Wrap Text
Interim results for the six months ended 31 December 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
FY19 INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
HALF YEAR ACHIEVEMENTS
- Improved safety performance - best ever, quarterly lost time injury
frequency rate of 4.84 achieved by the South African operations in the
December 2018 quarter
- 7% increase in underground recovered grade to 5.65g/t
- 34% increase in production - boosted by full six months of
Moab Khotsong and Hidden Valley
- R1.1 billion (US$81 million) operational free cash flow generated by
operations (more than 100% increase)
- Net debt reduced by R333 million (US$39 million) to R4.6 billion
(US$317 million)
- Wafi-Golpu memorandum of understanding agreement signed - key to
progressing the grant of the special mining lease
OPERATING RESULTS
Six Six
months months Six
ended ended months
December December Variance ended Variance*
2018 2017 % June 2018 %
Gold produced kg 23 359 17 418 34 20 775 12
oz 751 008 560 003 34 667 931 12
Underground grade g/t 5.65 5.26 7 5.69 (1)
Gold price received R/kg 572 898 580 672 (1) 561 689 2
US$/oz 1 258 1 348 (7) 1 418 (11)
Cash operating R/kg 429 860 419 440 (2) 422 880 (2)
costs US$/oz 944 974 3 1 068 12
Total costs and R/kg 525 674 494 369 (6) 503 178 (4)
capital(1) US$/oz 1 154 1 148 (1) 1 270 9
All-in sustaining R/kg 528 265 500 248 (6) 516 865 (2)
costs(2) US$/oz 1 160 1 161 - 1 307 11
Production profit R million 3 385 2 712 25 2 644 28
US$ million 239 203 18 214 12
Exchange rate R/US$ 14.17 13.40 6 12.30 15
* December 2018 six months and June 2018 six months comparison
(1) Excludes investment capital for Hidden Valley
(2) Excludes share-based payment charge
FINANCIAL RESULTS
Six Six
months months
ended ended
December December Variance
2018 2017 %
Basic earnings per share SA cents 15 203 (93)
US cents 1 15 (93)
Headline earnings R million 73 990 (93)
US$ million 5 74 (93)
Headline earnings per share SA cents 14 224 (94)
US cents 1 17 (94)
HARMONY'S ANNUAL REPORTS
Harmony's Integrated Annual Report, Financial Report, Mineral Reserves and
Resource 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)
SHAREHOLDER INFORMATION
Issued ordinary share capital at 31 December 2018 532 281 170
Issued ordinary share capital at 30 June 2018 500 251 751
Issued ordinary share capital at 31 December 2017 444 724 878
MARKET CAPITALISATION
At 31 December 2018 (ZARm) 13 413
At 31 December 2018 (US$m) 932
At 30 June 2018 (ZARm) 10 615
At 30 June 2018 (US$m) 774
At 31 December 2017 (ZARm) 10 627
At 31 December 2017 (US$m) 858
HARMONY ORDINARY SHARES AND ADR PRICES
12-month high (1 January 2018 - 31 December 2018) R31.50
for ordinary shares
12-month low (1 January 2018 - 31 December 2018) R19.00
for ordinary shares
12-month high (1 January 2018 - 31 December US$2.53
2018) for ADRs
12-month low (1 January 2018 - 31 December 2018) US$1.43
for ADRs
FREE FLOAT 100%
ADR RATIO 1:1
JSE LIMITED HAR
Range for six months (1 July 2018 - R20.63 - R31.27
31 December 2018 closing prices)
Average daily volume for the six months (1 July 2018 1 765 694
- 31 December 2018)
Range for previous six months (1 January 2018 R19.24 - R28.80
- 30 June 2018 closing prices)
Average daily volume for the previous six months 1 799 874
(1 January 2018 - 30 June 2018)
NEW YORK STOCK EXCHANGE HMY
including other US trading platforms
Range for six months (1 July 2018 U$1.44 - US$2.12
- 31 December 2018 closing prices)
Average daily volume for the six months (1 July 2018 3 071 356
- 31 December 2018)
Range for previous six months (1 January 2018 US$1.52 - US$2.50
- 30 June 2018 closing prices)
Average daily volume for the previous six months 5 016 078
(1 January 2018 - 30 June 2018)
Investors' calendar
H2 FY19 live presentation from Johannesburg 20 August 2019
Annual General Meeting 22 November 2019
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.
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 report or to
reflect the occurrence of unanticipated events, except as required by law. The foregoing
factors and others described under "Risk Factors" should not be construed as exhaustive.
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
The inclusion of Moab Khotsong and Hidden Valley in our asset
portfolio has boosted Harmony's production and cash flow in the first
half of the 2019 financial year (FY19), demonstrating the quality of
these assets in line with our investment strategy.
We remain committed to our strategy of producing safe, profitable
ounces and increasing our margins to ensure our operations benefit
from the positive sentiment in the gold market.
SAFETY
Sadly, the South African operations had four fatalities. The employees
who lost their lives were Michael Plaatjies (team leader at Kusasalethu),
Tsepo Libate (scraper winch operator at Tshepong), Tsietsi Manoto
(artisan at Kusasalethu) and Mvuyisi Mayekiso (locomotive operator
at Moab Khotsong). Our heartfelt condolences go to their families,
friends and colleagues.
Harmony's risk management approach enables our people to
understand and appropriately manage hazards, risks and controls.
Critical control management, positive safety behaviour reinforcement
and pro-active risk management are key components of our safety
approach.
The group achieved a notable improvement in its safety performance
measure of the lost time injury frequency rate (LTIFR) of 5.52 (per
1 million hours) (12% improvement compared to 6.26 in the previous
comparative period).
As part of the Minerals Council of South Africa's campaign to
recommit to the shared goal of zero harm, safety days were held at
each South African operation during October 2018. This successful
industry initiative reinforced Harmony's approach to safe behaviour
and the rights and responsibilities that all employees have in ensuring
a safe workplace.
OPERATIONAL RESULTS - H1FY18 TO H1FY19
Gold production for the group for the six months ended 31 December
2018 increased by 5 941kg (34%) to 23 359kg (751 008oz), compared
to 17 418kg (560 003oz) for the six months ended 31 December 2017.
Gold production in the first half of FY19 was significantly boosted by
the acquisition of Moab Khotsong (effective 1 March 2018 in FY18)
and Hidden Valley (which achieved commercial levels of production in
June 2018).
The performance from our operations is summarised below:
- Moab Khotsong: the first full six month inclusion of Moab Khotsong
in our portfolio resulted in gold production of 4 418kg (142 042oz),
achieving a recovered grade of 8.30g/t. Safety enhancements
in the middle mine during the first half of FY19 resulted in lower
production from this section. The planned upgrade to split reef and
waste to the plant will improve future grade recoveries;
- Hidden Valley: safety, good operational momentum and disciplined
cost management contributed to Hidden Valley achieving gold
production of 3 111kg (100 021oz) and generating operational free
cash flow of R196 million (US$14 million) (at a margin of 11%).
The mine is on track to achieve production guidance of 200 000oz.
