Wrap Text
Operational update for the first quarter of FY2019
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
OPERATIONAL UPDATE
FOR THE FIRST QUARTER OF FY2019
Johannesburg. Tuesday, 6 November 2018. Harmony Gold Mining Company Limited ("Harmony" or "the company") is pleased to provide a quarterly
operational update for the first quarter ended 30 September 2018.
"Hidden Valley and Moab Khotsong have boosted the group's production and free cash flow generation compared to the September 2017 quarter. We
are confident that we will achieve our annual production and cost guidance as we continue to focus on safety, production and cost management," said
chief executive officer, Peter Steenkamp.
OPERATIONAL UPDATE
Total gold production in the September 2018 quarter increased by 30% compared to the September 2017 quarter and decreased by 2% when compared
to the June 2018 quarter.
All-in sustaining unit costs for the group increased quarter on quarter by 8% to R526 747/kg (US$1 166/oz) in the September 2018 quarter.
Hidden Valley
In the September 2018 quarter, Hidden Valley delivered an excellent safety performance – recording no lost time injuries. The mine generated free cash flow
in the first quarter since achieving commercial levels of production in June 2018, compared to a net cash outflow in the previous quarter. The operation
recorded an all-in sustaining unit cost of R506 911/kg (US$1 119/oz). Recovered grade and gold production is expected to improve during the remainder
of the 2019 financial year (FY19) as mining into the deeper and higher grade areas of the ore-body progresses. During the September 2017 comparative
quarter, Hidden Valley recorded lower gold production due to the planned three and a half month plant stoppage and infrastructure upgrade and
maintenance programme which commenced in August 2017 (and successfully completed in November 2017).
South African operations
The South African operations recorded a 19% increase in gold production to 10 388kg (333 981oz) in the September 2018 quarter when compared to the
September 2017 quarter, mainly due to the addition of gold produced by Moab Khotsong (which was acquired in March 2018).
Quarter on quarter, production decreased by 2%. The underground recovered grade at Moab Khotsong is expected to improve during the remainder of
FY19 as mining in the middle mine section progresses. Operating costs during the September 2018 quarter increased due to the seasonal higher winter
electricity tariffs (in July and August) and higher labour costs, including once off leave liability adjustments following the settlement of the wage agreement
on 3 October 2018.
Below is a table setting out Harmony's total operating results quarter on quarter:
Comparative
Quarter Quarter Q-on-Q Quarter Q-on-Q*
September June Variance September Variance
2018 2018 % 2017 %
Gold produced kg 11 773 11 993 (2) 9 040 30
oz 378 510 385 583 (2) 290 644 30
Underground grade g/t 5.68 5.98 (5) 5.35 6
Gold price received R/kg 570 545 566 636 1 571 664 –
US$/oz 1 263 1 391 (9) 1 350 6
Cash operating costs R/kg 429 774 399 234 (8) 413 082 (4)
US$/oz 951 981 3 975 2
All-in sustaining costs R/kg 526 747 486 641 (8) 488 176 (8)
US$/oz 1 166 1 195 2 1 152 (1)
Production profit R million 1 678 1 883 (11) 1 397 20
S$ million 119 148 (20) 106 12
Exchange rate R/US$ 14.05 12.64 11 13.18 7
*September 2018 quarter and September 2017 quarter comparison
Quarter-on-quarter operating results tables have been included below (R/metric).
The operational update has not been reviewed or audited by the company's external auditors. Detailed financial and operational results are provided on
a six-monthly basis at the end of December and June.
HEDGING UPDATE
The volatility and weakening of the Rand exchange rate against the US dollar during the September 2018 quarter presented an opportunity to
top-up Harmony's hedging programme.
The average Rand/US dollar exchange rate for the September 2018 quarter weakened by 11% to R14.05/US$ compared to the average June 2018
quarter exchange rate of R12.64/US$ (7% weaker compared to the September 2017 quarter exchange rate of R13.18/US$).
