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Amendment No. 1
(Mark One) | ||
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2007 | |
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Date of event requiring this shell company report | ||
For the transition period from to |
RANDFONTEIN, SOUTH AFRICA, 1760
Private Bag X1, Melrose Arch, 2076, 1759, South Africa
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
(Title of Class)
each representing one ordinary share
(Title of Class)
(Title of Class)
each representing one ordinary share
(Title of Class)
* | Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission. |
U.S. GAAPþ | International financial Report Standards as issuedo by the International Accounting Standards Board | Othero |
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Item 4. | Information on the Company |
• | U.S. dollar equivalent amounts have been provided throughout this section when discussing transactions in currencies other than the U.S. dollar. |
Item 5. | Operating and Financial Review and Prospects |
• | The discussion prior to the Results of Operations comparison sections has been expanded to: |
— | Clarify that the Company is unable to provide a specific amount of the estimated costs related to the participation of historically disadavantaged South Africans in mining assets; | ||
— | Discuss the potential impact of royalty payments to be required under the Mineral and Petroleum Resource Development Act (“MPRDA”) on future operations; | ||
— | Discuss the potential impact of new mines expecting to start producing higher volumes at higher grades on the Company’s operating results; | ||
— | Further discuss the impact of high consumables and supervisory labor, as well as Continuous Operations (“CONOPS”), on future operating results; | ||
— | Further discuss the impact of underperformance of recovered grade and declining workforce productivity on future operating results; and | ||
— | Clarify the level of, and concerns over the reliability of, electricity supply to the Company’s South African operations. |
• | Liquidity and Capital Resources — expanded discussion on Working Capital and Anticipated Financing Needs. |
Item 18. | Financial Statements |
• | Report of Independent Registered Public Accounting Firm has been amended to specify location of audit firm. |
• | Notes 2(n)(i), Accounting Policies—Property, Plant and Equipment, on page F-13, has been revised to clarify the Company’s capitalization policy of capitalizing costs untilmore than a de minimisamount of saleable materials is extracted from the mine. |
• | Note 35, Disclosures Regarding Fair Value of Financial Instruments, on page F-44, has been revised to clarify the Company’s disclosures surrounding the fair value of unlisted equity investments. |
Item 19. | Exhibits |
• | Revise Item 19 to include the certifications of the Chief Executive Officer (formerly Acting Chief Executive Officer) and the Chief Financial Officer (formerly Interim Chief Financial Officer) in connection with this Amendment. |
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Item 16. [Reserved] | ||||||||
INDEX TO FINANCIAL STATEMENTS | ||||||||
Exhibit 12.1 | ||||||||
Exhibit 12.2 | ||||||||
Exhibit 13.1 | ||||||||
Exhibit 13.2 |
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• | overall economic and business conditions in South Africa and elsewhere; | ||
• | 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; | ||
• | availability, terms and deployment of capital; | ||
• | changes in government regulation, particularly mining rights and environmental regulation; | ||
• | fluctuations in exchange rates; | ||
• | currency devaluations/appreciations and other macroeconomic monetary policies; and | ||
• | socio-economic instability in South Africa and other countries in which Harmony operates. |
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Fiscal Year Ended June 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
(in $ thousands, except per share amounts) | ||||||||||||||||||||
Income Statement Data | ||||||||||||||||||||
Continuing operations | ||||||||||||||||||||
Revenues | 1,346,596 | 1,140,838 | 1,139,531 | 1,120,896 | 628,211 | |||||||||||||||
Operating profit/(loss) | 146,453 | (30,789 | ) | (303,825 | ) | (44,613 | ) | 18,112 | ||||||||||||
Equity income of joint venture | 1,702 | 445 | — | 9,503 | 52,843 | |||||||||||||||
Equity (loss)/income of associate companies | (2,576 | ) | (16,444 | ) | — | 2,020 | (1,233 | ) | ||||||||||||
(Loss)/Income from continuing operations before taxes and minority interests | (188,846 | ) | (97,324 | ) | (536,266 | ) | (10,286 | ) | 135,700 | |||||||||||
Loss from discontinued operations | (72,386 | ) | (61,483 | ) | (80,335 | ) | (18,983 | ) | (14,692 | ) | ||||||||||
Minority interests | — | — | — | 1,281 | (468 | ) | ||||||||||||||
(Loss)/income before cumulative effect of change in accounting principles | (295,435 | ) | (157,783 | ) | (552,549 | ) | 184 | 89,597 | ||||||||||||
Cumulative effect of change in accounting principles, net of tax | — | 2,058 | — | — | 14,770 | |||||||||||||||
Net (loss)/income | (295,435 | ) | (155,725 | ) | (552,549 | ) | 184 | 104,367 | ||||||||||||
Continuing Operations | ||||||||||||||||||||
Basic (loss)/earnings per share($) before cumulative effect of change in accounting principles | (0.56 | ) | (0.28 | ) | (1.30 | ) | 0.00 | 0.58 |
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Fiscal Year Ended June 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
(in $ thousands, except per share amounts) | ||||||||||||||||||||
Basic (loss)/earnings per share($) | (0.56 | ) | (0.28 | ) | (1.30 | ) | 0.00 | 0.67 | ||||||||||||
Diluted (loss)/earnings per share before cumulative effect of change in accounting principles | (0.56 | ) | (0.24 | ) | (1.30 | ) | 0.00 | 0.57 | ||||||||||||
Diluted (loss)/earnings per share | (0.56 | ) | (0.24 | ) | (1.30 | ) | 0.00 | 0.65 | ||||||||||||
Discountinued Operations | ||||||||||||||||||||
Basic loss per share($) | (0.18 | ) | (0.16 | ) | (0.22 | ) | 0.00 | (0.08 | ) | |||||||||||
Diluted loss per share | (0.18 | ) | (0.16 | ) | (0.22 | ) | 0.00 | (0.08 | ) | |||||||||||
Weighted average number of shares used in the computation of basic earnings per share | 398,593,297 | 394,409,512 | 362,499,012 | 254,240,500 | 177,954,245 | |||||||||||||||
Weighted average number of shares used in the computation of diluted earnings per share | 398,593,297 | 394,409,512 | 362,499,012 | 255,570,834 | 182,721,629 | |||||||||||||||
Cash dividends per share ($)(1) | — | — | 0.05 | 0.26 | 0.57 | |||||||||||||||
Cash dividends per share (R)(1) | — | — | 0.30 | 1.90 | 5.50 | |||||||||||||||
Other Financial Data | ||||||||||||||||||||
Cash cost per ounce of gold ($/oz)(2) | 486 | 436 | 378 | 338 | 239 |
Fiscal Year Ended June 30, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
(in $ thousands) | ||||||||||||||||||||
Balance Sheet Data | ||||||||||||||||||||
Continuing operations | ||||||||||||||||||||
Cash and cash equivalents | 99,759 | 89,189 | 266,746 | 217,022 | 189,040 | |||||||||||||||
Other current assets | 1,053,874 | 339,156 | 324,611 | 294,502 | 162,487 | |||||||||||||||
Non-current assets held for sale | 182,475 | — | — | — | — | |||||||||||||||
Property, plant and equipment — net | 3,533,938 | 3,306,555 | 3,451,963 | 3,769,971 | 1,188,910 | |||||||||||||||
Intangible assets | 34,005 | 28,256 | 30,367 | 32,480 | — | |||||||||||||||
Restricted cash | 723 | 35,599 | 7,798 | 9,922 | — | |||||||||||||||
Investments in associates | 853 | 266,331 | — | 19,908 | 63,782 | |||||||||||||||
Investment in joint ventures | 1,336 | 2,065 | — | — | 272,754 | |||||||||||||||
Other long-term assets | 206,954 | 395,048 | 655,333 | 435,058 | 79,562 | |||||||||||||||
Total assets | 5,113,917 | 4,462,199 | 4,736,818 | 4,778,863 | 1,956,535 | |||||||||||||||
Current liabilities | 685,596 | 343,802 | 428,756 | 393,764 | 189,668 | |||||||||||||||
Liabilities relating to non-current assets held for sale | 77,614 | — | — | — | — | |||||||||||||||
Provision for environmental rehabilitation | 131,913 | 110,164 | 120,450 | 125,917 | 62,977 | |||||||||||||||
Provision of social plan | 2,429 | 2,259 | 2,109 | 1,958 | — | |||||||||||||||
Deferred income and mining taxes | 512,829 | 521,000 | 541,188 | 580,086 | 218,995 | |||||||||||||||
Provision for post-retirement benefits | 15,257 | 14,964 | 13,276 | 1,584 | 1,017 | |||||||||||||||
Deferred financial liability | 354,896 | 150,038 | 76,720 | 91,513 | 37,228 | |||||||||||||||
Share appreciation rights liability | 877 | |||||||||||||||||||
Long-term loans | 270,079 | 394,608 | 409,486 | 509,195 | 301,572 | |||||||||||||||
Minority interest | — | — | — | — | 18,408 | |||||||||||||||
Shareholders’ equity(3) | 3,062,426 | 2,925,364 | 3,144,833 | 3,074,846 | 1,126,670 | |||||||||||||||
Total liabilities and shareholders’ equity | 5,113,917 | 4,462,199 | 4,736,818 | 4,778,863 | 1,956,535 |
(1) | Reflects dividends related to fiscal 2004 and 2003 that were declared on July 30, 2004 and August 1, 2003 respectively. | |
(2) | Total cash costs and total cash costs per ounce are non-GAAP measures. Harmony has calculated cash costs per ounce by dividing total cash costs, as determined using the guidance provided by the Gold Institute, by gold ounces sold for all periods presented. The Gold Institute was a non-profit industry association comprised of leading gold producers, refiners, bullion suppliers and manufacturers. This institute has now been incorporated into the National Mining Association. The guidance was first issued in 1996 and was revised in November 1999. Total cash costs, as defined in the guidance provided by the Gold Institute, include mine production costs, transport and refinery costs, applicable general and administrative costs, costs associated with movements in production inventories and ore |
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stockpiles, ongoing environmental rehabilitation costs as well as transfers to and from deferred stripping and costs associated with royalties. Ongoing employee termination costs are included, however, employee termination costs associated with major restructuring and shaft closures are excluded. Total cash costs have been calculated on a consistent basis for all periods presented and have been adjusted for the accounting changes associated with underground development costs and stripping costs incurred during the production phase of the mine. Changes in cash costs per ounce are affected by operational performance, as well as changes in the currency exchange rate between the Rand and the U.S. dollar. Because total cash costs and total cash costs per ounce are non GAAP measures, they should therefore not be considered by investors in isolation or as an alternative to operating income/(loss) or net income/(loss) or any other U.S. GAAP measure or an indicator of our performance. In particular depreciation and amortization would be included in a measure of total costs of producing gold under U.S. GAAP, but it is not included in total cash costs under the guidance provided by the Gold Institute. While the Gold Institute has provided a definition for the calculation of total cash costs and total cash costs per ounce, the calculation of cash costs per ounce may vary from company to company and may not be comparable to other similarly titled measures of other companies. However, Harmony believes that cash costs per ounce is a useful indicator to investors and management of a mining company’s performance as it provides (1) an indication of the cash generating capacities of the mining operations, (2) the trends in cash costs as the company’s operations mature, (3) a measure of a company’s performance, by comparison of cash costs per ounce to the spot price of gold and (4) an internal benchmark of performance to allow for comparison against other companies. For further information, seeItem 5. “Operating and Financial Review and Prospects — Costs — Reconciliation of non-GAAP measures.” | ||
(3) | The Company elected to apply provisions from SAB 108“Considering the effects of prior year misstatements when quantifying misstatements in current year financial statements”as at July 1, 2006. Adjustments have been made to the carrying values of assets and liabilities as of July 1, 2006 with an offsetting adjustment recorded to the operating balance of retained earnings. For further information, see note 3 of the consolidated financial statements. |
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Fiscal Year Ended | ||||||||
June 30, | Average(1) | Period End | ||||||
2003 | 9.13 | 7.51 | ||||||
2004 | 6.89 | 6.23 | ||||||
2005 | 6.18 | 6.67 | ||||||
2006 | 6.36 | 7.17 | ||||||
2007 | 7.20 | 7.04 |
Month of | High | Low | ||||||
June 2007 | 7.27 | 7.04 | ||||||
July 2007 | 7.15 | 6.81 | ||||||
August 2007 | 7.5 | 7.07 | ||||||
September 2007 | 7.25 | 6.89 | ||||||
October 2007 | 6.91 | 6.49 | ||||||
November 2007 (through November 28 ) | 7.0 | 6.45 |
(1) | The average of the noon buying rates provided by the Federal Reserve Bank of New York on the last day of each full month during the relevant period. |
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• | the demand for gold for industrial uses and for use in jewelry; | ||
• | international or regional political and economic trends; | ||
• | the strength of the U.S. dollar and of other currencies; | ||
• | financial market expectations regarding the rate of inflation; | ||
• | interest rates; | ||
• | speculative activities; | ||
• | actual or expected purchases and sales of gold bullion held by central banks or other large gold bullion holders or dealers; | ||
• | forward sales by other gold producers; and | ||
• | the production and cost levels for gold in major gold-producing nations, such as South Africa, United States, Australia and China. |
Price per ounce | ||||||||||||
High | Low | Average | ||||||||||
Calendar Year | ($) | ($) | ($) | |||||||||
1997 | 367 | 283 | 331 | |||||||||
1998 | 313 | 273 | 294 | |||||||||
1999 | 326 | 253 | 279 | |||||||||
2000 | 313 | 264 | 282 |
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Price per ounce | ||||||||||||
High | Low | Average | ||||||||||
Calendar Year | ($) | ($) | ($) | |||||||||
2001 | 293 | 256 | 271 | |||||||||
2002 | 332 | 278 | 309 | |||||||||
2003 | 412 | 322 | 361 | |||||||||
2004 | 427 | 343 | 389 | |||||||||
2005 | 476 | 411 | 434 | |||||||||
2006 | 725 | 525 | 604 | |||||||||
2007 (through November 28) | 833 | 608 | 687 |
• | locating orebodies; |
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• | identifying the metallurgical properties of orebodies; | ||
• | estimating the economic feasibility of mining orebodies; | ||
• | developing appropriate metallurgical processes; | ||
• | obtaining necessary governmental permits; and | ||
• | constructing mining and processing facilities at any site chosen for mining. |
• | future gold and other metal prices; | ||
• | anticipated tonnage, grades and metallurgical characteristics of ore to be mined and processed; | ||
• | anticipated recovery rates of gold and other metals from the ore, and | ||
• | anticipated total costs of the project, including capital expenditure and cash costs. |
• | the availability and timing of necessary environmental and governmental permits; | ||
• | the timing and cost necessary to construct mining and processing facilities, which can be considerable; | ||
• | the availability and cost of skilled labor, power, water and other materials; | ||
• | the accessibility of transportation and other infrastructure, particularly in remote locations; | ||
• | the availability and cost of smelting and refining arrangements; and | ||
• | the availability of funds to finance construction and development activities. |
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• | Harmony’s ability to identify appropriate acquisition candidates or negotiate acquisitions on favorable terms; | ||
• | obtaining the financing necessary to complete future acquisitions; | ||
• | difficulties in assimilating the operations of the acquired business; | ||
• | difficulties in maintaining the financial and strategic focus of Harmony while integrating the acquired business; | ||
• | problems in implementing uniform standards, controls, procedures and policies; | ||
• | increasing pressures on existing management to oversee a rapidly expanding company; and | ||
• | to the extent Harmony acquires mining operations outside South Africa or Australia encountering difficulties relating to operating in countries in which Harmony has not previously operated. |
• | rockbursts; | ||
• | seismic events; | ||
• | underground fires; | ||
• | cave-ins or falls of ground; | ||
• | discharges of gases and toxic chemicals; | ||
• | release of radioactive hazards; | ||
• | flooding; | ||
• | pillar mining | ||
• | accidents; and | ||
• | other conditions resulting from drilling, blasting and the removal and processing of material from a deep-level mine. |
• | flooding of the open pit; |
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• | collapse of the open pit walls; | ||
• | accidents associated with the operation of large open pit mining and rock transportation equipment; and | ||
• | accidents associated with the preparation and ignition of large scale open pit blasting operations. |
• | accidents associated with operating a waste dump and rock transportation; | ||
• | pillar mining; and | ||
• | production disruptions due to weather. |
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• | is generally not permitted to export capital from South Africa, to hold foreign currency or incur indebtedness denominated in foreign currencies without the approval of the South African exchange control authorities; | ||
• | is generally not permitted to acquire an interest in a foreign venture without the approval of the South African exchange control authorities and first having complied with the investment criteria of the South African exchange control authorities; | ||
• | is generally required to repatriate to South Africa profits of foreign operations; and | ||
• | is limited in its ability to utilize profits of one foreign business to finance operations of a different foreign business. |
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• | negotiating agreements with contractors on acceptable terms; | ||
• | the inability to replace a contractor and its operating equipment in the event that either party terminates the agreement; | ||
• | reduced control over those aspects of operations which are the responsibility of the contractor; | ||
• | failure of a contractor to perform under its agreement with Harmony; | ||
• | interruption of operations in the event that a contractor ceases its business due to insolvency or other unforeseen events; | ||
• | failure of a contractor to comply with applicable legal and regulatory requirements, to the extent it is responsible for such compliance; and | ||
• | problems of a contractor with managing its workforce, labor unrest or other employment issues. |
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• | the court that pronounced the judgment had jurisdiction to entertain the case according to the principles recognized by South African law with reference to the jurisdiction of foreign courts; | ||
• | the judgment is final and conclusive; | ||
• | the judgment has not lapsed; | ||
• | the recognition and enforcement of the judgment by South African courts would not be contrary to public policy, including observance of the rules of natural justice which require that the documents initiating the United States proceeding were properly served on the defendant and that the defendant was given the right to be heard and represented by counsel in a free and fair trial before an impartial tribunal; | ||
• | the judgment does not involve the enforcement of a penal or revenue law; and | ||
• | the enforcement of the judgment is not otherwise precluded by the provisions of the Protection of Business Act 99 of 1978, as amended, of the Republic of South Africa. |
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• | theQuality Assets,which typically have a larger reserve base and hence a longer mine life. These form the core of our operations; | ||
• | theLeveraged Assetsare those that have a large resource base and provide significant upside in the event of a rising gold price; and | ||
• | theGrowth Assets, which comprise the expansion projects and new mines currently under development in South Africa. |
Surface | ||||||
Quality Assets | Leveraged Assets*** | Growth Assets | Operations | |||
Target | Bambanani | Elandsrand mine and project | Kalgold | |||
Tshepong | Joel | Doornkop mine and project | Freegold | |||
Masimong shaft complex | West Shaft* | Phakisa capital project | Free State | |||
Evander 2,3 & 5 | St. Helena | Randfontein | ||||
Evander 7 | Harmony 2 | Target | ||||
Evander 8 | Merriespruit 1 | |||||
Cooke 1 | Merriespruit 3 | |||||
Cooke 2 | Unisel | |||||
Cooke 3 | Brand 3 | |||||
Orkney 2** | ||||||
Orkney 4** | ||||||
Orkney 7** |
* | West Shaft closed end of March 2007. | |
** | On September 24, 2007 an agreement to sell the Orkney shaft was entered into with Pamodzi Gold and is expected to be concluded by the first half of 2008. | |
*** | The Harmony 4 Shaft, St. Helena 2 Shaft and Eland Shaft are all currently under care and maintenance as of June 30, 2007. |
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• | We believe that our size and leading market position enables us to undertake exploration and simultaneously develop multiple projects around the world, as well as secure capital on competitive terms. | ||
• | The global gold industry offers a number of attractive industry fundamentals from which we benefit. This includes the absence of available substitutes, relatively high barriers to entry, and increasing gold producer concentration. | ||
• | We are developing new mines at a planned lower cost per ounce than our current operations, which we believe will help make them robust enough to survive any margin squeeze and to withstand any reversal in the gold price. We expect the gold price to continue its upward trend in the medium term. |
• | Harmony’s ore reserves as of June 30, 2007 amounted to 53.67 million ounces of gold spread across our assets in South Africa, Australia and PNG. This ore reserve base is sufficient to support our existing operations in excess of 20 years at current production levels. Year-on-year depletion accounted for 2.3 million ounces after disposals, shaft closures and the loss of Western Area equity ounces of 5.4 million ounces. However, the positive progress made with prefeasibility studies at the Evander South Project and at Wafi/Golpu in PNG added 3.5 million ounces to reserves. | ||
• | Of the company’s 53.67 million ounces of reserves, 41.5 million ounces are classified as above infrastructure and 12.2 million ounces are classified below infrastructure (reserves for which capital expenditure has still to be approved). |
• | We have a diverse portfolio of gold development projects spread across South Africa and PNG. These projects include Elandsrand, Doornkop, Tshepong and Phakisa in South Africa, and Hidden Valley in PNG, which, when developed, could deliver up to 1.4 million ounces of additional production by 2011. |
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• | We believe the relatively higher grade of these South African deposits and/or lower cost base will result in these additional ounces being produced at highly competitive cash costs. This in turn may result in a reduction in our overall cash cost position as these new projects are commissioned. | ||
• | In addition to these projects, we have a number of additional development prospects that are being considered and progressed, including the processing of sand dumps and tailings dams in our Mega Dumps projects, the processing of rock dumps, and developing the Wafi/Golpu copper/gold deposit in PNG, which, when all developed, could increase production by a further 1.0 million ounces per annum. | ||
• | We have also expanded our exploration skill base, evidenced by our progress in PNG. | ||
• | We are also currently assessing potential options for our uranium deposits. |
• | The gold market continued its strong trend over the last year, with the fiscal 2007 average gold price of $694 per ounce. This increase in the gold price has been driven predominantly by a combination of increased investment, consumer demand, flat mine production and relatively weak US dollar. | ||
• | Increased investment demand has been one of the major catalysts behind a recent surge in gold demand, with private investors now owning more gold than the governments of the world. The reasons behind this increased demand are varied, and include: concerns over the future of the U.S. economy and its currency; investors seeking portfolio diversification; the launch of a number of gold exchange traded funds; and investors seeking a safe haven in turbulent geopolitical tensions. | ||
• | We believe these fundamental drivers behind increased demand and decreased new supply of gold will remain in the future, which will in turn support a higher gold price over this period. As an unhedged gold producer, Harmony will benefit from a rising gold price environment. | ||
• | In addition, the fundamental demand for gold appears to have continued with lower official sales and an acceptance of a new “floor price” in the gold jewelry sector. Producer de-hedging, combined with the continued decline in global gold output, underpins the positive view. |
• | Our aim to return to profitability is assisted by improved market conditions for South African gold producers, but also importantly, through a restructuring of our portfolio to increase productivity and optimize overall production levels, while closing or divesting lower quality ounces. | ||
• | We are committed to lower our cost base and extensively benchmark our costing parameters both internally between operations within Harmony, and externally against other gold producers. | ||
• | We are confident that the benefits of our restructuring process and ongoing cost focus will be sustained in the long term, and as a result, our ability to withstand any future adverse market conditions has been significantly enhanced. |
• | We maintain a conservative gearing policy and seek to fund ongoing capital expenditure (excluding growth projects) through cash generated from existing operations. | ||
• | Our low level of gearing should provide us with the ability to utilize debt to fund capital and development expenditure requirements for our new projects. |
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• | Our senior management team consists of experienced mining executives with extensive industry backgrounds combined with geological and metallurgical expertise. | ||
• | Our senior management team has a proven track record in developing and managing the operations under its control, and has demonstrated an ability to optimize underperforming assets as well as developing new projects around the world. |
• | Harmony is proud to be a South African company and fully embraces the country’s transformation initiatives. We are 16% owned by African Rainbow Minerals (“ARM Limited”), a black empowerment company in which our chairman, Patrice Motsepe, owns an interest. | ||
• | We believe that we have gone beyond the requirements of the Mining Charter by ensuring that our historically disadvantaged South African (“HDSA”) partners are truly empowered, that we are largely managed by a HDSA Board, and that we continue to engage with black shareholders and/or partners to find more opportunities to invest in BEE transactions and involve HDSA partners. | ||
• | We will continue to embrace empowerment as part of our growth strategy and we acknowledge that empowerment forms a fundamental part of our business into the future. |
• | Harmony’s extensive experience and ten-year track record of successfully identifying, exploring and developing its own projects is a core component of our value creation strategy. | ||
• | Our ongoing exploration programme is focused on both on-mine exploration, which targets resources within the economic radius of existing mines, and new mine exploration, which targets promising early to advanced stage projects around the world. | ||
• | Harmony is currently expanding its production base in South Africa and PNG, with a focus on developing new mines at competitive cash costs and upgrading the overall quality of our portfolio. | ||
• | We currently have a diverse project pipeline, comprising five projects that are well advanced and, if all developed, could deliver up to an additional 1.4 million ounces of low-cost production by 2011. These projects include Elandsrand New Mine, Doornkop South Reef, Tshepong Sub 66 Decline and Phakisa in South Africa, and Hidden Valley in PNG, which, if all developed, would contribute to a reduction in our overall cash costs per ounce when they come on-stream. | ||
• | In addition to these projects, we have a number of additional development prospects that are being progressed, including surface sand dumps, rock dumps and tailings dams, reviewing the potential of our uranium deposits, and developing the Wafi/Golpu copper/gold deposit in PNG, which, when an investment decision is taken by the board to develop them once feasibility studies are complete, could increase production by up to a further 1.0 million ounces. | ||
• | We have also expanded our exploration skill base, evidenced by our progress in PNG. |
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• | At each mining site, Harmony has established small, multi-disciplinary, focused management teams responsible for planning and implementing the mining operations at the site. Each of these teams is accountable for the results at its particular site and reports directly to Harmony’s Board. |
• | Annual operational goals and targets, including cost, volume and grade targets are established in consultation with Harmony’s executive committee for each mining site. Each management team develops an operational plan to implement the goals and targets for its mine site. Members of Harmony’s executive committee review and measure the results at each mining site on a regular basis throughout the year. |
• | Gold mining in South Africa is labor intensive, accounting for about 50% of Harmony’s South African operating costs. To control these costs, Harmony structures its operations to achieve maximum productivity with the goal of having 60% of Harmony’s workforce directly engaged in stoping, or underground excavation, and development rock breaking activities. |
• | Harmony is committed to reducing its cost base and, to this end, Harmony benchmarks its costing parameters both internally between operations within Harmony and externally against other gold producers. |
• | Harmony applies a principle of “appropriate maintenance” which allows it to spend capital commensurate with the life of a specified operation. This principle ensures safe operation and reduces capital that may be used ineffectively on mines that have a limited life. |
• | Harmony has implemented cost accounting systems and strict ore accounting and ore reserve management systems to measure and track costs and ore reserve depletion accurately, so as to enable it to be proactive in its decision making. |
• | We are committed to increasing the consistency of our operations, in terms of both gold ore grades and production levels, in order to extract optimal value from our orebodies. To achieve this, we have undertaken an intensive program over the last 18 months to significantly improve the mining flexibility of our operations by increasing our development expenditure and focusing on comprehensive ore reserve management. We have made significant progress on this objective, as evidenced by our substantially improved development rates. | ||
• | We are currently reviewing potential opportunities in respect of certain deposits and assets which we may develop independently of our core gold business, and in particular, our uranium assets, of which the underground resources are not currently reflected on our balance sheet or reserve statement. In respect of our Wafi/Golpu copper/gold prospects, we may seek to develop those assets with partners. |
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• | Harmony has a long track-record of acquisitions, having completed over 25 transactions over the last eleven years and successfully integrating each of these operations into the Company. | ||
• | We possess broad and extensive gold mining experience gained through the development and operation of both surface, opencast mines and mechanized, underground mines. This breadth of expertise provides us with a competitive advantage when evaluation acquisition opportunities. | ||
• | Our acquisition strategy is currently focused on establishing another major growth area outside of South Africa by 2011. We believe that there is value in further diversifying our production base outside of South Africa, as well as applying our broad development and operational skills to new types of deposits. |
• | Harmony has accumulated a diverse portfolio of assets, a number of which are nearing the end of their productive lives for Harmony and are considered non-core to our business. However, these assets may be of higher value to smaller producers who are less concerned about short mine lives, and can still profitably operate these assets for a number of years. | ||
• | As a result, we believe our disposal strategy will create value through the targeted sale of these assets which for Harmony have relatively higher cost bases and/or shorter mine lives. | ||
• | However, we will look to retain upside gold exposure from any disposal through gold royalty arrangements. essentially a deferred purchase payment that is geared to increased production and increased gold price. | ||
• | This disposal process is already well progressed, with an agreement entered into for the sale of the Orkney operations in September 2007. This sale includes gold royalty arrangements, and is due to be concluded by the first half of calendar 2008. | ||
• | We have also signed sale agreements or letters of intent for the disposal of our Western Australian gold operations which includes South Kal and Mt Magnet. |
• | We acknowledge significant capital expenditure and a commitment to a long time horizon are required to develop our projects into new mines. However, we firmly believe that this is the foundation of Harmony’s future, and to this end, have made substantial investments in our major projects both in South Africa and PNG. |
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• | on-mine exploration, which looks for resources within the economic radius of existing mines, and | ||
• | new mine exploration, which is the global search for early to advanced stage projects. |
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• | Accessing the orebody. In Harmony’s South African underground mines, access to the orebody is by means of shafts sunk from the surface to the lowest economically and practically mineable level. Horizontal development at various intervals of a shaft (known as levels) extends access to the horizon of the reef to be mined. On-reef development then provides specific mining access. In Harmony’s Australian underground mines access to the orebody is by means of declines. Horizontal development at various intervals of the decline extends access to the horizon of the ore to be mined. The declines are advanced on a continuous basis to keep ahead of the mining taking place on the levels above. In Harmony’s open pit mines, access to the orebody is provided by overburden stripping, which removes the covering layers of topsoil or rock, through a combination of drilling, blasting, loading and hauling, as required. | ||
• | Mining the orebody. The process of ore removal starts with drilling and blasting the accessible ore. The blasted faces are then cleaned, and the ore is transferred to the transport system. In open pit mines, gold-bearing material may require drilling and blasting, and is usually collected by bulldozers or shovels to transfer it onto trucks, which transport it to the mill. |
• | Comminution. Comminution is the process of breaking up the ore to expose and liberate the gold and make it available for treatment. Conventionally, this process occurs in multi-stage crushing and milling circuits, which include the use of jaw and gyratory crushers and rod and tube and ball mills. Our more modern milling circuits include semi- or fully-autogenous milling where the ore itself is used as the grinding medium. Typically, ore must be ground to a minimum size before proceeding to the next stage of treatment. | ||
• | Treatment. In most of our metallurgical plants, gold is extracted into a leach solution from the host ore by leaching in agitated tanks. Gold is then extracted onto activated carbon from the solution using the CIL or CIP processes. |
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• | the database of measured and indicated resource blocks (per shaft section); | ||
• | an assumed gold price which, for this ore reserve statement, was taken as R115,000 per kilogram; | ||
• | planned production rates; | ||
• | the mine recovery factor (“MRF”) which is equivalent to the mine call factor (“MCF”) multiplied by the plant recovery factor; and | ||
• | planned cash costs (cost per tonne). |
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PROVEN | PROBABLE | TOTAL | ||||||||||||||||||||||||||||||||||
Tonnes | Grade | Gold1 | Tonnes | Grade | Gold1 | Tonnes | Grade | Gold1 | ||||||||||||||||||||||||||||
Operations | (million) | (oz/ton) | (Moz) | (million) | (oz/ton) | (Moz) | (million) | (oz/ton) | (Moz) | |||||||||||||||||||||||||||
South Africa Underground | ||||||||||||||||||||||||||||||||||||
Elandskraal | 7.1 | 0.222 | 1.57 | 27.9 | 0.240 | 6.71 | 35.0 | 0.237 | 8.28 | |||||||||||||||||||||||||||
Free State | 10.2 | 0.161 | 1.64 | 8.5 | 0.155 | 1.32 | 18.8 | 0.158 | 2.96 | |||||||||||||||||||||||||||
Randfontein | 3.5 | 0.232 | 0.80 | 4.7 | 0.173 | 0.82 | 8.2 | 0.198 | 1.62 | |||||||||||||||||||||||||||
Evander | 5.4 | 0.195 | 1.04 | 15.5 | 0.184 | 2.84 | 20.8 | 0.187 | 3.88 | |||||||||||||||||||||||||||
Evander(below infrastructure) | 57.2 | 0.213 | 12.21 | 57.2 | 0.213 | 12. 21 | ||||||||||||||||||||||||||||||
Target | 8.7 | 0.209 | 1.82 | 13.4 | 0.185 | 2.47 | 22.1 | 0.194 | 4.29 | |||||||||||||||||||||||||||
Free Gold | 15.2 | 0.198 | 3.02 | 45.9 | 0.224 | 10.28 | 61.1 | 0.217 | 13.30 | |||||||||||||||||||||||||||
Total S.A. Underground | 50.0 | 0.198 | 9.90 | 173.2 | 0.213 | 36.64 | 223.2 | 0.209 | 46.54 | |||||||||||||||||||||||||||
South Africa surface | ||||||||||||||||||||||||||||||||||||
Randfontein | 4.1 | 0.020 | 0.08 | 0.1 | 0.054 | 0.00 | 4.2 | 0.021 | 0.09 | |||||||||||||||||||||||||||
Kalgold | 4.0 | 0.029 | 0.12 | 4.3 | 0.053 | 0.23 | 8.4 | 0.041 | 0.35 | |||||||||||||||||||||||||||
Free Gold | 212.1 | 0.008 | 1.76 | 12.6 | 0.017 | 0.22 | 224.7 | 0.009 | 1.97 | |||||||||||||||||||||||||||
Total S.A. Surface | 220.2 | 0.009 | 1.96 | 17.0 | 0.026 | 0.45 | 237.2 | 0.010 | 2.41 | |||||||||||||||||||||||||||
Australian operations2 | ||||||||||||||||||||||||||||||||||||
Mt. Magnet | 1.9 | 0.064 | 0.12 | 0.6 | 0.147 | 0.09 | 2.5 | 0.083 | 0.21 | |||||||||||||||||||||||||||
South Kalgoorlie | 0.5 | 0.028 | 0.01 | 4.3 | 0.055 | 0.24 | 4.8 | 0.052 | 0.25 | |||||||||||||||||||||||||||
Total Australian Operations | 2.4 | 0.056 | 0.14 | 4.9 | 0.066 | 0.32 | 7.3 | 0.063 | 0.46 | |||||||||||||||||||||||||||
Papua New Guinea | ||||||||||||||||||||||||||||||||||||
Hidden valley | 5.6 | 0.064 | 0.36 | 36.4 | 0.055 | 2.01 | 42.0 | 0.056 | 2.37 | |||||||||||||||||||||||||||
Kaveroi and Hamata | 7.3 | 0.070 | 0.51 | 7.2 | 0.070 | 0.51 | ||||||||||||||||||||||||||||||
Golpu | 78.1 | 0.018 | 1.39 | 78.5 | 0.018 | 1.39 | ||||||||||||||||||||||||||||||
Total Papua New Guinea | 5.6 | 0.064 | 0.36 | 121.7 | 0.032 | 3.90 | 127.3 | 0.033 | 4.26 | |||||||||||||||||||||||||||
Grand total | 278.3 | 0.044 | 12.35 | 316.7 | 0.130 | 41.31 | 595.1 | 0.090 | 53.67 | |||||||||||||||||||||||||||
NB : Rounding of figures may result in slight computational discrepancies | ||
(1) | Gold oz figures are fully inclusive of all mining dilutions and gold losses, and are reported as mill-delivered tons and head grades. Metallurgical recovery factors have not been applied to the reserve figures stated above. The approximate metallurgical recovery factors for the table above are as follows: Elandskraal 97%; Free State 95%; Randfontein 96%; Evander 97%; Kalgold 85%; Freegold 96%; Target 97%; Mt. Magnet 93%; South Kalgoorlie 92%; PNG 93%. In order to derive the appropriate plant recovery factors for ore reserve estimates a process have been followed where realistic assumptions based on historical performance have been applied. There may be short term fluctuation either positive or negative which can lead to small discrepancies between actual and planned recovery factors. | |
(2) | Includes reserves from underground and surface mining at each of the Australian operations. | |
(3) | Includes reserves from underground and surface mining at the operations. | |
(4) | Cut-off grades are calculated per individual shaft, each having its own unique cost structure, ore flow and recovery factors, which are entered into Harmony’s “Optimizer” software for a cut-off calculation per shaft and expressed in oz/t units. These cut off’s indicated below are oz/ton and used on in situ grades. They are as follows: Harmony 2 ( 0.173); Merriespruit 1 (0.128); Merriespruit 3 (0.133); Unisel (0.146); Brand 3 (0.136); Masimong 5 (0.160); Bambanani (0.167); Phakisa (0.191); Tshepong (0.198); St Helena 8 (0.177); Joel (0.131); Evander 2 + 5 (0.211); Evander 7 (0.169); Evander 8 (0.203); Rolspruit (0.159); Poplar (0.204); Cooke 1 (0.204); Cooke 2 (0.211); Cooke 3 (0.214).; Doornkop Kr (0.090); Doornkop Sr (0.167); Elandsrand (0.176); Target (0.155); Kalgold (0.014) |