Stripping of the cutbacks will continue for the next two and a half
years to deliver an average life of mine all-in sustaining cost of below
US$950/oz;
- Kusasalethu: gold production increased by 8%, as a result of a 10%
increase in tonnes milled to 358 000t, offsetting the 2% decrease in
recovered grade to 6.74g/t. The operation has achieved operational
free cash flow for the fifth consecutive six month period;
- Doornkop: achieved 3.75 million fatality free shifts in December 2018
(achievement of more than 4 years). Gold production increased by
7% to 1 766kg (56 778oz), as a result of a 12% increase in tonnes
milled offsetting the 4% decrease in recovered grade 4.54g/t;
- Unisel: the operation was successfully restructured in the second half
of FY18 where mining is focused on targeted high grade areas of
the shaft pillar. Operational free cash flow increased by 197% to
R77 million (183% to US$5 million) as a result of the 61% increase
in recovered grade to 5.12g/t. Gold production decreased by 7% to
665kg (21 380oz);
- Waste rock dumps: gold production increased by 80%, as a result
of a 116% increase in tonnes milled to 2.2 Mt. Higher production
is mainly due to the treatment of Moab Khotsong rock dumps (not
included in Harmony's portfolio in the comparative six month period)
and increased production from processing of the Doornkop waste
rock dumps which only commenced in November 2017;
- Central plant reclamation: gold production increased by 16%
to 283kg (9 098oz), due to a 14% increase in grade recovered
to 0.146g/t and 2% increase in tonnes processed to 1 936 000t;
- Kalgold: gold production increased by 4% to 630kg (20 255oz), due
to a 7% increase in tonnes milled, offsetting the 4% decrease in
grade recovered;
- Phoenix (tailings retreatment): gold production increased by 2% to
393kg (12 635oz), due to a 3% increase in tonnes processed to
3 151 000t;
- Target 1: gold production decreased by 4%, due to a 16% decrease
in tonnes milled, offsetting the 14% increase in recovered grade to
4.81g/t;
- Tshepong operations: gold production decreased by 17%, due to
a 11% decrease in recovered grade to 5.04g/t and a 7% decrease
in tonnes milled. The performance and the momentum of the
Tshepong Operations have been impacted by a lack of flexibility due
to a reduction in the availability of stoping panels to mine, safety
related stoppages and measures taken to deal with the spate of
illegal mining incidents. The management team are working on
improving the performance of the mine, focusing on speeding up
development and improving overall mining and grade discipline;
- Joel: In line with Joel's operational plan, gold production decreased
by 18%, as a result of a 9% decrease in recovered grade to 3.28g/t,
and a 10% decrease in tonnes milled. The Joel decline project is
nearing completion and development in the footwall areas is
continuing. Grades are expected to improve towards the end of
FY19;
- Masimong: gold production decreased by 23% to 1 152kg
(37 038oz), mainly due to the 19% decrease in recovered grade to
3.69g/t as mining of the higher grade B reef was impacted by an
underground fire. Tonnes milled decreased by 5%.
The December six month period for our South African operations is
seasonally impacted by two months of higher winter electricity tariffs
and annual wage (bargaining unit) increases. The production from
Moab Khotsong aided in managing unit costs. Cash operating unit costs
increased by 2% to R429 860/kg in the six months ended 31 December
2018 (R419 440/kg for the six months ended 31 December 2017).
In US dollar terms, cash operating unit costs were impacted by the
weaker average Rand/US$ exchange rate, resulting in a decrease of
3% to US$944/oz.
All-in sustaining unit costs for the group increased by 6% to R528 265/kg
in the six months ended 31 December 2018 when compared to the
previous comparable period of 31 December 2017. Lower production
at Tshepong, deferred stripping at Hidden Valley and increased
capital development expenditure at Tshepong, Joel, Doornkop and
Target 1 increased all-in sustaining unit cost for the December 2018
six months. In US dollar terms all-in sustaining unit costs remained flat
at US$1 160/oz, mainly due to the weakening of the Rand against the
US dollar in the six months ended 31 December 2018.
Total capital expenditure decreased by 6% to R2.24 billion (11% to
US$158 million). The comparative December 2017 six month period
included R1.1 billion (US$82 million) related to the Hidden Valley
reinvestment.
FINANCIAL RESULTS - H1FY18 TO H1FY19
Revenue
Revenue increased by R3.9 billion or 40% (US$237 million or 32%)
mainly due to the inclusion of the Moab Khotsong operations
(R2.7 billion (US$190 million)) and Hidden Valley's production
(R1.7 billion (US$123 million) increase) for the full six month period to
31 December 2018. The average gold price received declined by 1%
to R572 898/kg from R580 672/kg in December 2017.
Forward gold sale contracts of 3 577kg (115 000oz) with an average
price of R654 245/kg matured during the period.
Production costs
Production costs increased by R3.2 billion or 45% (US$200 million or
37%) during the December 2018 six months mainly due to the addition
of Moab Khotsong (R1.8 billion (US$125 million)) and Hidden Valley's
return to full production (R836 million (US$59 million)).
Amortisation and depreciation
Depreciation is higher in the December 2018 six months owing
mainly to Hidden Valley's return to full production which contributed
R896 million (US$63 million) of the increase.
Net profit
The net profit for the six months ended 31 December 2018 was
R75 million (US$5 million), compared to a profit of R897 million
(US$65 million) for the comparative period. Headline earnings
amounted to 14 SA cents per share (1 US cents per share) compared to
224 SA cents per share (17 US cents) for the December 2017 period.
Borrowings
During November 2018, Harmony concluded a new four-year
R2.0 billion term and revolving credit facility with Nedbank Limited
(Nedbank) and ABSA Bank Limited, to replace the Nedbank R1 billion
revolving credit facility. The debt covenants remained unchanged
except for the tangible net worth to total debt covenant ratio, which
shall not be less than 4.5 times to June 2019, thereafter, not less than
5 times.
Net debt decreased to R4 575 million (US$317 million) at the end
of December 2018 from R4 908 million (US$356 million) at the end
of June 2018.
For further details refer to note 11 below.
Hedging activity
The hedging programmes realised gains from all hedging programmes
of R480 million for the December 2018 period. Management continues
to top-up these programmes when the market presents attractive
opportunities to do so.
Refer to note 9 below for further detail.
WAFI-GOLPU UPDATE
As announced on 11 December 2018, the Wafi-Golpu Joint Venture
(WGJV) signed a Memorandum of Understanding (MOU) with the
Independent State of Papua New Guinea (PNG) which affirmed the
parties' intent to proceed with the Wafi-Golpu Project, subject to
finalisation of the permitting process and Harmony and Newcrest
Mining Limited board approvals. The MOU also re-affirmed the
intention of the parties to complete the permitting process and achieve
the grant of a Special Mining Lease (SML) by 30 June 2019.
The WGJV is completing an approval process with the relevant PNG
authorities to commence a substantial work program, including
establishment of underground access for further drilling of the Golpu
deposit and the construction of a bridge over the Markham River,
which is an integral feature of the proposed new Northern Access road
from the Highlands Highway to the mine site.
Golpu continues to be a potential game-changer for Harmony.
ORGANIC GROWTH OPPORTUNITIES
Exploration and project studies continued and R234 million
(US$17 million) was spent in H1FY19. We recognise that disciplined
capital allocation is essential in generating shareholder return.
Key components of our capital allocation approach include:
- Safety - safety and surface projects are prioritised. Mining rates and
technical aspects of pillar mining are intensely scrutinised.
- Projects to generate high returns - project internal rates of return
(IRR) to exceed 15%.