The table below shows the open position at 30 September 2018:
FY 2019 FY 2020 FY2021
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 TOTAL
Rand Gold
Forward Contracts koz 61 62 64 62 64 65 64 52 494
R'000/kg 616 626 610 621 638 642 657 670 634
Dollar Gold
Forward Contracts koz – 20 18 6 4 – – – 48
US$/oz – 1 335 1 338 1 370 1 400 – – – 1 392
Total Gold koz 61 82 82 68 68 65 64 52 542
Currency Hedges
Rand Dollar
Zero Cost Collars $m 93 88 89 50 36 34 30 21 441
Floor R/$ 14.15 13.78 13.52 14.45 14.59 14.84 15.06 15.31 14.19
Cap R/$ 14.94 14.41 14.17 15.05 15.19 15.45 15.68 15.94 14.85
Forward Contracts $m 75 75 72 57 48 48 48 20 443
FEC R/$ 13.68 13.70 13.81 14.73 14.99 15.35 15.51 16.11 14.47
Total Rand Dollar $m 168 163 161 107 84 82 78 41 884
Dollar Silver
Zero Cost Collars koz – 90 90 90 – – – – 270
Floor $/oz – 17.30 17.30 17.40 – – – – 17.33
Cap $/oz – 18.30 18.30 18.40 – – – – 18.33
Board approved hedging limits:
25% currency (R/US$) over a 24 month period; 20% gold over a 24 month period; 50% silver over a 24 month period.
WAFI-GOLPU UPDATE
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 continued during the September quarter.
KALGOLD EXPLORATION UPDATE
Harmony is pleased to announce an updated mineral resource estimate for Kalgold incorporating the exploration drill results up to
30 September 2018.
On 4 June 2018, Harmony announced encouraging drilling results at its Kalgold, open-pit operation in the North-West Province in the release
titled "Robust exploration drill results from Harmony's Kalgold open pit operation to underpin resource growth and expansion studies".
The Kalgold brownfields drill campaign resulted in drilling of 20 872m. Intercepts returned over the course of the programme outlined an
expanded, robust mineralized system with over 2.1 kilometres of strike, extending to in excess of 300m below surface (a full list of drill intercepts
is included with the SAMREC Table 1 report at https//www.harmony.co.za/what-we-do/exploration/kalgold-brownfields).
An updated mineral resource estimate incorporating exploration drill results up to 30 September 2018 was compiled post June 2018. The
final SAMREC compliant, independently audited, mineral resource declaration contains 76.5Mt @ 0.95 g/t Au for 2.34Moz Au, an increase of
1.05Moz (180%) from the 2017 estimate. Infill and scoping drilling continues.
Kalgold mineral resource statement as at 30 September 2018(1):
Resource category Mt Au (g/t) Au (koz)
Measured 11.3 0.85 310
Indicated 36.4 0.96 1 125
Inferred 28.7 0.98 903
Total 76.5 0.95 2 339
(1) Reported at 0.44 g/t cut-off within an optimised pit shell generated from Whittle 3D.
Mining studies have commenced to test a range of concepts to achieve a step change in the production profile of the operation through higher
mining and throughput rates.
Competent persons declaration
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, a full-time employee of Harmony, is the Lead Competent Person and consents to the inclusion in the report of the matters based on
the information in the form and context in which it appears.
