 VCR Reef 2 545 2 192 25.00 0.69 17
All Reefs 776 668 64.55 23.33 1 506 All Reefs 2 545 2 192 25.00 0.69 17
Target 1 Target 1
Elsburg 431 228 289.07 2.50 723 Elsburg 1 414 748 114.00 0.07 8
All Reefs 431 228 289.07 2.50 723 All Reefs 1 414 748 114.00 0.07 8
Masimong 5 Masimong 5
Basal 1 232 996 69.24 14.86 1 029 Basal 4 040 3 268 27.00 0.44 12
B Reef 835 963 88.12 30.23 2 664 B Reef 2 740 3 159 35.00 0.87 31
All Reefs 2 067 1 959 78.52 23.34 1 833 All Reefs 6 780 6 427 31.00 0.68 21
Unisel Unisel
Basal 1 079 906 190.87 6.60 1 260 Basal 3 540 2 972 75.00 0.19 14
Leader 190 164 200.38 6.29 1 261 Leader 624 538 79.00 0.18 14
Middle 56 16 11.00 11.93 131 Middle 184 52 4.00 0.38 2
All Reefs 1 325 1 086 189.65 6.56 1 243 All Reefs 4 348 3 562 75.00 0.19 14
Joel Joel
Beatrix 1 704 1 716 132.50 7.57 1 004 Beatrix 5 589 5 630 52.00 0.22 12
All Reefs 1 704 1 716 132.50 7.57 1 004 All Reefs 5 589 5 630 52.00 0.22 12
Moab Moab
Khotsong Khotsong
Vaal Reef 366 316 92.70 32.24 2 155 Vaal Reef 1 202 1 037 36.00 0.69 25
All Reefs 366 316 92.70 32.24 2 155 All Reefs 1 202 1 037 36.00 0.69 25
Total Harmony Total Harmony
Basal 5 046 4 618 72.65 16.82 1 222 Basal 16 555 15 151 29.00 0.48 14
Beatrix 1 704 1 716 132.50 7.57 1 004 Beatrix 5 589 5 630 52.00 0.22 12
Leader 190 164 200.38 6.29 1 261 Leader 624 538 79.00 0.18 14
B Reef 1 258 1 373 105.91 22.80 2 415 B Reef 4 128 4 505 42.00 0.66 28
Middle 56 16 11.00 11.93 131 Middle 184 52 4.00 0.38 2
Elsburg 431 228 289.07 2.50 723 Elsburg 1 414 748 114.00 0.07 8
Vaal Reef 366 316 92.70 32.24 2 155 Vaal Reef 1 202 1 037 36.00 0.69 25
South Reef 1 478 1 506 68.51 15.48 1 061 South Reef 4 849 4 941 27.00 0.45 12
VCR 776 668 64.55 23.33 1 506 VCR 2 545 2 192 25.00 0.69 17
Main Reef - 171 209.79 0.89 187 Main Reef - 561 83.00 0.03 2
All Reefs 11 305 10 776 94.54 14.11 1 334 All Reefs 37 091 35 354 37.00 0.41 15
CONTACT DETAILS
CORPORATE OFFICE
Randfontein Office Park
PO Box 2, Randfontein, 1760, South Africa
Corner Main Reef Road and Ward Avenue
Randfontein, 1759, South Africa
Telephone: +27 11 411 2000
Website: www.harmony.co.za
DIRECTORS
PT Motsepe* (chairman)
M Msimang*^ (lead independent director)
JM Motloba*^ (deputy chairman)
PW Steenkamp (chief executive officer)
F Abbott (financial director)
JA Chissano*1^, FFT De Buck*^, KV Dicks*^, Dr DSS Lushaba*^
HE Mashego**, KT Nondumo*^
VP Pillay*^, MV Sisulu*^, JL Wetton*^, AJ Wilkens*
* Non-executive
** Executive
^ Independent
1 Mozambican
INVESTOR RELATIONS
E-mail: harmonyIR@harmony.co.za
Mobile: +27 82 759 1775
Telephone: +27 11 411 2314
Website: www.harmony.co.za
COMPANY SECRETARY
Telephone: +27 11 411 6020
E-mail: companysecretariat@harmony.co.za
TRANSFER SECRETARIES
Link Market Services South Africa (Proprietary) Limited
(Registration number 2000/007239/07)
13th Floor, Rennie House, Ameshoff Street, Braamfontein
PO Box 4844, Johannesburg, 2000, South Africa
Telephone: 0860 546 572
E-mail: info@linkmarketservices.co.za
Fax: +27 86 674 4381
ADR* DEPOSITARY
Deutsche Bank Trust Company Americas
c/o American Stock Transfer and Trust Company
Peck Slip Station
PO Box 2050, New York, NY 10272-2050
E-mail queries: db@amstock.com
Toll free: +1-800-937-5449
Int: +1-718-921-8137
Fax: +1-718-765-8782
*ADR: American Depositary Receipts
SPONSOR
JP Morgan Equities South Africa (Pty) Ltd
1 Fricker Road, corner Hurlingham Road
Illovo, Johannesburg, 2196
Private Bag X9936, Sandton, 2146
Telephone: +27 11 507 0300
Fax: +27 11 507 0503
TRADING SYMBOLS
JSE Limited: HAR
New York Stock Exchange, Inc.: HMY
REGISTRATION NUMBER:
1950/038232/06
Incorporated in the Republic of South Africa
ISIN:
ZAE 000015228
21 August 2018
Date: 21/08/2018 07:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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