- Affordability - project cash flows and capital intensity is weighed
against group and operational cash flow projections and
requirements. Ounce replacement and growth are aimed at securing
healthy margins.
- Project management - focused project management is crucial to
enhancing project return and ensuring operational momentum.
Most recently, excellent project management was fundamental
to the Hidden Valley re-investment project and Central Plant
Reclamation tailings plant conversion - both projects delivered safely,
below budget and on schedule.
Summary of Harmony's pipeline of organic growth opportunities:
Concept/
Permitting Pre- exploration
phase Feasibility feasibility phase
Wafi-Golpu Central Plant Mispah Tailings Kalgold
Reclamation
- Copper-gold - Tailings - Tailings - Near mine
project expansion retreatment brownfields
exploration
- PNG, - SA, surface - SA, surface - SA, open pit
mechanised
block-caving Great Noligwa Hidden Valley Target North
- High grade - Extension - Greenfields
pillar - PNG, open exploration
extraction pit - SA,
- SA, underground
underground
Zaaiplaats
- High grade
mine
extension
- SA,
underground
An update on the various studies will be provided in the second half
of FY19.
SILICOSIS CLASS ACTION UPDATE
The Gold Working Group (of which Harmony is a member) continue
to focus on a comprehensive and sustainable solution for the
compensation of occupational lung diseases in the mining industry.
On 13 December 2018, the High Court of South Africa (High Court)
heard the Gold Mineworkers' Class Action Settlement Agreement
(Settlement Agreement) signed on 3 May 2018.
A court order was granted setting out the process the Working Group
should follow in which the settlement will be made a final order of the
High Court.
The return date hearing for objections to a final order has been set for
29 May 2019 to 31 May 2019. Should there be no objections to the
settlement, the High Court will sit on 3 April 2019.
Previous gold mine workers and their families are encouraged to visit
www.silicosissettlement.co.za or www.harmonyreconnecting.co.za or
contacting 0801 000 240 for more details.
CONCLUSION
Continuous focus on safety, production and cost management - inputs
within our control - are critical to generating operational free cash flow.
We have seen significant improvements at our mines in terms of safety,
with the best ever LTIFR being recorded in Harmony's history. Capital
allocation that supports our strategy remains a priority.
The group is on track to achieving production guidance of 1.45 million
ounces. The first half performance from certain South African
operations has resulted in revising our all-in sustaining unit cost
guidance for FY19 to range between R520 000/kg and R530 000/kg,
instead of R515 000/kg previously guided.
OPERATING RESULTS - SIX MONTHLY (RAND/METRIC)
South Africa
Underground production Surface production
Six Total Central Total
months Tshepong Moab Under- plant Total South Hidden Total
ended operations Khotsong Bambanani Joel Doornkop Target 1 Kusasalethu Masimong Unisel ground Phoenix reclamation Dumps Kalgold Surface Africa Valley(1) Harmony
Ore milled - t'000 Dec-18 838 532 118 226 389 312 358 312 130 3 215 3 151 1 936 2 222 827 8 136 11 351 2 037 13 388
Dec-17 897 - 122 251 347 371 325 330 225 2 868 3 073 1 900 1 030 770 6 773 9 641 723 10 364
Yield - g/tonne Dec-18 5.04 8.30 10.82 3.28 4.54 4.81 6.74 3.69 5.12 5.65 0.125 0.146 0.354 0.76 0.26 1.78 1.53 1.74
Dec-17 5.68 - 11.56 3.62 4.74 4.22 6.91 4.56 3.18 5.26 0.125 0.128 0.423 0.79 0.25 1.74 1.12 1.72
Gold produced - kg Dec-18 4 222 4 418 1 277 742 1 766 1 500 2 414 1 152 665 18 156 393 283 786 630 2 092 20 248 3 111 23 359
Dec-17 5 093 - 1 410 908 1 646 1 564 2 245 1 504 715 15 085 384 243 436 608 1 671 16 756 662 17 418
Gold sold - kg Dec-18 4 250 4 449 1 284 756 1 774 1 513 2 506 1 157 672 18 361 387 286 772 647 2 092 20 453 3 062 23 515
Dec-17 5 087 - 1 412 936 1 570 1 580 2 200 1 502 715 15 002 388 247 437 572 1 644 16 646 551 17 197
Gold price received - R/kg Dec-18 580 735 556 383 581 450 581 413 583 439 581 461 579 209 581 584 580 263 575 061 560 845 582 175 574 679 582 329 575 511 575 107 558 142 572 898
Dec-17 581 912 - 582 493 580 839 585 845 580 493 581 545 580 936 580 827 581 958 550 634 583 619 579 410 586 521 575 725 581 343 543 805 580 672
Gold revenue (R'000) Dec-18 2 468 125 2 475 349 746 582 439 548 1 035 020 879 751 1 451 499 672 893 389 937 10 558 704 217 047 166 502 443 652 376 767 1 203 968 11 762 672 1 709 032 13 471 704
Dec-17 2 960 184 - 822 480 543 665 919 777 917 179 1 279 398 872 566 415 291 8 730 540 213 646 144 154 253 202 335 490 946 492 9 677 032 164 773 9 841 805
Cash operating cost (net (R'000) Dec-18 2 016 856 1 587 279 488 266 485 507 803 536 769 217 1 193 581 621 814 291 049 8 257 105 174 677 115 754 354 949 346 315 991 695 9 248 800 792 289 10 041 089
of by-product credits)* Dec-17 1 970 594 - 452 451 464 715 687 247 674 980 1 049 926 591 135 437 507 6 328 555 163 428 93 354 174 170 275 605 706 557 7 035 112 104 184 7 139 296
Inventory movement (R'000) Dec-18 11 327 (6 367) 3 453 7 038 (1 884) 4 782 43 247 3 071 (1 516) 63 151 (2 881) 1 889 (6 434) 6 670 (756) 62 395 (16 467) 45 928
Dec-17 (348) - (1 038) 15 302 (33 780) 8 792 (21 736) 234 (272) (32 846) 1 171 3 024 122 (18 195) (13 878) (46 724) 37 694 (9 030)
Operating costs (R'000) Dec-18 2 028 183 1 580 912 491 719 492 545 801 652 773 999 1 236 828 624 885 289 533 8 320 256 171 796 117 643 348 515 352 985 990 939 9 311 195 775 822 10 087 017
Dec-17 1 970 246 - 451 413 480 017 653 467 683 772 1 028 190 591 369 437 235 6 295 709 164 599 96 378 174 292 257 410 692 679 6 988 388 141 878 7 130 266
Production profit (R'000) Dec-18 439 942 894 437 254 863 (52 997) 233 368 105 752 214 671 48 008 100 404 2 238 448 45 251 48 859 95 137 23 782 213 029 2 451 477 933 210 3 384 687
Dec-17 989 938 - 371 067 63 648 266 310 233 407 251 208 281 197 (21 944) 2 434 831 49 047 47 776 78 910 78 080 253 813 2 688 644 22 895 2 711 539