Operating results – Quarter on Quarter (Rand/metric)
South Africa
Underground production Surface production
Three Central Total
months 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 Sep-18 423 276 61 118 197 161 180 166 66 1 648 1 561 981 1 071 418 4 031 5 679 988 6 667
Jun-18 428 257 54 107 180 169 187 164 67 1 613 1 436 971 1 027 400 3 834 5 447 1 008 6 455
Yield – g/tonne Sep-18 5.23 8.44 11.26 3.34 4.45 5.09 6.11 3.82 4.67 5.68 0.127 0.130 0.356 0.76 0.25 1.83 1.40 1.77
Jun-18 5.28 9.85 12.39 3.49 5.19 4.68 6.60 3.59 3.99 5.98 0.132 0.139 0.336 0.83 0.26 1.96 1.52 1.93
Gold produced – kg Sep-18 2 214 2 330 687 394 876 819 1 099 634 308 9 361 199 128 381 319 1 027 10 388 1 385 11 773
Jun-18 2 261 2 532 669 373 934 791 1 234 589 267 9 650 189 135 345 331 1 000 10 650 1 343 11 993
Gold sold – kg Sep-18 2 168 2 269 673 393 863 825 1 144 620 302 9 257 193 124 378 333 1 028 10 285 1 388 11 673
Jun-18 2 272 2 494 672 356 922 761 1 168 592 268 9 505 195 139 342 331 1 007 10 512 1 278 11 790
Gold price – R/kg Sep-18 582 719 547 560 582 866 583 364 583 346 581 578 577 753 583 050 583 414 573 527 552 083 580 589 573 000 580 084 572 283 573 403 549 372 570 545
received Jun-18 579 883 534 212 578 737 581 256 577 757 575 995 580 432 579 608 580 127 567 410 533 508 576 281 563 985 576 864 564 014 567 084 555 891 566 636
Gold Revenue (R'000) Sep-18 1 263 335 1 242 414 392 269 229 262 503 428 479 802 660 949 361 491 176 191 5 309 141 106 552 71 993 216 594 193 168 588 307 5 897 448 762 528 6 659 976
Jun-18 1 317 495 1 332 324 388 911 206 927 532 692 438 332 677 945 343 128 155 474 5 393 228 104 034 80 103 192 883 190 942 567 962 5 961 190 244 036 6 205 226
Cash operating (R'000) Sep-18 1 022 755 828 112 247 982 247 315 409 993 379 489 620 178 322 107 149 704 4 227 635 89 939 55 369 178 741 173 691 497 740 4 725 375 334 354 5 059 729
cost (net of by- Jun-18 960 052 768 919 234 963 234 619 378 687 342 405 531 707 294 964 148 712 3 895 028 83 670 49 918 151 026 159 675 444 289 4 339 317 123 716 4 463 033
product credits)
Inventory (R'000) Sep-18 (21 206) (32 696) (7 430) 392 (15 208) 3 336 20 083 (7 589) (4 206) (64 524) (3 217) (2 199) (2 219) 5 931 (1 704) (66 228) (11 775) (78 003)
movement Jun-18 2 550 (51 430) 4 940 (10 306) (6 268) (18 090) (34 551) 637 2 012 (110 506) 3 920 1 416 (968) (2 847) 1 521 (108 985) (31 687) (140 672)
Operating costs (R'000) Sep-18 1 001 549 795 416 240 552 247 707 394 785 382 825 640 261 314 518 145 498 4 163 111 86 722 53 170 176 522 179 622 496 036 4 659 147 322 579 4 981 726
Jun-18 962 602 717 489 239 903 224 313 372 419 324 315 497 156 295 601 150 724 3 784 522 87 590 51 334 150 058 156 828 445 810 4 230 332 92 029 4 322 361
Production profit (R'000) Sep-18 261 786 446 998 151 717 (18 445) 108 643 96 977 20 688 46 973 30 693 1 146 030 19 830 18 823 40 072 13 546 92 271 1 238 301 439 949 1 678 250
Jun-18 354 893 614 835 149 008 (17 386) 160 273 114 017 180 789 47 527 4 750 1 608 706 16 444 28 769 42 825 34 114 122 152 1 730 858 152 007 1 882 865
Capital (R'000) Sep-18 280 731 137 538 14 048 51 701 65 153 81 863 69 726 28 709 11 454 740 923 22 1 416 2 250 7 630 11 318 752 241 342 336 1 094 577
expenditure Jun-18 275 667 133 104 16 105 64 592 78 715 78 496 72 627 35 884 11 110 766 300 485 5 888 2 229 14 660 23 262 789 562 257 105 1 046 667
Cash operating – R/kg Sep-18 461 949 355 413 360 964 627 703 468 029 463 357 564 311 508 055 486 052 451 622 451 955 432 570 469 136 544 486 484 654 454 888 241 411 429 774
costs Jun-18 424 614 303 680 351 215 629 005 405 446 432 876 430 881 500 788 556 974 403 630 442 698 369 763 437 757 482 402 444 289 407 448 233 868 399 234
Cash operating – R/tonne Sep-18 2 418 3 000 4 065 2 096 2 081 2 357 3 445 1 940 2 268 2 565 58 56 167 416 123 832 338 759
costs Jun-18 2 243 2 992 4 351 2 193 2 104 2 026 2 843 1 799 2 220 2 415 58 51 147 399 116 797 356 770
Cash operating – R/kg Sep-18 588 747 414 442 381 412 758 924 542 404 563 311 627 756 553 338 523 240 530 772 452 065 443 633 475 042 568 404 495 675 527 302 488 585 522 747
cost and capital(2) Jun-18 546 536 356 249 375 288 802 174 489 724 532 113 489 736 561 711 598 584 483 039 445 265 413 378 444 217 526 692 467 551 481 585 393 699 477 426