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PROVEN | PROBABLE | TOTAL | ||||||||||||||||||||||||||||||||||||||||||||||
Tonnes | Silver | Silver | Tonnes | Silver | Silver | Tonnes | Silver | Silver | ||||||||||||||||||||||||||||||||||||||||
Mine | (Mt) | g/t | (000kg) | (000oz) | (Mt) | g/t | (000kg) | (000oz) | (Mt) | g/t | (000kg) | (000oz) | ||||||||||||||||||||||||||||||||||||
Hidden Valley and Kaveroi | 5.1 | 39.63 | 202.1 | 6498 | 33.0 | 33.23 | 1096.7 | 35261 | 38.1 | 34.09 | 1298.9 | 41759 | ||||||||||||||||||||||||||||||||||||
Grand total | 5.1 | 39.63 | 202.1 | 6498 | 33.0 | 33.23 | 1096.7 | 35261 | 38.1 | 34.09 | 1298.9 | 41759 | ||||||||||||||||||||||||||||||||||||
Silver price used = US$8/oz | ||
NB : Rounding of figures may result in slight computational discrepancies |
PROVEN | PROBABLE | TOTAL | ||||||||||||||||||||||||||||||||||||||||||||||
Tonnes | Cu | Cu | Tonnes | Cu | Cu | Tonnes | Cu | Cu | ||||||||||||||||||||||||||||||||||||||||
Mine | (Mt) | % | (000 t) | (M lbs) | (Mt) | % | (000 t) | (M lbs) | (Mt) | % | (000 t) | (M lbs) | ||||||||||||||||||||||||||||||||||||
Golpu | 0.0 | 0.00 | 0.0 | 0.0 | 70.8 | 1.13 | 800.0 | 1763 | 70.8 | 1.13 | 800.0 | 1763 | ||||||||||||||||||||||||||||||||||||
Grand total | 0.0 | 0.00 | 0.0 | 0.0 | 70.8 | 1.13 | 800.0 | 1763 | 70.8 | 1.13 | 800.0 | 1763 | ||||||||||||||||||||||||||||||||||||
Copper price used = US$30/lb | ||
NB : Rounding of figures may result in slight computational discrepancies |
PROVEN | PROBABLE | TOTAL | ||||||||||||||||||||||||||||||||||||||||||||||
Tonnes | Mo | Mo | Tonnes | Mo | Mo | Tonnes | Mo | Mo | ||||||||||||||||||||||||||||||||||||||||
Mine | (Mt) | ppm | (000 t) | (M lbs) | (Mt) | ppm | (000 t) | (M lbs) | (Mt) | ppm | (000 t) | (M lbs) | ||||||||||||||||||||||||||||||||||||
Golpu | 0.0 | 0.00 | 0.0 | 0.0 | 70.8 | 121.00 | 8.6 | 19 | 70.8 | 121.00 | 8.6 | 19 | ||||||||||||||||||||||||||||||||||||
Grand total | 0.0 | 0.00 | 0.0 | 0.0 | 70.8 | 121.00 | 8.6 | 19 | 70.8 | 121.00 | 8.6 | 19 | ||||||||||||||||||||||||||||||||||||
Molybdenum price used = US$20/lb | ||
NB : Rounding of figures may result in slight computational discrepancies |
R103,500 /kilogram (-10 percent) | R115,000/kilogram | R126,500 /kilogram (+10 percent) | ||
50.685 million ounces | 53.67 million ounces | 55.747 million ounces |
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Hectares | Acres | |||||||
Cooke (Randfontein) | 8,696 | 21,488 | ||||||
Lindum (Randfontein) | 3,143 | 7,766 | ||||||
Doornkop (Randfontein) | 2,941 | 7,267 | ||||||
Elandskraal | 5,113 | 12,634 | ||||||
Free State | 22,583 | 55,802 | ||||||
Freegold | 21,173 | 52,318 | ||||||
Kalgold | 615 | 1,520 | ||||||
Evander | 36,898 | 91,174 | ||||||
Target | 7,952 | 19,649 | ||||||
Total | 109,114 | 269,618 |
Hectares | Acres | |||||||
Mt. Magnet | 83,419 | 206,133 | ||||||
South Kalgoorlie | 113,375 | 280,156 | ||||||
Total | 196,794 | 486,289 |
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Hectares | Acres | |||||||
PNG | 346,138 | 855,326 | ||||||
Total Worldwide Operations | 642,046 | 1,611,233 |
• | Elandskraal | ||
• | Free State | ||
• | Randfontein | ||
• | Evander | ||
• | Freegold | ||
• | Target |
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• | Free State | ||
• | Randfontein | ||
• | Freegold | ||
• | Kalgold | ||
• | Target |
• | Mt. Magnet – (we have signed a letter of intent for the sale of this operation – See“Disposals”above.) | ||
• | South Kalgoorlie – (we have entered into an agreement for the sale of this operation – See“Disposals”above.) |
• | an overview of our South African mining operations with a discussion of each site; | ||
• | a production analysis of our South African mining operations based on individual shafts or mine grouped into categories (Quality, Leveraged and Growth); and | ||
• | an overview of our Australasian (Australian and PNG) operations. |
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Average Milled for the | ||||||
Processing | Fiscal Year | |||||
Plant | Capacity | June 30, 2007 | ||||
(tons/month) | (tons/month) | |||||
Elandsrand Plant | 185,000 * | 84,783 |
* | Processing capacity will reach its optimal capacity upon completion of the Elandsrand New Mine Project. |
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Average Milled for the | ||||||||
Processing | Fiscal Year Ended | |||||||
Plant | Capacity | June 30, 2007 | ||||||
(tons/month) | (tons/month) | |||||||
Cooke | 280,000 | 56,619 | ||||||
Doornkop | 220,000 | 169,613 |
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Average Milled | ||||||||
for the Fiscal Year | ||||||||
Processing | Ended | |||||||
Plant | Capacity | June 30, 2007 | ||||||
(tons/month) | (tons/month) | |||||||
Central | 168,000 | 162,737 | ||||||
Saaiplaas | 250,000 | 178,646 |
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Average Milled for the | ||||||||
Processing | Fiscal Year Ended | |||||||
Plant | Capacity | June 30, 2007 | ||||||
(tons/month) | (tons/month) | |||||||
Kinross-Winkelhaak | 200,000 | 126,250 |
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Average Milled for the | ||||||||
Processing | Fiscal Year Ended | |||||||
Plant | Capacity | June 30, 2007 | ||||||
(tons/month) | (tons/month) | |||||||
CIL | 135,000 | 132,485 | ||||||
Heap Leach* | — | — |
* | Active use of heap leaching was discontinued in July 2001; however, the Heap Leach is treated through the current circuit on a monthly basis. |
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Average Milled for | ||||||||
Processing | the Fiscal Year | |||||||
Plant | Capacity | Ended June 30, 2007 | ||||||
(tons/month) | (tons/month) | |||||||
FS 1 | 420,000 | 404,167 |
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Average Milled For the | ||||||||
Processing | Fiscal Year Ended | |||||||
Plant | Capacity | June 30, 2007 | ||||||
(tons/month) | (tons/month) | |||||||
Target Plant | 105,000 | 101,217 |
Fiscal Year Ended June 30, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Production | ||||||||||||
Tons (‘000) | 6,901 | 6,814 | 7,464 | |||||||||
Recovered grade (ounces/ton) | 0.155 | 0.167 | 0.185 | |||||||||
Gold sold (ounces) | 1,068,902 | 1,141,166 | 1,378,167 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 682,029 | 606,435 | 588,360 | |||||||||
Cash cost (‘000) | 472,749 | 437,193 | 436,018 | |||||||||
Cash profit (‘000) | 209,280 | 169,242 | 152,342 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 442 | 383 | 316 | |||||||||
Capex(‘000) ($) | 105,578 | 89,587 | 81,615 |
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Fiscal Year Ended June 30, | ||||||||||||
Target | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 904 | 813 | 1,178 | |||||||||
Recovered grade (ounces/ton) | 0.158 | 0.185 | 0.178 | |||||||||
Gold sold (ounces) | 142,433 | 150,196 | 209,847 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 91,228 | 81,178 | 89,233 | |||||||||
Cash cost (‘000) | 52,730 | 51,904 | 54,391 | |||||||||
Cash profit (‘000) | 38,498 | 29,274 | 34,842 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 370 | 346 | 259 | |||||||||
Capex(‘000 )($) | 16,745 | 9,644 | 10,818 |
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Fiscal Year Ended June 30, | ||||||||||||
Tshepong | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 1,824 | 1,786 | 1,700 | |||||||||
Recovered grade (ounces/ton) | 0,175 | 0.188 | 0.224 | |||||||||
Gold sold (ounces) | 318,887 | 335,289 | 380,695 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 202,757 | 179,626 | 162,958 | |||||||||
Cash cost (‘000) | 112,043 | 111,462 | 101,091 | |||||||||
Cash profit (‘000) | 90,714 | 68,164 | 61,867 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 351 | 332 | 266 | |||||||||
Capex(‘000) ($) | 26,072 | 23,529 | 23,346 |
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Fiscal Year Ended June 30, | ||||||||||||
Masimong Shaft Complex | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 1,074 | 1,020 | 1,046 | |||||||||
Recovered grade (ounces/ton) | 0.138 | 0.133 | 0.153 | |||||||||
Gold sold (ounces) | 147,958 | 136,153 | 159,981 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 94,534 | 72,854 | 68,342 | |||||||||
Cash cost (‘000) | 82,815 | 66,563 | 65,388 | |||||||||
Cash profit (‘000) | 11,719 | 6,291 | 2,954 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 560 | 489 | 409 | |||||||||
Capex(‘000) ($) | 15,141 | 14,520 | 10,630 |
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Fiscal Year Ended June 30, | ||||||||||||
Evander 2 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | — | — | 357 | |||||||||
Recovered grade (ounces/ton) | — | — | 0.137 | |||||||||
Gold sold (ounces) | — | — | 48,764 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | — | — | 20,695 | |||||||||
Cash cost (‘000) | — | — | 27,404 | |||||||||
Cash loss (‘000) | — | — | (6,709 | ) | ||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | — | — | 562 | |||||||||
Capex(‘000) ($) | — | — | 15 |
Fiscal Year Ended June 30, | ||||||||||||
Evander 5 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 377 | 450 | 245 | |||||||||
Recovered grade (ounces/ton) | 0.148 | 0.139 | 0.192 | |||||||||
Gold sold (ounces) | 55,643 | 62,388 | 47,093 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 35,673 | 32,183 | 20,078 | |||||||||
Cash cost (‘000) | 28,923 | 33,068 | 15,912 | |||||||||
Cash (loss)/profit (‘000) | 6,750 | (885 | ) | 4,166 | ||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 520 | 530 | 338 | |||||||||
Capex(‘000) ($) | 5,451 | 6,453 | 7,006 |
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Fiscal Year Ended June 30, | ||||||||||||
Evander 7 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 447 | 435 | 541 | |||||||||
Recovered grade (ounces/ton) | 0.137 | 0.191 | 0.240 | |||||||||
Gold sold (ounces) | 61,044 | 83,202 | 130,009 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 39,242 | 42,365 | 55,502 | |||||||||
Cash cost (‘000) | 38,633 | 32,648 | 32,795 | |||||||||
Cash profit (‘000) | 609 | 9,717 | 22,707 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 633 | 392 | 252 | |||||||||
Capex(‘000) ($) | 11,899 | 10,021 | 7,948 |
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Fiscal Year Ended June 30, | ||||||||||||
Evander 8 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 842 | 815 | 734 | |||||||||
Recovered grade (ounces/ton) | 0.141 | 0.158 | 0.207 | |||||||||
Gold sold (ounces) | 118,692 | 128,849 | 151,936 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 76,124 | 67,325 | 64,912 | |||||||||
Cash cost (‘000) | 45,792 | 44,863 | 41,500 | |||||||||
Cash profit (‘000) | 30,332 | 22,462 | 23,412 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 386 | 348 | 273 | |||||||||
Capex(‘000) ($) | 11,039 | 9,726 | 8,216 |
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Fiscal Year Ended June 30, | ||||||||||||
Cooke 1 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 426 | 490 | 520 | |||||||||
Recovered grade (ounces/ton) | 0.178 | 0.164 | 0.152 | |||||||||
Gold sold (ounces) | 75,698 | 80,495 | 79,101 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 48,311 | 42,978 | 33,888 | |||||||||
Cash cost (‘000) | 32,852 | 32,274 | 31,115 | |||||||||
Cash profit (‘000) | 15,459 | 10,704 | 2,773 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 434 | 401 | 393 | |||||||||
Capex(‘000) ($) | 1,967 | 3,759 | 2,811 |
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Fiscal Year Ended June 30, | ||||||||||||
Cooke 2 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 385 | 353 | 403 | |||||||||
Recovered grade (ounces/ton) | 0.149 | 0.170 | 0.135 | |||||||||
Gold sold (ounces) | 57,215 | 59,836 | 54,441 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 36,290 | 32,025 | 23,274 | |||||||||
Cash cost (‘000) | 34,880 | 23,082 | 24,144 | |||||||||
Cash profit (‘000) | 1,410 | 8,943 | (870 | ) | ||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 610 | 386 | 443 | |||||||||
Capex(‘000) ($) | 3,682 | 3,738 | 2,538 |
63
Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Cooke 3 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 622 | 652 | 740 | |||||||||
Recovered grade (ounces/ton) | 0.147 | 0.161 | 0.157 | |||||||||
Gold sold (ounces) | 91,332 | 104,758 | 116,300 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 57,870 | 55,901 | 49,478 | |||||||||
Cash cost (‘000) | 44,081 | 41,329 | 42,278 | |||||||||
Cash profit (‘000) | 13,789 | 14,572 | 7,200 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 483 | 395 | 364 | |||||||||
Capex(‘000 )($) | 13,582 | 8,197 | 8,287 |
64
Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Production | ||||||||||||
Tons (‘000) | 5,507 | 5,122 | 5,990 | |||||||||
Recovered grade (ounces/ton) | 0.125 | 0,133 | 0.140 | |||||||||
Gold sold (ounces) | 687,499 | 683,450 | 841,280 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 438,310 | 361,178 | 358,139 | |||||||||
Cash cost (‘000) | 377,238 | 336,695 | 402,695 | |||||||||
Cash profit (‘000) | 61,072 | 24,483 | (44,556 | ) | ||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 549 | 493 | 479 | |||||||||
Capex(‘000) ($) | 56,780 | 40,072 | 33,068 |
Fiscal Year Ended June 30, | ||||||||||||
Bambanani | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 1,191 | 1,196 | 1,090 | |||||||||
Recovered grade (ounces/ton) | 0.159 | 0.147 | 0.181 | |||||||||
Gold sold (ounces) | 189,683 | 175,214 | 197,535 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 120,733 | 93,111 | 84,165 | |||||||||
Cash cost (‘000) | 107,539 | 87,064 | 83,289 | |||||||||
Cash profit (‘000) | 13,194 | 6,047 | 876 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 567 | 497 | 422 | |||||||||
Capex(‘000) ($) | 16,639 | 14,870 | 12,178 |
65
Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Evander 9 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | — | — | 31 | |||||||||
Recovered grade (ounces/ton) | — | — | 0.083 | |||||||||
Gold sold (ounces) | — | — | 2,573 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | — | — | 1,078 | |||||||||
Cash cost (‘000) | — | 21 | 3,005 | |||||||||
Cash profit (‘000) | — | (21 | ) | (1,927 | ) | |||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | — | — | 1,168 | |||||||||
Capex(‘000) ($) | — | — | — |
Fiscal Year Ended June 30, | ||||||||||||
Joel | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 504 | 436 | 498 | |||||||||
Recovered grade (ounces/ton) | 0.158 | 0.134 | 0.129 | |||||||||
Gold sold (ounces) | 79,923 | 58,595 | 64,464 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 50,839 | 31,346 | 27,282 | |||||||||
Cash cost (‘000) | 33,412 | 29,170 | 28,990 | |||||||||
Cash profit (‘000) | 17,427 | 2,176 | (1,708 | ) | ||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 418 | 498 | 450 | |||||||||
Capex(‘000 )($) | 3,911 | 3,644 | 2,582 |
66
Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Kudu/Sable | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 15 | 13 | 194 | |||||||||
Recovered grade (ounces/ton) | 0.053 | 0.156 | 0.130 | |||||||||
Gold sold (ounces) | 845 | 2,024 | 25,175 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 553 | 890 | 10,764 | |||||||||
Cash cost (‘000) | 189 | 895 | 18,885 | |||||||||
Cash profit (‘000) | 364 | (5 | ) | (8,121 | ) | |||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 224 | 442 | 750 | |||||||||
Capex(‘000) ($) | — | — | — |
67
Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
West Shaft | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 93 | 206 | 176 | |||||||||
Recovered grade (ounces/ton) | 0,080 | 0.124 | 0.160 | |||||||||
Gold sold (ounces) | 7,377 | 25,525 | 28,165 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 4,592 | 13,117 | 12,049 | |||||||||
Cash cost (‘000) | 7,929 | 13,650 | 12,907 | |||||||||
Cash loss (‘000) | (3,337 | ) | (533 | ) | (858 | ) | ||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 1,075 | 535 | 458 | |||||||||
Capex(‘000) ($) | 666 | 887 | 107 |
68
Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Nyala | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | — | 2 | 198 | |||||||||
Recovered grade (ounces/ton) | — | 0.092 | 0.119 | |||||||||
Gold sold (ounces) | — | 184 | 23,503 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | — | 81 | 9,897 | |||||||||
Cash cost (‘000) | — | 226 | 17,587 | |||||||||
Cash profit (‘000) | — | (145 | ) | (7,690 | ) | |||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | — | 1,228 | 748 | |||||||||
Capex(‘000 )($) | — | 3 | 1,440 |
Fiscal Year Ended June 30, | ||||||||||||
Eland | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 11 | 21 | 175 | |||||||||
Recovered grade (ounces/ton) | 0.229 | 0.193 | 0.153 | |||||||||
Gold sold (ounces) | 2,420 | 4,058 | 26,782 | |||||||||
Results of operations( $) | ||||||||||||
Product sales (‘000) | 1,505 | 2,026 | 11,436 | |||||||||
Cash cost (‘000) | — | 1,066 | 13,404 | |||||||||
Cash profit (‘000) | 1,505 | 960 | (1,968 | ) | ||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | — | 263 | 500 | |||||||||
Capex(‘000) ($) | 79 | — | — |
69
Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Deelkraal | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | — | — | 1 | |||||||||
Recovered grade (ounces/ton) | — | — | 2.284 | |||||||||
Gold sold (ounces) | — | — | 2,284 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | — | — | 958 | |||||||||
Cash cost (‘000) | — | — | 714 | |||||||||
Cash profit (‘000) | — | — | 244 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | — | — | 313 | |||||||||
Capex(‘000) ($) | — | — | — |
Fiscal Year Ended June 30, | ||||||||||||
St. Helena | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 240 | 127 | 245 | |||||||||
Recovered grade (ounces/ton) | 0,089 | 0.101 | 0.122 | |||||||||
Gold sold (ounces) | 21,319 | 12,791 | 29,965 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 13,650 | 6,867 | 12,660 | |||||||||
Cash cost (‘000) | 17,909 | 10,802 | 24,191 | |||||||||
Cash loss (‘000) | (4,259 | ) | (3,935 | ) | (11,531 | ) | ||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 840 | 845 | 807 | |||||||||
Capex(‘000) ($) | 1,440 | 443 | 901 |
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Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Harmony 2 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 516 | 598 | 559 | |||||||||
Recovered grade (ounces/ton) | 0.090 | 0.116 | 0.123 | |||||||||
Gold sold (ounces) | 46,274 | 69,446 | 68,547 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 29,936 | 36,716 | 29,295 | |||||||||
Cash cost (‘000) | 29,887 | 33,527 | 30,021 | |||||||||
Cash profit (‘000) | 49 | 3,189 | (726 | ) | ||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 646 | 483 | 438 | |||||||||
Capex(‘000) ($) | 4,905 | 3,964 | 3,556 |
71
Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Merriespruit 1 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 476 | 410 | 414 | |||||||||
Recovered grade (ounces/ton) | 0.106 | 0.117 | 0.110 | |||||||||
Gold sold (ounces) | 50,612 | 48,069 | 45,559 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 32,520 | 25,685 | 19,428 | |||||||||
Cash cost (‘000) | 26,507 | 24,061 | 21,719 | |||||||||
Cash profit (‘000) | 6,013 | 1,624 | (2,291 | ) | ||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 524 | 501 | 477 | |||||||||
Capex(‘000) ($) | 3,509 | 2,445 | 2,833 |
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Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Merriespruit 3 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 444 | 452 | 548 | |||||||||
Recovered grade (ounces/ton) | 0.098 | 0.097 | 0.100 | |||||||||
Gold sold (ounces) | 43,541 | 43,691 | 54,690 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 27,933 | 23,078 | 23,325 | |||||||||
Cash cost (‘000) | 25,035 | 24,188 | 24,379 | |||||||||
Cash profit (‘000) | 2,898 | (1,110 | ) | (1,054 | ) | |||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 575 | 554 | 446 | |||||||||
Capex(‘000) ($) | 3,420 | 1,783 | 1,696 |
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Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Unisel | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 614 | 500 | 494 | |||||||||
Recovered grade (ounces/ton) | 0.130 | 0.146 | 0.132 | |||||||||
Gold sold (ounces) | 79,992 | 72,963 | 65,011 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 51,142 | 38,172 | 27,798 | |||||||||
Cash cost (‘000) | 35,013 | 28,789 | 31,055 | |||||||||
Cash profit (‘000) | 16,129 | 9,383 | (3,257 | ) | ||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 438 | 395 | 478 | |||||||||
Capex(‘000) ($) | 5,436 | 3,907 | 4,147 |
Fiscal Year Ended June 30, | ||||||||||||
Brand 3 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 444 | 405 | 448 | |||||||||
Recovered grade (ounces/ton) | 0.103 | 0.103 | 0.103 | |||||||||
Gold sold (ounces) | 45,611 | 41,647 | 46,299 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 29,174 | 22,147 | 19,807 | |||||||||
Cash cost (‘000) | 27,771 | 23,272 | 22,883 | |||||||||
Cash profit (‘000) | 1,403 | (1,125 | ) | (3,076 | ) | |||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 609 | 559 | 494 | |||||||||
Capex(‘000) ($) | 1,590 | 987 | 1,267 |
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Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Brand 5 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 12 | 3 | — | |||||||||
Recovered grade (ounces/ton) | 0.077 | 0.156 | — | |||||||||
Gold sold (ounces) | 918 | 469 | 33 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 592 | 236 | 8 | |||||||||
Cash cost (‘000) | 1526 | 975 | 2,120 | |||||||||
Cash loss (‘000) | (934 | ) | (739 | ) | (2,112 | ) | ||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 1,661 | 2,079 | 64,242 | |||||||||
Capex(‘000) ($) | — | — | — |
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Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Orkney 2 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 311 | 347 | 413 | |||||||||
Recovered grade (ounces/ton) | 0.168 | 0.201 | 0.190 | |||||||||
Gold sold (ounces) | 52,275 | 69,877 | 78,449 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 33,048 | 36,589 | 33,279 | |||||||||
Cash cost (‘000) | 26,262 | 29,716 | 31,495 | |||||||||
Cash profit (‘000) | 6,786 | 6,873 | 1,784 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 502 | 425 | 401 | |||||||||
Capex(‘000) ($) | 4,273 | 2,380 | 1,443 |
Fiscal Year Ended June 30, | ||||||||||||
Orkney 4 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 397 | 406 | 455 | |||||||||
Recovered grade (ounces/ton) | 0.116 | 0.145 | 0.169 | |||||||||
Gold sold (ounces) | 46,041 | 58,897 | 76,971 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 28,960 | 31,117 | 32,720 | |||||||||
Cash cost (‘000) | 26,317 | 29,273 | 29,616 | |||||||||
Cash profit (‘000) | 2,643 | 1,844 | 3,104 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 572 | 497 | 385 | |||||||||
Capex(‘000) ($) | 5,101 | 4,759 | 915 |
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Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Orkney 7 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 239 | — | — | |||||||||
Recovered grade (ounces/ton) | 0.086 | — | — | |||||||||
Gold sold (ounces) | 20,668 | — | — | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 13,133 | — | — | |||||||||
Cash cost (‘000) | 11,942 | — | — | |||||||||
Cash profit (‘000) | 1,191 | — | — | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 578 | — | — | |||||||||
Capex(‘000) ($) | 5,768 | — | — |
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Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Saaiplaas 3 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | — | — | 30 | |||||||||
Recovered grade (ounces/ton) | — | — | 0.085 | |||||||||
Gold sold (ounces) | — | — | 2,541 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | — | — | 1,026 | |||||||||
Cash cost (‘000) | — | — | 4,831 | |||||||||
Cash profit (‘000) | — | — | (3,805 | ) | ||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | — | — | 1,901 | |||||||||
Capex(‘000 )($) | 43 | — | 4 |
Fiscal Year Ended June 30, | ||||||||||||
Welkom 1 | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | — | — | 21 | |||||||||
Recovered grade (ounces/ton) | — | — | 0.130 | |||||||||
Gold sold (ounces) | — | — | 2,734 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | — | — | 1,164 | |||||||||
Cash cost (‘000) | — | — | 1,604 | |||||||||
Cash profit (‘000) | — | — | (440 | ) | ||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | — | — | 587 | |||||||||
Capex(‘000) ($) | — | — | — |
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Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Production | ||||||||||||
Tons (‘000) | 1,714 | 1,502 | 1,545 | |||||||||
Recovered grade (ounces/ton) | 0.147 | 0.143 | 0.168 | |||||||||
Gold sold (ounces) | 252,074 | 214,460 | 260,066 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 160,850 | 113,391 | 111,055 | |||||||||
Cash cost (‘000) | 127,744 | 113,671 | 112,172 | |||||||||
Cash profit (‘000) | 33,106 | (280 | ) | (1,117 | ) | |||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 507 | 530 | 431 | |||||||||
Capex(‘000) ($) | 102,244 | 78,076 | 73,458 |
Fiscal Year Ended June 30, | ||||||||||||
Elandsrand | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 1,117 | 987 | 1,019 | |||||||||
Recovered grade (ounces/ton) | 0.174 | 0.173 | 0.204 | |||||||||
Gold sold (ounces) | 194,710 | 170,867 | 207,371 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 124,347 | 90,097 | 88,577 | |||||||||
Cash cost (‘000) | 102,534 | 89,349 | 88,599 | |||||||||
Cash profit (‘000) | 21,813 | 748 | (22 | ) | ||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 527 | 523 | 427 | |||||||||
Capex(‘000) ($) | 33,094 | 30,523 | 26,081 |
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Table of Contents
• | Sinking and equipping of the No 2 Service Shaft to its final depth (105 level) was completed during the year. | ||
• | The 92 level turbine dam was sunk to its depth of 26m, and supported and sealed. | ||
• | The Man 1 Winder stations on the sub-shaft were commissioned on all five levels (102, 105, 109, 113 and 115). The sub-shaft can now hoist men and material with both winders on the project levels. | ||
• | All the electrical main sub-stations on the project levels (except 115 level) have now been completed and commissioned. This includes all main feeder cables below 100 level. All the services cables have been installed from 100 level to 115 level. These are expected to be commissioned during the first quarter of the 2008 fiscal year. | ||
• | The 22 kV systems from surface to 100 level was completed during the year and is awaiting the installation of the 10 MVA transformer on 100 level. | ||
• | The installation of the No. 1 Settler was completed during the year and is planned to be brought on line towards the end of December 2007. | ||
• | The winder and headgear chamber for the No 3 Service shaft was completed during the year. |
80
Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Doornkop | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 597 | 515 | 526 | |||||||||
Recovered grade (ounces/ton) | 0.096 | 0.085 | 0.100 | |||||||||
Gold sold (ounces) | 57,364 | 43,593 | 52,695 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 36,503 | 23,294 | 22,478 | |||||||||
Cash cost (‘000) | 25,210 | 24,322 | 23,573 | |||||||||
Cash profit (‘000) | 11,293 | (1,028 | ) | (1,095 | ) | |||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 439 | 558 | 447 | |||||||||
Capex(‘000) ($) | 37,557 | 26,031 | 28,621 |
81
Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Phakisa | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | — | — | — | |||||||||
Recovered grade (ounces/ton) | — | — | — | |||||||||
Gold sold (ounces) | — | — | — | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | — | — | — | |||||||||
Cash cost (‘000) | — | — | — | |||||||||
Cash profit (‘000) | — | — | — | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | — | — | — | |||||||||
Capex (‘000) ($) | 31,593 | 21,522 | 18,756 |
Fiscal Year Ended June 30, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Production | ||||||||||||
Tons (‘000) | 5,451 | 3,984 | 6,528 | |||||||||
Recovered grade (ounces/ton) | 0.019 | 0.029 | 0.029 | |||||||||
Gold sold (ounces) | 100,925 | 116,388 | 188,904 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 65,407 | 59,833 | 80,222 | |||||||||
Cash cost (‘000) | 40,790 | 49,543 | 73,679 | |||||||||
Cash profit (‘000) | 24,617 | 10,290 | (6,543 | ) |
82
Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 404 | 426 | 390 | |||||||||
Capex(‘000) ($) | 16,417 | 13,259 | 5,675 |
Fiscal Year Ended June 30, | ||||||||||||
Kalgold | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 1,740 | 2,008 | 1,855 | |||||||||
Recovered grade (ounces/ton) | 0.032 | 0.038 | 0.058 | |||||||||
Gold sold (ounces) | 56,129 | 77,071 | 108,195 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 35,743 | 39,342 | 46,331 | |||||||||
Cash cost (‘000) | 27,218 | 31,740 | 40,341 | |||||||||
Cash profit (‘000) | 8,525 | 7,602 | 5,990 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 485 | 412 | 373 | |||||||||
Capex(‘000) ($) | 376 | 389 | (4,145 | ) |
83
Table of Contents
Fiscal Year Ended June 30, | ||||||||||||
Elandsrand | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | — | — | — | |||||||||
Recovered grade (ounces/ton) | — | — | — | |||||||||
Gold sold (ounces) | — | — | — | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | — | — | — | |||||||||
Cash cost (‘000) | — | — | — | |||||||||
Cash profit (‘000) | — | — | — | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | — | — | — | |||||||||
Capex(‘000) ($) | 810 | — | 7 |
Fiscal Year Ended June 30, | ||||||||||||
Freegold | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 300 | 336 | 1,361 | |||||||||
Recovered grade (ounces/ton) | 0.010 | 0.033 | 0.027 | |||||||||
Gold sold (ounces) | 3,035 | 11,019 | 36,420 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 2,848 | 5,366 | 15,407 | |||||||||
Cash cost (‘000) | 302 | 5,386 | 15,436 | |||||||||
Cash profit (‘000) | 2,546 | (20 | ) | (29 | ) | |||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 99 | 489 | 424 | |||||||||
Capex(‘000) ($) | 913 | 340 | 314 |
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Fiscal Year Ended June 30, | ||||||||||||
Free State | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 2,369 | 897 | 467 | |||||||||
Recovered grade (ounces/ton) | 0.009 | 0.018 | 0.020 | |||||||||
Gold sold (ounces) | 21,345 | 15,902 | 9,542 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 13,628 | 8,614 | 3,720 | |||||||||
Cash cost (‘000) | 6,448 | 6,427 | 3,318 | |||||||||
Cash profit (‘000) | 7,180 | 2,187 | 402 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 304 | 404 | 348 | |||||||||
Capex(‘000) ($) | 4,711 | 3,818 | 1,589 |
Fiscal Year Ended June 30, | ||||||||||||
Randfontein | 2007 | 2006 | 2006 | |||||||||
Production | ||||||||||||
Tons (‘000) | 894 | 539 | 2,757 | |||||||||
Recovered grade (ounces/ton) | 0.021 | 0.022 | 0.012 | |||||||||
Gold sold (ounces) | 18,974 | 11,650 | 33,397 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 12,239 | 6,108 | 14,185 |
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Fiscal Year Ended June 30, | ||||||||||||
Randfontein | 2007 | 2006 | 2006 | |||||||||
Cash cost (‘000) | 5,791 | 5,022 | 14,117 | |||||||||
Cash profit (‘000) | 6,448 | 1,086 | 68 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 305 | 431 | 423 | |||||||||
Capex(‘000) ($) | 7,263 | 8,712 | 6,120 |
Fiscal Year Ended June 30, | ||||||||||||
Target | 2007 | 2006 | 2005 | |||||||||
Production | ||||||||||||
Tons (‘000) | 147 | 204 | 88 | |||||||||
Recovered grade (ounces/ton) | 0.009 | 0.004 | 0.015 | |||||||||
Gold sold (ounces) | 1,316 | 746 | 1,350 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 869 | 404 | 579 | |||||||||
Cash cost (‘000) | 1,028 | 968 | 467 | |||||||||
Cash profit (‘000) | (159 | ) | (564 | ) | 112 | |||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 781 | 1,298 | 346 | |||||||||
Capex(‘000) ($) | 1,707 | — | 1,790 |
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Fiscal Year Ended June 30, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Production | ||||||||||||
Tons (‘000) | 3,266 | 3,398 | 4,148 | |||||||||
Recovered grade (ounces/ton) | 0.069 | 0.068 | 0.072 | |||||||||
Gold sold (ounces) | 224,799 | 231,461 | 296,848 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 141,874 | 122,496 | 125,669 | |||||||||
Cash cost (‘000) | 115,193 | 96,950 | 100,178 | |||||||||
Cash profit (‘000) | 26,681 | 25,546 | 25,491 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 512 | 419 | 337 | |||||||||
Capex(‘000) ($) | 26,919 | 24,971 | 25,813 |
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Fiscal Year Ended June 30, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Production | ||||||||||||
Tons (‘000) | 1,875 | 1,918 | 2,743 | |||||||||
Recovered grade (ounces/ton) | 0.073 | 0.078 | 0.066 | |||||||||
Gold sold (ounces) | 136,428 | 148,822 | 181,233 | |||||||||
Results of operations ($) | ||||||||||||
Product sales (‘000) | 85,760 | 80,090 | 77,242 | |||||||||
Cash cost (‘000) | 70,626 | 59,427 | 60,915 | |||||||||
Cash profit (‘000) | 15,134 | 20,663 | 16,327 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold ($) | 518 | 399 | 336 | |||||||||
Capex(‘000) ($) | 20,199 | 22,651 | 15,652 |
Average Milled for | ||||||||
the Year Ended June | ||||||||
Plant | Processing Capacity* | 30, 2007 | ||||||
(tons/month) | (tons/month) | |||||||
Mt. Magnet | 243,000 | 156,145 |
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Fiscal Year Ended June 30, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Production | ||||||||||||
Tons (‘000) | 1,391 | 1,480 | 1,405 | |||||||||
Recovered grade (ounces/ton) | 0.064 | 0.056 | 0.082 | |||||||||
Gold sold (ounces) | 88,371 | 82,639 | 115,615 | |||||||||
Results of operations($) | ||||||||||||
Product sales (‘000) | 56,114 | 42,406 | 48,427 | |||||||||
Cash cost (‘000) | 44,567 | 37,523 | 39,263 | |||||||||
Cash profit (‘000) | 11,547 | 4,883 | 9,164 | |||||||||
Cash costs | ||||||||||||
Per ounce of gold($) | 504 | 454 | 340 | |||||||||
Capex(‘000)($) | 6,720 | 2,320 | 10,161 |
Average Milled for | ||||||||
the Year Ended June | ||||||||
Plant | Processing Capacity* | 30, 2007 | ||||||
(tons/month) | (tons/month) | |||||||
Jubilee | 122,000 | 115,878 |
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• | Major new stand alone discoveries; | ||
• | High-grade drivers to improve cash flows of the Hidden Valley Project; and | ||
• | Additional reserves to substantially increase mine life of the Hidden Valley Project. |
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Ton | Cu | Au | As | Ag | Mo | Cu Metal | Au Metal | Mo Metal | ||||||||||||||||||||||||||||
Golpu | (Mt) | % | ppm | ppm | ppm | ppm | (’000t) | (’000oz) | (’000t) | |||||||||||||||||||||||||||
Proven Reserve | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Probable Reserve | 78.5 | 1.1 | 0.6 | 136 | 1.2 | 121 | 881 | 1,389 | 9.5 | |||||||||||||||||||||||||||
Total | 78.5 | 1.1 | 0.6 | 136 | 1.2 | 121 | 881 | 1,389 | 9.5 | |||||||||||||||||||||||||||
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• | to recognize the internationally accepted right of the state of South Africa to exercise full and permanent sovereignty over all the mineral and petroleum resources within South Africa; | ||
• | to give effect to the principle of South Africa’s custodianship of its mineral and petroleum resources; | ||
• | to promote equitable access to South Africa’s mineral and petroleum resources to all the people of South Africa; | ||
• | to substantially and meaningfully expand opportunities for historically disadvantaged persons including women, to enter the mineral and petroleum industry and to benefit from the exploitation of South Africa’s mineral and petroleum resources; | ||
• | to promote economic growth and mineral and petroleum resources development in South Africa; | ||
• | to promote employment and advance the social and economic welfare of all South Africans; | ||
• | to provide security of tenure in respect of prospecting, exploration, mining and production operations; | ||
• | to give effect to Section 24 of the South African Constitution by ensuring that South Africa’s mineral and petroleum resources are developed in an orderly and ecologically sustainable manner while promoting justifiable social and economic development; and | ||
• | to ensure that holders of mining and production rights contribute towards socio-economic development of the areas in which they are operating. |
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• | limits ministerial discretion insofar as applications relating to the conversion of old order mining rights are concerned, | ||
• | introduces a first-come first-served principle with respect to the consideration of applications for new order mining rights, | ||
• | introduces a mining advisory board to advise the Minister of Minerals and Energy on matters relating to minerals and mining, consisting of representatives of,inter alia, the South African state, organized labor, organized business and relevant community based organizations, | ||
• | provides for compensation for currently held rights in certain circumstances, and | ||
• | provides that a party aggrieved by an administration decision made in terms of the MPRDA has the right of appeal to either the Director General or the Minister and may only take matters to the courts once that party has exhausted his or her remedies in terms of the appeal procedures that are to be set forth. |
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• | clean the surface environment after mining and ensure certificates of closure are obtained; |
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• | promote “clean” mining and minerals processing; | ||
• | support Harmony’s social plan requirements, such as required by the MPRDA and Mining Charter, Black Economic Empowerment (“BEE”) and local community involvement; | ||
• | reduce environmental liabilities by 10% per annum by optimising assets; and | ||
• | self-fund environmental rehabilitation through economic activities/savings, thus contributing to the bottom line. | ||
Our approach to environmental management encompasses the following four broad principles: | |||
• | All relevant environmental risks should be identified and prioritized; | ||
• | Environmental issues should be dealt with promptly; | ||
• | Environmental issues, particularly relating to continuous non-compliance or potentially serious environmental impacts, should be notified and dealt with at the board level; and | ||
• | we will adopt the best practicable environmental option; that is, the option that has most benefit, or causes the least damage to the environment, at a cost acceptable to society and affordable to us. |
• | That environmental management is a corporate priority; | ||
• | That environmental policies, programs and practices will be integrated into the activities of Harmony; | ||
• | That we will strive for continued improvement and efficiency; | ||
• | That we will work with government departments and the public to come up with the best sustainable solutions; | ||
• | That contractors and suppliers will be required to comply with the Harmony policy; and | ||
• | That employees will be informed and educated regarding their environmental responsibilities. |
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• | Environmental inspection:general inspections are performed routinely and systematically with collected data entered into the system to enable follow-up actions. | ||
• | Risk assessment:detailed and specific risk assessments are conduced to help identify deviations that may not have been otherwise anticipated. | ||
• | Stakeholder communication:all communication is managed and may result in action items for the organization for which the stakeholder will require follow-up feedback. All such communication is logged. | ||
• | Monitoring:impact monitoring is focused on collecting and analyzing environmental data that may well result in follow-up actions. | ||
• | Licenses/permits:all details relating to licenses or permits can be registered in the system. | ||
• | Major loss, incident and accident notification:when an incident occurs, initial information about the incident is recorded to trigger a notification process. |
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• | development and implementation of environmental management procedures; | ||
• | monitoring of environmental impacts and performance; and | ||
• | review of procedures to ensure continual improvement. |
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• | to protect the health and safety of employees and other persons at mines; | ||
• | to promote a culture of health and safety; | ||
• | to require employers and employees to identify hazards and eliminate, control and minimize the risks relating to health and safety at mines; | ||
• | to give effect to the public international law obligations of South Africa that concern health and safety at mines; | ||
• | to provide for employee participation in matters of health and safety through health and safety representatives and health and safety committees at mines; | ||
• | to provide for the effective monitoring of health and safety conditions at mines; | ||
• | to provide for the enforcement of health and safety measures at mines; and | ||
• | to foster and promote co-operation and consultation on health and safety between the Department of Minerals and Energy, employers, employees and their representatives. |
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• | theQuality Assets, which typically have a larger reserve base and hence a longer life. These form the core of our operations; | ||
• | theLeveraged Assetsare those that provide significant upside in the event of a rising gold; and | ||
• | theGrowth Assets, whichcomprisethe expansion projects/new mines currently being constructed in South Africa. |