Capital expenditure (R'000) Dec-18 583 574 286 019 32 030 97 021 144 407 152 287 157 953 54 052 22 388 1 529 731 1 667 2 622 5 334 28 265 37 888 1 567 619 670 515 2 238 134
Dec-17 476 946 - 33 326 128 194 126 919 166 571 150 025 62 563 56 984 1 201 528 1 000 7 672 - 57 040 65 712 1 267 240 1 107 987 2 375 227
Cash operating costs - R/kg Dec-18 477 702 359 275 382 354 654 322 455 003 512 811 494 441 539 769 437 668 454 787 444 471 409 025 451 589 549 706 474 042 456 776 254 673 429 860
Dec-17 386 922 - 320 887 511 801 417 526 431 573 467 673 393 042 611 898 419 526 425 594 384 173 399 472 453 298 422 835 419 856 393 147 419 440
Cash operating costs - R/tonne Dec-18 2 407 2 984 4 138 2 148 2 066 2 465 3 334 1 993 2 239 2 568 55 60 160 419 122 815 389 750
Dec-17 2 197 - 3 709 1 851 1 981 1 819 3 231 1 791 1 944 2 207 53 49 169 358 104 730 440 723
Cash operating cost - R/kg Dec-18 615 924 424 015 407 436 785 078 536 774 614 336 559 873 586 689 471 334 539 041 448 712 418 290 458 375 594 571 492 152 534 197 470 204 525 674
and Capital(2) Dec-17 480 569 - 344 523 652 983 494 633 538 076 534 499 434 640 691 596 499 177 428 198 415 745 399 472 547 113 462 160 495 485 423 804 494 369
All-in sustaining cost - R/kg Dec-18 601 206 424 491 424 467 757 922 537 394 605 434 573 049 602 209 478 444 538 390 448 225 417 000 458 354 606 924 496 775 533 241 495 022 528 265
Dec-17 483 982 - 359 282 590 571 510 253 539 615 550 625 450 373 691 636 503 809 426 802 405 814 398 838 565 847 464 593 499 900 519 338 500 248
Operating free cash flow % Dec-18 (5) 24 30 (33) 8 (5) 7 - 20 7 19 29 19 - 14 8 11 8
margin(3) Dec-17 17 - 41 (9) 11 8 6 25 (19) 14 23 30 31 - 18 14 (89) 12
(1) No production for Hidden Valley was capitalised during the six months ending December 2018. Ore milled for the six month ended December 2017 includes
486 000 tonnes that was capitalised as part of the pre-stripping of stages 5 and 6. Gold produced for the six months ended December 2017 includes 397 kilograms
and gold sold 248 kilograms that was capitalised.
(2) Excludes investment capital for Hidden Valley included in the June 2018 quarter of R1 100 million.
(3) Excludes run of mine costs for Kalgold (Dec-18: R-1.288 million, Dec-17: R-4.333 million) and Hidden Valley (Dec-18: R-50.59 million, Dec-17: R10.016 million)
as well as Hidden Valley's investment capital as per note 2.
*Reconciliation of revenue and production cost to the Income Statement is performed in reconciliation of segment information note in the financial statements.:
CONDENSED CONSOLIDATED INCOME STATEMENTS (RAND)
Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
(Reviewed) (Reviewed) (Audited)
Figures in million Notes Restated* Restated*
Revenue 2 13 789 9 875 20 452
Cost of sales 3 (12 919) (8 838) (23 596)
Production costs (10 404) (7 163) (15 084)
Amortisation and depreciation (2 119) (1 253) (2 570)
Impairment of assets - (116) (5 336)
Other items (396) (306) (606)
Gross profit/(loss) 870 1 037 (3 144)
Corporate, administration and other expenditure (388) (303) (813)
Exploration expenditure (72) (81) (135)
Gains on derivatives 4 20 337 99
Other operating income/(expenses) 5 (264) 208 (667)
Operating profit/(loss) 166 1 198 (4 660)
Acquisition related costs - (44) (98)
Share of profits from associates 24 33 38
Investment income 141 226 343
Finance costs (208) (157) (330)
Profit/(loss) before taxation 123 1 256 (4 707)
Taxation 6 (48) (359) 234
Current taxation (31) (335) (204)
Deferred taxation (17) (24) 438
Net profit/(loss) for the period 75 897 (4 473)
Attributable to:
Owners of the parent 75 897 (4 473)
Earnings per ordinary share (cents) 7
Basic earnings 15 203 (1 003)
Diluted earnings 13 197 (1 004)
*Refer to note 1 for detail. The restated amounts are unaudited
The accompanying notes are an integral part of these condensed consolidated financial statements.
The condensed consolidated financial statements for the six months ended 31 December 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 12 February 2019. These condensed consolidated
financials have been reviewed by the group's external auditors, PricewaterhouseCoopers Incorporated (see note 20).
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(RAND)
Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
Figures in million (Reviewed) (Reviewed) (Audited)
Net profit/(loss) for the period 75 897 (4 473)
Other comprehensive income for the period, net of income tax (207) (475) (660)
Items that may be reclassified subsequently to profit or loss: (207) (475) (647)
Foreign exchange translation gain/(loss) 81 (400) 83
Remeasurement of rand gold hedging contracts
Unrealised gain on Rand gold contracts 3 407 273
Released to revenue (365) (503) (1 197)
Deferred taxation thereon 74 21 194
Items that will not be reclassified to profit or loss: - - (13)
Remeasurement of retirement benefit obligation
Actuarial loss recognised during the period - - (11)
Deferred taxation thereon - - (2)
Total comprehensive income for the period (132) 422 (5 133)
Attributable to:
Owners of the parent (132) 422 (5 133)
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (RAND)
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018 (REVIEWED)
Accumulated Other
Figures in million Share capital loss reserves Total
Balance - 30 June 2018 29 340 (9 103) 5 145 25 382
Impact of adopting IFRS 9 (refer to note 1) - - 82 82
Restated opening balance - 1 July 2018 29 340 (9 103) 5 227 25 464
Issue of shares 211 - - 211
Share-based payments - - 143 143
Net profit for the period - 75 - 75
Other comprehensive income for the period - - (207) (207)
Balance - 31 December 2018 29 551 (9 028) 5 163 25 686
Balance - 30 June 2017 28 336 (4 486) 5 441 29 291
Share-based payments 1 - 190 191
Net profit for the period - 897 - 897
Other comprehensive income for the period - - (475) (475)
Dividends paid(1) - (154) - (154)
Balance - 31 December 2017 28 337 (3 743) 5 156 29 750
(1) Dividend of 35 SA cents declared on 13 August 2017.