All-in sustaining – R/kg Sep-18 580 236 413 411 396 073 745 913 542 925 555 341 640 421 573 206 539 440 532 929 449 451 432 121 472 942 579 483 498 120 529 424 506 911 526 747
cost Jun-18 525 012 418 590 383 340 776 149 490 703 521 646 488 998 581 252 616 728 494 544 451 667 411 669 445 284 521 339 466 879 489 026 429 519 486 641
Operating free % Sep-18 (3) 22 33 (30) 6 4 (4) 3 9 6 16 21 16 4 13 7 9 7
cash flow margin(3) Jun-18 6 32 35 (45) 14 4 11 4 (3) 14 19 30 21 10 18 14 (5) 13
(1)No production for Hidden Valley was capitalised during the September 2018 quarter. Ore milled for the June 2018 quarter includes
660 000 tonnes that was capitalised as part of pre-stripping of stages 5 & 6. Gold produced for the June 2018 quarter includes 814 kilograms
and gold sold 839 kilograms that was capitalised.
(2)Excludes investment capital for Hidden Valley included in the June 2018 quarter of R173 million.
(3)Excludes run of mine costs for Kalgold (Sep-18:R-3.188m, Jun-18:R2.472m) and Hidden Valley (Sep-18:R-16.349m, Jun-18:R-1.733m) as well as
Hidden Valley's investment capital as per note 2.
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
Dr 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
Telephone: +27 11 411 2314
Website: www.harmony.co.za
COMPANY SECRETARY
Telephone: +27 11 411 2094
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: +27 11 713 0800
E-mail: info@linkmarketservices.co.za
Fax: +27 86 674 2450
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@astfinancial.com
Toll free: +1-800-937-5449
Int: +1-718-921-8124
Fax: +1-718-765-8782
*ADR: American Depositary Receipt
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
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 is available on our website
(www.harmony.co.za/invest)
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the safe harbor provided
by Section 21E of the Exchange Act and Section 27A of the Securities Act of 1933, as amended
(the "Securities Act"), 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 forward-looking statements, including, among others, those relating to our future business
prospects, revenues, and the potential benefit of acquisitions (including statements regarding
growth and cost savings) wherever they may occur in this report and the exhibits, are necessarily
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 report.
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 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;
estimates of provision for silicosis settlement; statements regarding future debt repayments;
estimates of future capital expenditures; the success of our business strategy, development
activities and other initiatives; future financial position, plans, strategies, objectives, capital
expenditures, projected costs and anticipated cost savings and financing plans; 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, as well as at existing operations; 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 and the
availability, terms and deployment of capital; changes in government regulation and the political
environment, particularly tax, mining rights, environmental regulation and business ownership
including any interpretation thereof; fluctuations in exchange rates and currency devaluations
and other macroeconomic monetary policies; the adequacy of the Group's insurance coverage;
and socio-economic or political instability in South Africa, Papua New Guinea, Australia and
other countries in which we operate.
The foregoing factors and others described under "Risk Factors" should not be construed as
exhaustive.
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 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 report or to reflect the occurrence of unanticipated events, except as required by law. All
subsequent written or oral forward-looking statements attributable to Harmony or any person
acting on its behalf are qualified by the cautionary statements herein.
www.harmony.co.za
Johannesburg
6 November 2018
Date: 06/11/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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