Leveraged | Surface | |||||
Quality Assets | Assets*** | Growth Assets | Operations | |||
Target | Bambanani | Elandsrand mine and project | Kalgold | |||
Tshepong | Joel | Doornkop mine and project | Freegold | |||
Masimong shaft complex | West Shaft* | Phakisa capital project | Free State | |||
Evander 2, 3 & 5 | St. Helena | Randfontein | ||||
Evander 7 | Harmony 2 | Target | ||||
Evander 8 | Merriespruit 1 | |||||
Cooke 1 | Merriespruit 3 | |||||
Cooke 2 | Unisel | |||||
Cooke 3 | Brand 3 | |||||
Orkney 2** | ||||||
Orkney 4** Orkney 7** |
* | West Shaft closed end of March 2007. | |
** | On September 24, 2007 an agreement to sell the Orkney shaft was entered into with Pamodzi Gold and is expected to be concluded by the first half of 2008. | |
*** | The Harmony 4 Shaft, St. Helena 2 Shaft and Eland Shaft are all currently under care and maintenance as of June 30, 2007. |
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Fiscal Year Ended | ||||||||||||
June 30 | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
($/oz) | ||||||||||||
Average | 638 | 527 | 422 | |||||||||
High | 692 | 726 | 454 | |||||||||
Low | 561 | 418 | 387 | |||||||||
Harmony’s average sales price(1) | 638 | 529 | 427 |
(1) | Harmony’s average sales price differs from the average gold price due to the timing of its sales of gold within each year and due to the effect of delivering under the commodity hedge contracts acquired in the New Hampton and Hill 50 transactions. |
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Fiscal year ended June 30, | |||||||||||||
2007 | 2006 | 2005 | |||||||||||
(in $ thousands, except per ounce amounts) | |||||||||||||
Total production costs from continuing operations — under U.S. GAAP | 1,170,320 | 1,123,153 | 1,195,179 | ||||||||||
Depreciation and amortization expense (excluding depreciation on non-mining assets) | (120,795 | ) | (147,344 | ) | (141,354 | ) | |||||||
Other items to be excluded from GAAP measure(1) | (25,967 | ) | (17,255 | ) | (17,045 | ) | |||||||
Production costs exclusive of depreciation and amortization per financial statements | 1,023,558 | 958,554 | 1,036,780 | ||||||||||
Less: share-based compensation | (5,113 | ) | (15,726 | ) | (15,618 | ) | |||||||
Total cash costs — using Gold Institute guidance | 1,018,445 | 942,828 | 1,021,162 | ||||||||||
Per ounce calculation: | |||||||||||||
Ounces sold | 2,109,400 | 2,155,464 | 2,668,417 | ||||||||||
Total cash cost per ounce — using Gold Institute guidance | 483 | 437 | 383 | ||||||||||
Total production cost per ounce — under U.S. GAAP | 555 | 521 | 448 |
(1) | Includes corporate costs and decrease in rehabilitation cost from continuing operations. |
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Fiscal year ended June 30, | |||||||||||||
2007 | 2006 | 2005 | |||||||||||
(in $ thousands, except per ounce amounts) | |||||||||||||
Total production costs from discontinuing operations — under U.S. GAAP | 146,902 | 111,846 | 103,258 | ||||||||||
Depreciation and amortization expense (excluding depreciation on non-mining assets) | (31,547 | ) | (12,089 | ) | (3,971 | ) | |||||||
Other items to be excluded from GAAP measure(1) | 321 | (1,480 | ) | 890 | |||||||||
Production costs exclusive of depreciation and amortization per financial statements | 115,676 | 98,277 | 100,177 | ||||||||||
Less; Share-based compensation | (483 | ) | (1,329 | ) | — | ||||||||
Total cash costs — using Gold Institute guidance | 115,193 | 96,948 | 100,177 | ||||||||||
Per ounce calculation: | |||||||||||||
Ounces sold | 224,798 | 231,461 | 296,848 | ||||||||||
Total cash cost per ounce — using Gold Institute guidance | 512 | 419 | 337 | ||||||||||
Total production cost per ounce — under U.S. GAAP | 653 | 483 | 348 |
(1) | Includes corporate costs and decrease in rehabilitation cost from discontinued operations. |
Fiscal year ended June 30, | |||||||||||||
2007 | 2006 | 2005 | |||||||||||
(in $ thousands, except per ounce amounts) | |||||||||||||
Total production costs — under U.S. GAAP | 1,317,222 | 1,234,999 | 1,298,437 | ||||||||||
Depreciation and amortization expense (excluding depreciation on non-mining assets) | (152,342 | ) | (159,433 | ) | (145,325 | ) | |||||||
Other items to be excluded from GAAP measure(1) | (25,646 | ) | (18,735 | ) | (16,155 | ) | |||||||
Production costs exclusive of depreciation and amortization per financial statements | 1,139,234 | 1,056,831 | 1,136,957 | ||||||||||
Less: share-based compensation | (5,596 | ) | (17,055 | ) | (15,618 | ) | |||||||
Total cash costs — using Gold Institute guidance | 1,133,638 | 1,039,776 | 1,121,339 | ||||||||||
Per ounce calculation: | |||||||||||||
Ounces sold | 2,334,198 | 2,386,925 | 2,965,265 | ||||||||||
Total cash cost per ounce — using Gold Institute guidance | 486 | 436 | 378 | ||||||||||
Total production cost per ounce — under U.S. GAAP | 564 | 517 | 438 |
(1) | Includes corporate costs and decrease in rehabilitation cost. |
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Percentage | ||||||||||||||||||||
Year Ended June 30, | Year Ended June 30, | Increase | ||||||||||||||||||
2007 | 2006 | in Cash | ||||||||||||||||||
(oz) | ($/oz) | (oz) | ($/oz) | Costs per ounce | ||||||||||||||||
SOUTH AFRICA | ||||||||||||||||||||
Free State operations | ||||||||||||||||||||
Quality assets | ||||||||||||||||||||
Masimong | 147,958 | 560 | 136,153 | 489 | 15 | |||||||||||||||
Leveraged assets | ||||||||||||||||||||
Harmony 2 | 46,274 | 646 | 69,446 | 483 | 34 | |||||||||||||||
Merriespruit 1 | 50,612 | 524 | 48,069 | 501 | 5 | |||||||||||||||
Merriespruit 3 | 43,541 | 575 | 43,691 | 554 | 4 | |||||||||||||||
Unisel | 79,992 | 438 | 72,963 | 395 | 11 | |||||||||||||||
Brand 3 | 45,611 | 609 | 41,647 | 559 | 9 | |||||||||||||||
Brand 5 | 918 | 1,662 | 469 | 2,079 | (20 | ) |
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Percentage | ||||||||||||||||||||
Year Ended June 30, | Year Ended June 30, | Increase | ||||||||||||||||||
2007 | 2006 | in Cash | ||||||||||||||||||
(oz) | ($/oz) | (oz) | ($/oz) | Costs per ounce | ||||||||||||||||
Surface operations | 21,346 | 302 | 15,902 | 404 | (25 | ) | ||||||||||||||
Evander operations | ||||||||||||||||||||
Quality assets | ||||||||||||||||||||
Evander 5 | 55,643 | 520 | 62,388 | 530 | (2 | ) | ||||||||||||||
Evander 7 | 61,044 | 633 | 83,202 | 392 | 61 | |||||||||||||||
Evander 8 | 118,692 | 386 | 128,849 | 348 | 11 | |||||||||||||||
Randfontein operations | ||||||||||||||||||||
Quality assets | ||||||||||||||||||||
Cooke 1 | 75,698 | 434 | 80,495 | 401 | 8 | |||||||||||||||
Cooke 2 | 57,215 | 610 | 59,836 | 386 | 58 | |||||||||||||||
Cooke 3 | 91,332 | 483 | 104,758 | 395 | 22 | |||||||||||||||
Growth assets | ||||||||||||||||||||
Doornkop | 57,364 | 439 | 43,593 | 558 | (21 | ) | ||||||||||||||
Surface operations | 18,974 | 305 | 11,650 | 431 | (29 | ) | ||||||||||||||
Elandskraal operations | ||||||||||||||||||||
Growth assets | ||||||||||||||||||||
Elandsrand | 194,710 | 527 | 170,867 | 523 | 1 | |||||||||||||||
Freegold operations | ||||||||||||||||||||
Quality assets | ||||||||||||||||||||
Tshepong | 318,887 | 351 | 335,289 | 332 | 6 | |||||||||||||||
Growth assets | ||||||||||||||||||||
Phakisa | — | — | — | — | — | |||||||||||||||
Leveraged assets | ||||||||||||||||||||
Bambanani | 189,683 | 567 | 175,214 | 497 | 14 | |||||||||||||||
Joel | 79,923 | 418 | 58,595 | 498 | (16 | ) | ||||||||||||||
Eland | 2,420 | — | 4,058 | 263 | (100 | ) | ||||||||||||||
Kudu/Sable | 845 | 224 | 2,024 | 442 | (49 | ) | ||||||||||||||
West Shaft | 7,377 | 1,075 | 25,525 | 535 | 101 | |||||||||||||||
Nyala | — | — | 184 | 1,228 | (100 | ) | ||||||||||||||
St. Helena | 21,319 | 840 | 12,791 | 845 | (1 | ) | ||||||||||||||
Surface operations | 3,035 | 99 | 11,019 | 489 | (80 | ) | ||||||||||||||
ARMgold operations | ||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||
Orkney 2 | 52,275 | 502 | 69,877 | 425 | 18 | |||||||||||||||
Orkney 4 | 46,041 | 572 | 58,897 | 497 | 15 | |||||||||||||||
Orkney 7 | 20,668 | 578 | — | — | 100 | |||||||||||||||
Surface | 125 | 24 | — | — | 100 | |||||||||||||||
Avgold operations | ||||||||||||||||||||
Quality assets | ||||||||||||||||||||
Target | 142,433 | 370 | 150,196 | 346 | 7 | |||||||||||||||
Surface operations | 1,316 | 781 | 746 | 1,298 | (40 | ) | ||||||||||||||
Kalgold operations | ||||||||||||||||||||
Surface operations | 56,129 | 485 | 77,071 | 412 | 18 | |||||||||||||||
AUSTRALASIA | ||||||||||||||||||||
Papua New Guinea | — | — | — | — | — | |||||||||||||||
Other entities | — | — | — | — | — | |||||||||||||||
Total continuing operations | 2,109,400 | 2,155,464 | ||||||||||||||||||
Weighted average | 483 | 437 | 11 |
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Income and Mining Tax | 2007 | 2006 | ||||||
Effective tax rate (expense)/benefit | (18 | )% | 1 | % |
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Percentage | ||||||||||||||||||||
Year Ended June 30, | Year Ended June 30, | Increase | ||||||||||||||||||
2006 | 2005 | in Cash | ||||||||||||||||||
(oz) | ($/oz) | (oz) | ($/oz)(1) | Costs per ounce | ||||||||||||||||
Adjusted | ||||||||||||||||||||
SOUTH AFRICA | ||||||||||||||||||||
Free State operations | ||||||||||||||||||||
Quality assets | ||||||||||||||||||||
Masimong | 136,153 | 489 | 159,981 | 409 | 20 | |||||||||||||||
Leveraged assets | ||||||||||||||||||||
Harmony 2 | 69,446 | 483 | 68,547 | 438 | 10 | |||||||||||||||
Merriespruit 1 | 48,069 | 501 | 45,559 | 477 | 5 | |||||||||||||||
Merriespruit 3 | 43,691 | 554 | 54,690 | 446 | 24 | |||||||||||||||
Unisel | 72,963 | 395 | 65,011 | 478 | (17 | ) | ||||||||||||||
Brand 3 | 41,647 | 559 | 46,299 | 494 | 13 | |||||||||||||||
Brand 5 | 469 | 2,079 | 33 | 64,242 | (97 | ) | ||||||||||||||
Saaiplaas 3 | — | — | 2,541 | 1,901 | — | |||||||||||||||
Surface operations | 15,902 | 404 | 9,542 | 348 | 16 | |||||||||||||||
Evander operations | ||||||||||||||||||||
Quality assets | ||||||||||||||||||||
Evander 2 | — | — | 48,764 | 562 | — | |||||||||||||||
Evander 5 | 62,388 | 530 | 47,093 | 338 | 57 | |||||||||||||||
Evander 7 | 83,202 | 392 | 130,009 | 252 | 56 | |||||||||||||||
Evander 8 | 128,849 | 348 | 151,936 | 273 | 27 | |||||||||||||||
Leveraged assets | ||||||||||||||||||||
Evander 9 | — | — | 2,573 | 1,168 | — | |||||||||||||||
Randfontein operations | ||||||||||||||||||||
Quality assets | ||||||||||||||||||||
Cooke 1 | 80,495 | 401 | 79,101 | 393 | 2 | |||||||||||||||
Cooke 2 | 59,836 | 386 | 54,441 | 443 | (13 | ) | ||||||||||||||
Cooke 3 | 104,758 | 395 | 116,300 | 364 | 9 | |||||||||||||||
Growth assets | ||||||||||||||||||||
Doornkop | 43,593 | 558 | 52,695 | 447 | 25 | |||||||||||||||
Surface operations | 11,650 | 431 | 33,397 | 423 | 2 | |||||||||||||||
Elandskraal operations | ||||||||||||||||||||
Growth assets | ||||||||||||||||||||
Elandsrand | 170,867 | 523 | 207,371 | 427 | 22 | |||||||||||||||
Leveraged assets | ||||||||||||||||||||
Deelkraal | — | — | 2,284 | 313 | — | |||||||||||||||
Freegold operations | ||||||||||||||||||||
Quality assets | ||||||||||||||||||||
Tshepong | 335,289 | 332 | 380,695 | 266 | 26 | |||||||||||||||
Growth assets | ||||||||||||||||||||
Phakisa | — | — | — | — | — | |||||||||||||||
Leveraged assets | ||||||||||||||||||||
Bambanani | 175,214 | 497 | 197,535 | 422 | 18 | |||||||||||||||
Joel | 58,595 | 498 | 64,464 | 450 | 11 | |||||||||||||||
Eland | 4,058 | 263 | 26,782 | 500 | (48 | ) | ||||||||||||||
Kudu/Sable | 2,024 | 442 | 25,175 | 750 | (41 | ) | ||||||||||||||
West Shaft | 25,525 | 535 | 28,165 | 458 | 17 | |||||||||||||||
Nyala | 184 | 1,228 | 23,503 | 748 | 64 | |||||||||||||||
St. Helena | 12,791 | 845 | 29,965 | 807 | 5 | |||||||||||||||
Surface operations | 11,019 | 489 | 36,420 | 424 | 15 | |||||||||||||||
ARMgold operations | ||||||||||||||||||||
Leveraged assets |
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Percentage | ||||||||||||||||||||
Year Ended June 30, | Year Ended June 30, | Increase | ||||||||||||||||||
2006 | 2005 | in Cash | ||||||||||||||||||
(oz) | ($/oz) | (oz) | ($/oz)(1) | Costs per ounce | ||||||||||||||||
Adjusted | ||||||||||||||||||||
Orkney 2 | 69,877 | 425 | 78,449 | 401 | 6 | |||||||||||||||
Orkney 4 | 58,897 | 497 | 76,971 | 385 | 29 | |||||||||||||||
Welkom 1 | — | — | 2,734 | 587 | — | |||||||||||||||
Avgold operations | ||||||||||||||||||||
Quality assets | ||||||||||||||||||||
Target | 150,196 | 346 | 209,847 | 259 | 34 | |||||||||||||||
Surface operations | 746 | 1,298 | 1,350 | 346 | 275 | |||||||||||||||
Kalgold operations | ||||||||||||||||||||
Surface operations | 77,071 | 412 | 108,195 | 373 | (10 | ) | ||||||||||||||
AUSTRALASIA | ||||||||||||||||||||
Papua New Guinea | — | — | — | — | — | |||||||||||||||
Other entities | — | — | — | — | — | |||||||||||||||
Total | 2,155,464 | 2,668,417 | ||||||||||||||||||
Weighted average | 437 | 383 | 14 |
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Income and Mining Tax | 2006 | 2005 | ||||||
Effective tax rate benefit | 1 | % | 12 | % |
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2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Continuing operations | ||||||||||||
Operating cash flows | 217,795 | 61,772 | (143,126 | ) | ||||||||
Investing cash flows | (323,242 | ) | (268,415 | ) | 233,979 | |||||||
Financing cash flows | 163,389 | (16,615 | ) | 7,709 | ||||||||
Foreign exchange differences | (6,950 | ) | 31,235 | (11,085 | ) | |||||||
Total cash flows from continuing operations | 50,993 | (192,023 | ) | 87,477 | ||||||||
Discontinued operations | ||||||||||||
Operating cash flows | (53,111 | ) | (9,961 | ) | 27,512 | |||||||
Investing cash flows | 9,962 | 21,520 | (76,029 | ) | ||||||||
Financing cash flows | — | — | — | |||||||||
Foreign exchange differences | 3,138 | 2,907 | 10,762 | |||||||||
Total cash flows from discontinued operations | (40,011 | ) | 14,466 | (37,755 | ) | |||||||
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Payments Due by Period | ||||||||||||||||||||
Less Than | 12-36 | 36-60 | After 60 | |||||||||||||||||
12 Months | Months | Months | Months | |||||||||||||||||
July 1, 2007 | July 1, 2008 | July 1, 2010 | Subsequent | |||||||||||||||||
to June 30, | to June 30, | to June 30, | June 30, | |||||||||||||||||
Total | 2008 | 2010 | 2012 | 2012 | ||||||||||||||||
($’000) | ($’000) | ($’000) | ($’000) | ($’000) | ||||||||||||||||
Convertible uncollaterized bonds(1) | 264,544 | 11,766 | 252,778 | — | — | |||||||||||||||
Africa Vanguard Resources(1) | 4,543 | — | — | — | 4,543 | |||||||||||||||
Nedbank — AVR(1) | 28,892 | 28,892 | — | — | — | |||||||||||||||
Nedbank — ARM 1(1) | 121,985 | 121,985 | — | — | — | |||||||||||||||
Nedbank — ARM 2(1) | 92,932 | 92,932 | — | — | — | |||||||||||||||
RMB Financing (1) | 108,430 | 108,430 | — | — | — | |||||||||||||||
RMB Preference Shares (1) | 79,530 | 79,530 | — | — | — | |||||||||||||||
RMB senior bridge loan facility (1) | 73,211 | 73,211 | — | — | — | |||||||||||||||
Westpac Bank | 981 | 981 | — | — | — | |||||||||||||||
Post retirement health care(2) | 15,257 | — | — | — | 15,257 | |||||||||||||||
Environmental obligations(3) | 168,853 | — | — | — | 168,853 | |||||||||||||||
Total contractual obligations | 959,158 | 273,918 | 496,587 | — | 188,653 |
(1) | SeeItem 5. “Operating and Financial Review and Prospects — Liquidity and Capital Resources — Credit Facilities and Other Borrowings — Outstanding Credit Facilities and Other Borrowings.” | |
(2) | This liability relates to post-retirement medical benefits of former employees who retired prior to December 31, 1996 and is based on actuarial valuations conducted during fiscal 2007. | |
(3) | Harmony makes provision for environmental rehabilitation costs and related liabilities based on management’s interpretations of current environmental and regulatory requirements. SeeItem 5. “Operating and Financial Review and Prospects — Critical Accounting Policies.” |
Payment Due by Period | ||||||||||||||||||||
Less | ||||||||||||||||||||
Than 12 | 12-36 | 36-60 | ||||||||||||||||||
Months | Months | Months | After 60 | |||||||||||||||||
July 1, | July 1, | July 1, | Months | |||||||||||||||||
2007 | 2008 | 2010 | Subsequent | |||||||||||||||||
to June | to June | to June | to June | |||||||||||||||||
Total | 30, 2008 | 30, 2010 | 30, 2012 | 30, 2012 | ||||||||||||||||
($’000) | ($’000) | ($’000) | ($’000) | ($’000) | ||||||||||||||||
Melrose Arch, South Africa | 35 | 35 | — | — | — | |||||||||||||||
Perth Office, Australia | 221 | 221 | — | — | — | |||||||||||||||
Brisbane Office, Australia | 446 | 297 | 149 | — | — | |||||||||||||||
PNG Offices (1) | — | — | — | — | — | |||||||||||||||
Total Contractual Obligations Off Balance Sheet | 702 | 553 | 149 | — | — |
(1) | The PNG offices are rented on a monthly basis and the agreement may be cancelled within a months notice. |
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$’000 | ||||
Authorized and contracted for | 49,972 | |||
Authorized but not yet contracted for | 267,036 | |||
Total | 317,008 |
Amount of Commitments Expiring by Period | ||||||||||||||||||||
Less | ||||||||||||||||||||
Than 12 | 12-36 | 36-60 | ||||||||||||||||||
Months | Months | Months | After 60 | |||||||||||||||||
July 1, | July 1, | July 1, | Months | |||||||||||||||||
2007 to | 2008 to | 2010 to | Subsequent | |||||||||||||||||
June 30, | June 30, | June 30, | to June 30, | |||||||||||||||||
Total | 2008 | 2010 | 2012 | 2012 | ||||||||||||||||
($’000) | ($’000) | ($’000) | ($’000) | ($’000) | ||||||||||||||||
Guarantees(1) | 20,868 | — | — | — | 20,86 | |||||||||||||||
Capital commitments(2) | 49,972 | 49,972 | — | — | — | |||||||||||||||
Total commitments expiring by period | 70,841 | 49,972 | — | — | 20,869 |
(1) | Reflects guarantees for environmental rehabilitation expenses, principally environmental performance bonds required for Harmony’s Australian operations. SeeItem 4. “Information on the Company — Regulation — Environmental Matters.” | |
(2) | Capital commitments consist only of amounts committed to external suppliers, although a total of $317.0 million has been approved by the Board for capital expenditures. |
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Name | Date of appointment | Date of resignation | ||
Patrice Motsepe* | 23 September 2003 | By rotation or resignation | ||
Bernard Swanepoel | 16 May 1995 | Resigned on 6 August 2007 | ||
Frank Abbott** | 1 October 1994 | By rotation or resignation | ||
Graham Briggs | 6 August 2007 | By rotation or resignation | ||
Joaquim Chissano*# | 20 April 2005 | By rotation or resignation | ||
Fikile De Buck*# | 30 March 2006 | By rotation or resignation | ||
Dr Simo Lushaba*# | 18 October 2002 | By rotation or resignation | ||
Cathie Markus*# | 1 May 2007 | By rotation or resignation | ||
Modise Motloba*# | 30 July 2004 | By rotation or resignation | ||
Nomfundo Qangule | 26 July 2004 | Resigned on 21 August 2007 | ||
Cedric Savage*# | 23 September 2003 | By rotation or retirement | ||
André Wilkens* | 6 August 2007 | By rotation or retirement |
* | Non-executive directors | |
** | Frank Abbott served as a non-executive director until 20 August 2007 and was appointed interim financial director on 21 August 2007. | |
# | Independent |
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Graham Briggs | Chief Executive | |
Frank Abbott | Interim Chief Financial Officer | |
Bob Atkinson | Projects | |
Jaco Boshoff | Ore Reserves | |
Mashego Mashego | Human Resources | |
Jackie Mathebula | Corporate Affairs | |
Alwyn Petorius | Chief Operating Officer (North) | |
Tom Smith | Chief Operating Officer (South) | |
Marian van der Walt | Company Secretary; Legal and Compliance | |
Johannes van Heerden | Acting Managing Director of International Operations | |
Abre van Vuuren | Corporate Services |
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§ | Health | |
§ | HIV/AIDS |
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§ | Safety | |
§ | Social investment | |
§ | Environmental management |
§ | Ensuring that a sustainable organisational culture, structures and processes are in place that will support the development of empowerment in the company in line with the Company’s needs and requirements. | |
§ | Auditing and monitoring the development and progress of empowerment within the Company. | |
§ | Addressing inequalities that may exist in staff profiles and organisational practices. | |
§ | Reviewing and monitoring whether appropriate support is given to previously disadvantaged staff in order to equip them for successful careers in the Company. | |
§ | Meeting at least once a year or more often, should the need arise. Three meetings were held during the 2007 financial year, and it is planned that in future, this committee should meet on a quarterly basis. |
Retirement | ||||||||||||||||||||
contribu- | ||||||||||||||||||||
Directors’ | Salaries and | tions during | Bonuses | |||||||||||||||||
fee (1) | Benefits | the year | paid | Total | ||||||||||||||||
($’000) | ($’000) | ($’000) | ($’000) | ($’000) | ||||||||||||||||
Name | 2007 | 2007 | 2007 | 2007 | 2007 | |||||||||||||||
Non-executive | ||||||||||||||||||||
Patrice Motsepe | 85 | — | — | — | 85 | |||||||||||||||
Frank Abbott(2) | — | — | — | — | — | |||||||||||||||
Mr Joaquim Chissano | 38 | — | — | — | 38 | |||||||||||||||
Ms Fikile de Buck | 36 | — | — | — | 36 | |||||||||||||||
Dr Simo Lushaba | 39 | — | — | — | 39 |
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Retirement | ||||||||||||||||||||
contribu- | ||||||||||||||||||||
Directors’ | Salaries and | tions during | Bonuses | |||||||||||||||||
fee (1) | Benefits | the year | paid | Total | ||||||||||||||||
($’000) | ($’000) | ($’000) | ($’000) | ($’000) | ||||||||||||||||
Name | 2007 | 2007 | 2007 | 2007 | 2007 | |||||||||||||||
Cathie Markus | — | — | — | — | — | |||||||||||||||
Modise Motloba | 42 | — | — | — | 42 | |||||||||||||||
Cedric Savage | 45 | — | — | — | 45 | |||||||||||||||
Executive(3) | ||||||||||||||||||||
Nomfundo Qangule | — | 255 | 23 | — | 278 | |||||||||||||||
Bernard Swanepoel | — | 447 | 61 | — | 508 | |||||||||||||||
TOTAL | 1,071 | |||||||||||||||||||
Senior Management (as a group) | n/a | 5,741 | 171 | 35 | 5,947 | |||||||||||||||
Annual Fee | ||
Board* | R110,000 annually | |
Audit Committee | R45,000 annually | |
Empowerment Committee | R30,000 annually | |
Investment Committee | R30,000 annually | |
Nomination Committee | R30,000 annually |
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Annual Fee | ||
Remuneration Committee | R30,000 annually | |
Sustainable Development Committee | R40,000 annually | |
Special fee for additional work performed | R5,000 | |
Chairman of Board | R495,000 (4.5 times the individual director’s fee) annually | |
Chairman of Board committees | Double the amount that the individual Board committee member received annually |
Average | ||||||||||||
Number of | Strike | |||||||||||
Directors and | Share | Price | Expiration | |||||||||
Senior Management | Options | (R) | Dates | |||||||||
Directors (total) | 430,805 | 49.62 | 2012-2015 | |||||||||
Senior Management (as a group) | 685,701 | 52.82 | 2012-2015 | |||||||||
Total | 1,116,506 | 51.58 | 2012-2015 | |||||||||
PS | ||||||||||||||||||||
Directors and | Share Appreciation | Performance Shares | Price | Expiration | ||||||||||||||||
Senior Management | Rights (SAR) | SAR Price (R) | (PS) | (R) | Dates | |||||||||||||||
Frank Abbott | — | — | — | — | ||||||||||||||||
Graham Briggs | 3,473 / 159,484 | 112.64 / 70.54 | 11,326 / 42,529 | 112.64 / 70.54 | 2012 / 2013 | |||||||||||||||
Senior Management (as a group) | 23,074 / 518,940 | 112.64 / 70.54 | 64,411 / 155,135 | 112.64 / 70.54 | 2012 / 2013 |
Ordinary | ||||||||||||||||
Ordinary | Shares | |||||||||||||||
Shares Number | Number as at | |||||||||||||||
as at | November | |||||||||||||||
Holder | June 30, 2007 | Percentage | 28, 2007 | Percentage | ||||||||||||
Non-executive chairman | ||||||||||||||||
P. Motsepe | — | — | — | — | ||||||||||||
Directors Non-executive | ||||||||||||||||
J. Chissano | — | — | — | — | ||||||||||||
F De Buck | — | — | — | — | ||||||||||||
Dr. S. Lushaba | — | — | — | — | ||||||||||||
C. Markus | — | — | — | — |
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Ordinary | ||||||||||||||||
Ordinary | Shares | |||||||||||||||
Shares Number | Number as at | |||||||||||||||
as at | November | |||||||||||||||
Holder | June 30, 2007 | Percentage | 28, 2007 | Percentage | ||||||||||||
M. Motloba | — | — | — | — | ||||||||||||
C. Savage | — | — | — | — | ||||||||||||
A. Wilkens | 203,000 | * | 203,000 | * | ||||||||||||
Executive Directors | — | — | — | — | ||||||||||||
G. Briggs | — | — | — | — | ||||||||||||
F. Abbott | — | — | — | — | ||||||||||||
Total Directors (10 persons) | 203,000 | — | 203,000 | — | ||||||||||||
Total Senior Management as a group (11 persons) | 242 | * | 242 | * |
Harmony Employees at | Outside Contractors at | |||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||
2007 | 2006 | 2005 | 2007 | 2006 | 2005 | |||||||||||||||||||
South Africa | 47,600 | 43,283 | 46,669 | 9,075 | 5,287 | 359 | ||||||||||||||||||
Australia | 209 | 204 | 198 | 426 | 416 | 512 | ||||||||||||||||||
Papua New Guinea | 516 | 237 | 200 | 350 | 73 | 5 | ||||||||||||||||||
Grand total | 48,325 | 43,724 | 47,067 | 9,851 | 5,776 | 876 |
• | prescribed minimum levels of compensation and benefits; | ||
• | trade union access and membership; | ||
• | the right to strike; | ||
• | mandatory compensation in the event of termination for operational reasons; | ||
• | affirmative action policies and programs; | ||
• | compensation in the event of occupational illness or injury; and | ||
• | financing of training programs. |
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• | Collective Bargaining Fund: 5.44% | |
• | Non- union: 8.62% | |
• | NUM: 76.28% | |
• | SA Equity Workers Association: 0.06% | |
• | Solidarity: 1.77% | |
• | UASA: 7.81% | |
• | Umiwasa: 0.02% |
• | re-skilling, retraining and redeployment of surplus employees for alternative vacant positions that may exist at a particular operation or other Harmony operations; | ||
• | implementation of CONOPS (described below) to create additional job opportunities; | ||
• | transferring surplus or redundant employees to other Harmony operations that have placement opportunities; | ||
• | opening up voluntary retrenchment to minimize the impact of restructuring and/or closure of shafts/mines; and | ||
• | replacing contractors, who are involved in non-specialized work, with Harmony employees. |
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Number of | ||||||||
Holder | Shares | Percentage | ||||||
1. Bank of New York(1) | 141,644,415 | 35.41 | % | |||||
2. ARM Ltd.(2) | 63,632,922 | 15.91 | % | |||||
3. Allan Gray Ltd. | 51,230,844 | 12.81 | % | |||||
4. JP Morgan Chase Bank(3) | 24,317,568 | 6.08 | % |
(1) | Depository with respect to the ADRs held on the U.S. register. | |
(2) | Patrice Motsepe, the Chairman of Harmony, has an indirect holding in ARM Limited. | |
(3) | Depository with respect to Harmony’s International Depository Shares. |
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JSE Limited | HAR | |
New York Stock Exchange | HMY | |
NASDAQ | HMY | |
London Stock Exchange | HRM | |
Euronext Brussels | HG | |
Euronext Paris | HMY | |
Berlin Stock Exchange | HAM1 |
Harmony Ordinary | ||||||||
Shares | ||||||||
(Rand per Ordinary | ||||||||
Share) | ||||||||
High | Low | |||||||
Fiscal year ended June 30, 2005 | ||||||||
First Quarter | 88.55 | 58.00 | ||||||
Second Quarter | 93.30 | 51.00 | ||||||
Third Quarter | 58.50 | 47.50 | ||||||
Fourth Quarter | 58.80 | 36.40 | ||||||
Full Year | 93.30 | 36.40 | ||||||
Fiscal year ended June 30, 2006 | ||||||||
First Quarter | 71.99 | 46.62 | ||||||
Second Quarter | 88.35 | 65.50 | ||||||
Third Quarter | 117.05 | 76.00 | ||||||
Fourth Quarter | 114.21 | 80.51 | ||||||
Full Year | 117.05 | 46.62 | ||||||
Fiscal year ended June 30, 2007 | ||||||||
First Quarter | 121.54 | 86.10 | ||||||
Second Quarter | 123.00 | 101.00 | ||||||
Third Quarter | 113.45 | 90.85 |
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Harmony Ordinary | ||||||||
Shares | ||||||||
(Rand per Ordinary | ||||||||
Share) | ||||||||
High | Low | |||||||
Fourth Quarter | 117.85 | 94.30 | ||||||
Full Year | 118.96 | 93.06 | ||||||
Month of | ||||||||
July 2007 | 104.05 | 92.40 | ||||||
August 2007 | 99.48 | 60.00 | ||||||
September 2007 | 88.52 | 63.88 | ||||||
October 2007 | 83.05 | 63.00 |
NYSE | NASDAQ | |||||||||||||||
Harmony ADRs | Harmony ADRs | |||||||||||||||
($ per ADR) | ($ per ADR) | |||||||||||||||
High | Low | High | Low | |||||||||||||
Fiscal year ended June 30, 2005 | ||||||||||||||||
First Quarter | 13.74 | 9.75 | 16.29 | 12.93 | ||||||||||||
Second Quarter | 14.29 | 9.05 | 16.96 | 15.54 | ||||||||||||
Third Quarter | 9.58 | 7.51 | 13.90 | 13.39 | ||||||||||||
Fourth Quarter | 8.80 | 5.96 | 15.88 | 14.27 | ||||||||||||
Full Year | 14.29 | 5.96 | 16.96 | 12.93 | ||||||||||||
Fiscal year ended June 30, 2006 | ||||||||||||||||
First Quarter | 11.23 | 7.21 | 11.06 | 7.20 | ||||||||||||
Second Quarter | 13.64 | 9.71 | 13.64 | 9.71 | ||||||||||||
Third Quarter | 18.84 | 12.25 | 18.84 | 12.25 | ||||||||||||
Fourth Quarter | 17.76 | 11.90 | 17.76 | 11.90 | ||||||||||||
Full Year | 18.84 | 7.21 | 18.84 | 7.21 | ||||||||||||
Fiscal year ended June 30, 2007 | ||||||||||||||||
First Quarter | 17.10 | 11.91 | 17.10 | 11.91 | ||||||||||||
Second Quarter | 17.26 | 12.81 | 17.26 | 12.81 | ||||||||||||
Third Quarter | 15.97 | 12.80 | 15.97 | 12.80 | ||||||||||||
Fourth Quarter | 16.70 | 13.15 | 16.70 | 13.15 | ||||||||||||
Full Year | 16.76 | 12.67 | 16.76 | 12.67 | ||||||||||||
Month of | ||||||||||||||||
July 2007 | 15.27 | 15.13 | 15.19 | 13.36 | ||||||||||||
August 2007 | 14.10 | 8.41 | 13.97 | 8.48 | ||||||||||||
September 2007 | 12.36 | 8.97 | 12.31 | 9.33 | ||||||||||||
October 2007 | 11.90 | 9.41 | 11.90 | 9.58 |
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• | to acquire by purchase, cession, grant, lease, exchange or otherwise any movable or immovable property, mines, mineral property, claims, mineral rights, mining rights, mining leases, mining titles, mynpachts, lands, farms, buildings, water rights, concessions, grants, rights, powers, privileges, surface rights of every description, servitudes or other limited rights or interests in land and mineral contracts of every description; and any interest therein and rights over the same; and to enter into any contract, option or prospecting contract in respect thereof, and generally to enter into any arrangement that may seem conducive to Harmony’s objects or any of them; | ||
• | to carry out all forms of exploration work and in particular to search for, prospect, examine, explore and obtain information in regard to mines, mineral properties, claims, mineral rights, mining rights, mining leases, mining titles, mynpachts, mining districts or locations and ground and soil supposed to contain or containing precious stones, minerals or metals of every description; | ||
• | to open, work, develop and maintain gold, silver, diamond, copper, coal, iron and other mines, mineral and other rights, properties and works, and to carry on and conduct the business of raising, crushing, washing, smelting, reducing and amalgamating ores, metals, minerals and precious stones, and to render the same merchantable and fit for use and to carry on all or any of the businesses of miners, mineralogists, metallurgists, amalgamators, geophysicists, smelters, quarry owners, quarrymen and brickmakers; | ||
• | to buy, sell, refine and deal in bullion, specie, coin and precious and base metals, and also precious stones and other products of mining; and | ||
• | to employ and pay mining experts, agents and other persons, partnerships, companies or corporations, and to organize, equip and dispatch expeditions for prospecting, exploring, reporting on, surveying, working and developing lands, farms, districts, territories and properties in any part of the world, whether the same are the property of Harmony or otherwise. |
• | any arrangement for giving the director a security or indemnity in respect of money lent, or an obligation undertaken, by such director for the benefit of Harmony; |
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• | any arrangement by which Harmony gives any security to a third party in respect of a debt or obligation of Harmony for which the director himself or herself has assumed responsibility, in whole or in part, whether under a guarantee or indemnity or by the deposit of a security; | ||
• | any contract by the director to subscribe for or underwrite shares or debentures of Harmony; | ||
• | any contract or arrangement with a company other than Harmony, in which the director holds or controls, directly or indirectly, no more than one percent of shares representing either (i) any class of the equity share capital of that company or (ii) the overall voting rights of that company; or | ||
• | any retirement scheme or fund which relates to both directors and to employees (or a class of employees) and does not accord to any director, as such, any privilege or advantage not generally accorded to the employees to which such scheme or fund relates. |
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• | pursuant to an employee share incentive scheme the terms of which have been approved by the holders of the relevant class of shares in a general meeting; | ||
• | for the acquisition of an asset, provided that if the issue is more than 30% of the company’s issued share capital, a simple majority of holders of ordinary shares present and voting, must vote in favor of the acquisition; | ||
• | to raise cash by way of a general issue in the discretion of the directors (but not to related parties) of up to 15% of the issued share capital in any one fiscal year at an issue price with a discount not exceeding 10% of the 30-day weighted average trading price prior to the determination date, provided that the holders of ordinary shares, present and voting at a general meeting, must approve the granting of such authority to the directors by a 75% vote; or | ||
• | to raise cash by way of a specific issue of a specified number or a maximum number of shares for cash provided that the holders of ordinary shares, other than controlling shareholders, present and voting, vote in favor of the resolution to issue the shares at a general meeting by a 75% vote. In terms of JSE listings requirements, the circular to be sent to all shareholders informing them of the general meeting must include, inter alia: | ||
• | details of the persons to whom the shares are to be issued if such persons fall into the following categories or other categories identified by the JSE: directors of the company or its subsidiaries or their associates; trustees of employee or directors’ share scheme or pension funds; any person having the right to nominate directors of the company; and certain shareholders holding more than 10% of the issued share capital; | ||
• | if the persons to whom the shares are to be issued are related parties, an independent expert’s opinion that the issue price is fair and reasonable; and | ||
• | should the maximum size of the issue equal or exceed 30% of the company’s issued share capital, full listing particulars, which include, inter alia, a reporting accountant’s report and, in the case of a mining company, a competent person’s report setting out technical details of the company’s operations and assets. |
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• | increase its authorized or paid-up share capital; | ||
• | consolidate and divide all or any part of its shares into shares of a larger amount; | ||
• | increase the number of its no par value shares without an increase of its stated capital; | ||
• | sub-divide all or any part of its shares having a par value; | ||
• | convert all of its ordinary or preference share capital consisting of shares having a par value into stated capital constituted by shares of no par value and vice versa; | ||
• | convert its stated capital constituted by ordinary or preference shares of no par value into share capital consisting of shares having a par value; | ||
• | vary the rights attached to any shares whether issued or not yet issued; | ||
• | convert any of its issued or unissued shares into shares of another class; | ||
• | convert any of its paid-up shares into stock, and reconvert any stock into any number of paid-up shares of any denomination; | ||
• | convert any of its issued shares into preference shares which can be redeemed; | ||
• | cancel shares which, at the date of passing of the resolution, have not been taken or agreed to be taken by any person, and diminish the amount of the authorized share capital by the amount of the shares so cancelled; or | ||
• | reduce the authorized share capital. |
• | reduce its issued share capital; | ||
• | reduce its stated capital; or | ||
• | reduce its capital redemption reserve fund and share premium account. |
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• | to every member of Harmony except any member who has not supplied to Harmony a registered address for the giving of notices; | ||
• | to every person entitled to a share in consequence of the death or insolvency of a member; | ||
• | to the directors and auditor for the time being of Harmony; and | ||
• | by advertisement to the holders of share warrants to bearer. |
• | the consideration of the annual financial statements and report of the auditors; | ||
• | the election of directors; | ||
• | the appointment of auditors; and | ||
• | any business arising from the annual financial statements considered at the meeting. |
• | that the registered holder or holders hold such shares upon trust for, or as the nominee of, any other person; or | ||
• | that any person, other than the registered holder or holders, holds any contingent, future or partial interest in such shares or any interest in any fractional part of any of such shares. |
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• | the names and address of the members; | ||
• | the shares held by each member, distinguishing each share by its denoting number, if any, by its class or kind, and by the amount paid or deemed to be paid thereon; | ||
• | the date on which the name of any person was entered in the register as a member; and |
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• | the date on which any person ceased to be a member. |
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100 F Street, NW
Room 1580
Washington D.C. 20549
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• | both the hedged item and the hedging instrument are specifically identified and documented; | ||
• | management documents the nature of the hedging risk and identifies how the effectiveness of the hedge will be assessed; | ||
�� | the effectiveness of the hedge is tested regularly throughout the life of the hedge, and a hedging instrument is identified as highly effective if it is able to offset changes in the fair value of cash flows from the hedged item by between 80% and 125% of the price at which it was fixed; | ||
• | any ineffectiveness of hedged instruments is recognized immediately in the income statement; and | ||
• | in the case of a hedge of an anticipated future transaction, there is a high probability that the transaction will occur. |
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Mark-to- | ||||||||||||||||||||||
June 30, | June 30, | June 30, | market | |||||||||||||||||||
Year | 2007 | 2008 | 2009 | Total | $’000 | |||||||||||||||||
AUSTRALIAN DOLLAR GOLD | ||||||||||||||||||||||
Forward contracts | Kilograms | 4,572 | 3,110 | 3,110 | 10,793 | |||||||||||||||||
Ounces | 147,000 | 100,000 | 100,000 | 347,000 | (86,276 | ) | ||||||||||||||||
A$ per oz | 515 | 518 | 518 | 516 | ||||||||||||||||||
Call options sold | Kilograms | 311 | — | — | 311 | |||||||||||||||||
Ounces | 10,000 | — | — | 10,000 | (1,842 | ) | ||||||||||||||||
A$ per oz | 562 | — | — | 562 | ||||||||||||||||||
Total commodity contracts | Kilograms | 4,883 | 3,110 | 3,110 | 11,104 | |||||||||||||||||
Ounces | 157,000 | 100,000 | 100,000 | 357,000 | (88,118 | ) | ||||||||||||||||
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Metric unit | U.S. equivalent | |||
1 tonne | = 1 t | = 1.10231 short tons | ||
1 gram | = 1 g | = 0.03215 ounces | ||
1 gram per tonne | = 1 g/t | = 0.02917 ounces per short ton | ||
1 kilogram per tonne | = 1 kg/t | = 29.16642 ounces per short ton | ||
1 kilometer | = 1 km | = 0.621371 miles | ||
1 meter | = 1 m | = 3.28084 feet | ||
1 centimeter | = 1 cm | = 0.3937 inches | ||
1 millimeter | = 1 mm | = 0.03937 inches | ||
1 hectare | = 1 ha | = 2.47105 acres |
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• | development of additional reserves; | ||
• | depletion of existing reserves through production; | ||
• | actual mining experience; and | ||
• | price forecasts. |
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1. | Information technology control environment |
2. | Assets brought into use |
3. | Capitalisation of borrowing costs |
4. | Valuation of inventory |
5. | Deferred tax |
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o | To move away from legacy systems which make extensive use of external spreadsheets and databases which are prone to both error and manipulation; | |
o | To assist in complying with the requirements of the Sarbanes Oxley Act of 2002; | |
o | Lack of external support for the system from the software providers. |
o | The automated bank reconciliation function within the Oracle ERP system was not available due to incorrect configuration of the system at the implementation date. As a result bank reconciliations were not performed timely. | ||
o | Supplier reconciliations were not performed and payments were not allocated accurately to suppliers which resulted in duplicated payments. |
Incorrect configuration of the inventory module resulted in inventory items being recorded at the incorrect units of measure as well as unit prices.