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS (RAND)
At At At
31 December 30 June 31 December
2018 2018 2017
Figures in million Notes (Reviewed) (Audited) (Reviewed)
ASSETS
Non-current assets
Property, plant and equipment 31 538 31 001 30 954
Intangible assets 515 515 600
Restricted cash 85 77 70
Restricted investments 3 359 3 271 2 822
Investments in associates 75 84 79
Inventories 46 46 38
Trade and other receivables 259 253 240
Derivative financial assets 9 123 84 258
Other non-current assets 61 11 5
Total non-current assets 36 061 35 342 35 066
Current assets
Inventories 1 795 1 759 1 370
Restricted cash 41 38 36
Trade and other receivables 1 188 1 139 993
Derivative financial assets 9 206 539 1 595
Cash and cash equivalents 1 388 706 1 055
Total current assets 4 618 4 181 5 049
Total assets 40 679 39 523 40 115
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 12 29 551 29 340 28 337
Other reserves 5 163 5 145 5 156
Accumulated loss (9 028) (9 103) (3 743)
Total equity 25 686 25 382 29 750
Non-current liabilities
Deferred tax liabilities 1 093 1 147 1 704
Provision for environmental rehabilitation 3 436 3 309 2 661
Provision for silicosis settlement 10 964 925 953
Retirement benefit obligation 191 186 183
Borrowings 11 5 871 4 924 2 566
Other non-current liabilities 41 41 9
Derivative financial liabilities 9 55 10 5
Total non-current liabilities 11 651 10 542 8 081
Current liabilities
Borrowings 11 92 690 -
Trade and other payables 2 947 2 704 2 258
Derivative financial liabilities 9 303 205 26
Total current liabilities 3 342 3 599 2 284
Total equity and liabilities 40 679 39 523 40 115
The accompanying notes are an integral part of these condensed financial statements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (RAND)
Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
Figures in million Notes (Reviewed) (Reviewed) (Audited)
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated by operations 2 810 2 044 4 289
Interest received 34 44 82
Interest paid (190) (60) (180)
Income and mining taxes paid (4) (196) (307)
Cash generated from operating activities 2 650 1 832 3 884
CASH FLOW FROM INVESTING ACTIVITIES
Increase in restricted cash (8) (22) (32)
Decrease in amounts invested in restricted investments 3 2 -
Consideration paid for the acquisition of Moab Khotsong operations 8 - - (3 474)
Redemption of preference shares from associates 32 - -
Capital distributions from investments 30 - -
Proceeds from disposal of property, plant and equipment 2 1 2
Additions to property, plant and equipment 14 (2 400) (2 565) (4 571)
Cash utilised by investing activities (2 341) (2 584) (8 075)
CASH FLOW FROM FINANCING ACTIVITIES
Borrowings raised 11 1 122 2 856 6 937
Borrowings repaid 11 (982) (2 147) (4 063)
Proceeds from the issue of shares 12 211 - 1 003
Dividends paid - (154) (154)
Cash generated from financing activities 351 555 3 723
Foreign currency translation adjustments 22 6 (72)
Net increase/(decrease) in cash and cash equivalents 682 (191) (540)
Cash and cash equivalents - beginning of year 706 1 246 1 246
Cash and cash equivalents - end of year 1 388 1 055 706
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 31 December 2018 (Rand)
1. ACCOUNTING POLICIES
Basis of accounting
The condensed consolidated interim financial statements are prepared in accordance with International Financial Reporting
Standards, IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the
Companies Act of South Africa. The accounting policies applied in the preparation of these interim financial statements are in terms
of International Financial Reporting Standards (IFRS) and are consistent with those applied in the previous consolidated annual
financial statements except for the changes discussed below.
The group adopted IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments on 1 July 2018. The group
has also changed its accounting policy in respect of by-product income. The impact of the changes are disclosed below.
Impact of the adoption of IFRS 15 ? Revenue from Contracts with Customers
Scope of IFRS 15
The group's contracts that are in scope of the new revenue standard include gold, silver and uranium contracts. Income derived from
all of these products are presented in revenue.
Revenue measurement
Under IAS 18 revenue was measured at the fair value of the consideration received and discounted to the present value of
consideration due if payment extended beyond normal credit terms. Historically payments have not extended beyond normal credit
terms and the amount of revenue recognised equated to the transaction price.
Under IFRS 15, revenue is measured at the amount of consideration to which an entity expects to be entitled in exchange for
transferring goods to a customer. The group's contracts do not contain elements of variable consideration, non-cash consideration or
significant financing components and therefore the amount of revenue recognised equates to the transaction price.
Revenue recognition
Under IAS 18, revenue was recognised for the South African operations when the goods were delivered and a certificate of sale for
gold and confirmation of transfer for uranium was issued. At Hidden Valley, the point of recognition was when the metal account was
credited. This was taken to be the point in time at which the customer accepted the goods and the related risks and rewards of
ownership transfered.
IFRS 15 requires revenue to be recognised when a customer obtains control of the goods. The group has assessed that the drivers
for revenue recognition are unchanged as this is the point when control of the goods effectively transfers to the customer.
Hedge accounting
The effective portion of gains or losses on the derivatives designated as cash flow hedging items (forecast sales transactions) are
recognised in revenue when the forecast sales transactions occur. The adoption of IFRS 15 Revenue from Contracts with Customers
and IFRS 9 Financial Instruments did not have an impact on the amount or timing of the hedging gains or losses recognised in
revenue.
Change in accounting policy - accounting for by-products
Previously, income from silver and uranium sales were considered by-product revenue and were recorded as a credit to cost of sales.
The increasing significance of by-product income warrants the by-products to be considered an output of the group's ordinary
activities and therefore income from these products are considered to be part of the group's revenue.
The change in accounting policy results in an increase in revenue and a consequential increase in costs of sales and therefore does
not have an impact on previously reported gross profit or loss.
The group has applied the change retrospectively to each prior reporting period presented in accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors.
Six months
ended Year ended
31 December 30 June
Figures in million 2017 2018
Revenue as previously reported 9 842 20 359
By-product revenue 33 93
Revenue (restated) 9 875 20 452
Cost of sales as previously reported 8 805 23 503
By-product revenue 33 93
Cost of sales (restated) 8 838 23 596
Impact of the adoption of IFRS 9 ? Financial Instruments
Classification and measurement
This standard replaces IAS 39, Financial Instruments: Recognition and Measurement. In terms of IFRS 9 financial instruments are
measured either at amortised cost or at fair value. Movements in fair value are presented in either profit or loss or other
comprehensive income (OCI), subject to certain criteria being met.
The new guidance did not have a significant impact on the classification and measurement of the group's financial assets for the
following reasons:
? An election was made to classify the equity instruments previously classified as available-for-sale as at fair value through other
comprehensive income (FVOCI);
? Equity investments previously measured at fair value through profit or loss (FVTPL) are classified and measured on the same
basis under IFRS 9;
? Debt instruments previously classified as held-to-maturity and measured at amortised cost are classified and measured at
amortised cost under IFRS 9;
? Derivative financial instruments continue to be classified and measured at FVTPL and
? Loans and other receivables previously classified as at amortised cost continue to be classified as at amortised cost as the
group's business model is to hold these instruments in order to collect contractual cash flows, which is solely payments of principal
and interest.
There was no impact on the group's accounting for financial liabilities as the new requirements only affected the accounting for
financial liabilities that are designated at FVTPL and currently the group's does not have any such liabilities.
Impairment
The change from the "incurred loss" model to the "expected credit loss" model did not have a material impact on the measurement of
financial assets.
Hedge accounting
Except for assessing hedge effectiveness, accounting for the group's defined hedge relationships remained unchanged under
IFRS 9. The new requirements will be applied prospectively.
Transition
On 1 July 2018 management classified its financial instruments into the appropriate IFRS 9 categories. In line with the transitional
provisions of IFRS 9, the group has applied the standard retrospectively without restating any comparative figures. IFRS 9 eliminates
the exemption provided under IAS 39 where unquoted equity investments were measured at cost when fair value could not be
reliably measured. This change resulted in revaluing one of our unlisted investments from cost of R0 milion to fair value of
R82 million. The difference between the carrying amounts of financial instruments before the adoption of IFRS 9 and the new
carrying amount calculated in accordance with the standard at 1 July 2018 was recognised directly in the opening balance of equity.
Refer to the statements of changes in equity.
Impact of IFRS 16 ? Leases (issued but not yet adopted)
The new standard on leases, effective for financial periods beginning on or after 1 January 2019, requires lessees to recognise a
lease liability reflecting future lease payments and a ?right-of-use asset' for virtually all lease contracts (with limited exceptions),
whereas previously, lessees were required to make a distinction between a finance lease (on-balance sheet) and an operating lease
(off-balance sheet).
The guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts) has been
updated, affecting both lessees and lessors, although the accounting requirements by lessors remain largely unchanged.
The group is still assessing the impact of the new standard. In general, it is expected that assets and liabilities will increase as right of
use assets and lease liabilities will be recognised for most of the group's operating leases where the group is the lessee. This is
expected to lead to an increase in depreciation and finance costs and a change in the classification of cash flows. The group will
adopt the standard on 1 July 2019.
No other standards, amendments or interpretations became effective during the current reporting period that had a material impact
on the group.
2. REVENUE
Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
(Reviewed) (Reviewed) (Audited)
Figures in million Restated Restated
Gold 13 107 9 339 19 162
Hedging gain(1) 365 503 1 197
Other metal sales 317 33 93
Silver 227 33 74
Uranium 90 - 19
Total revenue(2) 13 789 9 875 20 452
(1) Relates to the realised effective portion of the Rand gold hedge.
(2) The increase in revenue for the December 2018 period related to the addition of the Moab Khotsong operations (R2.7 billion) and Hidden Valley's
return to commercial levels of production (R1.7 billion increase).
Disaggregation of revenue
A geographical analysis of gold revenue is provided in the segment report. A reconciliation of the segment revenue to the condensed
consolidated income statement is provided in note 18. Revenue from silver sales is derived largely from Hidden Valley while revenue
from the sale of uranium is derived from the Moab Khotsong operations.
Major customer
Total revenue from Hidden Valley represents 12% of the group's total revenue and is derived from one customer. Gold revenue from
the South African operations is derived from multiple customers.
3. COST OF SALES
Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
(Reviewed) (Reviewed) (Audited)
Figures in million Restated Restated
Production costs - excluding royalty (a) 10 308 7 072 14 933
Royalty expense 96 91 151
Amortisation and depreciation (b) 2 119 1 253 2 570
Impairment of assets (c) - 116 5 336
Rehabilitation expenditure 51 47 67
Care and maintenance cost of restructured shafts 62 60 128
Employment termination and restructuring costs (d) 162 92 208
Share-based payments 92 123 244
Other 29 (16) (41)
Total cost of sales 12 919 8 838 23 596
(a) Production costs for the six months ended 31 December 2018 increased mainly due to the addition of the Moab Khotsong
operations (R1.8 billion) and Hidden Valley's return to commercial levels of production (R836 million increase).
(b) Depreciation for the six months ending 31 December 2018 increased mainly due to Hidden Valley's return to commercial
levels of production which contributed a R896 million increase.
(c) At 31 December 2018, management assessed the potential triggers for impairment. All key assumptions disclosed remained
the same as at 30 June 2018, with the exception of the gold price on the South African operations which was increased from
R535 000/kg to R550 000/kg, and the discount rate on Tshepong Operations which increased from 8.7% to 9.2%. The
recoverable amounts of the cash generating units were determined on a fair value less cost to sell basis. This is a fair value
measurement classified as level 3. The impairment test performed did not result in any impairments or reversals at any of the
operations.
(d) The increase for the six months ended 31 December 2018 relates to the extension of the voluntary severance programme in
an effort to curtail costs.
4. 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 and the amortisation of day one gains and losses for hedging instruments.
Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
Figures in million (Reviewed) (Reviewed) (Audited)
Derivative gains(1) 35 360 136
Day one loss amortisation (15) (23) (37)
Total gains on derivatives 20 337 99
(1) Refer to note 9 for further information.
5. OTHER OPERATING INCOME/(EXPENSES)
Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
Figures in million (Reviewed) (Reviewed) (Audited)
Social investment expenditure (56) (26) (73)
Foreign exchange translation gain/(loss)1 (164) 177 (682)
Silicosis settlement reversal of provision - - 68
Reversal of provision for ARM BEE loan - 40 43
Bad debts provision (38) (5) (7)
Other operating income/(expenses) (6) 22 (16)
Total other operating income/(expenses) (264) 208 (667)
(1) Refer to note 11 for the foreign exchange translation gain/(loss) on the US$ borrowings.
6. TAXATION
The taxation expense for the six months ended 31 December 2018 is lower than the comparative period due to higher foreign exchange
gains on the USD loans, higher derivative gains and mining profits earned during the six months ended 31 December 2017.
7. EARNINGS PER ORDINARY SHARE
Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
(Reviewed) (Reviewed) (Audited)
Weighted average number of shares (million) 515 441 446
Weighted average number of diluted shares (million) 537 454 465
Total earnings/(loss) per share (cents):
Basic earnings/(loss) 15 203 (1 003)
Diluted earnings/(loss) 13 197 (1 004)
Headline earnings 14 224 171
Diluted headline earnings 13 218 163
Reconciliation of headline earnings:
Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
Figures in million (Reviewed) (Reviewed) (Audited)
Net profit 75 897 (4 473)
Adjusted for:
Impairment of assets - 116 5 336
Taxation effect on impairment of assets - (22) (99)
Profit on sale of property, plant and equipment (2) (1) (2)
Loss on scrapping of property, plant and equipment - - 1
Headline earnings 73 990 763
8. ACQUISITION OF MOAB KHOTSONG
Effective 1 March 2018 the group acquired the Moab Khotsong and Great Noligwa mines and related infrastructure as well as
goldbearing tailings and the Nufcor uranium plant (collectively the Moab Khotsong operations) from AngloGold Ashanti Limited on a
going concern basis. The combined assets acquired and liabilities assumed constitute a business as defined by IFRS 3 Business
Combinations. 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 cash consideration paid to acquire the Moab Khotsong operations amounted to R3 474 million (US$300 million).
9. DERIVATIVE FINANCIAL INSTRUMENTS
At At At
31 December 30 June 31 December
2018 2018 2017
Figures in million (Reviewed) (Audited) (Reviewed)
Financial assets
Non-current 123 84 258
Rand gold forward sale contracts (a) 47 70 258
US$ commodity contracts (b) - 11 -
Foreign exchange hedging contracts (c) 76 3 -
Current 206 539 1 595
Rand gold forward sale contracts (a) 119 412 1 032
US$ commodity contracts (b) 41 63 5
Foreign exchange hedging contracts (c) 46 64 558
Total derivative financial assets 329 623 1 853
Financial liabilities
Non-current 55 10 5
Rand gold forward sale contracts (a) 29 10 -
US$ commodity contracts (b) - - 5
Foreign exchange hedging contracts (c) 26 - -
Current 303 205 26
Rand gold forward sale contracts (a) 57 2 -
US$ commodity contracts (b) - - 26
Foreign exchange hedging contracts (c) 246 203 -
Total derivative financial liabilities 358 215 31
(a) Harmony has entered into rand gold forward sale derivative contracts to hedge the risk of lower rand/gold prices at its South
African operations. 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 six months
ended 31 December 2018, the contracts that matured realised a gain of R365 million (June 2018: R1 197 million; December
2017: R503 million), which has been included in revenue. There were no ineffective portions in the periods presented. The
unamortised portion of the day one gain or loss amounted to R30 million on 31 December 2018 (June 2018: R11 million;
December 2017: R24 million). Losses from non-hedge accounted rand gold forward sale contracts amounted to R30 million
and are included in gains on derivatives.