Reports generated by the system were incorrect and unreliable as certain elements within working costs were posted to suspense accounts on the balance sheet with the effect of understating the costs recorded in the business unit.
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o | Proof of global accreditation has been verified with Oracle. The consultant has Global Implementation Partner status with Oracle Corporation. | |
o | A reference check on the credentials of the consultant has been performed. | |
o | A service level agreement has been signed with the consultant and deliverables are measured and monitored on a periodic basis. | |
o | Proof of implementation methodology developed by the consultant has been provided with all supporting documentation. | |
o | A background check has been performed on all other consultants assisting with this project. . |
o | The committee members will analyse and request information to enable them to understand the reported issues as well as identify other risks. | |
o | The chief information officer will ensure that accurate and detailed information is provided to the monitoring committees within the company. |
o | The Company is continuing with the manual reconciliations between the general ledger and Projects module to ensure accurate financial reporting. | |
o | The following key accounts are now reconciled and reviewed on a monthly basis. |
• | Project clearance account | ||
• | Oracle ERP Suspense accounts | ||
• | Balance sheet account review | ||
• | Stores valuations | ||
• | Bank accounts |
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Fiscal year ended June 30, 2006 | $1.634 million | |||
Fiscal year ended June 30, 2007 | $1.343 million |
Fiscal year ended June 30, 2006 | $0.688 million | |||
Fiscal year ended June 30, 2007 | $0.451 million |
Fiscal year ended June 30, 2006 | $0.24 million | |||
Fiscal year ended June 30, 2007 | $0.168 million |
Fiscal year ended June 30, 2006 | — | |||
Fiscal year ended June 30, 2007 | — |
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1.1 | Memorandum of Association of Harmony, as amended (incorporated by reference to Harmony’s Registration Statement (file no. 333-13516) on Form F-3 filed on June 21, 2001). | |
1.2 | Articles of Association of Harmony, as amended (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
2.1# | Notice to shareholders dated September 25, 2007 in respect of the Annual General Meeting held on November 26, 2007. | |
2.2 | Share Exchange Agreement between Avmin and Harmony to acquire the shareholding in Avgold dated February 16, 2004 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2004, as amended, filed on October 14, 2004). | |
2.3 | Deposit Agreement among Harmony, The Bank of New York, as Depositary, and owners and holders of American Depositary Receipts, dated as of August 12, 1996, as amended and restated as of October 2, 1996, as further amended and restated as of September 15, 1998 (incorporated by reference to Post-Effective Amendment No. 1 to Harmony’s Registration Statement (file no. 333-5410) on Form F-6 filed on May 17, 2001). | |
2.4 | Form of ADR (included in Exhibit 2.3). | |
2.5 | Form of Harmony’s senior unsecured 13% bonds due June 14, 2006 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2001 filed on September 26, 2001). | |
2.6 | Form of Global Bond (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2004, as amended, filed on October 14, 2004). | |
2.7 | Bond Offering Circular dated October 14, 2004 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2004, as amended, filed on October 14, 2004). | |
4.1 | Harmony (2003) Share Option Scheme, as amended (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
4.2# | Harmony 2006 Share Scheme. | |
4.3 | Sale of Shares Agreement amongst Harmony, ARMgold Harmony Joint Investment Company (Proprietary) Limited, and The ARM Broad-Based Empowerment Trust signed on April 15, 2005 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
4.4 | Subordination Agreement amongst Harmony, Nedbank Limited and The ARM Broad-Based Empowerment Trust signed on April 15, 2005 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
4.5 | First Loan Agreement between Nedbank Limited and The ARM Broad-Based Empowerment Trust signed on April 15, 2005 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). |
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4.6 | First Ranking Cessation and Pledge between The ARM Broad-Based Empowerment Trust and Nedbank Limited signed on April 15, 2005 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
4.7 | Second Loan Agreement between Nedbank Limited and The ARM Broad-Based Empowerment Trust signed on April 15, 2005 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
4.8 | Second Ranking Cessation and Pledge between The ARM Broad-Based Empowerment Trust and Nedbank Limited signed on April 15, 2005 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
4.9 | Flow of Funds Agreement amongst Nedbank Limited, ARMgold Harmony Joint Investment Company (Proprietary) Limited, Harmony and The ARM Broad-Based Empowerment Trust signed on April 15, 2005 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
4.10 | Right of Pre-emption and Deed of Adherence between Nedbank Limited, Harmony, African Rainbow Minerals & Exploration Investments (Proprietary) Limited and ARMgold Harmony Joint Investment Company (Proprietary) Limited signed on April 15, 2005 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
4.11 | Agreement of Assignment between African Rainbow Minerals & Exploration Investments (Proprietary) Limited, Harmony, ARMgold Harmony Joint Investment Company (Proprietary) Limited and The Trustees of The ARM Broad-Based Empowerment Trust signed on April 15, 2005 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
4.12 | Harmony Option Agreement between Harmony and Nedbank Limited signed on April 15, 2005 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
4.13 | Harmony Undertaking amongst Harmony, ARMgold Harmony Joint Investment Company (Proprietary) Limited and Nedbank Limited signed on April 15, 2005 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
4.14 | Term Loan Agreement with Rand Merchant Bank dated March 9, 2006 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2006, filed on October 31, 2006). | |
4.15 | Pledge Agreement in favor of FirstRand Bank Limited (acting through its Rand Merchant Bank division) dated March 9, 2006 (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2006, filed on October 31, 2006). | |
4.16# | Senior Facility Agreement among Nedbank Limited and Harmony Gold Mining Company Limited and the Guarantors named therein dated on or about September 28, 2007. | |
4.17# | Cession and Pledge in Security by African Rainbow Minerals Gold Limited in favour of Nedbank dated on or about September 28, 2007. | |
4.18# | Cession and Pledge in Security by Harmony Gold Mining Company Limited in favour of Nedbank dated on or about September 28, 2007. | |
4.19# | Preference Share Subscription Agreement dated March 20, 2007 by and among FirstRand Bank Limited (RMB), Harmony and the subsidiaries named therein. | |
4.20# | Senior Bridge Loan Facility with RMB dated June 29, 2007. | |
4.21# | Draw Down Facility Agreement with Westpac Bank dated June 27, 2007. |
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8.1 | Significant subsidiaries of Harmony Gold Mining Company Limited (incorporated by reference to Harmony’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
12.1* | Certification of the principal executive officer required by Rule 13a-14(a) or Rule 15(d)-14(a), pursuant to Section 302 of the Sarbanes Oxley Act of 2002. | |
12.2* | Certification of the principal financial officer required by Rule 13a-14(a) or Rule 15(d)-14(a), pursuant to Section 302 of the Sarbanes Oxley Act of 2002. | |
13.1* | Certification of the principal executive officer, pursuant to Section 906 of the Sarbanes Oxley Act of 2002. | |
13.2* | Certification of the principal financial officer, pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |
* Filed herewith | ||
# Previously filed in Harmony’s Form 20-F on December 7, 2007 |
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Graham Briggs
Chief Executive Officer
Date: July 16, 2008
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Page | ||||
Harmony Gold Mining Company Limited | ||||
Report of the Independent Registered Public Accounting Firm | F-2 | |||
Consolidated Income Statements for the years ended June 30, 2007, 2006 and 2005 | F-3 | |||
Consolidated Balance Sheets at June 30, 2007 and 2006 | F-6 | |||
Consolidated Statements of Changes in Shareholders’ Equity for the years ended June 30, 2007, 2006 and 2005 | F-7 | |||
Consolidated Statements of Cash Flows for the years ended June 30, 2007, 2006 and 2005 | F-9 | |||
Notes to the Consolidated Financial Statements | F-10 |
F-1
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Johannesburg, Republic of South Africa
December 7, 2007
F-2
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Consolidated Statements of Income
For the years ended June 30
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
CONTINUING OPERATIONS | ||||||||||||
REVENUES | ||||||||||||
Product sales | 1,346,596 | 1,140,838 | 1,139,531 | |||||||||
COSTS AND EXPENSES | ||||||||||||
Production costs exclusive of depreciation and amortization | 1,023,558 | 958,554 | 1,036,780 | |||||||||
Depreciation and amortization | 122,530 | 154,031 | 147,997 | |||||||||
Impairment of assets | 10,243 | 15,951 | 122,819 | |||||||||
Employment termination and restructuring costs | — | (12,289 | ) | 73,215 | ||||||||
Care and maintenance cost of restructured shafts | 9,184 | 26,837 | 29,975 | |||||||||
Profit on sale of property, plant and equipment | (25,346 | ) | (10,148 | ) | (13,594 | ) | ||||||
Corporate expenditure | 27,564 | 19,929 | 17,943 | |||||||||
Exploration expenditure | 26,864 | 11,090 | 4,672 | |||||||||
Marketing and new business expenditure | 8,987 | 9,171 | 15,310 | |||||||||
Decrease in rehabilitation costs | (1,597 | ) | (2,674 | ) | (898 | ) | ||||||
Post retirement benefits expense | (1,844 | ) | 1,175 | 9,137 | ||||||||
1,200,143 | 1,171,627 | 1,443,356 | ||||||||||
OPERATING PROFIT/(LOSS) | 146,453 | (30,789 | ) | (303,825 | ) | |||||||
OTHER (EXPENSES)/INCOME | ||||||||||||
Dividends received | 2,030 | 3,321 | 2,785 | |||||||||
Loss on derivative financial instruments | (284,692 | ) | (52,659 | ) | (18,386 | ) | ||||||
(Loss)/profit on sale of listed investments | (4,898 | ) | 45,345 | (93,479 | ) | |||||||
Impairment of listed investment | (51,087 | ) | — | (63,234 | ) | |||||||
Profit on sale of investment in associates | 33,478 | — | — | |||||||||
Profit/(loss) on sale of subsidiaries | — | 3,035 | (114 | ) | ||||||||
Profit on sale of investment in joint ventures | 30 | — | — | |||||||||
Interest income | 24,910 | 32,411 | 21,295 | |||||||||
Interest expense — net of amounts capitalized of $7.7 million, $2.3 million and $1.9 million in 2007, 2006 and 2005, respectively | (47,596 | ) | (55,544 | ) | (63,936 | ) | ||||||
Other expenses | (6,599 | ) | (26,444 | ) | (17,372 | ) | ||||||
(334,425 | ) | (50,535 | ) | (232,441 | ) | |||||||
LOSS FROM CONTINUING OPERATIONS BEFORE TAXATION AND EQUITY INCOME/(LOSS) FROM JOINT VENTURES AND ASSOCIATED COMPANIES | (187,972 | ) | (81,324 | ) | (536,266 | ) | ||||||
Income and mining tax (expense)/benefit | (34,202 | ) | 1,023 | 64,052 | ||||||||
Equity income of joint venture | 1,702 | 445 | — | |||||||||
Equity loss of associated companies | (2,576 | ) | (16,444 | ) | — | |||||||
LOSS FROM CONTINUING OPERATIONS | (223,049 | ) | (96,300 | ) | (472,214 | ) | ||||||
LOSS FROM DISCONTINUED OPERATIONS | (72,386 | ) | (61,483 | ) | (80,335 | ) | ||||||
LOSS BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLE | (295,435 | ) | (157,783 | ) | (552,549 | ) | ||||||
Cumulative effect of change in accounting principle, net of tax | — | 2,058 | — | |||||||||
NET LOSS | (295,435 | ) | (155,725 | ) | (552,549 | ) | ||||||
F-3
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2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
CONTINUING OPERATIONS | ||||||||||||
BASIC LOSS PER SHARE ($) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE | (0.56 | ) | (0.28 | ) | (1.30 | ) | ||||||
FULLY DILUTED LOSS PER SHARE ($) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE | (0.56 | ) | (0.28 | ) | (1.30 | ) | ||||||
BASIC LOSS PER SHARE ($) | (0.56 | ) | (0.24 | ) | (1.30 | ) | ||||||
FULLY DILUTED LOSS PER SHARE ($) | (0.56 | ) | (0.24 | ) | (1.30 | ) | ||||||
DISCONTINUED OPERATIONS | ||||||||||||
BASIC LOSS PER SHARE ($) | (0.18 | ) | (0.16 | ) | (0.22 | ) | ||||||
FULLY DILUTED LOSS PER SHARE ($) | (0.18 | ) | (0.16 | ) | (0.22 | ) | ||||||
WEIGHTED AVERAGE NUMBER OF SHARES USED IN THE COMPUTATION OF BASIC EARNINGS PER SHARE | 398,593,297 | 394,409,512 | 362,499,012 | |||||||||
WEIGHTED AVERAGE NUMBER OF SHARES USED IN THE COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE | 398,593,297 | 394,409,512 | 362,499,012 | |||||||||
DIVIDEND PER SHARE ($) | — | — | 0.05 |
F-4
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Consolidated Statements of Comprehensive Income
For the years ended June 30
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Loss — before cumulative effect of change in accounting principle | (295,435 | ) | (157,783 | ) | (552,549 | ) | ||||||
Cumulative effect of change in accounting principle, net of tax | — | 2,058 | — | |||||||||
Net loss | (295,435 | ) | (155,725 | ) | (552,549 | ) | ||||||
Other comprehensive income/(loss) | ||||||||||||
Mark-to-market of listed and other investments — unrealized | 296,980 | 119,713 | (44,674 | ) | ||||||||
Mark-to-market of listed and other investments — realized | 4,046 | (38,253 | ) | 105,892 | ||||||||
Foreign currency translation adjustment | 98,206 | (191,651 | ) | (197,665 | ) | |||||||
Other comprehensive income/(loss) | 399,232 | (110,191 | ) | (136,447 | ) | |||||||
Comprehensive income/(loss) | 103,797 | (265,916 | ) | (688,996 | ) | |||||||
F-5
Table of Contents
Consolidated Balance Sheets
At June 30
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | 99,759 | 89,189 | ||||||
Restricted cash | 38,881 | — | ||||||
Receivables | 135,868 | 100,175 | ||||||
Listed and other investments | 705,985 | — | ||||||
Inventories | 104,422 | 91,998 | ||||||
Materials contained in heap leach pads | 524 | 515 | ||||||
Income and mining taxes | 2,298 | 4,359 | ||||||
Deferred income and mining taxes | 65,896 | 142,109 | ||||||
1,153,633 | 428,345 | |||||||
Non-current assets classified as held for sale | 182,475 | — | ||||||
Total current assets | 1,336,108 | 428,345 | ||||||
Property, plant and equipment | 3,533,938 | 3,306,555 | ||||||
Other assets | 2,398 | 3,605 | ||||||
Intangible assets | 34,005 | 28,256 | ||||||
Restricted cash | 723 | 35,599 | ||||||
Receivables | 7,057 | 12,701 | ||||||
Listed and other investments | 197,499 | 378,742 | ||||||
Investments in associates | 853 | 266,331 | ||||||
Investments in joint ventures | 1,336 | 2,065 | ||||||
Total non-current assets | 3,777,809 | 4,033,854 | ||||||
TOTAL ASSETS | 5,113,917 | 4,462,199 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES | ||||||||
Accounts payable and other liabilities | 94,546 | 78,391 | ||||||
Short term portion of long term loans | 404,985 | 140,344 | ||||||
Payroll and leave liabilities | 100,373 | 87,909 | ||||||
Accrued liabilities | 53,466 | 36,182 | ||||||
Bank overdraft | 31,232 | — | ||||||
Dividends payable | 994 | 976 | ||||||
685,596 | 343,802 | |||||||
Liabilities directly associated with non-current assets classified as held for sale | 77,614 | — | ||||||
Total current liabilities | 763,210 | 343,802 | ||||||
Long-term loans | 270,079 | 394,608 | ||||||
Deferred income and mining taxes | 512,829 | 521,000 | ||||||
Derivative financial liabilities | 354,896 | 150,038 | ||||||
Share appreciation rights liability | 877 | — | ||||||
Provision for environmental rehabilitation | 131,913 | 110,164 | ||||||
Provision for social plan | 2,429 | 2,259 | ||||||
Provision for post retirement benefits | 15,257 | 14,964 | ||||||
1,288,280 | 1,193,032 | |||||||
Commitments and contingencies (Note 34) | — | — | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Share capital - 1,200,000,000 (2006: 1,200,000,000) authorized ordinary shares of 50 South African cents each. Shares issued 400,290,884 (2006: 397,616,950) | 31,916 | 31,730 | ||||||
Additional paid-in capital | 3,449,119 | 3,429,775 | ||||||
Accumulated loss | (822,287 | ) | (540,587 | ) | ||||
Accumulated other comprehensive income | 403,678 | 4,446 | ||||||
Total shareholders’ equity | 3,062,426 | 2,925,364 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 5,113,917 | 4,462,199 | ||||||
F-6
Table of Contents
Consolidated Statements of Changes in Shareholders’ Equity
For the years ended June 30
Accumulated | ||||||||||||||||||||||||
Number of | (Accumulated | other | ||||||||||||||||||||||
ordinary | Additional | loss)/retained | comprehensive | |||||||||||||||||||||
shares issued | Share capital | paid-in capital | earnings | income | Total | |||||||||||||||||||
$’000 | $’000 | $’000 | $’000 | $’000 | ||||||||||||||||||||
BALANCE — JUNE 30, 2004 | 321,424,077 | 25,204 | 2,616,419 | 182,140 | 251,084 | 3,074,847 | ||||||||||||||||||
Issue of shares | ||||||||||||||||||||||||
- Acquisition of 11.5% interest in Gold Fields | 72,173,265 | 6,210 | 760,980 | — | — | 767,190 | ||||||||||||||||||
Exercise of employee share options | 426,352 | 34 | 18,844 | — | — | 18,878 | ||||||||||||||||||
Share issue expenses | — | — | (12,957 | ) | — | — | (12,957 | ) | ||||||||||||||||
Consolidation of share trusts | — | — | 324 | — | — | 324 | ||||||||||||||||||
Net loss | — | — | — | (552,549 | ) | — | (552,549 | ) | ||||||||||||||||
Dividends declared | — | — | — | (14,453 | ) | — | (14,453 | ) | ||||||||||||||||
Mark-to-market of listed and other investments | — | — | — | — | 61,218 | 61,218 | ||||||||||||||||||
Foreign exchange translation adjustment | — | — | — | — | (197,665 | ) | (197,665 | ) | ||||||||||||||||
BALANCE — JUNE 30, 2005 | 394,023,694 | 31,448 | 3,383,610 | (384,862 | ) | 114,637 | 3,144,833 | |||||||||||||||||
Issue of shares | ||||||||||||||||||||||||
Exercise of employee share options | 3,593,256 | 282 | 43,399 | — | — | 43,681 | ||||||||||||||||||
Consolidation of share trusts | — | — | 2,766 | — | — | 2,766 | ||||||||||||||||||
Net loss | — | — | — | (155,725 | ) | — | (155,725 | ) | ||||||||||||||||
Mark-to-market of listed and other investments | — | — | — | — | 81,460 | 81,460 | ||||||||||||||||||
Foreign exchange translation adjustment | — | — | — | — | (191,651 | ) | (191,651 | ) | ||||||||||||||||
BALANCE — JUNE 30, 2006 | 397,616,950 | 31,730 | 3,429,775 | (540,587 | ) | 4,446 | 2,925,364 | |||||||||||||||||
Adjustment to accumulated loss in respect of adoption of SAB 108 (see note 3) | — | — | — | 13,735 | — | 13,735 | ||||||||||||||||||
Issue of shares | ||||||||||||||||||||||||
Exercise of employee share options | 2,673,934 | 186 | 18,094 | — | — | 18,280 | ||||||||||||||||||
Consolidation of share trusts | 1,250 | 1,250 | ||||||||||||||||||||||
Net loss | — | — | — | (295,435 | ) | — | (295,435 | ) | ||||||||||||||||
Mark-to-market of listed and other investments | — | — | — | — | 301,026 | 301,026 | ||||||||||||||||||
Foreign exchange translation adjustment | — | — | — | — | 98,206 | 98,206 | ||||||||||||||||||
BALANCE — JUNE 30, 2007 | 400,290,884 | 31,916 | 3,449,119 | (822,287 | ) | 403,678 | 3,062,426 | |||||||||||||||||
F-7
Table of Contents
Consolidated Statements of Changes in Shareholders’ Equity
For the years ended June 30
�� | ||||||||||||||||||||
Mark-to- | Mark-to- | |||||||||||||||||||
market of | market of | Foreign | Accumulated | |||||||||||||||||
cash flow | listed and | currency | Deferred share- | other | ||||||||||||||||
hedging | other | translation | based | comprehensive | ||||||||||||||||
instruments | investments | adjustment | compensation | income/(loss) | ||||||||||||||||
$’000 | $’000 | $’000 | $’000 | $’000 | ||||||||||||||||
BALANCE — JUNE 30, 2004 | 54 | (59,283 | ) | 310,313 | — | 251,084 | ||||||||||||||
Mark-to-market of listed and other investments — unrealized | — | (43,656 | ) | — | — | (43,656 | ) | |||||||||||||
Mark-to-market of listed and other investments — realized | — | 105,892 | — | — | 105,892 | |||||||||||||||
Mark-to-market of environmental trust funds | — | (1,018 | ) | — | — | (1,018 | ) | |||||||||||||
Foreign currency translation adjustment | (54 | ) | (68 | ) | (197,543 | ) | — | (197,665 | ) | |||||||||||
BALANCE — JUNE 30, 2005 | — | 1,867 | 112,770 | — | 114,637 | |||||||||||||||
Mark-to-market of listed and other investments — unrealized | — | 120,014 | — | — | 120,014 | |||||||||||||||
Mark-to-market of listed and other investments — realized | — | (38,253 | ) | — | — | (38,253 | ) | |||||||||||||
Mark-to-market of environmental trust funds | — | (301 | ) | — | — | (301 | ) | |||||||||||||
Foreign currency translation adjustment | — | 1,648 | (193,299 | ) | — | (191,651 | ) | |||||||||||||
BALANCE — JUNE 30, 2006 | — | 84,974 | (80,529 | ) | — | 4,446 | ||||||||||||||
Mark-to-market of listed and other investments — unrealized | — | 330,610 | — | — | 386,177 | |||||||||||||||
Mark-to-market of listed and other investments — realized | — | 4,046 | — | — | 4,046 | |||||||||||||||
Mark-to-market of environmental trust funds | — | 257 | — | — | 257 | |||||||||||||||
Other-than-temporary impairment of listed investment | — | 51,087 | — | — | (3,401 | ) | ||||||||||||||
Foreign currency translation adjustment | — | 90 | 98,116 | — | 98,206 | |||||||||||||||
BALANCE — JUNE 30, 2007 | — | 386,090 | 17,587 | — | 403,678 | |||||||||||||||
F-8
Table of Contents
Consolidated Statements of Cash Flows
For the years ended June 30
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
CASH FLOW FROM OPERATIONS | ||||||||||||
Sources of cash | ||||||||||||
Cash received from customers | 1,488,469 | 1,263,333 | 1,265,200 | |||||||||
Interest and dividends received | 27,342 | 35,826 | 24,181 | |||||||||
Cash provided by operating activities | 1,515,811 | 1,299,159 | 1,289,381 | |||||||||
Uses of cash | ||||||||||||
Cash paid to suppliers and employees | 1,317,768 | 1,213,910 | 1,353,887 | |||||||||
Interest paid | 31,455 | 31,609 | 42,156 | |||||||||
Income and mining taxes paid | 1,903 | 1,829 | 8,952 | |||||||||
Cash used in operating activities | 1,351,126 | 1,247,348 | 1,404,995 | |||||||||
NET CASH GENERATED/(UTILIZED) BY OPERATIONS | 164,685 | 51,811 | (115,614 | ) | ||||||||
CASH FLOW FROM INVESTING ACTIVITIES | ||||||||||||
Net increase in amounts invested in environmental trusts | (1,696 | ) | (4,318 | ) | (251 | ) | ||||||
Restricted cash | (4,011 | ) | (31,913 | ) | 1,585 | |||||||
Cash held by subsidiaries on acquisition | — | — | 723 | |||||||||
Cash held by subsidiaries at disposal | — | — | (1,830 | ) | ||||||||
Other direct costs of investment in Gold Fields | — | — | (13,802 | ) | ||||||||
Cash paid for Village | — | (64 | ) | — | ||||||||
Cash paid for Western Areas | — | (321,477 | ) | — | ||||||||
Cash received for Buffalo Creek | — | 3,058 | — | |||||||||
Cash paid for Orpheo | — | (733 | ) | — | ||||||||
Proceeds on disposal of listed investments | 54,634 | 364,974 | 380,363 | |||||||||
(Increase)/decrease in other non-current investments | (4,755 | ) | 2,824 | (1,204 | ) | |||||||
Additions to intangible assets | (5,769 | ) | — | — | ||||||||
Proceeds on disposal of mining assets | 26,448 | 12,509 | 20,892 | |||||||||
Additions to property, plant and equipment | (378,131 | ) | (271,755 | ) | (228,524 | ) | ||||||
NET CASH (UTILIZED)/GENERATED BY INVESTING ACTIVITIES | (313,280 | ) | (246,895 | ) | 157,952 | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
Long-term borrowings raised | 252,526 | 160,149 | 231,554 | |||||||||
Long-term borrowings paid | (138,610 | ) | (204,414 | ) | (199,655 | ) | ||||||
Increase in bank overdraft | 31,232 | — | — | |||||||||
Ordinary shares issued — net of expenses | 19,158 | 28,684 | (9,695 | ) | ||||||||
Dividends paid | (917 | ) | (1,034 | ) | (14,495 | ) | ||||||
NET CASH GENERATED/(UTILIZED) BY FINANCING ACTIVITIES | 163,389 | (16,615 | ) | 7,709 | ||||||||
EFFECTS OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | (3,812 | ) | 34,142 | (323 | ) | |||||||
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | 10,982 | (177,557 | ) | 49,724 | ||||||||
CASH AND CASH EQUIVALENTS — JULY 1 | 89,189 | 266,746 | 217,022 | |||||||||
CASH AND CASH EQUIVALENTS — JUNE 30 | 100,171 | 89,189 | 266,746 | |||||||||
F-9
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
1 | NATURE OF OPERATIONS | |
Harmony Gold Mining Company Limited and its subsidiaries (collectively “Harmony” or the “Company”) are engaged in gold mining and related activities, including exploration, extraction and processing. Gold bullion, the Company’s principal product, is currently produced at its operations in South Africa. As discussed in note 17, Harmony has classified the results of its Australian operations as discontinued operations. | ||
2 | ACCOUNTING POLICIES |
(a) | USE OF ESTIMATES:The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the Company’s consolidated financial statements requires the Company’s management to make estimates and assumptions about current and future events that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgement based on various assumptions and other factors such as historical experience, current and expected economic conditions, and in some cases actuarial techniques. Actual results ultimately may differ from those estimates. | ||
The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves that are the basis for future cash flow estimates and units-of-production depreciation, depletion and amortization calculations; environmental, reclamation and closure obligations; estimates of recoverable gold and other materials in heap leach pads; asset impairments (including impairments of goodwill, long-lived assets, and investments); write-downs of inventory to net realizable value; post employment, post retirement and other employee benefit liabilities (including valuation of share options); valuation allowances for deferred tax assets; reserves for contingencies and litigation; and the fair value and accounting treatment of financial instruments. | |||
The following are the accounting policies used by the Company which have been consistently applied, unless otherwise stated: | |||
(b) | CONSOLIDATION: |
(i) | Consolidated entities:The Company’s consolidated financial statements include the financial statements of the Company, its subsidiaries, and its investments in joint ventures and associates. A company in which the Group has, directly or indirectly, through subsidiary undertakings, a controlling interest is classified as a subsidiary undertaking. The Company also reviews its relationships with other entities to assess if the Company is the primary beneficiary of a variable interest entity. If the determination is made that the Company is the primary beneficiary, then that entity is consolidated. See note 5. The results of any subsidiary acquired or disposed of during the year are consolidated from the effective date of acquisition and up to the effective date of disposal. | ||
Any excess between the purchase price and the fair value of the identifiable net assets of subsidiaries, joint ventures and associates at the date of acquisition is capitalized as goodwill. | |||
Intercompany profits, transactions and balances have been eliminated. | |||
(ii) | Investments in associates:An associate is an entity, other than a subsidiary, in which the Company has a material long-term interest and in respect of which the Company exercises significant influence over operational and financial policies, normally owning between 20% and 50% of the voting equity. | ||
Investments in associates are accounted for by using the equity method of accounting based on the most recent audited financial statements of those entities. Equity accounting involves recognizing in the income statement the Group’s share of the associates’ profit or loss for the period. The Group’s interest in the associate is carried in the balance sheet at an amount that reflects the cost of the investment, the Group’s share of post acquisition earnings and other movement in reserves. The carrying value of an associate is reviewed on a regular basis and, if an impairment in the carrying value has occurred, it is written off in the period in which such permanent impairment is identified. | |||
(iii) | Investment in joint ventures:A joint venture is an entity in which the Company holds a long-term interest and which is jointly controlled by the Company and one or more venturers under a contractual arrangement. The Company’s interest in jointly controlled entities is accounted for under the equity method as described in note 2(b)(ii) above. |
F-10
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
(c) | FOREIGN CURRENCIES: |
(i) | Foreign entities:For self-sustaining foreign entities, assets and liabilities are translated using the closing rates at year-end, and income statements are translated at average rates. Differences arising on translation are taken directly to shareholders’ equity, until the foreign entity is sold or disposed of when the translation differences are recognized in the income statement as part of the gain or loss on sale. | ||
Fair value adjustments arising on the acquisition of the foreign entities are treated as assets and liabilities of the foreign entity are translated at the closing rate. | |||
(ii) | Foreign currency transactions:Transactions in foreign currencies are converted at the rates of exchange ruling at the date of these transactions. Monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange ruling at balance sheet date. Gains, losses and costs associated with foreign currency transactions are recognized in the income statement in the period to which they relate. These transactions are included in the determination of other (expenses)/income. | ||
(iii) | Functional currency:The functional currency of the majority of the Company’s operations is the South African Rand. The translation differences arising as a result of converting to US dollars using the current exchange rate method are included as a separate component of shareholders’ equity. | ||
References to “A$” refers to Australian currency, “R” to South African currency, and “$” or “US$” to United States currency. |
(d) | FINANCIAL INSTRUMENTSare initially measured at cost. Subsequent to initial recognition these instruments are measured as set out below in terms of the applicable accounting policy. Financial instruments carried on the consolidated balance sheets include cash and cash equivalents, money market instruments, investments, receivables, accounts payable, long term loans, interest free loans, forward sales contracts, option contracts, interest rate swaps and gold leases. | ||
(e) | CASH AND CASH EQUIVALENTSare defined as cash on hand, deposits held at call with banks and short term highly liquid investments with insignificant interest rate risk and original maturities of three months or less. Cash and cash equivalents are measured at fair value. | ||
(f) | RESTRICTED CASHconsists of cash held as security deposits on mining tenements, cash held to acquire shares in subsidiaries as part of the compulsory takeover of shares as well as cash held on margin call in terms of certain conditions of borrowing agreements. | ||
(g) | NON-CURRENT INVESTMENTS:Management determines the appropriate classification of its investments in equity securities at the time of purchase and re-evaluates such determinations at each reporting date. Non-current investments comprise of the following: |
(i) | Listed investments:Investments in listed companies, other than investments in subsidiaries, joint ventures and associates, are carried at fair value. These investments are considered to be available-for-sale investments. Changes in the carrying amount of available-for-sale investments, are excluded from earnings and included as a separate component of shareholders’ equity. On disposal of available-for-sale investments, amounts previously included as a separate component of shareholders’ equity, are transferred to income/(loss) and included in the determination of the gain/(loss) on disposal of available-for-sale securities. The amount transferred out of equity is determined by reference to the amounts previously included as a separate component of shareholders’ equity relating to the specific investment. Unrealized losses are recognized in the determination of net income/(loss) when the market value decreases below the carrying value of the investment and this decrease is determined by management to be other than temporary in nature. | ||
(ii) | Unlisted investmentsare reflected at cost. If the directors are of the opinion that there has been an impairment in the value of these investments they are written down, with the write down recognized as an expense in the period in which the impairment is determined to have taken place. |
(h) | INVENTORIESare valued at the lower of cost and net realizable value. The Company’s inventories comprise of consumable stores, gold-in-process and ore stockpiles and are accounted for as follows: | ||
Consumable storesare valued at average cost, after appropriate provision for redundant and slow moving items. |
F-11
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
Gold-in-processinventories represent materials that are currently in the process of being converted to a saleable product. Conversion processes vary depending on the nature of the ore and the specific mining operation, but include mill in-circuit, leach in-circuit, flotation and column cells, and carbon in-pulp inventories. In-process material is measured based on assays of the material fed to process and the projected recoveries of the respective plants. In-process inventories are valued at the average cost of the material fed to process attributable to the source material coming from the mine, stockpile or leach pad plus the in-process conversion costs, including applicable depreciation relating to the process facility, incurred to that point in the process. Where mechanized mining is used in underground operations, gold-in-process is accounted for at the earliest stage of production when reliable estimates of quantities and costs are capable of being made, normally from when ore is broken underground. | |||
Stockpilesrepresents coarse ore that has been extracted from the mine and is available for further processing. Stockpiles are measured by estimating the number of tons (via truck counts and/or in-put surveys of the ore before stockpiling) added and removed from the stockpile, the number of contained ounces (based on assay data) and the recovery percentage (based on the process for which the ore is destined). Stockpile tonnages are verified by periodic surveys. Stockpiles are valued based on mining costs incurred up to the point of stockpiling the ore, including applicable depreciation and amortization relating to mining operations. Value is added to a stockpile based on the current mining cost per ton plus applicable depreciation and amortization and removed at the average cost per recoverable ounce of gold in the stockpile. | |||
(i) | MATERIALS CONTAINED IN HEAP LEACH PADS:The recovery of gold from certain oxide ores is best achieved through the heap leaching process. Under this method, ore is placed on leach pads where it is permeated with a chemical solution, which dissolves the gold contained in the ore. The resulting “pregnant” solution is further processed in a leach plant where the gold in solution is recovered. For accounting purposes, value is added to leach pads based on current mining costs, including applicable depreciation and amortization relating to mining operations. Value is removed from the leach pad as ounces are recovered in circuit at the leach plant based on the average cost per recoverable ounce of gold on the leach pad. | ||
The engineering estimates of recoverable gold on the heap leach pads are calculated from quantities of ore placed on the pads (measured tons added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a recovery percentage (based on the leach process and the ore type). In general, the leach pad production cycles project recoveries of approximately 50% to 70% of the placed recoverable ounces during the leaching process, declining at the end of the leaching process. | |||
Although the quantities of recoverable gold placed on the leach pads are reconciled by comparing the grades of ore placed on the pads to the quantities of gold actually recovered (metallurgical balancing), the nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, the metallurgical balancing process is constantly monitored and engineering estimates are refined based on actual results over time. Variations between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis. The ultimate recovery of gold from the pad will not be known until the leaching process is terminated. | |||
The current portion of leach pad inventories is determined based on engineering estimates of the quantities of gold at the balance sheet date that are expected to be recovered during the next twelve months. | |||
(j) | RECEIVABLES:Accounts receivable are stated at the gross invoice value adjusted for payments received and an allowance for doubtful debt, where appropriate, to reflect the fair value of the anticipated realizable value. Bad debts are written off during the period in which they are identified. | ||
(k) | ACCOUNTS PAYABLEare stated at cost adjusted for payments made to reflect the value of the anticipated economic outflow of resources. | ||
(l) | HEDGING:The Company accounts for its hedging activities in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133 (“SFAS No. 133”), Accounting for Derivative instruments and Hedging Activities, as amended by Statements of Financial Accounting Standards Nos. 137, 138 and 149. |
F-12
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
Under SFAS No. 133, all derivatives are recognized on the balance sheet at their fair value, unless they meet the criteria for the normal purchases normal sale exemption. On the date a derivative contract is entered into, the Company designates the derivative as (1) a hedge of the fair value of a recognized asset or liability (fair value hedge), (2) a hedge of a forecasted transaction (cash flow hedge), or (3) a hedge of a net investment in a foreign entity. Certain derivative transactions, while providing effective economic hedges under the Company’s risk management policies, do not qualify for hedge accounting. The Company does not currently hold or issue derivative financial instruments for trading or speculative purposes. | |||
Changes in the fair value of a derivative that is highly effective, and that is designated and qualifies as a fair value hedge, are recorded in the income statement, along with the change in fair value of the hedged asset or liability that is attributable to the hedged risk. | |||
Changes in the fair value of a derivative that is highly effective, and that is designated and qualifies as a cash flow hedge, are recognized directly as a separate component of shareholders’ equity. Amounts deferred as a component of shareholders’ equity are included in the income statement in the same periods during which the hedged firm commitment or forecasted transaction affects net profit or loss. | |||
Hedges of net investment in foreign entities are accounted for similarly to cash flow hedges. | |||
Recognition of derivatives which meet the criteria for the normal purchases, normal sales exemption under SFAS No. 133 are deferred until settlement. Under these contracts the group must physically deliver a specified quantity of gold at a future date at a specified price to the contracted counter party. | |||
Gains and losses arising from a change in the fair value of a contract before the contract’s designated delivery date are therefore not recorded, but the contract price recognized in Product sales following settlement of the contract by physical delivery of production to the counterparty at contract maturity. | |||
Changes in the fair value of derivatives which are not designated as hedges and do not qualify for hedge accounting and the ineffective portion of the derivatives are recognized in the income statement. | |||
The Group formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking derivatives designed as hedges to specific assets and liabilities or to specific firm commitments or forecasted transactions. The Group also formally assesses, both at the hedge inception date and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. | |||
(m) | EXPLORATION COSTSare expensed as incurred prior to the completion of a final feasibility study to establish proved and probable reserves. | ||
Costs incurred associated with upgrading or converting measured, indicated and inferred resources to probable reserves, including drilling and analysis costs at locations that are either in production or development stage, are expensed as incurred. | |||
(n) | PROPERTY, PLANT AND EQUIPMENT |
(i) | Mining assetsincluding mine development costs and mine plant facilities are recorded at cost. | ||
At the Company’s surface mines, when it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, costs incurred to develop the property are capitalized as incurred until more than a de minimis amount of saleable minerals are extracted from the mine and are then amortized using the units-of-production method over the estimated life of the ore body based on estimated recoverable ounces or pounds mined from proven and probable reserves. These costs include costs to further delineate the ore body and remove overburden to initially expose the ore body. Subsequent mine development costs at the Company’s surface mines are treated as variable production costs. | |||
At the Company’s underground mines, all costs incurred to develop the property, including costs to access specific ore blocks or other areas of the underground mine, are capitalized to the extent that such costs will provide future economic benefits as a result of establishing proven and probable reserves associated with specific ore blocks or areas of operations. These costs include the cost of shaft sinking and access, the costs of building access ways, lateral development, drift development, ramps, box cuts and other infrastructure development. Once more than a de minimis amount of saleable materials are extracted from a specific ore block or area of operation, the costs are amortized using the units-of production method as described under (iv) below. | |||
Interest on borrowings incurred in respect of assets requiring a substantial period of time to prepare for their intended use are capitalized to the date on which the assets are substantially completed and ready for their intended use. Interest from all interest-bearing loans are included in the calculation of the interest capitalized. |
F-13
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
(ii) | Mining operations placed on care and maintenance:The net assets of operations placed on care and maintenance are written down to net realizable value. Expenditure on the care and maintenance of these operations is charged against income, as incurred. | ||
(iii) | Non mining fixed assets:Land is shown at cost and not depreciated. Other non-mining fixed assets are shown at cost less accumulated depreciation. | ||
(iv) | Mineral and surface use rightsrepresent mineral and surface use rights for parcels of land both owned and not owned by the Company. Mineral and surface rights include acquired mineral use rights in production, development and exploration stage properties. The amount capitalized related to a mineral and surface rights represents its fair value at the time it was acquired, either as an individual asset purchase or as part of a business combination and are recorded at cost of acquisition. | ||
Production stage mineral interests represent interests in operating properties that contain proven and probable reserves. Development stage mineral interests represent interests in properties under development that contain proven and probable reserves. Exploration stage mineral interests represent interests in properties that are believed to potentially contain (i) other mineralized material such as inferred material within pits; measured, indicated and inferred material with insufficient drill spacing to qualify as proven and probable reserves; and inferred material in close proximity to proven and probable reserves; (ii) around-mine exploration potential such as inferred material not immediately adjacent to existing reserves and mineralization but located within the immediate mine infrastructure; (iii) other mine-related exploration potential that is not part of measured, indicated or inferred material and is comprised mainly of material outside of the immediate mine area; or (iv) greenfield exploration potential that is not associated with any other production, development or exploration stage property as described above. | |||
The Company’s mineral use rights are enforceable regardless of whether proven or probable reserves have been established. In certain limited situations, the nature of a use changes from an exploration right to a mining right upon the establishment of proven and probable reserves. The Company has the ability and intent to renew mineral use rights where the existing term is not sufficient to recover all identified and valued proven and probable reserves and/or undeveloped mineral interests. | |||
(v) | Depreciation and amortization of mineral property interests, mine development costs and mine plant facilitiesare computed principally by the units of production method based on estimated proven and probable reserves. Costs incurred and capitalized to enable access to specific ore blocks or areas of the mine, and which only provide an economic benefit over the period of mining that ore block or area, are attributed to earnings using the units-of-production method where the denominator is estimated recoverable ounces of gold contained in proven and probable reserves within that ore block or area. If capitalized underground development costs provide an economic benefit over the entire mine life, the costs are attributed to earnings using the units-of-production method, where the denominator is the estimated recoverable ounces of gold contained in total accessible proven and probable reserves. Other non-mining fixed assets are depreciated by straight line over estimated useful lives of two to five years. | ||
(vi) | Amortization of mineral and surface use rights:Mineral rights associated with production stage mineral interests are amortized over the life of mine using the units-of-production method in order to match the amortization with the expected underlying future cash flows. Mineral interests associated with development and exploration stage mineral interests are not amortized until such time as the underlying property is converted to the production stage. | ||
(vii) | Impairment:The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets, including goodwill, if any. An impairment loss is measured and recorded based on discounted estimated future cash flows. Future cash flows are estimated based on quantities of recoverable minerals, expected gold prices (considering current and historical prices, price trends and related factors), production levels and cash costs of production and capital, all based on life-of-mine plans. |
F-14
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
The term “recoverable minerals” refers to the estimated amount of gold that will be obtained from proven and probable reserves and all related exploration stage mineral interests (except for other mine-related exploration potential and greenfields exploration potential discussed separately below) after taking into account losses during ore processing and treatment. Estimates of recoverable minerals from such related exploration stage mineral interests will be risk adjusted based on management’s relative confidence in such materials. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of cash flows from other asset groups. With the exception of other mine-related exploration potential and greenfields exploration potential, estimates of future undiscounted cash flows are included on an area of interest basis, which generally represents an individual operating mine, even if the mines are included in a larger mine complex. In the case of mineral interests associated with other mine-related exploration potential and greenfields exploration potential, cash flows and fair values are individually evaluated based primarily on recent exploration results and recent transactions involving sales of similar properties, if any. Assumptions underlying future cash flow estimates are subject to significant risks and uncertainties. |
(o) | INTANGIBLE ASSETSconsist of all identifiable non-monetary assets without physical substance. They are stated at cost less accumulated amortization and accumulated impairment losses, if any. The following are the main categories of intangible assets: |
i) | Intangible assets with an indefinite useful life | ||
Intangible assets with an indefinite useful life are not amortised but tested for impairment on an annual basis. | |||
Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net assets of the acquired subsidiary, associate, joint venture or business at the date of acquisition. Goodwill on acquisition of subsidiaries and businesses is presented separately within non-current assets. Goodwill on acquisition of associates and joint ventures are included in the carrying value of investments in associates and joint ventures. | |||
Goodwill is not subject to amortization. Instead, the Company evaluates, on at least an annual basis, the carrying amount of goodwill to determine whether current events and circumstances indicate that such carrying amount may no longer be recoverable. To accomplish this, the Company compares the fair value of its reporting units to their carrying amounts. If the carrying value of a reporting unit were to exceed its fair value, the Company would perform the second step of the impairment test. In the second step, the Company would compare the implied fair value of the reporting unit’s goodwill to its carrying amount and any excess of the carrying value over the implied fair value would be charged to operations. | |||
The gain or loss on disposal of an entity includes the carrying amount of goodwill relating to the entity sold. | |||
The intangible assets are tested for impairment at April 30. | |||
(ii) | Intangible assets with a finite useful life | ||
Acquired computer software licenses and development costs are capitalized on the basis of costs incurred to acquire and bring into use the acquired software. | |||
Intangible assets with a finite useful life are amortized on a straight line basis over their estimated useful lives, which are reviewed annually, as follows: | |||
- Computer software at 20% per year. | |||
�� | |||
The assets are reviewed for impairment at least annually or when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets, including goodwill, if any. An impairment loss is measured and recorded based on discounted estimated future cash flows. |
(p) | ENVIRONMENTAL OBLIGATIONS:SFAS No. 143, Accounting for Asset Retirement Obligations (“SFAS No. 143”) applies to legal obligations associated with the retirement of a long-lived asset that result from the acquisition, construction, development and/or the normal operation of a long-lived asset. | ||
SFAS No. 143 applies to legal obligations associated with the retirement of a long-lived asset that result from the acquisition, construction, development and/or the normal operation of a long-lived asset. Under SFAS No. 143 the Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the Company |
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Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
capitalizes the cost by increasing the carrying value of the related long-lived asset. Changes resulting from revisions in the amount of estimated cash flows are recognized as an increase or decrease in the carrying amount of the rehabilitation liability and the associated capitalized retirement cost. Decreases in the rehabilitation liability in excess of capitalized retirement costs (net of accumulated depreciation) are recognized in the income statement as Decrease in rehabilitation costs. Over time, the liability is increased to reflect an interest element (accretion) considered in its initial measurement at fair value, and the capitalized cost is amortized over the useful life of the related asset. Upon settlement of the liability, the Company will record a gain or loss if the actual cost incurred is different than the liability recorded. | |||
Environmental liabilities, other than rehabilitation costs which relate to liabilities from specific events, are expensed as incurred. | |||
(q) | ENVIRONMENTAL TRUST FUNDS:Contributions are made to the Company’s trust funds, created in accordance with statutory requirements, to fund the estimated cost of pollution control, rehabilitation and mine closure at the end of the life of the Company’s South African mines. Contributions are determined on the basis of the estimated environmental obligation over the life of the mine. Income earned on monies paid to environmental trust funds is accounted for as investment income. The funds contributed to the trusts plus growth in the trust funds are included under Listed and Other Investments on the balance sheet. | ||
(r) | PROVISIONSare recognized when information is available prior to the issuance of financial statements which indicates that it is probable that an asset has been impaired or a liability has been incurred as at the date of the financial statements and can be reasonably estimated. | ||
(s) | DEFERRED TAXATION:The Company follows the comprehensive liability method of accounting for deferred tax using the balance sheet approach. Under this method deferred income and mining taxes are recognized for the tax consequences of temporary differences by applying expected future mining tax rates to the differences between the tax base of certain assets or liabilities and their balance sheet carrying amount. The effect on deferred tax of any changes in tax rates is recognized in the income statement during the period in which the change in tax rate occurs. | ||
The principal temporary differences arise from amortization and depreciation on property, plant and equipment, provisions, deferred financial liability and unredeemed capital expenditure. A valuation allowance is recorded to reduce the carrying value of deferred tax assets if it is more likely than not that such assets will not be realized. | |||
(t) | PENSION PLANS AND OTHER EMPLOYEE BENEFITS: |
(i) | Pension plansare funded through annual contributions. The Company’s contributions to the defined contribution pension plans are charged to the income statement in the year to which they relate. The Company’s liability is limited to its annually determined contributions. | ||
(ii) | Medical plans:The Company provides medical cover to current employees and certain retirees through certain funds. The medical accounting costs for the defined benefit plan are assessed using the projected unit credit method. The health care obligation is measured as the present value of the estimated future cash outflows using market yields consistent with the term and risks of the obligation. Actuarial gains and losses as a result of these valuations are recognised in the income statement at re-valuation date. A liability for retirees and their dependents is accrued in full based on actuarial valuations every year. | ||
(iii) | Share-based compensation: Effective July 1, 2005, the Company adopted the fair value recognition provisions of SFAS No. 123(R), Share-Based Payments (“SFAS No. 123(R)”). Prior to that date, the Company applied SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) in accounting for options granted after July 1, 2001 and Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”) together with its related interpretations in accounting for options granted prior to July 1, 2001. | ||
The Company adopted SFAS No. 123(R) using the modified retrospective transition method. Under this method, share-based payment expense for the years ended June 30, 2006 and 2007 include: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of July 1, 2005, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all share-based payments granted subsequent to July 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of |
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Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
SFAS No. 123(R). Results for all prior periods presented have been adjusted based on the amounts previously recognized under SFAS No. 123 for purposes of pro forma disclosures. See note 3. In both cases, the Company has recognised the share-based payment expense associated with options with graded-vesting features over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards. |
(u) | REVENUE RECOGNITION:Revenue arising from gold sales is recognized when the price is determinable, the product has been delivered in accordance with the terms of the contract, the significant risks and rewards of ownership have been transferred to the customer and collection of the sales price is reasonably assured. These criteria are met when the gold leaves the Company’s smelt-houses. | ||
Revenue further excludes value-added tax but includes the net realized profit and losses arising from hedging transactions from matched gold sales contracts. Revenues from silver and other by-products sales are credited to production costs as a by-product credit. | |||
(v) | INTEREST INCOME:Interest is recognized on a time proportion basis, taking into account the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group. | ||
(w) | DIVIDEND INCOMEis recognized when the shareholders’ right to receive payment is established, recognized at the last date of registration. | ||
(x) | DIVIDENDS DECLARED:Dividends proposed and the related transactions thereon are recognized when declared by the the Board of directors. Dividends paid therefore relate to those declared in the current fiscal year. Dividends are payable in South African Rands. | ||
Dividends declared which are payable to foreign shareholders are subject to approval by the South African Reserve Bank in terms of South African foreign exchange control regulations. In practice, dividends are freely transferable to foreign shareholders. | |||
(y) | LOSS PER SHARE:Loss per share is based on net loss divided by the weighted average number of ordinary shares in issue during the year. Diluted loss per share includes potential ordinary shares that have a dilutive effect on earnings per share. | ||
(z) | RECENT ACCOUNTING PRONOUNCEMENTS: | ||
In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FAS 115” (“SFAS No. 159” or “Fair Value Option”). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value through profit and loss. Application of the provisions of the Fair Value Option is optional and the provisions can be elected on an instrument by instrument basis. If the Company elects to utilize the provisions of this Statement, it may do so beginning on July 1, 2008. The Company plans to early-adopt SFAS No. 159 and anticipates electing the Fair Value Options for its investment in African Rainbow Minerals Limited, held through ARM Broad-Based Economic Empowerment Trust. The adoption of the Fair Value Option for this investment, will result in a cumulative-effect adjustment of $386.1 million, representing the unrealized gain included in Accumulated Other Comprehensive Income as at June 30, 2007. Going forward, changes in the fair value of the investment will be recorded in the Consolidated Statements of Income, consistent with changes in the fair value of derivative liability. See note 4(a), 25 and 30. | |||
In November 2006, the FASB ratified the consensus reached by the Emerging Issues Task Force (“EITF”) in connection with EITF Issue No. 06-6, Debtor’s Accounting for a Modification (or Exchange) of Convertible Debt Instruments (“EITF 06-6”). EITF 06-6 addresses the analysis required to determine the accounting for a modification of or exchange in convertible debt instruments that changes the terms of an embedded conversion option. The consensus reached under EITF 06-6 is applicable to modifications or exchanges of debt instruments occurring after July 1, 2008. The Company will evaluate the impact of EITF 06-6 on its financial position and results of operations should there be any modifications or exchanges in debt instruments. | |||
In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements” (“SFAS No. 157”). This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.This Statement does not require any new fair value measurements, it emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. SFAS No. 157 expands disclosures about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. |
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Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
This statement applies for derivatives and other financial instruments measured at fair value under SFAS No. 133, “Derivative Financial Instruments” at initial recognition and in all subsequent periods. The Company plans to early-adopt SFAS No. 157 on July 1, 2007, and is currently evaluating the impact of SFAS No. 157 on its financial position and results of operations. | |||
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS No.158”). SFAS 158 improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS 158 requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The adoption of SFAS No. 158 on July 1, 2006 did not have an impact on the Company’s financial position and results of operations. | |||
In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (“FIN No. 48”) an interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Interpretation requires that the Company recognize in the financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. In May 2007, the FASB issued “FSP No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48” (“FSP No. FIN 48-1”). This Staff Position clarifies how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. FSP No. FIN 48-1 specifically addresses the interaction between reviews and examinations by the taxing authority and settlement of uncertain tax positions. The provisions of FIN No. 48 and FSP No. FIN 48-1 are effective for the years beginning after December 31, 2006 (i.e., July 1, 2007 for the Company), with the cumulative effect of the change in accounting principle recorded as an adjustment to the opening balance of retained earnings. The Company is currently evaluating the impact of adopting FIN No. 48 and FSP FIN No. 48-1 on its financial statements. |
3 | ACCOUNTING CHANGE |
Share-based payments | |||
On July 1, 2005, the Company adopted the fair value recognition provisions of SFAS No. 123(R), Share-Based Payments (“SFAS No. 123(R)”). Prior to that date, the Company applied SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) in accounting for options granted after July 1, 2001 and Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”) together with its related interpretations in accounting for options granted prior to July 1, 2001. | |||
In connection with the change relating to share-based payments, the Company followed the modified retrospective approach permitted by SFAS No. 123(R). Under this method, the Company has adjusted its financial statements for the years ended June 30, 2005 and 2004 based on the amounts previously recognized under SFAS No. 123 for purposes of pro forma disclosures, without adjustment. Prior to the adoption of SFAS 123(R) however, the Company recognized actual |
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Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
forfeitures when they occurred (as opposed to estimating forfeitures at the grant date and subsequently adjusting their estimated forfeitures to actuals). In accordance with SFAS No. 123(R)’s specific transition provisions, the Company recorded a cumulative effect adjustment on July 1, 2005 related to outstanding awards that are not expected to vest based on an estimate of forfeitures as of that date. | |||
Adoption of Staff Accounting Bulletin No. 108 “Considering the effects of Prior Year Misstatements when Quantifying Misstatements” in Current Year Financial Statements (“SAB No. 108”). | |||
In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108 was issued in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. | |||
Traditionally, there have been two widely-recognized methods for quantifying the effects of financial statement misstatements: the “roll-over” method and the “iron curtain” method. The roll-over method focuses primarily on the impact of a misstatement on the income statement-including the reversing effect of prior year misstatements-but its use can lead to the accumulation of misstatements in the balance sheet. The iron-curtain method, on the other hand, focuses primarily on the effect of correcting the period-end balance sheet with less emphasis on the reversing effects of prior year errors on the income statement. Prior to our application of the guidance in SAB No 108, we used the roll-over method for quantifying financial statement misstatements. | |||
In SAB No 108, the SEC staff established an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the company’s financial statements and the related financial statement disclosures. This model is commonly referred to as a “dual approach” because it requires quantification of errors under both the iron curtain and the roll-over methods. | |||
SAB No 108 permits existing public companies to initally apply its provisions either by (i) restating prior financial statements as if the “dual approach” had always been applied or (ii) recording the cumulative effect of initially applying the “dual approach” as adjustments to the carrying values of assets and liabilities as of July 1, 2006 with an offsetting adjustment recorded to the opening balance of retained earnings. We elected to record the effects of applying SAB No 108 using the cumulative effect transition method, as follows: |
Period in which the misstatement | ||||||||||||||||
originated (1) | ||||||||||||||||
Cumulative | ||||||||||||||||
prior to | ||||||||||||||||
June | Adjustment | |||||||||||||||
30, | Year ended June 30, | recorded July | ||||||||||||||
2004 | 2005 | 2006 | 1,2006 | |||||||||||||
$’000 | $’000 | $’000 | $’000 | |||||||||||||
Depreciation on assets not yet in production (2) | 1,547 | 3,592 | 3 854 | 8,993 | ||||||||||||
Capitalized borrowing costs not accounted for (3) | 5,460 | 2,630 | 2 598 | 10,687 | ||||||||||||
Deferred tax (4) | (2,093 | ) | (1,904 | ) | (1 949 | ) | (5,946 | ) | ||||||||
Impact on net loss (5) | 4,914 | 4,318 | 4 503 | |||||||||||||
Accumulated loss (6) | 13,735 | |||||||||||||||
(1) | The Company considered these errors to be immaterial under the roll-over method individually and in the aggregate. | |
(2) | The Company previously recognized depreciation on assets that had not yet reached production levels. As a result the Company overstated its depreciation and amortization expense by $1.5 million (cumulatively) in years prior to fiscal 2005, by $3.6 million in fiscal 2005 and $3.9 million in fiscal 2006. The Company recorded an increase of $8.9 million in its mining assets for the depreciation as of July 1, 2006 with a corresponding decrease in its accumulated loss to correct these misstatements. | |
(3) | The Company previously did not capitalize borrowing costs on all qualifying assets. As a result, the Company overstated its interest expense by $5.5 million (cumulatively) in years prior to fiscal 2005, by $2.6 million in fiscal 2005 and $2.6 million in fiscal 2006. The Company recorded an increase of $10.7 million in its mining assets for the borrowing costs as of July 1, 2006 with a corresponding decrease in its accumulated loss to correct these misstatements. | |
(4) | As a result of the of the misstatements described, the Company’s provision for income taxes was understated by $2.1 million in years prior to fiscal 2005, by $1.9 million in fiscal 2005 and by $1.9 million in fiscal 2006. The Company recorded an increase of $5.9 million in its deferred tax liability as of July 1, 2006 with a corresponding increase in its accumulated loss to correct these misstatements. | |
(5) | Represents the net overstatment of net loss for the indicated periods resulting from these misstatements. | |
(6) | Represents the net reduction in accumulated loss as of July 1, 2006 to record the initial application of SAB No 108. |
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Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
4 | ACQUISITION AND DISPOSAL OF BUSINESSES AND INVESTMENTS |
(a) | Acquisition and disposal of African Rainbow Minerals Limited (“ARM”) (formerly Anglovaal Mining Limited) (“Avmin”) |
On May 8, 2003 and May 14, 2003 the Company acquired a 17.25% interest in ARM through its 50% interest in a joint venture with ARMgold Limited, ARMgold/Harmony Joint Investment Company (Proprietary) Limited (“Clidet”). The joint venture company purchased 27,786,362 shares in ARM from Anglo American Plc for a cash consideration of R1,209 million ($167 million) on May 8, 2003 and a further 11,003,399 shares for a cash consideration of R478 million ($63 million) on May 14, 2003, giving it a combined interest of 34.5% in the issued share capital of ARM. ARM is listed on the Johannesburg Stock Exchange and has interests in operating gold, manganese, iron, chrome, platinum, and nickel mines in South Africa, as well as cobalt and copper mines in Zambia. | ||
The Company equity accounted its investment in Clidet from May 8, 2003 through September 22, 2003. With the acquisition of ARMgold on September 22, 2003, the Company obtained control over the entire shareholding of Clidet, and has treated it as a subsidiary from that date. Accordingly, the Company equity accounted its investment in ARM, directly, from September 22, 2003. | ||
The Company continued to equity account its investment in ARM through May 3, 2004, the date on which the Company acquired ARM’s 42.2% interest in Avgold. Following the acquisition of Avgold, in which the Company’s investment in ARM was reduced to 19.5%, Harmony has classified the investment in ARM as available-for-sale. | ||
The Company disposed of 5.82% of the 19.5% investment held in ARM in the open market for $57.3 million through a range of transactions on February 3, 2005, March 15, 2005 and May 27, 2005, resulting in a loss of $38.2 million. See note 10. On April 15, 2005, the Company transferred the remaining 13.68% of the investment in ARM to the ARM Broad-Based Economic Empowerment Trust (“the ARM Trust”) for an aggregate cash consideration of R829.8 million ($132.1 million), representing a price of R29 per ARM share. | ||
The acquisition of the shares by the ARM Trust was financed through two term loan facilities with Nedbank Limited (“Nedbank”). The first term loan facility of R473.6 million ($75.4 million) previously contained a put option whereby Nedbank could have put the loan to the Company in the event of default by the ARM Trust. The Company was also entitled, at any time up to the facilities discharge date, to call the loan and “step into the shares of Nedbank as the lender”. On June 6, 2006, this put and call option was replaced by a guarantee from the Company to the value of R367 million ($54.0 million), plus interest accrued at the applicable funding rate. On the same date, the Company received an indemnity from ARM to the value of 50% of the Company’s liability under the guarantee. The second term loan facility amounting to R356.2 million ($56.7 million) continues to be collaterialized by the underlying ARM shares in the ARM Trust. Nedbank is entitled to force the trust to sell the shares if the market price of the ARM shares decrease to a certain level. | ||
For accounting purposes, the Company did not account for the transfer of the shares to the ARM Trust as a sale. This is because the previous put and call option on the first term loan facility, as well as the new guarantee and the fact that the ARM Trust’s ability to pledge or exchange the shares is inhibited through restrictions imposed by Harmony and its related parties as Trustees, are according to the guidance in SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, indications that Harmony has not surrendered control over the ARM shares. The 13.68% investment therefore continues to be accounted for as “available-for sale” with gains and losses arising from changes in the fair value of the shares excluded from earnings and included as a separate component of stockholders’ equity. See note 25. | ||
Harmony also considered the appropriate accounting for the fact that, in terms of the stated objective of the ARM Trust, the upside on appreciation of the ARM shares legally belongs to the intended beneficiaries of the ARM Trust. The Company determined that this written option would qualify as a derivative instrument under the SEC staff’s long standing position for written options as noted in EITF 01-6 “Accounting for Freestanding Derivative Financial Instruments Indexed to, and Potentially Settled in, the Stock of a Consolidated Subsidiary”. Harmony has therefore recorded a derivative financial liability on its balance sheet to reflect the fair value of the net increase in the ARM Empowerment Trust. Any changes in the fair value of the derivative financial liability have been accounted for in the consolidated income statements. See Note 30. |
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Notes to the Consolidated Financial Statements
For the years ended June 30
Subsequent to the balance sheet date, the Gold Fields shares were sold and the related RMB financing was repaid. See note 40.
F-21
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
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Notes to the Consolidated Financial Statements
For the years ended June 30
F-23
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Production costs include mine production, transport and refinery costs, general and administrative costs, movement in inventories and ore stockpiles as well as transfers to and from deferred stripping. Ongoing employee termination cost is included, however employee termination costs associated with major restructuring and shaft closures are excluded. These costs, analyzed by nature, consist of the following: | ||||||||||||
Labor costs, including contractors | 695,760 | 622,655 | 631,284 | |||||||||
Stores and materials | 229,600 | 199,153 | 224,375 | |||||||||
Water and electricity | 102,515 | 98,607 | 115,990 | |||||||||
Hospital costs | 3,732 | 12,788 | 21,968 | |||||||||
Changes in inventory | (8,072 | ) | (20,331 | ) | (4,483 | ) | ||||||
Share-based compensation | 5,113 | 15,726 | 15,618 | |||||||||
Other | (5,090 | ) | 29,956 | 32,028 | ||||||||
1,023,558 | 958,554 | 1,036,780 | ||||||||||
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
South African operations: | ||||||||||||
Free State operations | 4,441 | — | 42,018 | |||||||||
Lydenburg Exploration | — | 15,951 | — | |||||||||
Evander operations | — | — | 15,324 | |||||||||
Kalgold operations | — | — | 12,441 | |||||||||
Freegold operations | 5,802 | — | 52,557 | |||||||||
ARMgold operations | — | — | 479 | |||||||||
10,243 | 15,951 | 122,819 | ||||||||||
F-24
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Notes to the Consolidated Financial Statements
For the years ended June 30
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Free State | — | (8,695 | ) | 20,909 | ||||||||
Evander | — | 917 | 4,005 | |||||||||
Kalgold | — | 4 | 143 | |||||||||
Randfontein and Elandskraal | — | 751 | 16,721 | |||||||||
Freegold | — | (4,867 | ) | 28,076 | ||||||||
ARMgold (Welkom and Orkney) | — | (914 | ) | 1,872 | ||||||||
Avgold | — | 369 | 1,489 | |||||||||
Musuku (Refinery) | — | 146 | — | |||||||||
— | (12,289 | ) | 73,215 | |||||||||
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Balance at July 1, 2006 and 2005 | — | 32,910 | ||||||
Employment termination costs paid | — | (22,001 | ) | |||||
(Benefit from)/provision for employment termination costs | — | (12,480 | ) | |||||
Foreign currency translation adjustment | — | 1,571 | ||||||
Balance at June 30, 2007 and 2006 | — | — | ||||||
F-25
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Notes to the Consolidated Financial Statements
For the years ended June 30
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Sale of Randfontein 4 Shaft | 9,805 | — | — | |||||||||
Sale of Deelkraal surface assets | 13,743 | — | — | |||||||||
Other | 1,798 | 10,148 | 13,594 | |||||||||
25,346 | 10,148 | 13,594 | ||||||||||
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Profit on sale of investment in Atlas Gold Limited | — | 79 | — | |||||||||
Loss on sale of investment in San Gold Corporation | — | (121 | ) | — | ||||||||
(Loss)/profit on sale of investment in Gold Fields Limited | (4,898 | ) | 45,387 | (60,168 | ) | |||||||
Loss on sale of investment in ARM Limited | — | — | (38,242 | ) | ||||||||
Profit on sale of investment in Bendigo NL | — | — | 4,931 | |||||||||
(4,898 | ) | 45,345 | (93,479 | ) | ||||||||
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Notes to the Consolidated Financial Statements
For the years ended June 30
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Impairment of shares in listed companies | (51,087 | ) | — | (63,234 | ) | |||||||
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Profit on sale of investment in Western Areas Limited | 33,478 | — | — | |||||||||
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Profit on sale of investment in Buffalo Creek | — | 3,035 | — | |||||||||
Profit on sale of investment in Ubuntu | — | — | 1,125 | |||||||||
Loss on sale of investment in Future | — | — | (1,367 | ) | ||||||||
Profit on sale of investment in NACS | — | — | 128 | |||||||||
— | 3,035 | (114 | ) | |||||||||
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Profit on sale of Orpheo by Harmony (Pty) Ltd | 30 | — | — | |||||||||
F-27
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Notes to the Consolidated Financial Statements
For the years ended June 30
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Foreign exchange (losses)/gains | 5,043 | (3,959 | ) | 452 | ||||||||
Non-mining bad debts | (1,816 | ) | 854 | (6,079 | ) | |||||||
Other expenditure | (9,826 | ) | (23,339 | ) | (11,747 | ) | ||||||
(6,599 | ) | (26,444 | ) | (17,374 | ) | |||||||
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Current income and mining taxes | (610 | ) | (642 | ) | (12,255 | ) | ||||||
Deferred income and mining taxes | (33,592 | ) | 1,665 | 76,307 | ||||||||
Total income and mining taxation benefit | (34,202 | ) | 1,023 | 64,052 | ||||||||
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
South Africa | (163,285 | ) | (69,024 | ) | (538,791 | ) | ||||||
Foreign | (24,687 | ) | (12,301 | ) | 2,524 | |||||||
Total | (187,972 | ) | (81,324 | ) | (536,266 | ) | ||||||
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Income and mining tax benefit on loss from continuing operations before tax and equity income from joint ventures and associated companies at the maximum statutory mining tax rate | 84,587 | 36,596 | 241,320 | |||||||||
Non-deductible expenses(1) | (122,263 | ) | (5,153 | ) | (3,711 | ) | ||||||
Difference between South African mining formula tax rate and maximum mining statutory rate on mining income | 7,780 | 1,534 | (108,338 | ) | ||||||||
Difference between non-mining tax rate and maximum mining statutory rate on non-mining income | 5,633 | (11,950 | ) | (12,552 | ) | |||||||
Difference between estimated effective tax rate and maximum mining statutory rate (deferred tax) | (10,495 | ) | (20,004 | ) | (52,667 | ) | ||||||
Prior year adjustment — mining and non-mining tax | 555 | — | — | |||||||||
Income and mining tax (expense)/benefit | (34,202 | ) | 1,023 | 64,052 | ||||||||
Effective income and mining tax rate | -18 | % | 1 | % | 12 | % | ||||||
(1) Non-deductible expenses comprise primarily fair value adjustments on the derivative financial liability relating to the ARM Trust.