(b) Harmony entered into commodity hedging contracts to secure sales prices for its Hidden Valley operations. 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 R36 million (June 2018: R35 million gain; December 2017:
R43 million loss).
(c) Harmony maintains a foreign exchange hedging programme in the form of zero cost collars, which establish a floor and cap
US$/Rand exchange rate at which to convert US dollars to Rands, and foreign exchange forward contracts. As hedge
accounting is not applied, the resulting gains and losses have been recorded in gains on derivatives in the income statement.
These gains amounted to R29 million (June 2018: R113 million; December 2017: R403 million).
The following table shows the volume of open positions at the reporting date:
FY19 FY20 FY21 TOTAL
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
US$ZAR
Zero cost collars
US$m 88 89 55 46 39 35 26 - 378
Floor 13.78 13.52 14.5 14.7 14.92 15.15 15.43 - 14.29
Cap 14.41 14.17 15.12 15.34 15.55 15.79 16.09 - 14.93
Forward contracts
US$m 75 72 57 54 50 48 35 2 393
FEC 13.70 13.81 14.73 15.05 15.36 15.51 16.12 16.55 14.72
R/gold
'000 oz 66 66 66 66 65 64 64 28 485
R'000/kg 626 610 621 638 642 657 668 667 639
US$/gold
'000 oz 20 18 6 4 - - - - 48
US$/oz 1 335 1 338 1 370 1 400 - - - - 1 346
Total gold
'000 oz 86 84 72 70 65 64 64 28 533
US$/silver
'000 oz 90 90 90 - - - - - 270
Floor 17.30 17.30 17.40 - - - - - 17.33
Cap 18.30 18.30 18.40 - - - - - 18.33
Refer to note 13 for details on the fair value measurements.
10. PROVISION FOR SILICOSIS
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. For detailed disclosure refer to
Harmony's annual financial statements for the financial year ended 30 June 2018. The time value of money recognised for the period
ended 31 December 2018 is R39 million and there was no change in the estimate.
11. BORROWINGS
During the six months ended 31 December 2018:
- The remaining outstanding balance of US$50 million (R670 million) was repaid on the US$200 million bridge loan.
- Harmony entered into a four-year loan with Westpac Bank of US$24 million (R322 million) to finance the acquisition of fleet
equipment for the group's PNG operations. The loan is repayable in quarterly instalments and bears interest at a rate of
LIBOR + 3.2%. During October 2018 US$2 million (R22 million) was repaid on the loan.
- US$20 million (R273 million) was repaid on the US$350 million syndicated facility.
- Harmony drew down the remaining R500 million on the R1 billion Nedbank revolving credit facility (RCF).
- During November 2018, Harmony concluded a new four-year R2.0 billion facility with Nedbank and ABSA which consists of a
R600 million term facility and a R1.4 billion RCF to replace the Nedbank R1 billion RCF. The facility bears interest at a rate of
JIBAR + the applicable margin. Harmony drew down R300 million on the new facility during December 2018.
Harmony's lending group relaxed the tangible net worth to total debt covenant ratio (which is tested quarterly) during the period under
review as follows:
Period until June 2019: Ratio to be tested at 4.5 times.
Thereafter: Ratio to be tested at 5 times.
The group complied with all the debt covenants as at 31 December 2018.
Westpac US$ term Rand term
fleet loan loan US$ RCF loan Rand RCF
Figures in million US dollar US dollar US dollar SA rand SA rand
Borrowings summary at 31 December 2018
Original facility 24 175 175 600 1 400
Drawn down 23 175 130 600 700
Undrawn committed borrowing facilities N/A - 45 - 700
Maturity June July July November November
2022 2020 2020 2022 2022
Interest rate LIBOR + LIBOR + LIBOR + JIBAR + JIBAR +
3.20% 3.15% 3.00% 2.90% 2.80%
The foreign exchange translation movements on the US$ loans are as follows:
Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
Figures in million (Reviewed) (Reviewed) (Audited)
Translation gain/(loss) on US$ facilities (180) 196 (669)
Rand/US$ exchange rate:
Closing/spot 14.38 12.32 13.81
Average 14.17 13.40 12.85
12. SHARE CAPITAL
Harmony conducted a placement of new ordinary shares to qualifying investors during June 2018. For detailed disclosure refer to
Harmony's annual financial statements for the financial year ended 30 June 2018.
African Rainbow Minerals Limited (ARM) subscribed for 11 032 623 shares at R19.12 a share to maintain its shareholding of 14.29%
post the placement of shares issued during the 2018 financial year.
Additional share capital movements relate to shares issued as part of the group's employee share schemes.
13. 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$.
Harmony maintains a foreign currency hedging programme to manage foreign exchange risk. The limit currently set by the Board is
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 50% 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
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).
At At At
Fair value 31 December 30 June 31 December
hierarchy 2018 2018 2017
Figures in million level (Reviewed) (Audited) (Reviewed)
Fair value through other comprehensive income financial
instruments
Investment in financial assets(1) Level 3 61 8 5
Fair value through profit or loss financial instruments
Restricted investments(2) Level 2 1 215 913 893
Derivative financial assets(3) Level 2 329 623 1 853
Derivative financial liabilities(3) Level 2 (358) (215) (31)
(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 are carried at amortised
cost and therefore not disclosed here.
(3) The mark-to market remeasurement of the following contracts is derived from:
- Forex hedging contracts (zero cost collars): 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). FECs are derived from the forward rand/US$ exchange rate 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.
14. ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
Figures in million (Reviewed) (Reviewed) (Audited)
Capital expenditure - operations 1 738 1 214 2 619
Additions resulting from development at Hidden Valley(1) - 1 108 1 563
Capital and capitalised exploration and evaluation expenditure for Wafi-Golpu 162 187 288
Additions resulting from stripping activities 500 53 98
Other - 3 3
Total additions to property, plant and equipment 2 400 2 565 4 571
(1) Hidden Valley reached commercial levels of production in June 2018 and halted the capitalisation of development costs related to stage 5 and 6.
15. COMMITMENTS AND CONTINGENCIES
At At At
31 December 30 June 31 December
2018 2018 2017
Figures in million (Reviewed) (Audited) (Reviewed)
Capital expenditure commitments:
Contracts for capital expenditure 475 273 459
Authorised by the directors but not contracted for 1 370 1 719 1 880
Total capital commitments 1 845 1 992 2 339
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 2018.
16. RELATED PARTIES
Shares Shares sold Performance
purchased in open shares
in open market vested and
Name of director/prescribed officer market retained
Frank Abbott (Financial director) - - 394 193
Phillip Tobias (Chief Operating Officer: New business) - - 126 378
Johannes van Heerden (Chief Executive Officer: South-east Asia) - - 85 000
17. SEGMENT REPORT
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker
(CODM).
The segment report follows below.