F-28
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Deferred income and mining tax assets: | ||||||||
Derivative financial liability | 3,608 | 10,101 | ||||||
Unredeemed capital expenditure | 123,757 | 95,088 | ||||||
Provisions, including rehabilitation accruals | 36,651 | 25,754 | ||||||
Tax losses | 47,350 | 65,262 | ||||||
Other | — | — | ||||||
211,366 | 196,205 | |||||||
Valuation allowance for deferred tax assets | — | (4,004 | ) | |||||
Total deferred income and mining tax assets | 211,366 | 192,200 | ||||||
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Deferred income and mining tax liabilities: | ||||||||
Mining assets | (640,282 | ) | (560,559 | ) | ||||
Product inventory not taxed | (14,294 | ) | (8,939 | ) | ||||
Other | (510 | ) | (1,593 | ) | ||||
(655,086 | ) | (571,091 | ) | |||||
Valuation allowance | — | — | ||||||
Total deferred income and mining tax liabilities | (655,086 | ) | (571,091 | ) | ||||
Reclassified as non-current assets held for sale | 3,213 | — | ||||||
Net deferred income and mining tax liabilities | (446,933 | ) | (378,891 | ) | ||||
Net deferred income and mining tax liabilities comprise of: | ||||||||
Current deferred income and mining tax assets | 65,896 | 142,109 | ||||||
Non-current deferred income and mining tax liabilities | (512,829 | ) | (521,000 | ) | ||||
Net deferred income and mining tax liabilities | (446,933 | ) | (378,891 | ) | ||||
F-29
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
Australia | Other entities | Total | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Non-current assets classified as held-for-sale: | ||||||||||||
Property, plant and equipment | 88,087 | 36,498 | 124,585 | |||||||||
Restricted cash | 706 | — | 706 | |||||||||
Listed and other investments | 638 | 8,415 | 9,053 | |||||||||
Deferred income tax | 14,621 | 2,418 | 17,039 | |||||||||
Income tax | — | 1,562 | 1,562 | |||||||||
Inventories | 9,229 | 7,991 | 17,220 | |||||||||
Receivables | 2,826 | 9,072 | 11,898 | |||||||||
Cash and cash equivalents | 332 | 80 | 412 | |||||||||
116,439 | 66,036 | 182,475 | ||||||||||
Liabilities directly associated with non-current assets classified as held-for-sale: | ||||||||||||
Borrowings | 121 | — | 121 | |||||||||
Deferred income tax | 10,147 | 3,679 | 13,826 | |||||||||
Provision for environmental rehabilitation | 24,602 | 12,338 | 36,940 | |||||||||
Trade and other payables | 13,225 | 13,501 | 26,727 | |||||||||
48,096 | 29,518 | 77,614 | ||||||||||
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Analysis of the results of discontinued operations: | ||||||||||||
Revenue | 141,874 | 122,496 | 125,667 | |||||||||
Expenses | (148,418 | ) | (185,299 | ) | (110,457 | ) | ||||||
Impairment of assets | (51,788 | ) | — | (120,305 | ) | |||||||
(Loss) from discontinued operations before tax | (58,332 | ) | (62,803 | ) | (105,095 | ) | ||||||
Taxation | (14,054 | ) | 1,320 | 24,759 | ||||||||
(Loss) from discontinued operations for the year | (72,386 | ) | (61,483 | ) | (80,336 | ) | ||||||
When the decision was taken to classify the operations as held-for-sale, the assets’ carrying values were compared to their fair values less costs to sell. The assets were found to be impaired and as a result, an impairment loss of $51.8 million was recognized. | ||
The Australian operations also recorded an impairment loss of $120.3 million during the year ended June 30, 2005. This impairment related to a $52.5 million impairment loss on amounts previously capitalized as undeveloped properties for which no future benefits were expected by management. An impairment loss of $67.8 million was also recorded on mining assets mainly resulting from a review performed on life of mine plans. The revised life of mine plans included an adjusted Australian dollar gold price and adjustments to estimated production costs. Utilizing the revised mine plans, a gold price of $380 per ounce and an exchange rate of AU$1=$0.69, the life of mine plans did not support the carrying value of some of the Australian operations on an undiscounted cash flow basis. Accordingly, an asset impairment of $120.3 million was charged against income, utilizing a discount rate of 7%. | ||
During the year ended June 30, 2005, the Australian operations recorded an impairment of $3.1 million at its South Kalgoorlie operations, mainly as a result of the depletion of open pit reserves through mining activities, despite continued exploration around the South Kalgoorlie area. | ||
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Operating cash flows | (53,111 | ) | (9,961 | ) | 27,512 | |||||||
Investing cash flows | 9,962 | 21,520 | (76,029 | ) | ||||||||
Financing cash flows | — | — | — | |||||||||
Foreign exchange differences | 3,138 | 2,907 | 10,762 | |||||||||
Total cash flows | (40,011 | ) | 14,466 | (37,755 | ) | |||||||
F-30
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
For the year ended June 30, 2007 | |||||||||||||
Loss | Shares | Per-share | |||||||||||
(Numerator) | (Denominator) | amount | |||||||||||
$’000 | ($) | ||||||||||||
Basic loss per share | |||||||||||||
Shares outstanding July 1, 2006 | — | 397,616,950 | — | ||||||||||
Weighted average number of ordinary shares issued during the year | — | 976,347 | — | ||||||||||
Total weighted average shares | 398,593,297 | ||||||||||||
Loss available to common shareholders | |||||||||||||
- Continuing operations | (223,049 | ) | (0.56 | ) | |||||||||
- Discontinued operations | (72,386 | ) | (0.18 | ) | |||||||||
Effect of dilutive securities | |||||||||||||
Share options issued to employees | — | — | — | ||||||||||
Total diluted shares | — | 398,593,297 | — | ||||||||||
Diluted loss per share | |||||||||||||
- Continuing operations | (223,049 | ) | (0.56 | ) | |||||||||
- Discontinued operations | (72,386 | ) | (0.18 | ) |
The inclusion of share options issued to employees totaling 4,471,214 as of June 30, 2007, as potential ordinary shares, would have an anti-dilutive effect on diluted loss per share. Accordingly, such additional shares have not been taken into account in the determination of diluted loss per share. |
For the year ended June 30, 2006 | ||||||||||||
Loss | Shares | Per-share | ||||||||||
(Numerator) | (Denominator) | amount | ||||||||||
$’000 | ($) | |||||||||||
Basic loss per share | ||||||||||||
Shares outstanding July 1, 2005 | — | 394,023,694 | — | |||||||||
Weighted average number of ordinary shares issued during the year | — | 385,818 | — | |||||||||
Total weighted average shares | — | 394,409,512 | — | |||||||||
Loss available to common shareholders | ||||||||||||
- Continuing operations | (96,300 | ) | (0.24 | ) | ||||||||
- Discontinued operations | (61,483 | ) | (0.16 | ) | ||||||||
Effect of dilutive securities | ||||||||||||
Share options issued to employees | — | — | — | |||||||||
Total diluted shares | — | 394,409,512 | — | |||||||||
Diluted loss per share | ||||||||||||
- Continuing operations | (96,300 | ) | (0.24 | ) | ||||||||
- Discontinued operations | (61,483 | ) | (0.16 | ) |
The inclusion of share options issued to employees totaling 4,919,895 as of June 30, 2006, as potential ordinary shares, would have an anti-dilutive effect on diluted loss per share. Accordingly, such additional shares have not been taken into account in the determination of diluted loss per share. |
For the year ended June 30, 2005 | ||||||||||||
Loss | Shares | Per-share | ||||||||||
(Numerator) | (Denominator) | amount | ||||||||||
$’000 | ($) | |||||||||||
Basic loss per share | ||||||||||||
Shares outstanding July 1, 2004 | — | 321,424,077 | — | |||||||||
Weighted average number of ordinary shares issued during the year | — | 41,074,935 | — | |||||||||
Total weighted average shares | 362,499,012 | |||||||||||
Loss available to common shareholders | ||||||||||||
- Continuing operations | (472,214 | ) | (1.30 | ) | ||||||||
- Discontinued operations | (80,335 | ) | (0.22 | ) |
F-31
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
Effect of dilutive securities | ||||||||||||
Share options issued to employees | — | — | — | |||||||||
Total diluted shares | 362,499,012 | |||||||||||
Diluted (loss)/earnings per share | ||||||||||||
- Continuing operations | (472,214 | ) | (1.30 | ) | ||||||||
- Discontinued operations | (80,335 | ) | (0.22 | ) |
The inclusion of share options issued to employees totaling 3,208,201 as of June 30, 2005, as potential ordinary shares, would have an anti-dilutive effect on diluted loss per share. Accordingly, such additional shares have not been taken into account in the determination of diluted loss per share. |
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Current | ||||||||
Trade receivables (gold) | 11,320 | 40,738 | ||||||
Other mining related receivables — net of allowance for doubtful accounts of $3.4 million and $1.8 million in 2007 and 2006, respectively | 25,904 | 12,422 | ||||||
Value Added Tax | 68,071 | 15,098 | ||||||
Insurance claims and prepayments | 4,942 | 8,339 | ||||||
Employee receivables | 7,661 | 5,621 | ||||||
Deferred consideration for sale of Buffalo Creek | 4,543 | 6,531 | ||||||
Interest and other | 13,427 | 11,426 | ||||||
135,868 | 100,175 | |||||||
Non-current | ||||||||
Deferred consideration for sale of Buffalo Creek | — | 4,047 | ||||||
Loans | 7,057 | 8,653 | ||||||
7,057 | 12,701 | |||||||
Total receivables | 142,925 | 112,876 | ||||||
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Gold in-process | 71,267 | 63,465 | ||||||
Consumable stores | 33,155 | 28,533 | ||||||
104,422 | 91,998 | |||||||
Gold in-process is valued at fair value less cost to sell, except for the Free State, Evander, Freegold and Target operations’ (2006: Elandskraal operation’s) gold in-process, that are valued at net realisable value. Gold in-process includes immaterial amounts of stockpile inventories. |
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Mining properties, mine development costs and mine plant facilities — cost | 3,237,909 | 2,905,099 | ||||||
Mining assets under construction | 393,258 | 207,676 | ||||||
Undeveloped properties | 1,046,163 | 1,719,553 | ||||||
Other non-mining assets | 289,630 | 57,518 | ||||||
Accumulated depreciation and amortization | (1,433,022 | ) | (1,583,291 | ) | ||||
3,533,938 | 3,306,555 | |||||||
Other non-mining assets consist of freehold land, computer equipment and motor vehicles. | ||
Depreciation of property, plant and equipment amounted to $122.5 million in 2007, $154.0 million in 2006 and $147.9 million in 2005. |
F-32
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
In fiscal 2007, an impairment loss of $10.2 million was recorded at the Company’s Free State and Freegold operations. See note 7. | ||
During fiscal 2006, an impairment loss of $16.0 million was recorded on amounts previously capitalized as undeveloped properties at its Lydenburg operations for which no future financial benefits were expected by management. |
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Bond issue costs, net of amortization | 2,398 | 3,605 | ||||||
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Goodwill | 28,742 | 28,256 | ||||||
Computer software | 5,263 | — | ||||||
34,005 | 28,256 | |||||||
The Company allocated the goodwill arising from the ARMgold acquisition primarily to the Tshepong and Phakisa reporting units. The allocation was based on the valuations of those shafts and based on the mine-specific synergies arising from the acquisition that are expected to be realized in future. There have been no impairments or other adjustments to the goodwill since acquisition. The movement in the goodwill balance compared to the prior year relates to currency fluctuations. The goodwill is reflected in the “Freegold” reportable segment. See note 41. | ||
The computer software asset relates to the acquisition and development costs for the Oracle ERP software implemented in December 2006. Amortization for fiscal 2007 was $0.6 million. The accumulated amortization balance for fiscal 2007 was $0.6 million. The estimated amortization expense over the next five years is $1.2 million per annum, with the exception of the last year, in which the expense recorded is expected to be $0.5 million. |
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Rand Merchant Bank | 38,881 | — | ||||||
Bissett proceeds held in trust | — | 182 | ||||||
Australian dissentient shareholders funds | 85 | 1,064 | ||||||
Security deposits | 1,344 | 34,353 | ||||||
Reclassified as current | (38,881 | ) | — | |||||
Reclassified as non-current assets held for sale | (706 | ) | — | |||||
723 | 35,599 | |||||||
In connection with the refinancing of the Rand Merchant Bank term loan facility, $39 million (R274 million) was placed in a security deposit account with Rand Merchant Bank. See note 29(i). | ||
An amount of C$0.2 million of the proceeds on sale of Bissett was held in trust with Stike and Elliot attorneys in Canada at June 30, 2006. The amount was held in trust until clearance was provided by the Canadian tax authority that all outstanding tax obligations by Harmony had been met. | ||
An amount of A$0.1 million (2006: A$1.4 million) is held to acquire the remaining shares in Australian subsidiaries, as part of the compulsory takeover of the New Hampton, Hill 50 and Abelle shares. | ||
An amount of A$1.6 million (2006: A$46 million) is held in respects of security deposits on mining tenements. |
F-33
Table of Contents
Harmony Gold Mining Company Limited Notes to the Consolidated Financial Statements For the years ended June 30 |
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Listed investments | ||||||||
Investments in listed shares (a) | 706,623 | 196,346 | ||||||
Other investments | ||||||||
Unlisted investments (b) | 8,416 | 2,729 | ||||||
Amounts contributed to environmental trust funds (c) | 189,083 | 179,667 | ||||||
197,499 | 182,396 | |||||||
Reclassified as current assets | (705,985 | ) | — | |||||
Reclassified as non-current assets held for sale | (638 | ) | — | |||||
Total non-current investments | 197,499 | 378,742 | ||||||
(a) | On February 5, 2007 the Company disposed of its shares in Peninsula Minerals Limited for A$0.4 million ($0.3 million), resulting in a profit of $0.2 million (A$0.3 million). These shares, totaling 5 million ordinary shares, were received on January 25, 2005, issued at A$0.02 per share, as partial consideration for the sale of tenements. | |
During January 2006 the Company disposed of the 500 000 ordinary shares held in Atlas Gold Limited (“Atlas”) for $0.2 million (A$0.2 million). The Company received the shares in Atlas, issued at $0.20 per share, on January 13, 2005, as partial consideration for the sale of tenements. See note 10. | ||
Harmony’s 34.5% investment in 38,789,761 issued ordinary shares of ARM was diluted to 19.5% on May 3, 2004, by the issue of new shares by ARM, following a range of transactions between Harmony, ARM and ARMI. The result was that the investment in ARM was reclassified from an investment in an associate to an available-for-sale investment. Through the same range of transactions, Harmony disposed of its interest in the Kalplats platinum project to ARM for the issue of 2,000,000 new ordinary shares in ARM. The market value of the investment was $233.2 million (R34.00 per share) on June 30, 2004, which resulted in a decrease of $51.1 million in the carrying value of the investment. This decrease was viewed as a temporary decrease in market value and thus recorded as a component of other comprehensive income. | ||
During the 2005 fiscal year Harmony entered into a number of transactions to dispose of the 19.5% investment held in ARM. These transactions included transactions in the open market to dispose of a 5.82% share in ARM on which a loss of some $38.2 million was recorded (See note 10). In addition Harmony disposed of the remaining portion of the investment in ARM to the ARM Trust. As part of the various agreements put in place to arrange the sale of the shares to the ARM Trust, Harmony has accepted terms which resulted in the majority of the risks not being transferred to the ARM Trust. Harmony has therefore not derecognized the shares (See note 4(a) and 5(b)). The market value of the remaining investment was $501.7 million (R123.49 per share) on June 30, 2007 (2006: $191.7 million (R47.99 per share)). | ||
On March 17, 2004 the Company received 5,000,000 ordinary shares in San Gold, issued at C$0.40 per share, and 5,714,285 ordinary shares in Gold City, issued at C$0.35 per share, as partial consideration for the sale of the Company’s wholly owned subsidiary, Bissett. San Gold and Gold City are mineral resources companies, which have secondary listings on the Toronto Stock Exchange. The market value of the investment in San Gold was $1.6 million (C$0.40 per share) on June 30, 2005, resulting in an increase of $0.2 million since acquisition, which was reflected in other comprehensive income. The market value of the investment in Gold City was $0.9 million (C$0.20 per share) on June 30, 2005, resulting in a decrease of $0.6 million since acquisition, which was reflected in other comprehensive income. The decrease in the market values of both companies was considered to be temporary. | ||
Effective June 30, 2005, San Gold and Gold City were amalgamated to form a new company named San Gold Corporation. Accordingly the Company received 1 San Gold Operation share for 1 San Gold share and 0.5176 San Gold Corporation shares for each Gold City share held, bringing the total shares held in San Gold Corporation to 7 957 498 shares. On December 29, 2005, the Company disposed of its investment in San Gold Corporation for $3.1 million. The investment was carried at a total cost of $3.2 million, resulting in a loss of $0.1 million (See note 10). | ||
On March 31, 2006 Vadessa (Pty) Ltd, a subsidiary of Harmony Gold (Australia) (Proprietary) Limited, received 1,907,892 shares in GBS Gold, issued at C$1.75, as partial consideration for the sale of the Company’s wholly owned subsidiary, Buffalo Creek. See note 4(l). GBS Gold is a mineral resources company, which are listed on the Toronto Stock Exchange. The market value of the investment was $3.0 million (C$1.75 per share) on June 30, 2006, resulting in a decrease of $0.7 million since acquisition, which was reflected in other comprehensive income. |
F-34
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
On September 28, 2006 the Company sold 361 807 GBS Gold shares for $3.9 million (R30 million), resulting in a profit of $0.1 million. | ||
On February 9, 2007 the Company disposed of the remaining 1 546 085 shares for $5.3 million resulting in a profit of $1 million. | ||
On April 3, 2006, Big Bell Gold Operations (Pty) Ltd, a subsidiary of Harmony Gold (Australia) (Proprietary) Limited, received 5,000,000 shares, valued at A$0.20 per share, in Alloy Resources Limited (“Alloy Resources”), as partial consideration for the sale of Comet tenements. The market value of the investment was $0.6 million (A$0.15 per share) on June 30, 2007 (2006: $0.7 million (A$0.185 per share)), resulting in a decrease of $0.1 million (2006: $0.1 million) for the year, which was reflected in other comprehensive income. This investment has now been included in non-current assets held for sale (see note 17). | ||
On December 8, 2006 the Company disposed of its interest in Western Areas in exchange for Gold Fields ordinary shares. This was in terms of an offer by Gold Fields whereby every 100 Western Areas shares were exchanged for 35 Gold Fields shares. The Company received 15,745,079 Gold Fields shares, issued at R135.02 per share. Gold Fields is a mineral resources company, primarily gold, which is listed on the JSE Limited (JSE) and has a secondary listing on the New York Stock Exchange. | ||
The Company disposed of 1,150,000 Gold Fields shares for $19.7 million (R143 million) in a range of transactions between January 26, 2007 and February 12, 2007. The total cost of these shares was $21.4 million (R155.3 million), resulting in a loss of $1.7 million (R12.3 million). During May and June 2007, a further 1,500,000 shares with a cost of $28.3 million (R202.5 million) were disposed of for $25.1 million (R179.6 million), resulting in a loss of $3.2 million (R22.9 million). After this transaction, the Company still held 7,348,079 shares in Gold Fields, excluding the 5,747,000 shares pledged to Rand Merchant Bank Morgan Stanley for financing received. See note 29. | ||
The market value of the investment in Gold Fields shares was $203.4 million on June 30, 2007, resulting in a decrease of $46.6 million since acquisition. Management has assessed this decrease and determined that it was other-than-temporary. As a result the loss was recognized in the consolidated statement of income. Dividends to the value of $1.8 million was received from this investment during the 2007 fiscal year. | ||
This investment is disclosed as a current asset as it was disposed of subsequent to year end. See note 40. | ||
The following table summarizes the unrealized gains/(losses) in the market value of the listed investments included in equity since their acquisition on June 30, 2007 and 2006: |
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
ARM | 386,146 | 85,767 | ||||||
GBS Gold | — | (735 | ) | |||||
Alloy Resources | (57 | ) | (57 | ) | ||||
386,090 | 84,975 | |||||||
(b) | Unlisted investments comprise of various industry related investments, which have been recorded at cost. The directors of the Company perform independent valuations of the investments on an annual basis to ensure that no other-than-temporary decline in the value of the investments has occurred. No dividends were received from these investments in the 2007, 2006 and 2005 fiscal years. | |
On December 11, 2006, Harmony subscribed to 50 000 cumulative redeemable participating preference shares in Clidet No 700 (Proprietary) Limited (Clidet 700) for $7.1 million (R50 million). The consideration was paid on January 3, 2007. Clidet 700 used these funds to purchase 4 106 667 ordinary shares in Pamodzi Gold Limited (Pamodzi Gold), which listed on the JSE on December 11, 2006. Clidet 700 has pledged the Pamodzi Gold shares to Harmony as security for the amounts owing in terms of the redemption of the preference shares. The preference shares may be redeemed after May 1, 2009 by Clidet 700.or after three years and one day from the issue date by Harmony. Dividends are accumulated and are payable on the redemption date, if not paid before. | ||
(c) | The environmental trust funds are irrevocable trusts under the Company’s control. The cash in the trusts are invested primarily in interest bearing short-term and other investments and approximate their fair value. |
F-35
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
Carrying amounts | ||||||||||||||||||||
Investment | Description of business | Ownership % | 2007 | 2006 | ||||||||||||||||
2007 | 2006 | $’000 | $’000 | |||||||||||||||||
Western Areas Limited | Gold mining | — | 29.2 | % | — | 266,267 | ||||||||||||||
Village Main Reef Gold Mining Company(1934) Limited | Dormant | 37.8 | % | 37.8 | % | — | 64 | |||||||||||||
Orpheo by Harmony (Pty) Limited | Jewelry manufacturing | 34.0 | % | — | 853 | — | ||||||||||||||
853 | 266,331 | |||||||||||||||||||
On March 9, 2006 the Company acquired a 29.2% interest in the issued share capital of Western Areas through its subsidiary ARMgold/Harmony Joint Investment Company (Pty) Ltd. The Company purchased 44,985,939 shares in Western Areas at R44.23 per share, resulting in total cost of $321 million. Western Areas is listed on the JSE Limited and has interests in operating gold mines in South Africa. On June 30, 2006 the fair value of the investment decreased to $250 million (R39.83 per share), which was considered to be temporary. | ||
On December 8, 2006 the Company disposed of its interest in Western Areas in exchange for Gold Fields ordinary shares. This was in terms of an offer by Gold Fields whereby every 100 Western Areas shares were exchanged for 35 Gold Fields shares. The Company received 15,745,079 Gold Fields shares for its 44,985,939 Western Areas shares. The gain on the transaction was $33 million (R236 million). The Company recorded equity losses of $19 million (R123 million). See note 12. | ||
The unaudited results of Western Areas for the period since acquisition of the investment on March 9, 2006, to June 30, 2006, are as follows: |
100% | 29.2% | |||||||
$’000 | $’000 | |||||||
Revenue | 7,933 | 2,316 | ||||||
Production costs | (25,949 | ) | (7,577 | ) | ||||
(18,016 | ) | (5,261 | ) | |||||
Net loss | (56,317 | ) | (16,444 | ) | ||||
100% | 29.2% | |||||||
$’000 | $’000 | |||||||
Non-current assets | 843,364 | 246,262 | ||||||
Current assets | 34,947 | 10,205 | ||||||
Total assets | 878,311 | 256,467 | ||||||
Equity | 123,838 | 36,161 | ||||||
Non-current liabilities | 647,927 | 189,195 | ||||||
Current liabilities | 106,546 | 31,111 | ||||||
Total equity and liabilities | 878,311 | 256,467 | ||||||
The difference between the cost of the Company’s investment and the underlying net assets has been allocated to undeveloped properties ($187.7 million) and goodwill ($66.9 million). | ||
On June 21, 2006 Harmony acquired 37.8% of the issued share capital of Village at a total cost of $0.06 million. The equity stake was purchased from ARM at a price of 20 cents per share. Village is listed on the JSE Limited in the gold sector and has been dormant for some time without any operating mines. See note 4(g). | ||
On May 28, 2007 the Company disposed of 17% of its share in Orpheo by Harmony (Pty) Limited (Orpheo), which had previously been accounted for as a joint venture. After this transaction, the Group held a 34% interest in Orpheo. See note 4(d). |
F-36
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Opening carrying amount | 266,333 | — | ||||||
Shares at cost | — | 321,541 | ||||||
Disposal of investment in associate | (268,063 | ) | — | |||||
Joint venture becoming associate | 847 | — | ||||||
Net share of results of associates | (2,576 | ) | (16,444 | ) | ||||
Foreign currency translation differences | 4,312 | (38,764 | ) | |||||
Closing carrying amount | 853 | 266,333 | ||||||
27 | INVESTMENT IN JOINT VENTURES | ||
Interest in Healthshare Solutions (Pty) Ltd | |||
The Company acquired the 45% of Healthshare on July 1, 2004, for a total cash consideration of R45 ($7). Healthshare was capitalized by means of capital contributions and loans from the joint venture partners. The Company, together with the joint venture partner, Network Healthcare Holdings Limited, control the entire shareholding of Healthshare, and have treated it as a joint venture accounted under the equity method. | |||
28 | ACCOUNTS PAYABLE AND OTHER LIABILITIES |
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Trade payables | 57,046 | 72,947 | ||||||
Value Added Tax | 16,718 | — | ||||||
Short term borrowings | 1,442 | 1,107 | ||||||
Other liabilities | 19,340 | 4,337 | ||||||
94,546 | 78,391 | |||||||
29 | LONG TERM LOANS |
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Uncollateralized | ||||||||
Convertible uncollaterized fixed rate bonds (a) | 241,340 | 237,264 | ||||||
Africa Vanguard Resources (Proprietary) Limited (b) | 4,543 | 4,467 | ||||||
Total uncollateralized long term loans | 245,883 | 241,731 | ||||||
Collateralized | ||||||||
Nedbank Limited (c) | 24,196 | 21,544 | ||||||
Gold Fields Limited (d) | — | 705 | ||||||
Less : short term portion | — | (705 | ) | |||||
— | — | |||||||
Nedbank Limited (e) | 85,316 | 75,173 | ||||||
Less : short term portion | (85,316 | ) | — | |||||
— | 75,173 | |||||||
Nedbank Limited (f) | 63,946 | 56,065 | ||||||
Less : short term portion | (63,946 | ) | — | |||||
— | 56,065 | |||||||
Auriel Alloys (g) | — | 167 | ||||||
Less : short term portion | — | (72 | ) | |||||
— | 95 |
F-37
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Rand Merchant Bank Limited (h) | — | 139,567 | ||||||
Less: short term portion | — | (139,567 | ) | |||||
— | — | |||||||
Rand Merchant Bank Limited (i) | 106,781 | — | ||||||
Less: short term portion | (106,781 | ) | — | |||||
— | — | |||||||
Rand Merchant Bank Limited (j) | 78,081 | — | ||||||
Less: short term portion | (78,081 | ) | — | |||||
— | — | |||||||
Rand Merchant Bank Limited (k) | 70,982 | — | ||||||
Less: short term portion | (70,982 | ) | — | |||||
— | — | |||||||
Westpac Bank (l) | 121 | — | ||||||
Less: short term portion | (121 | ) | — | |||||
— | — | |||||||
Total collateralized long term loans | 24,196 | 152,877 | ||||||
Total long term loans | 270,079 | 394,608 | ||||||
(a) | On May 21, 2004, Harmony issued R1.7 billion ($252.0 million) in international uncollateralized fixed-rate convertible bonds in order to refinance its domestic Rand debt. Interest at a rate of 4.875% per annum is payable semi-annually in arrears on May 21 and November 21 of each year, commencing November 21, 2004. The bonds mature 5 years from the issue date at their nominal value of R1 700 million unless converted into the Company’s ordinary shares. The bonds are convertible at the option of the bondholders at any time on or after July 1, 2004 and up to and including May 15, 2009, unless previously redeemed, converted or purchased and cancelled, into fully paid ordinary shares, at nominal value Rand 0.50 per share. The number of ordinary shares to be issued at such a conversion shall be determined by dividing the principal amount of each bond by the conversion price in effect on the relevant conversion date. The initial conversion price is R121 per ordinary share subject to certain standard anti-dilution provisions, such as a stock-split, spinoff or rights offering, that are designed to maintain the value of the conversion option. | |
The trust deed for the convertible bonds contains clauses that restrict certain of Harmony’s activities, including a negative pledge, according to which Harmony will not create or permit any mortgage, charge, lien, pledge or other form of encumbrance of security interest with respect to any part of its undertaking or assets, present or future, to collateralize any relevant debt, guarantee or indemnity. In addition, the trust deed contains covenants that require Harmony to, among other things, maintain the listing of the bonds with the UK Listing Authority and to all things necessary, in the opinion of the trustee, to give effect to the trust deed. Included in the amortisation charge as per the income statement is $ 1.2 million (2006: $1.4 million, 2005: $1.4 million) for amortization of the bond issue costs. | ||
(b) | During the 2005 fiscal year Africa Vanguard borrowed an additional R18 million ($2.8 million) (2004: R14 million ($2.0 million)) from its holding company Africa Vanguard Resources to service working capital commitments. The loan is uncollateralized and interest free, with no fixed terms of repayment. See note 5(a). | |
(c) | On July 30, 2003, Africa Vanguard Resources (Doornkop) (Proprietary) Limited (AVR) entered into a term loan facility of R116 million ($16 million) with Nedbank Limited for the purpose of partially funding AVR’s purchase of an undivided 26% share of the Mining titles, to be contributed to the Doornkop joint venture with Randfontein. See note 5(a). The loan bears interest at JIBAR plus 2%, compounded monthly, and any stamp duties and holding costs. The loan matures on July 30, 2008, at which date all loan amounts and any interest accrued are to be paid. The loan is jointly and severally guaranteed by Evander Gold Mines Limited, Harmony, Kalahari Gold Ridge Mining Company Limited, Lydenburg Exploration Limited and Randfontein. The facility from Nedbank to AVRD is guaranteed by Harmony and certain of its subsidiaries. As a result of this guarantee and other factors, the Company is required to consolidate AVR and has therefore included the loans from Nedbank and Africa Vanguard Resources (Pty) Limited in its consolidated debt. Interest capitalized during the year ended June 30, 2007 amounted to $ 2.2 million (2006: $2.3 million and 2005: $1.9 million). | |
(d) | On July 1, 2002 Freegold entered into an agreement with St Helena Gold Mines Limited, a fully owned subsidiary of Gold Fields Limited, to purchase its St Helena assets for R129 million ($12.8 million). R120 million ($11.9 million) was payable on October 29, 2002, being the effective date after the fulfilment of all the conditions precedent. The balance of R9 million ($0.9 million) was payable by way of a 1 % royalty on turnover, monthly in arrears, for a period of 48 months, commencing on the |
F-38
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
10th of the month following the effective date. In October 2006, the obligation relating to the royalty on turnover for the St Helena assets ended. The outstanding balance was not payable in terms of the agreement and the balance was reversed. | ||
(e) | On April 15, 2005 the ARM Trust entered into a term loan facility of R474 million ($75.4 million) with Nedbank Limited for the purpose of funding the balance of the ARM Trust’s acquisition of the shares, the Company held in ARM (See note 4(a)). The loan bears interest, compounded monthly, at a fixed rate of 9.52%. The loan is repayable on April 15, 2010. Harmony has guaranteed this loan, subject to a maximum guaranteed amount of R367.4 million ($50.4 million) plus interest. In addition, if the ARM Empowerment Trust chooses to dispose of 8,175,640 of its ARM Limited shares at cost, the maximum guaranteed amount will be reduced to R214.9 million ($29.5 million) plus interest. Harmony has also entered into an indemnity agreement with ARM Limited, pursuant to which ARM Limited has indemnified Harmony against 50% of all claims under the guarantee, subject to a maximum of R107.4 million ($14.7 million) plus interest thereon at the applicable rate from May 26, 2006. Interest accrued during the year ended June 30, 2007 amounted to $8.5 million (2006: $7.6 million). | |
Subsequent to year end, the guarantee was cancelled by Nedbank and consequently Harmony has no further obligation to Nedbank. See note 40. | ||
(f) | On April 15, 2005 the ARM Trust entered into a second term loan facility of R356 million ($56.7 million) with Nedbank Limited for the purpose of funding the ARM Trust’s partial acquisition of the shares, the Company held in ARM (See note 4(a)). The loan bears interest, compounded monthly, at a fixed rate of 10.02%. Interest accrued during the year ended June 30, 2007 amounted to $6.7 million (2006: $6.0 million). The loan is repayable on April 15, 2010. | |
Subsequent to year end, the guarantee was cancelled by Nedbank and consequently Harmony has no further obligation to Nedbank. See note 40. | ||
(g) | During December 2003 Musuku Beneficiation Systems (Proprietary) Limited, a wholly owned subsidiary of the Company, entered into a long term loan facility of R2 million ($0.3 million) with Auriel Alloys for the purpose of financing the acquisition of Dental Alloy equipment. The loan bore interest at 11% and was payable by way of 60 instalments of R50,000 each. During December 2006, the loan was bought out in terms of a purchase agreement with Auriel Alloys for R812,733 ($0.1 million), which was the original amount reduced by the capital portion of the instalments paid to date. | |
(h) | On March 9, 2006, Harmony entered into a term loan facility of R1.0 billion ($159.7 million) with RMB, for the purpose of partially funding the acquisition of the 29% stake in Western Areas. Interest is compounded at a rate equal to three-month JIBAR plus 1.5%. This facility was partially repaid on March 27, 2007 from the net proceeds of a sale of Gold Fields shares, and the balance was repaid on April 4, 2007 from the net proceeds from the issuance of certain preference shares by Randfontein (see note 4 (c )). | |
(i) | On March 20, 2007, Harmony received financing of R750.3 million ($103.4 million) from Rand Merchant Bank (“RMB”). The Company pledged 5,747,000 Gold Fields shares as collateral for the financing. Of the proceeds received, R599.8 million ($82.3 million) were applied towards partial repayment of the R1.0 billion term loan facility with RMB. A cash deposit equal to 20% of the notional amount was placed for any change in the Gold Fields share price below the reference price of R130.88 per share(amounting to $38.9 million on June 30, 2007; see note 24). Interest is payable at a rate equal to the SAFEX overnight deposit rate plus 35 basis points. | |
Subsequent to year end, the Company repaid the loan. See note 40. | ||
(j) | On March 20, 2007 Randfontein Estates Limited (“Randfontein”) (a wholly owned subsidiary of Harmony) entered into a preference share subscription agreement with RMB. According to the terms of the agreement, following the satisfaction of certain conditions, Randfontein issued R550.0 million ($75.4 million) principal amount of preference shares to RMB on April 5, 2007. Dividends on the preference shares are payable semi-annually on the principal amount and are calculated at 35% of the South African Prime Interest Rate from the issue date until August 31, 2007, 50% of the South African Prime Interest Rate from September 1, 2007 to February 29, 2008 and 83% of the |
F-39
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
South African Prime Interest Rate thereafter. The preference shares have been guaranteed by Harmony, Evander Gold Mines Limited, ARMgold/Harmony Freegold Joint Venture Company (Pty) Limited, Avgold Limited and AHJIC, as well as certain future material subsidiaries. | ||
In the subscription agreement for the preference shares, AHJIC has also granted a security interest over 6,196,863 Gold Fields shares held by it to collateralize its obligations under the subscription agreement for the preference shares. In the subscription agreement for the preference shares, AHJIC has also undertaken that, if the cover ratio of the value of the Gold Fields shares to the redemption amount falls below 1.25, it will deposit additional Gold Fields shares or cash to bring this ratio to 1.5. On or after March 1, 2008, if this ratio falls below 2.0, AHJIC will be required to deposit cash equal to 75% of the redemption amount. | ||
The preference shares are redeemable at the option of the holders on the final redemption date, which is three years and one day after the issue date, and upon the occurrence of certain events, including a failure by AHJIC to meet its obligations under the subscription agreement, a delisting of the Gold Fields shares from the Johannesburg Stock Exchange, cross-defaults or other events that are customary events of default for financing agreements. The preference shares are also redeemable by Randfontein at any time. These shares are redeemable at par value plus the accrued dividends. | ||
The subscription agreement contains covenants that restrict certain of Harmony’s activities, including that it will not, without the prior written consent of RMB, merge with any other entity or incur any indebtedness, with certain exceptions. Harmony also agreed that it would not give any guarantees or surety, reduce its share capital or dispose of or encumber its assets, with certain exceptions. | ||
Subsequent to year end, the preference shares were redeemed. See note 40. | ||
(k) | On June 29, 2007, Harmony entered into a senior bridge loan facility for R500.0 million ($68.6 million) with RMB for the purpose of funding its capital expenditure requirements in respect to the Hidden Valley mine project. The loan bears interest, compounded monthly at a rate equal to the SAFEX Financial Derivatives overnight deposit rate (the “Safex Overnight Rate”) plus 2.4% until July 31, 2007, the maturity date. In the event that Harmony elected to extend the loan facility until September 30, 2007, the loan would bear interest at a rate equal to the Safex Overnight Rate plus 3.6% during the extension period. | |
This loan was settled on September 29, 2007. See note 40. | ||
(l) | On June 27, 2007 the Company entered into a draw down facility agreement with Westpac Bank for the Papua New Guinea operations. The limit is Kina 3 million (US$0.9 million) and interest is payable at 9.45%. Subsequent to the balance sheet date, the facility was repaid and then cancelled. |
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Current | 405,226 | 140,344 | ||||||
Between 1 to 2 years | 265,536 | 95 | ||||||
Between 2 to 5 years | — | 390,046 | ||||||
Over 5 years | 4,543 | 4,467 | ||||||
Total borrowings | 675,305 | 534,952 | ||||||
Convertible collateralized fixed rate bonds (a) | 10.0 | % | 10.0 | % | ||||
Africa Vanguard Resources (Proprietary) Limited (b) | 0.0 | % | 0.0 | % | ||||
Nedbank Limited (c) | 11.87 | % | 13.0 | % | ||||
Gold Fields Limited (d)* | — | 0.0 | % | |||||
Nedbank Limited (e) | 9.5 | % | 9.5 | % | ||||
Nedbank Limited (f) | 10.0 | % | 10.0 | % | ||||
Auriel Alloys (g)* | 11.0 | % | 11.0 | % | ||||
Rand Merchant Bank (h)* | — | 9.0 | % | |||||
Rand Merchant Bank (i) | 9.42 | % | 0.0 | % | ||||
Rand Merchant Bank (j) | 4.6 | % | 0.0 | % | ||||