18. RECONCILIATION OF SEGMENT INFORMATION
Six months ended
31 December 31 December
2018 2017
Figures in million (Reviewed) (Reviewed)
Reconciliation of production profit to gross profit
Revenue 13 789 9 875
? Per segment report 13 472 9 842
? Other metal sales treated as by-product credits in the segment report 317 33
Production costs (10 404) (7 163)
? Per segment report (10 087) (7 130)
? Other metal sales treated as by-product credits in the segment report (317) (33)
Production profit per segment report 3 385 2 712
Impairment of assets - (116)
Amortisation and depreciation (2 119) (1 253)
Other cost of sales items (396) (306)
Gross profit as per income statements(1) 870 1 037
(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.
At At
31 December 31 December
2018 2017
Figures in million (Reviewed) (Reviewed)
Reconciliation of total segment mining assets to consolidated property, plant and
equipment
Property, plant and equipment not allocated to a segment
Mining assets 972 1 217
Undeveloped property 3 681 5 139
Other non-mining assets 111 184
Wafi-Golpu assets 2 325 1 842
7 089 8 382
19. SUBSEQUENT EVENTS
On 15 January 2019 the group issued and allocated 6.7 million ordinary shares to its employee share trust as part of a new employee
share option plan (ESOP). The shares are expected to be granted to the employees by the end of February 2019 and the
determination of their value for accounting purposes will be done subsequently.
20. REVIEW CONCLUSION
These condensed consolidated financial statements for the year ended 31 December 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)
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018 (REVIEWED)
Production profit/ Kilograms
Revenue Production cost (loss) Mining assets Capital expenditure# produced* Tonnes milled*
31 December 31 December 31 December 31 December 31 December 31 December 31 December
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
South Africa
Underground
Tshepong operations 2 468 2 960 2 028 1 970 440 990 8 325 8 575 584 477 4 222 5 093 838 897
Moab Khotsong 2 475 - 1 581 - 894 - 3 842 - 286 - 4 418 - 532 -
Bambanani 747 822 492 451 255 371 612 706 32 33 1 277 1 410 118 122
Joel 440 544 493 480 (53) 64 1 067 998 97 128 742 908 226 251
Doornkop 1 035 920 802 653 233 267 2 725 3 007 144 127 1 766 1 646 389 347
Target 1 880 917 774 684 106 233 1 317 1 975 152 167 1 500 1 564 312 371
Kusasalethu 1 451 1 279 1 237 1 028 214 251 2 075 2 790 158 150 2 414 2 245 358 325
Masimong 673 873 625 591 48 282 85 393 54 63 1 152 1 504 312 330
Unisel 390 415 290 437 100 (22) 47 411 22 57 665 715 130 225
Surface
All other surface operations 1 204 947 989 694 215 253 557 524 38 65 2 092 1 671 8 136 6 773
Total South Africa 11 763 9 677 9 311 6 988 2 452 2 689 20 652 19 379 1 567 1 267 20 248 16 756 11 351 9 641
International
Hidden Valley (a) 1 709 165 776 142 933 23 3 796 3 193 671 1 108 3 111 662 2 037 723
Total international 1 709 165 776 142 933 23 3 796 3 193 671 1 108 3 111 662 2 037 723
Total operations 13 472 9 842 10 087 7 130 3 385 2 712 24 448 22 572 2 238 2 375 23 359 17 418 13 388 10 364
Reconciliation of the segment
information to the consolidated
income statement and balance sheet
(refer to note 18) 317 33 317 33 7 089 8 382
13 789 9 875 10 404 7 163 3 385 2 712 31 538 30 954 2 238 2 375 23 359 17 418 13 388 10 364
# Capital expenditure for international operations excludes expenditure spent on Wafi-Golpu of R161 million (2017: R187 million).
(a) Capital expenditure for the six months ended 31 December 2017 comprises of expenditure of R1 267 million net of capitalised revenue of R159 million.
* Production statistics are unaudited and not reviewed.
DEVELOPMENT RESULTS
6 Month average
July 2018 - December 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 547 620 9,03 191,66 1 730 Basal 1 793 2 034 4,00 4,97 20
B Reef 457 340 131,61 28,48 3 749 B Reef 1 498 1 115 52,00 0,83 43
All Reefs 1 003 960 52,44 46,62 2 445 All Reefs 3 291 3 150 21,00 1,34 28
Phakisa Phakisa
Basal 634 624 45,38 26,95 1 223 Basal 2 078 2 047 18,00 0,78 14
All Reefs 634 624 45,38 26,95 1 223 All Reefs 2 078 2 047 18,00 0,78 14
Doornkop Doornkop
South Reef 779 825 73,37 10,79 791 South Reef 2 555 2 707 29,00 0,31 9
All Reefs 779 825 73,37 10,79 791 All Reefs 2 555 2 707 29,00 0,31 9
Kusasalethu Kusasalethu
VCR Reef 444 432 74,84 20,06 1 501 VCR Reef 1 455 1 417 29,00 0,59 17
All Reefs 444 432 74,84 20,06 1 501 All Reefs 1 455 1 417 29,00 0,59 17
Target 1 Target 1
Elsburg 55 40 296,00 0,54 159 Elsburg 181 131 117,00 0,02 2
All Reefs 55 40 296,00 0,54 159 All Reefs 181 131 117,00 0,02 2
Masimong 5 Masimong 5
Basal 476 432 75,35 16,25 1 224 Basal 1 562 1 417 30,00 0,47 14
B Reef 232 282 90,49 21,07 1 906 B Reef 762 925 36,00 0,61 22
All Reefs 708 714 81,33 18,37 1 494 All Reefs 2 324 2 343 32,00 0,54 17
Unisel Unisel
Basal 880 692 175,66 9,63 1 692 Basal 2 886 2 270 69,00 0,28 19
All Reefs 880 692 175,66 9,63 1 692 All Reefs 2 886 2 270 69,00 0,28 19
Joel Joel
Beatrix 758 768 94,65 9,42 891 Beatrix 2 488 2 520 37,00 0,28 10
All Reefs 758 768 94,65 9,42 891 All Reefs 2 488 2 520 37,00 0,28 10
Moab Moab
Khotsong Khotsong
VRF 562 524 95,20 33,80 3 218 VRF 1 845 1 719 37,00 1,00 37
C REEF 100 130 11,34 40,47 459 C REEF 328 427 4,00 1,32 5
All Reefs 662 654 78,53 33,99 2 669 All Reefs 2 173 2 146 31,00 0,99 31
Total Harmony Total Harmony
Basal 2 536 2 368 79,40 18,80 1 493 Basal 8 319 7 769 31,00 0,55 17
Beatrix 758 768 94,65 9,42 891 Beatrix 2 488 2 520 37,00 0,28 10
B Reef 689 622 112,97 25,79 2 913 B Reef 2 261 2 041 44,00 0,76 33
Elsburg 55 40 296,00 0,54 159 Elsburg 181 131 117,00 0,02 2
VRF 562 524 95,20 33,80 3 218 VRF 1 845 1 719 37,00 1,00 37
South Reef 779 825 73,37 10,79 791 South Reef 2 555 2 707 29,00 0,31 9
VCR 444 432 74,84 20,06 1 501 VCR 1 455 1 417 29,00 0,59 17
C Reef 100 130 11,34 40,47 459 C Reef 328 427 4,00 1,32 5
All Reefs 5 923 5 709 85,31 18,65 1 591 All Reefs 19 432 18 730 34,00 0,54 18
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: 0861 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 (within US): +1-886-249-2593
Int: +1-718-921-8124
Fax: +1-718-921-8334
*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
12 February 2019
Date: 12/02/2019 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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