Rand Merchant Bank (k) | 12.7 | % | 0.0 | % | ||||
Westpac Bank (l) | 9.45 | % | 0.0 | % |
* | Loan repaid in full |
F-40
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
30 | DERIVATIVE FINANCIAL LIABILITY |
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Mark-to-market of financial instruments at year end | 1,552 | 88,680 | ||||||
ARM Empowerment Trust | 353,344 | 61,358 | ||||||
354,896 | 150,038 | |||||||
In line with Harmony’s strategy of continuously evaluating hedge agreements as well as market conditions in order to close out these contracts at the most beneficial time, the Company was able to close out the remainder of the Australian hedge book inherited with the acquisition of Hill 50 Mine in Western Australia: 220,000 ounces were closed out at an average spot rate of A$809 per ounce, for a total cost of A$72.8 million ($60.0 million) on May 17, 2007. This close out results in Harmony being totally unhedged in line with its stated company policy to give shareholders full exposure to the gold price. | |||
The Company entered into a contract in November 2006 for the purchase of the mining fleet to be used on the Hidden Valley project. The contract is in four different currencies and the estimated value is $34.3 million (R241.7 million). The delivery date for the equipment has been split into two phases with the first phase received in April 2007 and the second phase being expected in November 2007. | |||
The underlying cash flows that will be required by the contract will therefore be modified in accordance with the movements in the foreign exchange rates to which the contract is linked. The embedded derivative relating to the exchange rates were calculated based on the adjusted price at June 30, 2007 and Price Retail Index (PRI) movements since September 2005. | |||
All forward-pricing commitments and forward exchange contracts do not meet the criteria to qualify for hedge accounting and the mark-to-market movements are reflected in the income statement. | |||
The liability of $353.3 million (2006: $61.4 million) represents the fair value of the net increase in the ARM Empowerment Trust. See note 4(a). Changes in the fair value of this derivative financial liability have been accounted for in the consolidated income statements, amounting to $284.7 million, $49.3 million and $20.3 million for the year ended June 30, 2007, 2006 and 2005, respectively. Unrealized gains on the increase in fair value of available-for-sale investment have been included in Other Comprehensive Income. | |||
Refer to note 37 for more detail on the outstanding financial instruments. | |||
31 | PROVISION FOR ENVIRONMENTAL REHABILITATION | ||
The Company’s mining and exploration activities are subject to extensive environmental laws and regulations. These laws and regulations are continually changing and are generally becoming more restrictive. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements. The following is a reconciliation of the total liability for environmental rehabilitation: |
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Balance as at July 1, 2006 and 2005 | 110,164 | 120,450 | ||||||
Revisions in estimates | 48,865 | (10,184 | ) | |||||
Accretion expenses | 5,919 | 6,917 | ||||||
Disposal of assets | (4,097 | ) | — | |||||
Reclassified as non-current assets held for sale | (36,940 | ) | — | |||||
Foreign currency translation adjustment | 8,002 | (7,018 | ) | |||||
Balance as at June 30, 2007 and 2006 | 131,913 | 110,164 | ||||||
F-41
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
32 | PROVISION FOR SOCIAL PLAN |
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Opening balance | 2,259 | 2,109 | ||||||
Charge to income statement | 139 | 334 | ||||||
Foreign currency translation adjustment | 31 | (184 | ) | |||||
Closing balance | 2,429 | 2,259 | ||||||
The company has undertaken to donate R50 million ($8.0 million) over a period of 10 years to The Harmony Gold Mining Company Social Plan Trust in terms of an agreement signed on November 3, 2003. R18.5 million ($2.7 million) was donated during the 2004 year and the balance will be donated in instalments of R3.5 million ($0.6 million) annually with the final instalment to be made in 2013. The purpose of the trust is to fund the social plan to reduce the negative effects of restructuring on the company’s workforce, to put measures in place to ensure that the technical and life skills of the company’s workforce are developed and to develop the company’s workforce in such a manner to avoid or minimize job losses and a decline in employment through turnaround or redeployment strategies. | |||
33 | PROVISION FOR POST-RETIREMENT BENEFITS | ||
Most of the supervisory and managerial workers in South Africa participate in the Minemed defined contribution medical scheme, as well as other medical schemes. The Company contributes to these schemes on behalf of current employees and retired employees who retired prior to December 31, 1996 (the “Minemed scheme”). The Company’s contributions to these schemes on behalf of retired and current employees amounted to $10.3 million, $13.9 million and $10.0 million for 2007, 2006 and 2005 respectively. | |||
With the exception of some Freegold employees, included from date of acquisition, no post-retirement benefits are available to other workers. No liability exists for employees who were members of these schemes who retired after the date noted above. The medical schemes pay certain medical expenses for both current and retired employees and their dependents. Current and retired employees pay an annual fixed contribution to these schemes. | |||
Assumptions used to determine the liability relating to the Minemed medical scheme included, a discount rate of 9%, no increases in employer subsidies (in terms of the agreement) and mortality rates according to the SA ‘‘a mf’’ tables, which are generally used in South Africa to represent the mortality of CAWMs, and a medical inflation rate of 6.34%. | |||
The company operates a post retirement medical aid benefit scheme. The amounts were based on an actuarial valuation conducted during the year ended June 30, 2007, on the Minemed medical scheme, following the last actuarial valuation on June 30, 2006. The liability was valued using the projected unit credit method. The next actuarial valuation will be performed on June 30, 2008. | |||
The movements in the present value of the unfunded obligations of the accrued post-retirement health care costs recognised in the balance sheet are as follows: |
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Opening balance at the beginning of the year | 14,964 | 13,276 | 1,584 | |||||||||
Additional provision for the current employees | — | — | 6,470 | |||||||||
Contributions paid | (278 | ) | (333 | ) | (971 | ) | ||||||
Other expenses included in staff costs — current service cost | 556 | 528 | 971 | |||||||||
Interest cost | 1,389 | 1,237 | 3,235 | |||||||||
Net actuarial (loss)/gains recognised during the year | (1,667 | ) | 1,507 | 3,074 | ||||||||
Foreign currency translation adjustments | 293 | (1,252 | ) | (1,087 | ) | |||||||
Balance at the end of the year | 15,257 | 14,964 | 13,276 | |||||||||
The principal actuarial assumptions used for accounting purposes were: | ||||||||||||
Discount rate | 9 | % | 9 | % | 9 | % | ||||||
Healthcare inflation rate | 6.34 | % | 6.34 | % | 6.34 | % | ||||||
Normal retirement age | 60 | 60 | 60 |
F-42
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
Period ending June 30: | $’000 | |||
2008 | 357 | |||
2009 | 377 | |||
2010 | 406 | |||
2011 | 433 | |||
2012 | 471 | |||
Thereafter | 3,221 |
The post-retirement medical benefit plan is unfunded. The Company’s best estimate of expected contributions for the next year equals the expected benefit payment of $ 0.3 million (R2.4 million). | |||
34 | COMMITMENTS AND CONTINGENCIES |
2007 | 2006 | |||||||
$’000 | $’000 | |||||||
Capital expenditure commitments | ||||||||
Contracts for capital expenditure | 49,972 | 21,398 | ||||||
Authorized by the directors but not contracted for | 267,036 | 373,794 | ||||||
317,008 | 395,192 | |||||||
Contingent liabilities | ||||||||
Guarantees and suretyships | 2,555 | 2,481 | ||||||
Environmental guarantees | 18,313 | 18,054 | ||||||
20,868 | 20,535 | |||||||
F-43
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
The potential costs involved in remediating the groundwater impact cannot be quantified with any level of confidence unless a number of detailed studies are conducted for each specific situation and an agreed strategy for dealing with this issue has been adopted. This is an industry-wide issue and it is unclear who will be liable for which portion of the water treatment. | |||
Directives issued by Department of Water Affairs and Forestry during 2005 are still active with regard to the Klerksdorp, Orkney, Stilfontein and Hartebeestfontein (“KOSH”) area but significant progress has been made towards managing the process going forward . A section 21 company has been formed in the name of the Margaret Water Company by the recipient mining houses, namely Harmony, Anglogold Ashanti and Simmer and Jack to manage the water emanating from the now defunct Stilfontein Gold Mine .The company is managed by directors appointed by each of the mining houses and is in the process of funding the necessary infrastructure improvements to ensure the sustainability of the pumping operations. Negotiations with the liquidator of Stilfontein Gold Mine are in the final stages which will secure the necessary assets and staffing for the continued operation. | |||
35 | DISCLOSURES REGARDING FAIR VALUE OF FINANCIAL INSTRUMENTS | ||
Cash and equivalents | |||
The carrying amount approximates fair value as a result of the short-term maturity of these instruments. | |||
Restricted cash | |||
The carrying amount approximates fair value as a result of the short-term maturity of these instruments. | |||
Investments | |||
Unlisted equity investments are carried at their original cost in the balance sheet as the directors believe that the original cost is not materially different from the fair value. The fair value of listed equity investments is determined with reference to their market value at the end of each reporting period. | |||
Receivables, accounts payable and accrued liabilities | |||
The carrying amount of receivables, accounts payable and accrued liabilities approximates fair value as a result of the short-term maturity of these items. | |||
Long-term and short-term debt | |||
The fair value of long-term debt is estimated based on the effective interest rate and expected future cash flows. The fair value of short-term debt approximates the carrying value as a result of the short-term maturity periods. | |||
Interest rate swaps | |||
The fair value of interest rate swaps is determined by reference to quoted market prices for similar instruments. | |||
Derivative liabilities | |||
The fair value of a derivative liability is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. | |||
The fair values of financial instruments were as follows: |
2007 | ||||||||
Carrying value | Fair Value | |||||||
$’000 | $’000 | |||||||
Cash and cash equivalents | 99,759 | 99,759 | ||||||
Restricted cash | 39,604 | 39,604 | ||||||
Bank overdraft | 31,232 | 31,232 | ||||||
Receivables | 142,925 | 142,925 | ||||||
Investments in listed securities | 706,623 | 706,623 | ||||||
Investments in unlisted securities | 8,416 | 8,416 | ||||||
Accounts payable and accrued liabilities | 248,386 | 248,386 | ||||||
Long and short-term debt | 675,063 | 589,050 | ||||||
Derivative liabilities | 354,896 | 354,896 |
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Notes to the Consolidated Financial Statements
For the years ended June 30
2006 | ||||||||
Carrying value | Fair Value | |||||||
$’000 | $’000 | |||||||
Cash and cash equivalents | 89,189 | 89,189 | ||||||
Restricted cash | 35,599 | 35,599 | ||||||
Receivables | 112,875 | 112,875 | ||||||
Investments in listed securities | 196,346 | 196,346 | ||||||
Investments in unlisted securities | 2,729 | 2,729 | ||||||
Accounts payable and accrued liabilities | 202,481 | 202,481 | ||||||
Long and short-term debt | 534,952 | 526,420 | ||||||
Derivative liabilities | 150,038 | 150,038 |
36 | EMPLOYEE BENEFIT PLANS | ||
(a) | PENSION AND PROVIDENT FUNDS:The Company contributes to several defined contribution pension and provident funds governed by the Pension Funds Act, 1946 for the employees of its South African subsidiaries. The pension funds are multi-employer industry plans. The Company’s liability is limited to its annually determined contributions. | ||
The provident funds are funded on the ‘‘money accumulative basis’’ with the member’s and employer’s contributions having been fixed in the constitution of the funds. | |||
The Australian group companies make contributions to each employee’s Superannuation (pension) funds in accordance with the Superannuation Guarantee Scheme (SGS). The SGS is a Federal Government initiative enforced by law which compels employers to make regular payments to regulated funds providing for each employee on their retirement. The Superannuation Guarantee Contributions were set at a minimum of 9% of gross salary and wages for the year ended June 30, 2007 (2006: 9% and 2005: 9%). | |||
Substantially all the Company’s employees are covered by the above mentioned retirement benefit plans. Funds contributed by the Company for the year ended June��30, 2007, amounted to $47.0 million (2006: $49.8 million and 2005 : $56.0 million). | |||
(b) | SHARE OPTION SCHEMES | ||
(i) | HARMONY SHARE OPTION SCHEMES:The Company currently has four employee share option schemes, being the Harmony (1994) Share Option Scheme (“HSOS 1994 Scheme”), the Harmony (2001) Share Option Scheme (“HSOS 2001 Scheme”), the Harmony (2003) Share Option Scheme (“HSOS 2003 Scheme”) and the Harmony (2006) Share Plan (“HSP 2006 Scheme”). Pursuant to the rules of these schemes, certain qualifying employees may be granted options to purchase shares in the Company’s authorized but unissued ordinary shares. | ||
The HSOS 2001 Scheme was established following approval by the Company’s shareholders during fiscal 2002. The HSOS 2001 Scheme came into effect on November 16, 2001 and the HSOS 2003 Scheme came into effect on November 12, 2003, however, options previously issued under the HSOS 1994 Scheme remain in force. The terms of the HSOS 2001 Scheme and the HSOS 2003 Scheme are substantially equivalent to the terms of the HSOS 1994 Scheme, except that the maximum number of share options that may be granted under the HSOS 2001 Scheme is a fixed amount (8,000,000), rather than a percentage of share capital. Options granted under the HSOS 1994 Scheme are not counted against this maximum. | |||
Of the 8,000,000 ordinary shares under the specific authority of the directors in terms of the HSOS 2001 Scheme, 7,572,500 shares have been offered to participants leaving a balance of 427,500 to be offered to eligible employees. Upon the date of adoption of the HSOS 2001 Scheme, 1,065,400 shares were still outstanding under the HSOS 1994 Scheme. Following the adoption of the HSOS 2001 Scheme, no further option grants have been made under the HSOS 1994 Scheme. On June 30, 2007 13,532,997 shares of the 23,204,960 ordinary shares have been offered to participants in terms of the HSOS 2003 Scheme, leaving a balance of 9,671,963. | |||
On November 10, 2006, a maximum of 14% of the issued share capital was approved to be offered to participants under the HSP (2006) Scheme. On June 30, 2007 929,994 share appreciation rights and 537,066 shares were offered to participants. | |||
In terms of the rules of the Schemes, the exercise price of the options granted is equal to fair market value of the shares at the date of the grant. | |||
On November 29, 1999, the Company adopted a share purchase scheme (the “Share Purchase Scheme”), in which eligible employees may participate. The Share Purchase Scheme provides for a share purchase trust controlled by the Company. The share purchase trust provides recourse loans to enable employees to acquire shares or exercise their options under the HSOS 1994 Scheme. To date, the Share Purchase Scheme has only been used for the purpose of making recourse loans to employees to enable them to exercise their options under the HSOS 1994 Scheme. The shares acquired by an employee pursuant to the exercise of the option are then pledged by that employee to the share purchase trust to secure repayment of the recourse loan granted by the share purchase trust, plus any interest thereon. |
F-45
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
Average | Average | |||||||||||||||||||
Number of | exercise price | exercise price | ||||||||||||||||||
Available for | share options | per share | per share | Average grant date fair value | ||||||||||||||||
grant | granted | SA Rand | US Dollar | US Dollar | ||||||||||||||||
Balance as at June 30, 2004 | 5,077,788 | 6,101,958 | — | — | — | |||||||||||||||
Share options reserved during the year | 23,204,960 | — | — | — | — | |||||||||||||||
Share options granted during the year | (13,611,762 | ) | 13,611,762 | — | — | 3.59 | ||||||||||||||
Share options exercised during the year | — | (471,962 | ) | 45.69 | 7.39 | — | ||||||||||||||
Share options forfeited during the year | 883,695 | (883,695 | ) | — | — | — | ||||||||||||||
Balance as at June 30, 2005 | 15,554,681 | 18,358,063 | — | — | — | |||||||||||||||
Share options exercised during the year | — | (4,201,575 | ) | 49.76 | 7.82 | — | ||||||||||||||
Share options forfeited during the year | 1,449,181 | (1,449,181 | ) | — | — | — | ||||||||||||||
Balance as at June 30, 2006 | 17,003,862 | 12,707,307 | — | — | — | |||||||||||||||
Share options exercised during the year | — | (2,666,833 | ) | 51.65 | 7.18 | — | ||||||||||||||
Share options forfeited during the year | 1,748,408 | (1,748,408 | ) | — | — | — | ||||||||||||||
Balance as at June30, 2007 | 18,752,270 | 8,292,066 | — | — | — | |||||||||||||||
Outstanding options weighted average | ||||||||||||||||||||
Exercise | Exercise | |||||||||||||||||||
Number of | Contractual | price | price | |||||||||||||||||
SA Rand Range of prices | US$ | shares | life (in years) | SA Rand | US$ | |||||||||||||||
22.90 - 27.20 | 3.25 - 3.86 | 9,900 | 2.70 | 24.64 | 3.50 | |||||||||||||||
35.40 - 49.60 | 5.03 - 7.04 | 5,916,592 | 7.53 | 39.68 | 5.63 | |||||||||||||||
66.00 - 66.15 | 9.37 - 9.39 | 2,053,374 | 7.05 | 66.14 | 9.39 | |||||||||||||||
91.60 | 13.00 | 312,200 | 5.75 | 91.60 | 13.00 | |||||||||||||||
Total | 8,292,066 | 12.60 | 75.85 | 10.77 | ||||||||||||||||
Exercisable options | ||||||||||||||||
Weighted | Weighted | |||||||||||||||
average | average | |||||||||||||||
Number of | exercise price | exercise price | ||||||||||||||
SA Rand Range of prices | US$ | shares | Rand | US$ | ||||||||||||
22.90 - 27.20 | 3.25 - 3.86 | 9,900 | 24.64 | 3.50 | ||||||||||||
35.40 - 49.60 | 5.03 - 7.04 | 1,482,873 | 41.70 | 5.92 | ||||||||||||
66.00 - 66.15 | 9.37 - 9.39 | 218,223 | 66.13 | 9.39 | ||||||||||||
91.60 | 13.00 | 206,700 | 91.60 | 13.00 | ||||||||||||
Total | 1,917,696 | 44.13 | 6.27 | |||||||||||||
F-46
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Fair value of vested shares during the year | 55,898 | 45,211 | 15,150 | |||||||||
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Compensation costs | 3,713 | 12,054 | 13,180 | |||||||||
Expected weighted average period to be recognized in (years) | 7.6 | 8.3 | 9.2 |
November 15, | August 10, | March 27 , | ||||||||||||||||||
2006 option | April 26, 2005 | 2004 option | 2003 option | November 20, 2001 | ||||||||||||||||
allocation | option grant | grant | grant | option grant | ||||||||||||||||
Expected life (in years) | 3.0 | 5.0 | 5.0 | 5.0 | 3.5 | |||||||||||||||
Risk free interest rate (%) | 8.84 | % | 8.37 | % | 9.94 | % | 11.63 | % | 11.50 | % | ||||||||||
Volatility (%) | 26.00 | % | 35.00 | % | 40.00 | % | 45.00 | % | 40.00 | % | ||||||||||
Dividend yield (%) | 0.00 | % | 0.00 | % | 0.00 | % | 1.52 | % | 4.00 | % | ||||||||||
Price at date of grant (Rand per share) | 112.64 | 39.00 | 66.15 | 91.60 | 49.60 | |||||||||||||||
Vesting period (in years) | 3.0 | 5.0 | 5.0 | 5.0 | 3.0 to 5.0 |
F-47
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
37 | DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE AND CREDIT RISK OF FINANCIAL INSTRUMENTS | ||
Harmony is exposed to various market risks, including commodity price risk, foreign currency risk, interest rate risk, liquidity risk and credit risk associated with the underlying assets and liabilities of the company as well as with anticipated transactions. Harmony does not issue derivative financial instruments for trading or speculative purposes. However, following periodic evaluation of these exposures, Harmony may enter into derivative financial instruments to manage these exposures. | |||
Commodity price sensitivity | |||
As a general rule, the Company sells its gold production at market prices. The Company, generally, does not enter into forward sales, derivatives or other hedging arrangements to establish a price in advance for the sale of its future gold production. | |||
Gold Hedge Position | |||
On May 17, 2007, Harmony closed out the remainder of the Australian hedge book inherited with the acquisition of the Hill 50 mine in Western Australia. 220 000 ounces were closed out at an average spot rate of $681 (A$809) per ounce, for a total cost of $60.0 million (A$72.8 milion). | |||
At year-end, partial settlement was effected with available cash resources, leaving $11.1 million (A$14.1 million) to be settled during July 2007. | |||
The mark-to-market movement for the 2007 year was a positive US$ 4.8 million (R 35.4million). | |||
Summary of the group’s gold hedge position at June 30, 2006 |
Mark-to- | ||||||||||||||||||||||
June 30, | June 30, | June 30, | market | |||||||||||||||||||
Year | 2007 | 2008 | 2009 | Total | $’000 | |||||||||||||||||
AUSTRALIAN DOLLAR GOLD | ||||||||||||||||||||||
Forward contracts | Kilograms | 4,572 | 3,110 | 3,110 | 10,793 | |||||||||||||||||
Ounces | 147,000 | 100,000 | 100,000 | 347,000 | (86,276 | ) | ||||||||||||||||
A$ per oz | 515 | 518 | 518 | 516 | ||||||||||||||||||
Call options sold | Kilograms | 311 | — | — | 311 | |||||||||||||||||
Ounces | 10,000 | — | — | 10,000 | (1,842 | ) | ||||||||||||||||
A$ per oz | 562 | — | — | 562 | ||||||||||||||||||
Total commodity | Kilograms | 4,883 | 3,110 | 3,110 | 11,104 | |||||||||||||||||
contracts | Ounces | 157,000 | 100,000 | 100,000 | 357,000 | (88,118 | ) | |||||||||||||||
F-48
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
38 | CASH (UTILIZED)/GENERATED BY OPERATIONS |
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Reconciliation of net loss to cash generated from/(utilized by) operations: | ||||||||||||
Net loss | (295,435 | ) | (155,725 | ) | (552,549 | ) | ||||||
Cumulative effect of change in accounting principle, net of tax | — | (2,058 | ) | — | ||||||||
Income and mining tax expense/(benefit) | 48,256 | (2,344 | ) | (88,811 | ) | |||||||
Loss before taxation | (247,178 | ) | (160,127 | ) | (641,360 | ) | ||||||
Adjustments for: | ||||||||||||
(Profit)/loss on sale of listed investments | (29,261 | ) | (45,345 | ) | 93,470 | |||||||
Profit on sale of joint venture | (29 | ) | — | — | ||||||||
(Profit)/loss on sale of subsidiaries | — | (3,035 | ) | 114 | ||||||||
Profit on sale of mining assets | (25,419 | ) | (10,148 | ) | (12,542 | ) | ||||||
Depreciation and amortization | 154,077 | 166,120 | 151,967 | |||||||||
Impairment of assets | 63,658 | 15,951 | 243,124 | |||||||||
Loss on financial instruments | 278,988 | 131,444 | 17,672 | |||||||||
Other-than-temporary impairment in value of listed investment | 51,087 | — | 63,234 | |||||||||
Equity income of joint venture | (1,702 | ) | (445 | ) | — | |||||||
Equity loss of associated companies | 2,576 | 16,444 | — | |||||||||
Net decrease in provision for environmental rehabilitation | (1,790 | ) | (2,162 | ) | (2,828 | ) | ||||||
Provision for post retirement benefits | (1,844 | ) | 1,175 | 9,137 | ||||||||
Other non cash transactions | 21,425 | 12,778 | 13,256 | |||||||||
Income and mining taxes paid | (1,903 | ) | (1,829 | ) | (8,952 | ) | ||||||
Cash cost to close out hedges | (97,847 | ) | (54,045 | ) | (34,248 | ) | ||||||
Share-based compensation | 5,596 | 17,055 | 15,618 | |||||||||
Effect of changes in operating working capital items: | ||||||||||||
Receivables | (29,493 | ) | (8,702 | ) | 38,092 | |||||||
Inventories | (27,529 | ) | (12,822 | ) | (8,121 | ) | ||||||
Accounts payable and accrued liabilities | 51,273 | (10,496 | ) | (53,247 | ) | |||||||
Cash generated/(utilized) by operations | 164,685 | 51,811 | (115,614 | ) | ||||||||
39 | RELATED PARTY TRANSACTIONS | ||
On June 21, 2006 Harmony acquired 37.8%of the issued share capital of Village Main Reef Gold Mining Company (1934) Limited (Village) from ARM Limited. The Chairman of the Company’s Board of directors, Patrice Motsepe, is also a member of the ARM board of directors. Frank Abbott was also a director of Village, at the time that Harmony purchased ARM’s 37.8% holding in Village. (See note 26) Following the resignation of ARM as the Village company secretary, Harmony Gold Mining Company Limited was appointed as from October 2, 2006. | |||
The Group acquired 37.37 million of the 44.99 million shares held in Western Areas Limited from Allan Gray Ltd on March 9, 2006. As at June 30, 2006 Allan Gray Ltd was one of the Group’s largest shareholders, by holding 15% of Harmony’s total shares. (See note 26) | |||
During the 2005 financial year Harmony entered into a number of transactions to dispose of the 19.5% investment held in ARM. Harmony dispose of the remaining portion of the investment in ARM of 16% to the ARM Empowerment Trust. As part of the various agreements put in place to arrange the sale of the shares to the Trust Harmony has accepted terms which resulted in the majority of the risk not being transferred away from Harmony. This relates mainly to a guarantee to the value of US$56 million (R367 million) as at May 27, 2006, plus interest accrued at the applicable funding rate. An indemnity from ARM Limited to the value of 50% of Harmony’s liability under the guarantee has been received. This guarantee is subject to a maximum amount of R107 million, as at May 27 2006, plus interest thereon at the applicable rate, and further reduces Harmony’s obligation. | |||
At the time of these transactions, the Chairman of the Company’s Board of directors, Patrice Motsepe, was Chief Executive Officer of ARM. Frank Abbott and Nomfundo Qangule, directors of the Company, were also trustees of the ARM Empowerment Trust at the time. | |||
On the 28 September 2007, the guarantee was cancelled by the Bank and Harmony has no further obligation. ( Refer note 29) | |||
African Rainbow Minerals Limited (ARM) currently holds 16% of Harmony’s shares. Patrice Motsepe, Andre’ Wilkens and Frank Abbott are directors of ARM. |
F-49
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the company, directly or indirectly, including any director, (whether executive or otherwise) of the company. For the fiscal year 2007 total directors remuneration amounted to $1.1 million and senior management’s remuneration to $5.9 million. | |||
None of the directors or major shareholders of Harmony or, to the knowledge of Harmony, their families, had any interest, direct or indirect, in any transaction concluded in the 2007, 2006 and 2005 fiscal years, or in any proposed transaction that has affected or will materially affect Harmony or its investment interests or subsidiaries, other than stated above. | |||
None of the directors or members of senior management of Harmony or any associate of such director or member of senior management is currently or has been at any time during the past three fiscal years indebted to Harmony and /or its subsidiaries. | |||
40 | SUBSEQUENT EVENTS | ||
(a) | On August 24, 2007 the Group entered into an agreement with RMB to sell 7,348,079 of its Gold Fields ordinary shares, including 5,747,000 shares pledged as collateral for the financing obtained in March 2007, at R100.00 per ordinary shares, resulting in a realized loss of R35.02 per share. The proceeds were used to settle the Randfontein redeemable preference shares issued to RMB on April 5, 2007. | ||
(b) | On August 24, 2007 the Group repaid the financing from RMB that was collateralized by a portion of its Gold Fields shares (5,747,000 shares) at R 100.00 per ordinary share. | ||
(c) | On September 28, 2007, Harmony announced that it intends raising a debt facility of R2 billion (US$283.9 million) from Nedbank in order to finance the Hidden Valley project in Papua New Guinea. | ||
d) | In July 2007 Harmony entered into an agreement with Dioro Exploration NL (Dioro) to acquire Harmony’s South Kal assets in Western Australia. The total selling price is AU$45 million, which consists of a cash component and a share component. The share component entails the issuance of 160 million Dioro shares and a cash component of AU$25 million. The transaction will require a minimum capital raising by Dioro of $AU35 million by the completion date. The completion of the agreement is subject to shareholder and regulatory approvals. | ||
e) | A smaller tenement in Location 45 and two mining tenements are also being divested to Australian Mines (ASX listed company). The terms of the agreement have been finalised and the document was signed in July 2007. This package has been sold for AU$3 million cash, payable over three tranches. Completion of this agreement is expected before December 2007. | ||
f) | On September 4, 2007 Harmony announced that it had signed formal agreements with Pamodzi Gold Limited (Pamodzi Gold) for the sale to all rights, title and interest of Harmony’s Orkney shafts located near Orkney in the North West province. | ||
In terms of a contracting agreement, Pamodzi Gold has engaged Harmony in order to take management control of the Orkney operations under a contracting agreement by October 1, 2007, prior to all conditions precedent being met. Harmony has agreed in principle to this arrangement and both parties will be signing a formal agreement by the end of December. | |||
The initial purchase consideration payable to Harmony by Pamodzi Gold for the Orkney shafts is equal to R550 million ($78.1 million), and a secondary consideration is calculated as follows: | |||
- 3% of the net smelter revenues in respect of the first one million ounces of gold produced by Orkney after the effective date of the transaction; and | |||
- 1.75% of the net smelter revenue in respect of all gold produced by the Orkney thereafter subject to an maximum aggregate amount of R450 million ($63.9 million). | |||
The initial Orkney purchase consideration will be settled by Pamodzi Gold through: | |||
- the payment of a cash amount of R350 million ($49.7 million); and | |||
- issue of 9,272,903 ordinary consideration shares to Harmony. | |||
The number of Pamodzi Gold ordinary shares to be issued to Harmony has been calculated based on the 30 day VWAP of the Pamodzi Gold ordinary share price on the JSE up to the business day immediately preceding the date upon which the detailed cautionary was announced, being April 24, 2007, which VWAP is equal to R21.57. | |||
g) | On September 28, 2007, the ARM Trust guarantee was cancelled by Nedbank. Harmony will evaluate the impact of the cancellation of the guarantee on its accounting for the transaction. |
F-50
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
h) | On September 29, 2007 the senior bridge loan from RMB of R500 million ($68.6 million) was settled. | ||
i) | On November 8, 2007, the Company announced that it had signed a letter of intent to sell its Mt Magnet operations for $A65 million to Monarch Gold Mining Company. Cash amounting to A$30 million would be received, with the balance of the consideration receivable in shares and a convertible note. |
F-51
Table of Contents
Notes to the Consolidated Financial Statements
For the years ended June 30
41 | GEOGRAPHICAL AND SEGMENT INFORMATION | |
The company is primarily involved in gold mining, exploration and related activities. Activities are conducted and investments held both inside and outside of South Africa. | ||
The Company’s operations are managed on a shaft-by-shaft (geographical) basis and discrete financial information under International Financial Reporting Standards (“IRFS”) for each shaft is reviewed by the Company’s chief operating decision maker to assess performance and allocate resources. The accompanying geographical and segment information has therefore been presented on a shaft by shaft basis and reconciled to U.S. GAAP. | ||
These segments have been grouped together in the regions in which they operate, being the Free State, Evander, Kalgold, Randfontein, Elandskraal, Free Gold, ARMgold and Avgold. The Big Bell, Mt Magnet, South Kal and Abelle mines are located primarily in Western Australia. The Hidden Valley project is located in Papua New Guinea. The Company also has exploration interests in Southern Africa and Australia which are included in Other. Selling, administrative, general charges and corporate costs are allocated between segments based on production results. | ||
In addition to the grouping of its operating segments by geographic region, management has also categorized its South African underground operations as follows: |
o | Quality assets,which are typically those with a larger reserve base and longer life which form the core of the group’s production; | ||
o | Leveraged assets,which are those that supplement operations and provide significant upside in the event of a rising gold price; | ||
o | Growth assets,which comprise the expansion projects/new mines in South Africa; and | ||
o | Surface operations |
Management believes that the categorization above is in line with its shaft’s strategic roles and the different skill sets, which are currently used to manage them. While the leveraged operations generally require a more short-term, flexible and lean approach, the quality assets require investment over the longer time horizon. This grouping has also enabled increased focus on the completion of the growth projects and in turning them into mines. |
Cash | ||||||||||||||||||||||||||||||||||||||||
Production | operating | Mining | Unallocated | Total | Total | Capital | Ounces | Tons | ||||||||||||||||||||||||||||||||
Revenue | cost | profit/(loss) | assets | assets | assets | liabilities | expenditure | produced (*) | milled (*) | |||||||||||||||||||||||||||||||
South Africa operations | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | oz | ’000 | ||||||||||||||||||||||||||||||
Freestate operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality assets | ||||||||||||||||||||||||||||||||||||||||
Masimong | 94,534 | 82,815 | 11,719 | 78,657 | — | 78,657 | 15,141 | 147,958 | 1,074 | |||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Harmony 2 | 29,936 | 29,887 | 49 | 10,305 | — | 10,305 | 4,905 | 46,274 | 516 | |||||||||||||||||||||||||||||||
Merriespruit 1 | 32,520 | 26,507 | 6,013 | 14,283 | — | 14,283 | 3,509 | 50,612 | 476 | |||||||||||||||||||||||||||||||
Merriespruit 3 | 27,933 | 25,035 | 2,898 | 9,545 | — | 9,545 | 3,420 | 43,541 | 444 | |||||||||||||||||||||||||||||||
Unisel | 51,142 | 35,013 | 16,129 | 29,759 | — | 29,759 | 5,436 | 79,992 | 614 | |||||||||||||||||||||||||||||||
Brand 3 | 29,174 | 27,771 | 1,403 | 3,246 | — | 3,246 | 1,590 | 45,611 | 444 | |||||||||||||||||||||||||||||||
Brand 5 | 592 | 1,526 | (934 | ) | — | — | — | — | 918 | 12 | ||||||||||||||||||||||||||||||
Saaiplaas 3 | — | — | — | — | — | — | 43 | — | — | |||||||||||||||||||||||||||||||
Surface | 13,628 | 6,448 | 7,180 | 31,014 | — | 31,014 | 4,711 | 21,346 | 2,369 | |||||||||||||||||||||||||||||||
Other | — | — | — | 63,846 | 213,380 | 277,226 | — | — | — | |||||||||||||||||||||||||||||||
Total Freestate | 279,459 | 235,002 | 44,457 | 240,655 | 213,380 | 454,035 | 465,771 | 38,755 | 436,252 | 5,949 | ||||||||||||||||||||||||||||||
Evander operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality assets | ||||||||||||||||||||||||||||||||||||||||
Evander 5 | 35,673 | 28,923 | 6,750 | 36,901 | — | 36,901 | 5,451 | 55,643 | 377 | |||||||||||||||||||||||||||||||
Evander 7 | 39,242 | 38,633 | 609 | 56,246 | — | 56,246 | 11,899 | 61,044 | 447 | |||||||||||||||||||||||||||||||
Evander 8 | 76,124 | 45,792 | 30,332 | 49,476 | — | 49,476 | 11,039 | 118,692 | 842 | |||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Evander 9 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Surface | — | — | — | — | — | — | 660 | — | — | |||||||||||||||||||||||||||||||
Other | — | — | — | 42,689 | 47,903 | 90,592 | — | — | — | |||||||||||||||||||||||||||||||
Total Evander | 151,039 | 113,348 | 37,691 | 185,312 | 47,903 | 233,215 | 79,129 | 29,049 | 235,379 | 1,666 | ||||||||||||||||||||||||||||||
Randfontein operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality assets | ||||||||||||||||||||||||||||||||||||||||
Cooke 1 | 48,311 | 32,852 | 15,459 | 9,058 | — | 9,058 | 1,967 | 75,698 | 426 | |||||||||||||||||||||||||||||||
Cooke 2 | 36,290 | 34,880 | 1,410 | 12,316 | — | 12,316 | 3,682 | 57,215 | 385 | |||||||||||||||||||||||||||||||
Cooke 3 | 57,870 | 44,081 | 13,789 | 40,496 | — | 40,496 | 13,582 | 91,332 | 622 | |||||||||||||||||||||||||||||||
Growth assets | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Doornkop | 36,503 | 25,210 | 11,293 | 242,368 | — | 242,368 | 37,557 | 57,364 | 597 | |||||||||||||||||||||||||||||||
Surface | 12,239 | 5,791 | 6,448 | 9,976 | — | 9,976 | 7,263 | 18,974 | 894 | |||||||||||||||||||||||||||||||
Other | — | — | — | — | 167,174 | 167,174 | — | — | — | |||||||||||||||||||||||||||||||
Total Randfontein | 191,213 | 142,814 | 48,399 | 314,214 | 167,174 | 481,388 | 333,944 | 64,051 | 300,583 | 2,924 | ||||||||||||||||||||||||||||||
Elandsrand operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Growth assets | ||||||||||||||||||||||||||||||||||||||||
Elandsrand | 124,347 | 102,534 | 21,813 | 293,220 | — | 293,220 | 33,094 | 194,710 | 1,117 | |||||||||||||||||||||||||||||||
Surface | — | — | — | 908 | — | 908 | 810 | — | — | |||||||||||||||||||||||||||||||
Other | — | — | — | — | 28,589 | 28,589 | — | — | — | |||||||||||||||||||||||||||||||
Total Elandsrand | 124,347 | 102,534 | 21,813 | 294,128 | 28,589 | 322,717 | 30,629 | 33,904 | 194,710 | 1,117 | ||||||||||||||||||||||||||||||
F-52
Table of Contents
Cash | ||||||||||||||||||||||||||||||||||||||||
Production | operating | Mining | Unallocated | Total | Total | Capital | Ounces | Tons | ||||||||||||||||||||||||||||||||
Revenue | cost | profit/(loss) | assets | assets | assets | liabilities | expenditure | produced (*) | milled (*) | |||||||||||||||||||||||||||||||
South Africa operations | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | oz | ’000 | ||||||||||||||||||||||||||||||
Freegold operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality operations | ||||||||||||||||||||||||||||||||||||||||
Tshepong | 202,757 | 112,043 | 90,714 | 440,912 | — | 440,912 | 26,072 | 318,887 | 1,824 | |||||||||||||||||||||||||||||||
Growth assets | ||||||||||||||||||||||||||||||||||||||||
Phakisa | — | — | — | 298,034 | — | 298,034 | 31,593 | — | — | |||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Bambanani | 120,733 | 107,539 | 13,194 | 101,604 | — | 101,604 | 16,639 | 189,683 | 1,191 | |||||||||||||||||||||||||||||||
Joel | 50,839 | 33,412 | 17,427 | 14,211 | — | 14,211 | 3,911 | 79,923 | 504 | |||||||||||||||||||||||||||||||
Eland | 1,505 | — | 1,505 | — | — | — | 79 | 2,420 | 11 | |||||||||||||||||||||||||||||||
Kudu/Sable | 553 | 189 | 364 | — | — | — | — | 845 | 15 | |||||||||||||||||||||||||||||||
West shaft | 4,592 | 7,929 | (3,337 | ) | 3,028 | — | 3,028 | 666 | 7,377 | 93 | ||||||||||||||||||||||||||||||
Nyala | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
St Helena | 13,650 | 17,909 | (4,259 | ) | 13,785 | — | 13,785 | 1,440 | 21,319 | 240 | ||||||||||||||||||||||||||||||
Surface | 2,848 | 302 | 2,546 | 2,076 | — | 2,076 | 913 | 3,035 | 300 | |||||||||||||||||||||||||||||||
Other | — | — | — | 185,744 | 610,233 | 795,977 | — | — | — | |||||||||||||||||||||||||||||||
Total Freegold | 397,477 | 279,323 | 118,154 | 1,059,394 | 610,233 | 1,669,627 | 472,341 | 81,313 | 623,489 | 4,178 | ||||||||||||||||||||||||||||||
ARMgold operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Orkney 2 | 33,048 | 26,262 | 6,786 | 13,437 | — | 13,437 | 4,273 | 52,275 | 311 | |||||||||||||||||||||||||||||||
Orkney 3 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Orkney 4 | 28,960 | 26,317 | 2,643 | 15,991 | — | 15,991 | 5,101 | 46,041 | 397 | |||||||||||||||||||||||||||||||
Orkney 7 | 13,133 | 11,942 | 1,191 | 7,601 | — | 7,601 | 5,768 | 20,668 | 239 | |||||||||||||||||||||||||||||||
Welkom 1 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Surface | 80 | 3 | 77 | — | — | — | (23 | ) | 125 | 1 | ||||||||||||||||||||||||||||||
Other | — | — | — | (646 | ) | 29,653 | 29,007 | — | — | — | ||||||||||||||||||||||||||||||
Total ARMgold | 75,221 | 64,524 | 10,697 | 36,383 | 29,653 | 66,036 | 29,518 | 15,119 | 119,109 | 948 | ||||||||||||||||||||||||||||||
Avgold operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality assets | ||||||||||||||||||||||||||||||||||||||||
Target | 91,228 | 52,730 | 38,498 | 287,236 | — | 287,236 | 16,745 | 142,433 | 904 | |||||||||||||||||||||||||||||||
Surface | 869 | 1,028 | (159 | ) | — | — | — | 1,707 | 1,316 | 147 | ||||||||||||||||||||||||||||||
Other | — | — | — | 732,886 | 22,768 | 755,654 | — | — | — | |||||||||||||||||||||||||||||||
Total Avgold | 92,097 | 53,758 | 38,339 | 1,020,122 | 22,768 | 1,042,890 | 12,243 | 18,452 | 143,749 | 1,051 | ||||||||||||||||||||||||||||||
Kalgold operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Surface | 35,743 | 27,218 | 8,525 | 32,308 | — | 32,308 | 376 | 56,129 | 1,740 | |||||||||||||||||||||||||||||||
Other | — | — | — | — | 15,954 | 15,954 | — | — | — | |||||||||||||||||||||||||||||||
Total Kalgold | 35,743 | 27,218 | 8,525 | 32,308 | 15,954 | 48,262 | 7,674 | 376 | 56,129 | 1,740 | ||||||||||||||||||||||||||||||
Other entities | — | — | — | 1,471 | 418,180 | 419,651 | 266,649 | — | — | — | ||||||||||||||||||||||||||||||
Total South Africa | 1,346,596 | 1,018,521 | 328,075 | 3,183,987 | 1,553,834 | 4,737,821 | 1,697,898 | 281,019 | 2,109,400 | 19,573 | ||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||
Mt Magnet | 85,760 | 70,626 | 15,134 | 29,388 | 16,118 | 45,506 | 66,125 | 20,199 | 136,428 | 1,875 | ||||||||||||||||||||||||||||||
South Kal | 56,114 | 44,567 | 11,547 | 16,573 | 12,117 | 28,690 | 48,580 | 6,720 | 88,371 | 1,391 | ||||||||||||||||||||||||||||||
Papua New Guinea | — | — | — | 314,124 | 60,688 | 374,812 | 376,637 | 73,055 | — | — | ||||||||||||||||||||||||||||||
Other entities | — | — | — | 43,236 | 15,400 | 58,636 | (294,854 | ) | 29 | — | — | |||||||||||||||||||||||||||||
Total Australia | 141,874 | 115,193 | 26,681 | 403,321 | 104,323 | 507,644 | 196,488 | 100,003 | 224,799 | 3,266 | ||||||||||||||||||||||||||||||
Total Harmony | 1,488,470 | 1,133,714 | 354,756 | 3,587,308 | 1,658,157 | 5,245,465 | 1,894,386 | 381,022 | 2,334,199 | 22,839 | ||||||||||||||||||||||||||||||
Reconciliation of segment data to consolidated financial statements | (141,874 | ) | 36,606 | (220,230 | ) | 88,682 | (131,548 | ) | 157,105 | |||||||||||||||||||||||||||||||
1,346,596 | 1,170,320 | 3,367,078 | 1,746,839 | 5,113,917 | 2,051,491 | |||||||||||||||||||||||||||||||||||
Included in the above are the following operations whose assets have been classified as held for sale and results as discontinued operations for management reporting purposes (a): | ||||||||||||||||||||||||||||||||||||||||
South Africa | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Orkney 2 | 33,048 | 26,262 | 6,786 | 13,437 | — | 13,437 | 4,273 | 52,275 | 311 | |||||||||||||||||||||||||||||||
Orkney 3 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Orkney 4 | 28,960 | 26,317 | 2,643 | 15,991 | — | 15,991 | 5,101 | 46,041 | 397 | |||||||||||||||||||||||||||||||
Orkney 6 | 13,133 | 11,942 | 1,191 | 7,601 | — | 7,601 | 5,768 | 20,668 | 239 | |||||||||||||||||||||||||||||||
Welkom 1 | — | — | — | |||||||||||||||||||||||||||||||||||||
ARM surface | 80 | 3 | 77 | — | — | — | (23 | ) | 125 | 1 | ||||||||||||||||||||||||||||||
ARM other | — | — | — | (646 | ) | 29,653 | 29,007 | — | — | — | ||||||||||||||||||||||||||||||
Kudu/Sable | 75,221 | 64,524 | 10,697 | — | — | — | — | 845 | 15 | |||||||||||||||||||||||||||||||
Total SA operations that have been classified as discontinued operations for management reporting purposes, but not for U.S. GAAP purposes (a) | 150,442 | 129,048 | 21,394 | 36,383 | 29,653 | 66,036 | 29,518 | 15,119 | 119,954 | 963 | ||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||
Mt Magnet | 85,760 | 70,626 | 15,134 | 29,388 | 16,118 | 45,506 | 66,125 | 20,199 | 136,428 | 1,875 | ||||||||||||||||||||||||||||||
South Kal | 56,114 | 44,567 | 11,547 | 16,573 | 12,117 | 28,690 | 12,153 | 6,720 | 88,371 | 1,391 | ||||||||||||||||||||||||||||||
Other entities | — | — | — | 41,982 | 261 | 42,243 | (30,182 | ) | 29 | — | — | |||||||||||||||||||||||||||||
Total Australia operations that have been classified as discontinued operations for management reporting and U.S. GAAP purposes (a) | 141,874 | 115,193 | 26,681 | 87,943 | 28,496 | 116,439 | 48,096 | 26,948 | 224,799 | 3,266 | ||||||||||||||||||||||||||||||
Total Harmony discontinued operations for management reporting purposes (a) | 292,316 | 244,241 | 48,075 | 124,326 | 58,149 | 182,475 | 77,614 | 42,067 | 344,753 | 4,229 | ||||||||||||||||||||||||||||||
* | Production statistics are unaudited. |
F-53
Table of Contents
Cash | ||||||||||||||||||||||||||||||||||||||||
Production | operating | Mining | Unallocated | Total | Total | Capital | Ounces | Tons | ||||||||||||||||||||||||||||||||
Revenue | cost | profit/(loss) | assets | assets | assets | liabilities | expenditure | produced (*) | milled (*) | |||||||||||||||||||||||||||||||
South Africa operations | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | oz | ’000 | ||||||||||||||||||||||||||||||
Freestate operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality assets | ||||||||||||||||||||||||||||||||||||||||
Masimong | 72,854 | 66,563 | 6,291 | 65,928 | — | 65,928 | 14,520 | 136,153 | 1,020 | |||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Harmony 2 | 36,716 | 33,527 | 3,189 | 6,933 | — | 6,933 | 3,964 | 69,446 | 598 | |||||||||||||||||||||||||||||||
Merriespruit 1 | 25,685 | 24,061 | 1,624 | 6,217 | — | 6,217 | 2,445 | 48,069 | 410 | |||||||||||||||||||||||||||||||
Merriespruit 3 | 23,078 | 24,188 | (1,110 | ) | 5,175 | — | 5,175 | 1,783 | 43,691 | 452 | ||||||||||||||||||||||||||||||
Unisel | 38,172 | 28,789 | 9,383 | 29,519 | — | 29,519 | 3,907 | 72,963 | 500 | |||||||||||||||||||||||||||||||
Brand 3 | 22,147 | 23,272 | (1,125 | ) | 2,557 | — | 2,557 | 987 | 41,647 | 405 | ||||||||||||||||||||||||||||||
Brand 5 | 236 | 975 | (739 | ) | — | — | — | — | 469 | 3 | ||||||||||||||||||||||||||||||
Saaiplaas 3 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Surface | 8,614 | 6,427 | 2,187 | 33,666 | — | 33,666 | 3,818 | 15,902 | 897 | |||||||||||||||||||||||||||||||
Other | — | — | — | 61,711 | 126,700 | 188,411 | — | — | — | |||||||||||||||||||||||||||||||
Total Freestate | 227,502 | 207,802 | 19,700 | 211,706 | 126,700 | 338,406 | 506,639 | 31,424 | 428,340 | 4,285 | ||||||||||||||||||||||||||||||
Evander operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality assets | ||||||||||||||||||||||||||||||||||||||||
Evander 5 | 32,183 | 33,068 | (885 | ) | 33,020 | — | 33,020 | 6,453 | 62,388 | 450 | ||||||||||||||||||||||||||||||
Evander 7 | 42,365 | 32,648 | 9,717 | 47,034 | — | 47,034 | 10,021 | 83,202 | 435 | |||||||||||||||||||||||||||||||
Evander 8 | 67,325 | 44,863 | 22,462 | 40,464 | — | 40,464 | 9,726 | 128,849 | 815 | |||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Evander 9 | — | 21 | (21 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Surface | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Other | — | — | — | 38,025 | 26,212 | 64,237 | 1,033 | — | — | |||||||||||||||||||||||||||||||
Total Evander | 141,873 | 110,600 | 31,273 | 158,543 | 26,212 | 184,755 | 45,017 | 27,233 | 274,439 | 1,700 | ||||||||||||||||||||||||||||||
Randfontein operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality assets | ||||||||||||||||||||||||||||||||||||||||
Cooke 1 | 42,978 | 32,274 | 10,704 | 11,835 | — | 11,835 | 3,759 | 80,495 | 490 | |||||||||||||||||||||||||||||||
Cooke 2 | 32,025 | 23,082 | 8,943 | 12,962 | — | 12,962 | 3,738 | 59,836 | 353 | |||||||||||||||||||||||||||||||
Cooke 3 | 55,901 | 41,329 | 14,572 | 27,692 | — | 27,692 | 8,197 | 104,758 | 652 | |||||||||||||||||||||||||||||||
Growth assets | — | |||||||||||||||||||||||||||||||||||||||
Doornkop | 23,294 | 24,322 | (1,028 | ) | 200,096 | — | 200,096 | 26,031 | 43,593 | 515 | ||||||||||||||||||||||||||||||
Surface | 6,108 | 5,022 | 1,086 | 5,143 | — | 5,143 | 8,712 | 11,650 | 539 | |||||||||||||||||||||||||||||||
Other | — | — | — | — | 114,154 | 114,154 | — | — | — | |||||||||||||||||||||||||||||||
Total Randfontein | 160,306 | 126,029 | 34,277 | 257,728 | 114,154 | 371,882 | 130,543 | 50,437 | 300,332 | 2,549 | ||||||||||||||||||||||||||||||
Elandsrand operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Growth assets | ||||||||||||||||||||||||||||||||||||||||
Elandsrand | 90,097 | 89,349 | 748 | 259,500 | — | 259,500 | 30,523 | 170,867 | 987 | |||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Deelkraal | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Surface | — | — | — | 300 | — | 300 | — | — | — | |||||||||||||||||||||||||||||||
Other | — | — | — | — | 91,572 | 91,572 | — | — | — | |||||||||||||||||||||||||||||||
Total Elandsrand | 90,097 | 89,349 | 748 | 259,800 | 91,572 | 351,372 | 80,720 | 30,523 | 170,867 | 987 | ||||||||||||||||||||||||||||||
Freegold operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality operations | ||||||||||||||||||||||||||||||||||||||||
Tshepong | 179,626 | 111,462 | 68,164 | 429,453 | — | 429,453 | 23,529 | 335,289 | 1,786 | |||||||||||||||||||||||||||||||
Growth assets | ||||||||||||||||||||||||||||||||||||||||
Phakisa | — | — | — | 260,966 | — | 260,966 | 21,522 | — | — | |||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Bambanani | 93,111 | 87,064 | 6,047 | 98,472 | — | 98,472 | 14,870 | 175,214 | 1,196 | |||||||||||||||||||||||||||||||
Joel | 31,346 | 29,170 | 2,176 | 10,239 | — | 10,239 | 3,644 | 58,595 | 436 | |||||||||||||||||||||||||||||||
Eland | 2,026 | 1,066 | 960 | — | — | — | — | 4,058 | 21 | |||||||||||||||||||||||||||||||
Kudu/Sable | 890 | 895 | (5 | ) | — | — | — | — | 2,024 | 13 | ||||||||||||||||||||||||||||||
West shaft | 13,117 | 13,650 | (533 | ) | 8,900 | — | 8,900 | 887 | 25,525 | 206 | ||||||||||||||||||||||||||||||
Nyala | 81 | 226 | (145 | ) | — | — | — | 3 | 184 | 2 | ||||||||||||||||||||||||||||||
St Helena | 6,867 | 10,802 | (3,935 | ) | 6,416 | — | 6,416 | 443 | 12,791 | 127 | ||||||||||||||||||||||||||||||
Surface | 5,366 | 5,386 | (20 | ) | 858 | — | 858 | 340 | 11,019 | 336 | ||||||||||||||||||||||||||||||
Other | — | — | — | 160,980 | 257,043 | 418,023 | — | — | — | |||||||||||||||||||||||||||||||
Total Freegold | 332,430 | 259,721 | 72,709 | 976,284 | 257,043 | 1,233,327 | 402,860 | 65,238 | 624,699 | 4,123 | ||||||||||||||||||||||||||||||
ARMgold operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Orkney 2 | 36,589 | 29,716 | 6,873 | 9,231 | — | 9,231 | 2,380 | 69,877 | 347 | |||||||||||||||||||||||||||||||
Orkney 3 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Orkney 4 | 31,117 | 29,273 | 1,844 | 11,690 | — | 11,690 | 4,759 | 58,897 | 406 | |||||||||||||||||||||||||||||||
Orkney 7 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Welkom 1 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Surface | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Other | — | — | — | 671 | 340,179 | 340,850 | — | — | — | |||||||||||||||||||||||||||||||
Total ARMgold | 67,706 | 58,989 | 8,717 | 21,592 | 340,179 | 361,771 | 20,065 | 7,139 | 128,774 | 753 | ||||||||||||||||||||||||||||||
Avgold operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality assets | ||||||||||||||||||||||||||||||||||||||||
Target | 81,178 | 51,904 | 29,274 | 279,852 | — | 279,852 | 9,644 | 150,196 | 813 | |||||||||||||||||||||||||||||||
Surface | 404 | 968 | (564 | ) | 678 | — | 678 | — | 746 | 204 | ||||||||||||||||||||||||||||||
Other | — | — | — | 717,182 | 19,180 | 736,362 | — | — | — | |||||||||||||||||||||||||||||||
Total Avgold | 81,582 | 52,872 | 28,710 | 997,712 | 19,180 | 1,016,892 | 5,309 | 9,644 | 150,942 | 1,017 | ||||||||||||||||||||||||||||||
Kalgold operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Surface | 39,342 | 31,740 | 7,602 | 12,190 | — | 12,190 | 389 | 77,071 | 2,008 | |||||||||||||||||||||||||||||||
Other | — | — | — | — | 5,402 | 5,402 | — | — | — | |||||||||||||||||||||||||||||||
Total Kalgold | 39,342 | 31,740 | 7,602 | 12,190 | 5,402 | 17,592 | 1,933 | 389 | 77,071 | 2,008 | ||||||||||||||||||||||||||||||
Other entities | — | — | — | 1,450 | 429,445 | 430,895 | 133,631 | — | — | — | ||||||||||||||||||||||||||||||
F-54
Table of Contents
Cash | ||||||||||||||||||||||||||||||||||||||||
Production | operating | Mining | Unallocated | Total | Total | Capital | Ounces | Tons | ||||||||||||||||||||||||||||||||
Revenue | cost | profit/(loss) | assets | assets | assets | liabilities | expenditure | produced (*) | milled (*) | |||||||||||||||||||||||||||||||
$’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | oz | ’000 | |||||||||||||||||||||||||||||||
Total South Africa | 1,140,838 | 937,102 | 203,736 | 2,897,005 | 1,409,887 | 4,306,892 | 1,326,717 | 222,027 | 2,155,464 | 17,422 | ||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||
Mt Magnet | 80,090 | 59,427 | 20,663 | 71,897 | 9,401 | 81,298 | 23,669 | 22,651 | 148,822 | 1,918 | ||||||||||||||||||||||||||||||
South Kal | 42,406 | 37,523 | 4,883 | 42,637 | 8,367 | 51,004 | 12,213 | 2,320 | 82,639 | 1,480 | ||||||||||||||||||||||||||||||
Papua New Guinea | — | — | — | 212,166 | 851 | 213,017 | 3,164 | 18,221 | — | — | ||||||||||||||||||||||||||||||
Other entities | — | — | — | 21,367 | 93,253 | 114,620 | 162,640 | 104 | — | — | ||||||||||||||||||||||||||||||
Total Australia | 122,496 | 96,950 | 25,546 | 348,067 | 111,872 | 459,939 | 201,686 | 43,296 | 231,461 | 3,398 | ||||||||||||||||||||||||||||||
Total Harmony | 1,263,334 | 1,034,052 | 229,282 | 3,245,072 | 1,521,759 | 4,766,831 | 1,528,403 | 265,323 | 2,386,925 | 20,820 | ||||||||||||||||||||||||||||||
Reconciliation of segment data to consolidated financial statements | (122,496 | ) | 89,101 | 51,141 | (355,773 | ) | (304,632 | ) | 8,432 | |||||||||||||||||||||||||||||||
1,140,838 | 1,123,153 | 3,296,213 | 1,165,986 | 4,462,199 | 1,536,835 | |||||||||||||||||||||||||||||||||||
Included in the above are the following operations whose assets have been classified as held for sale and results as discontinued operations for management reporting purposes (a): | ||||||||||||||||||||||||||||||||||||||||
South Africa | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Orkney 2 | 36,589 | 29,716 | 6,873 | — | — | — | 2,380 | 69,877 | 347 | |||||||||||||||||||||||||||||||
Orkney 3 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Orkney 4 | 31,117 | 29,273 | 1,844 | — | — | — | 4,759 | 58,897 | 406 | |||||||||||||||||||||||||||||||
Orkney 6 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Welkom 1 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
ARM surface | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
ARM other | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Kudu/Sable | 67,706 | 58,989 | 8,717 | — | — | — | — | 2,024 | 13 | |||||||||||||||||||||||||||||||
Total SA operations that have been classified as discontinued operations for management reporting purposes, but not for U.S. GAAP purposes (a) | 135,412 | 117,978 | 17,434 | — | — | — | — | 7,139 | 130,798 | 766 | ||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||
Mt Magnet | 80,090 | 59,427 | 20,663 | — | — | — | — | 22,651 | 148,822 | 1,918 | ||||||||||||||||||||||||||||||
South Kal | 42,406 | 37,523 | 4,883 | — | — | — | — | 2,320 | 82,639 | 1,480 | ||||||||||||||||||||||||||||||
Other entities | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Total Australia operations that have been classified as discontinued operations for management reporting and U.S. GAAP purposes (a) | 122,496 | 96,950 | 25,546 | — | — | — | — | 24,971 | 231,461 | 3,398 | ||||||||||||||||||||||||||||||
Total Harmony discontinued operations for management reporting purposes (a) | 257,908 | 214,928 | 42,980 | — | — | — | — | 32,110 | 362,259 | 4,164 | ||||||||||||||||||||||||||||||
* | Production statistics are unaudited. |
F-55
Table of Contents
Cash | ||||||||||||||||||||||||||||||||||||||||
Production | operating | Mining | Unallocated | Total | Total | Capital | Ounces | Tons | ||||||||||||||||||||||||||||||||
Revenue | cost | profit/(loss) | assets | assets | assets | liabilities | expenditure | produced (*) | milled (*) | |||||||||||||||||||||||||||||||
South Africa operations | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | oz | ’000 | ||||||||||||||||||||||||||||||
Freestate operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality assets | ||||||||||||||||||||||||||||||||||||||||
Masimong | 68,342 | 65,388 | 2,954 | 48,026 | — | 48,026 | 10,630 | 159,981 | 1,046 | |||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Harmony 2 | 29,295 | 30,021 | (726 | ) | 6,234 | — | 6,234 | 3,556 | 68,547 | 559 | ||||||||||||||||||||||||||||||
Merriespruit 1 | 19,428 | 21,719 | (2,291 | ) | 5,865 | — | 5,865 | 2,833 | 45,559 | 414 | ||||||||||||||||||||||||||||||
Merriespruit 3 | 23,325 | 24,379 | (1,054 | ) | 5,091 | — | 5,091 | 1,696 | 54,690 | 548 | ||||||||||||||||||||||||||||||
Unisel | 27,798 | 31,055 | (3,257 | ) | 21,106 | — | 21,106 | 4,147 | 65,011 | 494 | ||||||||||||||||||||||||||||||
Brand 3 | 19,807 | 22,883 | (3,076 | ) | 3,435 | — | 3,435 | 1,267 | 46,299 | 448 | ||||||||||||||||||||||||||||||
Brand 5 | 8 | 2,120 | (2,112 | ) | — | — | — | — | 33 | — | ||||||||||||||||||||||||||||||
Saaiplaas 3 | 1,026 | 4,831 | (3,805 | ) | 475 | — | 475 | 4 | 2,541 | 30 | ||||||||||||||||||||||||||||||
Surface | 3,720 | 3,318 | 402 | 37,481 | — | 37,481 | 1,589 | 9,542 | 467 | |||||||||||||||||||||||||||||||
Other | — | — | — | 66,795 | 604,336 | 671,131 | 30 | — | — | |||||||||||||||||||||||||||||||
Total Freestate | 192,749 | 205,714 | (12,965 | ) | 194,508 | 604,336 | 798,844 | 539,519 | 25,752 | 452,203 | 4,006 | |||||||||||||||||||||||||||||
Evander operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality assets | ||||||||||||||||||||||||||||||||||||||||
Evander 2 | 20,695 | 27,404 | (6,709 | ) | 10,872 | — | 10,872 | 15 | 48,764 | 357 | ||||||||||||||||||||||||||||||
Evander 5 | 20,078 | 15,912 | 4,166 | 10,499 | — | 10,499 | 7,006 | 47,093 | 245 | |||||||||||||||||||||||||||||||
Evander 7 | 55,502 | 32,795 | 22,707 | 44,770 | — | 44,770 | 7,948 | 130,009 | 541 | |||||||||||||||||||||||||||||||
Evander 8 | 64,912 | 41,500 | 23,412 | 40,526 | — | 40,526 | 8,216 | 151,936 | 734 | |||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Evander 9 | 1,078 | 3,005 | (1,927 | ) | — | — | — | — | 2,573 | 31 | ||||||||||||||||||||||||||||||
Surface | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Other | — | — | — | 40,101 | 31,242 | 71,343 | — | — | — | |||||||||||||||||||||||||||||||
Total Evander | 162,265 | 120,616 | 41,649 | 146,768 | 31,242 | 178,010 | 46,946 | 23,185 | 380,375 | 1,908 | ||||||||||||||||||||||||||||||
Randfontein operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality assets | ||||||||||||||||||||||||||||||||||||||||
Cooke 1 | 33,888 | 31,115 | 2,773 | 13,317 | — | 13,317 | 2,811 | 79,101 | 520 | |||||||||||||||||||||||||||||||
Cooke 2 | 23,274 | 24,144 | (870 | ) | 13,848 | — | 13,848 | 2,538 | 54,441 | 403 | ||||||||||||||||||||||||||||||
Cooke 3 | 49,478 | 42,278 | 7,200 | 24,610 | — | 24,610 | 8,287 | 116,300 | 740 | |||||||||||||||||||||||||||||||
Growth assets | ||||||||||||||||||||||||||||||||||||||||
Doornkop | 22,478 | 23,573 | (1,095 | ) | 192,666 | — | 192,666 | 28,621 | 52,695 | 526 | ||||||||||||||||||||||||||||||
Surface | 14,185 | 14,117 | 68 | 2,676 | — | 2,676 | 6,120 | 33,397 | 2,757 | |||||||||||||||||||||||||||||||
Other | — | — | — | — | 69,082 | 69,082 | — | — | — | |||||||||||||||||||||||||||||||
Total Randfontein | 143,303 | 135,227 | 8,076 | 247,117 | 69,082 | 316,199 | 59,469 | 48,377 | 335,934 | 4,946 | ||||||||||||||||||||||||||||||
Elandsrand operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Growth assets | ||||||||||||||||||||||||||||||||||||||||
Elandsrand | 88,577 | 88,599 | (22 | ) | 257,670 | — | 257,670 | 26,081 | 207,371 | 1,019 | ||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Deelkraal | 958 | 714 | 244 | 2,514 | — | 2,514 | — | 2,284 | 1 | |||||||||||||||||||||||||||||||
Surface | — | — | — | 334 | — | 334 | 7 | — | — | |||||||||||||||||||||||||||||||
Other | — | — | — | — | 98,919 | 98,919 | — | — | — | |||||||||||||||||||||||||||||||
Total Elandsrand | 89,535 | 89,313 | 222 | 260,518 | 98,919 | 359,437 | 100,437 | 26,088 | 209,655 | 1,020 | ||||||||||||||||||||||||||||||
Freegold operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality operations | ||||||||||||||||||||||||||||||||||||||||
Tshepong | 162,958 | 101,091 | 61,867 | 642,328 | — | 642,328 | 23,346 | 380,695 | 1,700 | |||||||||||||||||||||||||||||||
Growth assets | ||||||||||||||||||||||||||||||||||||||||
Phakisa | — | — | — | 258,424 | — | 258,424 | 18,756 | — | — | |||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Bambanani | 84,165 | 83,289 | 876 | 101,291 | — | 101,291 | 12,178 | 197,535 | 1,090 | |||||||||||||||||||||||||||||||
Joel | 27,282 | 28,990 | (1,708 | ) | 8,271 | — | 8,271 | 2,582 | 64,464 | 498 | ||||||||||||||||||||||||||||||
Eland | 11,436 | 13,404 | (1,968 | ) | — | — | — | — | 26,782 | 175 | ||||||||||||||||||||||||||||||
Kudu/Sable | 10,764 | 18,885 | (8,121 | ) | — | — | — | — | 25,175 | 194 | ||||||||||||||||||||||||||||||
West shaft | 12,049 | 12,907 | (858 | ) | 10,230 | — | 10,230 | 107 | 28,165 | 176 | ||||||||||||||||||||||||||||||
Nyala | 9,897 | 17,587 | (7,690 | ) | — | — | — | 1,440 | 23,503 | 198 | ||||||||||||||||||||||||||||||
St Helena | 12,660 | 24,191 | (11,531 | ) | 2,227 | — | 2,227 | 901 | 29,965 | 245 | ||||||||||||||||||||||||||||||
Surface | 15,407 | 15,436 | (29 | ) | 3,376 | — | 3,376 | 314 | 36,420 | 1,361 | ||||||||||||||||||||||||||||||
Other | — | — | — | — | 596,686 | 596,686 | — | — | — | |||||||||||||||||||||||||||||||
Total Freegold | 346,618 | 315,780 | 30,838 | 1,026,147 | 596,686 | 1,622,833 | 455,720 | 59,624 | 812,704 | 5,637 | ||||||||||||||||||||||||||||||
ARMgold operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Leveraged assets | ||||||||||||||||||||||||||||||||||||||||
Orkney 2 | 33,279 | 31,495 | 1,784 | 9,666 | — | 9,666 | 1,443 | 78,449 | 413 | |||||||||||||||||||||||||||||||
Orkney 3 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Orkney 4 | 32,720 | 29,616 | 3,104 | 10,321 | — | 10,321 | 915 | 76,971 | 455 | |||||||||||||||||||||||||||||||
Orkney 7 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Welkom 1 | 1,164 | 1,604 | (440 | ) | — | — | 2,734 | 21 | ||||||||||||||||||||||||||||||||
Surface | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Other | — | — | — | — | 21,088 | 21,088 | 394 | — | — | |||||||||||||||||||||||||||||||
Total ARMgold | 67,163 | 62,715 | 4,448 | 19,987 | 21,088 | 41,075 | 48,872 | 2,752 | 158,154 | 889 | ||||||||||||||||||||||||||||||
Avgold operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Quality assets | ||||||||||||||||||||||||||||||||||||||||
Target | 89,233 | 54,391 | 34,842 | 303,491 | — | 303,491 | 10,818 | 209,847 | 1,178 | |||||||||||||||||||||||||||||||
Surface | 579 | 467 | 112 | 942 | — | 942 | 1,790 | 1,350 | 88 | |||||||||||||||||||||||||||||||
Other | — | — | — | 770,753 | 16,303 | 787,056 | — | — | — | |||||||||||||||||||||||||||||||
Total Avgold | 89,812 | 54,858 | 34,954 | 1,075,186 | 16,303 | 1,091,489 | 29,989 | 12,608 | 211,197 | 1,266 | ||||||||||||||||||||||||||||||
Kalgold operations | Total liabilities not calculated at shaft level | |||||||||||||||||||||||||||||||||||||||
Surface | 46,331 | 40,341 | 5,990 | 20,442 | — | 20,442 | (4,145 | ) | 108,195 | 1,855 | ||||||||||||||||||||||||||||||
Other | — | — | — | 1,217 | 7,403 | 8,620 | — | — | — | |||||||||||||||||||||||||||||||
Total Kalgold | 46,331 | 40,341 | 5,990 | 21,659 | 7,403 | 29,062 | 4,621 | (4,145 | ) | 108,195 | 1,855 | |||||||||||||||||||||||||||||
Other entities | 1,755 | — | 1,755 | 900 | 172,202 | 173,102 | 122,657 | 2,035 | — | — | ||||||||||||||||||||||||||||||
Total South Africa | 1,139,531 | 1,024,564 | 114,967 | 2,992,790 | 1,617,261 | 4,610,051 | 1,408,230 | 196,276 | 2,668,417 | 21,527 | ||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||
Mt Magnet | 77,242 | 60,915 | 16,327 | 78,172 | — | 78,172 | 74,686 | 15,652 | 181,233 | 2,743 | ||||||||||||||||||||||||||||||
South Kal | 48,427 | 39,263 | 9,164 | 55,289 | — | 55,289 | 52,123 | 10,161 | 115,615 | 1,405 | ||||||||||||||||||||||||||||||
Papua New Guinea | — | — | — | 200,749 | — | 200,749 | 2,680 | 12,051 | — | — | ||||||||||||||||||||||||||||||
Other entities | — | — | — | 24,265 | 103,357 | 127,622 | 51,541 | 2,178 | — | — | ||||||||||||||||||||||||||||||
Total Australia | 125,669 | 100,178 | 25,491 | 358,475 | 103,357 | 461,832 | 181,030 | 40,042 | 296,848 | 4,148 | ||||||||||||||||||||||||||||||
Total Harmony | 1,265,200 | 1,124,742 | 140,458 | 3,351,265 | 1,720,618 | 5,071,883 | 1,589,260 | 236,318 | 2,965,265 | 25,675 | ||||||||||||||||||||||||||||||
F-56
Table of Contents
Cash | ||||||||||||||||||||||||||||||||||||||||
Production | operating | Mining | Unallocated | Total | Total | Capital | Ounces | Tons | ||||||||||||||||||||||||||||||||
Revenue | cost | profit/(loss) | assets | assets | assets | liabilities | expenditure | produced (*) | milled (*) | |||||||||||||||||||||||||||||||
South Africa operations | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | oz | ’000 | ||||||||||||||||||||||||||||||
Reconciliation of segment data to consolidated financial statements | (125,669 | ) | 70,437 | 85,334 | (420,399 | ) | (335,065 | ) | 2,724 | |||||||||||||||||||||||||||||||
1,139,531 | 1,195,179 | 3,436,599 | 1,300,219 | 4,736,818 | 1,591,984 | |||||||||||||||||||||||||||||||||||
Included in the above are the following operations whose assets have been classified as held for sale and results as discontinued operations for management reporting purposes (a): | ||||||||||||||||||||||||||||||||||||||||
Total liabilities not calculated at shaft level | ||||||||||||||||||||||||||||||||||||||||
South Africa | ||||||||||||||||||||||||||||||||||||||||
Orkney 2 | 33,279 | 31,495 | 1,784 | — | — | — | 1,443 | 78,449 | 413 | |||||||||||||||||||||||||||||||
Orkney 3 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Orkney 4 | 32,720 | 29,616 | 3,104 | — | — | — | 915 | 76,971 | 455 | |||||||||||||||||||||||||||||||
Orkney 6 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Welkom 1 | 1,164 | 1,604 | (440 | ) | — | — | — | — | 2,734 | 21 | ||||||||||||||||||||||||||||||
ARM surface | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
ARM other | — | — | — | — | — | — | 394 | — | — | |||||||||||||||||||||||||||||||
Kudu/Sable | 67,163 | 62,715 | 4,448 | — | — | — | — | 25,175 | 194 | |||||||||||||||||||||||||||||||
Total SA operations that have been classified as discontinued operations for management reporting purposes, but not for U.S. GAAP purposes (a) | ||||||||||||||||||||||||||||||||||||||||
Total SA | 134,326 | 125,430 | 8,896 | — | — | — | — | 2,752 | 183,329 | 1,083 | ||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||
Mt Magnet | 77,242 | 60,915 | 16,327 | — | — | — | — | 15,652 | 181,233 | 2,743 | ||||||||||||||||||||||||||||||
South Kal | 48,427 | 39,263 | 9,164 | — | — | — | — | 10,161 | 115,615 | 1,405 | ||||||||||||||||||||||||||||||
Other entities | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Total Australia operations that have been classified as discontinued operations for management reporting and U.S. GAAP purposes (a) | 125,669 | 100,178 | 25,491 | — | — | — | — | 25,813 | 296,848 | 4,148 | ||||||||||||||||||||||||||||||
Total Harmony discontinued operations for management reporting purposes (a) | 259,995 | 225,608 | 34,387 | — | — | — | — | 28,565 | 480,177 | 5,231 | ||||||||||||||||||||||||||||||
* | Production statistics are unaudited. |
F-57
Table of Contents
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Revenue from continuing operations | ||||||||||||
Discontinued operations under U.S. GAAP (a) | (141,874 | ) | (122,496 | ) | (125,669 | ) | ||||||
(141,874 | ) | (122,496 | ) | (125,669 | ) | |||||||
Production cost of continuing operations | ||||||||||||
Discontinued operations under U.S. GAAP (a) | (115,193 | ) | (96,950 | ) | (100,178 | ) | ||||||
Depreciation and amortization expense (excluding depreciation on non-mining assets) (b) | 120,795 | 147,344 | 141,354 | |||||||||
Share-based compensation (b) | 5,113 | 15,726 | 15,618 | |||||||||
Corporate costs and decrease in rehabilitation costs (b) | 25,967 | 17,255 | 17,045 | |||||||||
Reversal of proportionate consolidation (c) | 779 | 2,968 | — | |||||||||
Other items | (855 | ) | 2,758 | (3,402 | ) | |||||||
36,606 | 89,101 | 70,437 | ||||||||||
Reconciliation of cash operating profit to consolidated loss before income taxes, equity income of joint venture, equity (loss)/income of associated companies, impairment of investment in associate and the cumulative effect of change in accounting principle: | ||||||||||||
Total segment revenue | 1,488,470 | 1,263,334 | 1,265,200 | |||||||||
Total segment production costs | (1,133,714 | ) | (1,034,052 | ) | (1,124,742 | ) | ||||||
Cash operating profit — all operations | 354,756 | 229,282 | 140,458 | |||||||||
Discontinued operations under U.S. GAAP (a) | (26,681 | ) | (25,546 | ) | (25,491 | ) | ||||||
Depreciation and amortization expense (excluding depreciation on non-mining assets) (b) | (120,795 | ) | (147,344 | ) | (141,354 | ) | ||||||
Share-based compensation (b) | (5,113 | ) | (15,726 | ) | (15,618 | ) | ||||||
Corporate costs and decrease in rehabilitation costs (b) | (25,967 | ) | (17,255 | ) | (17,045 | ) | ||||||
Reversal of proportionate consolidation (c) | (779 | ) | (2,968 | ) | — | |||||||
Other items | 855 | (2,758 | ) | 3,402 | ||||||||
176,276 | 17,685 | (55,648 | ) | |||||||||
Depreciation and amortization expenses on non-mining assets | (1,735 | ) | (6,687 | ) | (6,642 | ) | ||||||
Impairment of assets | (10,243 | ) | (15,951 | ) | (122,819 | ) | ||||||
Employment termination and restructuring costs | — | 12,289 | (73,215 | ) | ||||||||
Care and maintenance cost of restructured shafts | (9,184 | ) | (26,837 | ) | (29,975 | ) | ||||||
Exploration expenditure | (26,864 | ) | (11,090 | ) | (4,672 | ) | ||||||
Marketing and new business expenditure | (8,987 | ) | (9,171 | ) | (15,310 | ) | ||||||
Profit on sale of property, plant and equipment | 25,346 | 10,148 | 13,594 | |||||||||
Post retirement benefits expense | 1,844 | (1,175 | ) | (9,137 | ) | |||||||
Operating loss | 146,453 | (30,789 | ) | (303,824 | ) | |||||||
Total other (expenses)/income | (334,425 | ) | (50,535 | ) | (232,442 | ) | ||||||
Loss before income taxes, equity income of joint venture, equity (loss)/income of associated companies, impairment of investment in associate and the cumulative effect of change in accounting principle | (187,972 | ) | (81,324 | ) | (536,266 | ) | ||||||
F-58
Table of Contents
2007 | 2006 | 2005 | ||||||||||
$’000 | $’000 | $’000 | ||||||||||
Total assets | ||||||||||||
Reversal of proportionate consolidation (c) | (1,574 | ) | (1,155 | ) | — | |||||||
Exploration costs (d) | (10,802 | ) | (10,577 | ) | (11,367 | ) | ||||||
Business combinations — goodwill (e) | 14,856 | 14,605 | 15,696 | |||||||||
Business combinations — acquisition date (f) | (289,158 | ) | (284,274 | ) | (305,509 | ) | ||||||
Business combinations — purchase price (g) | 78,603 | 78,544 | 85,906 | |||||||||
Impairment of assets (h) | (78,145 | ) | (76,421 | ) | (32,022 | ) | ||||||
Provision for environmental rehabilitation (i) | 9,349 | 10,881 | 11,330 | |||||||||
Deferred taxation (j) | (263,572 | ) | (133,578 | ) | (133,076 | ) | ||||||
Borrowings (k) | 2,398 | 3,605 | 5,733 | |||||||||
Transfer of ARM shares to ARM Trust (l) | 353,344 | 61,358 | 18,858 | |||||||||
Other items | 53,154 | 32,381 | 9,386 | |||||||||
(131,548 | ) | (304,631 | ) | (335,065 | ) | |||||||
Total liabilities | ||||||||||||
Reversal of proportionate consolidation (a) | (3,767 | ) | (1,154 | ) | — | |||||||
Business combinations — purchase price (f) | 55,859 | 56,033 | 61,556 | |||||||||
Impairment of assets (g) | (19,007 | ) | (19,499 | ) | (10,977 | ) | ||||||
Provision for environmental rehabilitation (h) | (16,300 | ) | (5,940 | ) | (2,313 | ) | ||||||
Deferred taxation (i) | (265,661 | ) | (133,578 | ) | (133,076 | ) | ||||||
Borrowings (j) | 19,209 | 28,294 | 40,432 | |||||||||
Transfer of ARM shares to ARM Trust (k) | 353,344 | 61,358 | 18,858 | |||||||||
Other items | 33,428 | 22,918 | 28,244 | |||||||||
157,105 | 8,432 | 2,724 | ||||||||||
a) | Discontinued operations | |
As described in note 17, Harmony has classified the assets and liabilities of certain of its South African and all of its Australian operations as held for sale. In connection with this determination, Harmony has also presented the results of its Australia operations for all periods as discontinued operations under U.S. GAAP. This is because the operations and cash flows of the Australian operations will be eliminated from the ongoing operations of Harmony as a result of the proposed disposal transactions, and the fact that Harmony will not have any significant continuing involvement in the Australian operations. In contrast, since Harmony continues to produce and sell gold within South Africa, the results associated with certain of its South African assets that has been classified as held for sale, continues to be presented within continuing operations. | ||
For management reporting purposes however, Harmony has classified both its South African and Australian operations as discontinued operations. | ||
The adjustments to revenue, production costs and cash operating profits from continuing operations therefore removes the results of Harmony’s Australian operations that have been classified as discontinued operations. | ||
b) | Difference in calculation of production costs | |
Production costs for management reporting purposes excludes depreciation and amortization of mining assets, share-based compensation, certain corporate costs and decrease in rehabilitation costs. Under U.S. GAAP, all these items would be included in production costs. The items appearing in the reconciliation of production costs in the table above includes the impact of the other differences between IFRS and U.S. GAAP, such as those relating to exploration costs, business combinations and provision for environmental rehabilitation, discussed further below. | ||
c) | Reversal of proportionate consolidation | |
For management reporting purposes, the Company account for its investments in joint ventures using the proportional consolidation method. Under U.S. GAAP, the equity method of accounting is applied in accounting for all incorporated joint ventures. | ||
d) | Exploration costs | |
For management reporting purposes, certain exploration costs are capitalized. U.S. GAAP does not permit the capitalization of exploration and evaluation expenditure prior to the establishment of a bankable feasibility study. | ||
e) | Business combinations — goodwill | |
For management reporting purposes, prior to 2004, goodwill was amortized using the straight-line method over the estimated life of the underlying asset. Under U.S. GAAP, goodwill is not subject to amortization. Instead, the Company evaluates, on at least an annual basis, the carrying amount of |
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goodwill to determine whether current events and circumstances indicate that such carrying amount may no longer be recoverable. From July 1, 2004, this is in line with management’s reporting. | ||
f) | Business combinations — acquisition date | |
For management reporting purposes, the Free Gold Company results have been included from the date upon which the Company assumed joint operational control of the assets together with the seller. Under U.S. GAAP, the Company accounts for its interest in the Free Gold Company from the date that all the conditions precedent to the transaction were met, and the assets were no longer subject to joint operational control. |
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g) | Business combinations — purchase price | |
For management reporting purposes, the purchase price of the initial investment in Free Gold was determined as the sum of a cash payment, the fair value of an interest free loan and the taxes payable on the transaction by the seller. Under U.S. GAAP, the purchase price was determined as the sum of a cash payment, the fair value of the interest free loan, the taxes payable on the transaction by the seller, offset by the cash flows generated by the joint venture during the period the assets were subject to joint operational control with the seller, as the cash flows generated during this period were for the account of the joint venture. | ||
In addition, for management reporting purposes, traded equity securities issued as consideration in a business combination are valued on the date they are issued. Under U.S. GAAP, traded equity securities issued as consideration in a business combination are valued a few days before and after the terms of the transaction are announced. | ||
h) | Impairment of assets | |
For management reporting purposes, impairment is assessed on discounted cash flows. If impairment is indicated, assets are written down to higher of fair value less costs to sell and value in use based on discounted cash flows. Reversal of impairment losses is required in certain circumstances, except for goodwill. Under U.S. GAAP, impairment is assessed on undiscounted cash flows for assets to be held and used. If less than carrying amount, impairment loss is measured using market value or discounted cash flows. The reversal of previously recognized impairments is also not permitted. | ||
i) | Provision for environmental rehabilitation | |
(i) | Revisions to the asset retirement obligation | |
For management reporting purposes, all changes in the carrying amount of the obligation are recognized in the income statement. Changes resulting from revisions in the timing or amount of estimated cash flows are recognized as an increase or decrease in the carrying amount of the asset retirement obligation and the associated capitalized retirement cost for U.S. GAAP. | ||
In addition, the current discount rate is applied to measure the retirement obligation for management reporting purposes. Under U.S. GAAP any decreases in the asset retirement obligation as a result of downward revisions in cash flow estimates should be treated as a modification of an existing asset retirement obligation, and should be measured at the historical discount rate used to measure the initial asset retirement obligation. | ||
(ii) | Amortization of rehabilitation asset | |
The rehabilitation assets carrying value for management reporting purposes is different to that under U.S. GAAP, mainly as a result of the unique transition provisions under SFAS No. 143 and revisions to the asset retirement obligation described above, which results in a different amortization charge. | ||
j) | Deferred taxation | |
For management reporting purposes, deferred tax assets and liabilities are classified net as non-current on the balance sheet. Under U.S. GAAP, deferred tax assets and liabilities are either classified as current or non-current, based on the classification of the related non-tax asset or liability for financial reporting purposes. Deferred tax assets not associated with an underlying asset or liability are classified based on the expected reversal period. | ||
k) | Borrowings | |
For management reporting purposes, the international unsecured fix rate convertible bond totaling R1,700 million is split between a debt component and an equity component. Under U.S. GAAP the entire loan is classified as debt. In addition, for management reporting purposes, debt issuance cost is set off against debt. Under U.S. GAAP debt issuance cost is recorded as a deferred cost within accounts receivable. | ||
l) | Transfer of ARM shares to the ARM Trust | |
Although the transfer of the ARM shares to the ARM Trust was also not recognized for management reporting purposes, the Company ceased accounting for the increase in the fair value of ARM shares subsequent to the transfer of those shares to the ARM Trust. Under U.S. GAAP, the Company has continued to account for the investment as “available-for sale” with gains and losses arising from changes in the fair value of the shares excluded from earnings and included as a separate component of stockholders’ equity. In turn, under U.S. GAAP only, the Company recorded a derivative financial liability in respect of the increase in fair value of the shares and to reflect the fact that the upside on appreciation of the ARM shares now legally belongs to the intended beneficiaries of the ARM Trust. |
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