UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13a-16 OR 15d-16 UNDER THE SECURITIES
EXCHANGE ACT OF 1934
For August 19, 2003
Harmony Gold Mining Company
Limited
Suite No. 1
Private Bag X1
Melrose Arch, 2076
South Africa
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-
F or Form 40-F.)
Form 20-F X Form 40-F
(Indicate by check mark whether the registrant by
furnishing the information contained in this form
is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.)
Yes No X
"This Report on Form 6-K is incorporated by reference into the registration statement on Form F-3
(file no. 333-13516) for Harmony Gold Mining Company Limited, filed on December 23, 2002, and into the prospectus that forms a part of that registration statement."
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
Action required
1. If you are in any doubt as to the action that you should take, please consult your stockbroker, banker, accountant, legal adviser or other professional adviser
immediately.
2. If you have sold or otherwise disposed of all your shares in Harmony Gold Mining Company Limited ("Harmony"), this circular, together with the attached
form of proxy (blue), should be handed to the purchaser of such shares, or to the stockbroker, banker or agent through whom the disposal was effected.
3. Certificated shareholders and shareholders who hold dematerialised shares and have elected "own name" registration in the sub-register through a Central
Securities Depository Participant ("CSDP") who are unable to attend the general meeting of shareholders of Harmony, to be held at 09:00 on 1 September 2003 at the corporate office of Harmony, Randfontein Office Park, Corner Main Reef Road and Ward Avenue, Randfontein, but wish to be represented thereat, should complete and return the attached form of proxy (blue) in accordance with the instructions contained therein to the transfer secretaries of Harmony, Ultra Registrars (Pty) Limited, 11 Diagonal Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000) or Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, England, so as to be received by not later than 09:00 on 28 August 2003.
4. Shareholders who hold dematerialised shares through a CSDP or broker, other than those who have elected "own name" registration, and who wish to attend
the general meeting must request their CSDP or broker to provide them with a Letter of Representation or should advise their CSDP or broker as to what action they wish to take. This must be done in terms of the agreement entered into between them and the CSDP or broker. Shareholders who have dematerialised their shares, other than those who have elected "own name" registration, must not complete and return the attached form of proxy.
Harmony Gold Mining Company Limited
(Incorporated in the Republic of South Africa) (Registration number 1950/038232/06) Share code: HAR ISIN: ZAE000015228
("Harmony" or the "company")
CIRCULAR TO SHAREHOLDERS
relating to an authority for
- the increase of Harmony's authorised ordinary share capital from 250 000 000 ordinary shares with a par value of
50 cents each to 350 000 000 ordinary shares with a par value of 50 cents each ("Harmony shares");
- the approval of the merger between Harmony and African Rainbow Minerals Gold Limited ("ARMgold"), the
consideration for which will be discharged by the issue of up to 64 000 000 Harmony shares to ARMgold, in the ratio of 2 Harmony shares for every 3 ARMgold shares, to be implemented by way of a scheme arrangement proposed by Harmony between ARMgold and its shareholders, in terms of section 311 of the Companies Act, 1973 (Act 61 of 1973), as amended,
and incorporating
- information relating to Harmony as required for inclusion in a pre-listing statement in compliance with the Listings
Requirements of the JSE Securities Exchange South Africa;
- a notice of a general meeting of shareholders; and
- a form of proxy for certificated and own name dematerialised shareholders.
TM
Financial adviser
Sponsor
Reporting accountants
Technical adviser
Attorneys
Date of issue of this circular: 7 August 2003
Contents
Page
Corporate information
Inside front cover
Important dates and times
3
Definitions
4
Circular to shareholders
1. Introduction
7
2. Increase in authorised ordinary share capital
7
3. Background and rationale for the merger
8
4. Background and information on ARMgold
8
4.1
Introduction
8
4.2
Nature of business
8
4.3
Strategy and prospects
8
4.4
Litigation statement
9
4.5
Financial information on ARMgold
9
4.6
Details of any significant contracts
9
4.7
Material changes
9
5. The merger consideration and salient terms
9
6. Financial effects of the merger on Harmony and ARMgold
10
7. Conditions precedent
11
8. General meeting and shareholder approval
12
8.1
General meeting
12
8.2
Shareholder approvals
12
9. Exchange Control Regulations
12
10. Information on Harmony
12
10.1 Introduction
12
10.2 Nature of business
12
10.3 Strategy and prospects
13
11. Directorate
13
11.1 Directors
13
11.2 Appointment and remuneration of directors
15
11.3 Directors' interests in capital of Harmony
16
11.3.1 Details of Harmony shares held by directors
16
11.3.2 Details of share options held by directors
16
11.4 Directors' responsibility statement
17
1
2
Page
12. Share capital
17
12.1 Capitalisation
17
12.2 Voting rights and rights to dividends
17
12.3 Share issues, consolidation and sub-division of shares
18
12.4 Preferential rights over Harmony shares
18
12.5 Major shareholders
19
13. Financial information of Harmony
19
13.1 Information relating to Harmony
19
13.2 Working capital
19
13.3 Borrowings and material loans
19
13.4 Material inter-company finance
20
13.5 Contingent liabilities and capital commitments
20
13.6 Details of materials loans by Harmony Group
20
14. General
20
14.1 Litigation statement
20
14.2 Expenses
20
14.3 Experts consent
20
14.4 Corporate governance
20
14.5 Significant contracts
22
14.6 Acquisitions and disposals of property
22
15. Documents available for inspection
22
Annexure 1
Extracts from the Memorandum and Articles relating to the directors of Harmony
23
Annexure 2
Report of the independent reporting accountants on the pro forma financial effects of the merger to the shareholders of Harmony
26
Annexure 3
Pro forma financial information of Harmony
28
Annexure 4
Historical financial information of Harmony
30
Annexure 5
Historical information of ARMgold
63
Annexure 6
Significant contracts of ARMgold
74
Annexure 7
Trading history of Harmony shares
76
Annexure 8
Competent Person's Report on Harmony
77
Annexure 9
Acquisitions and disposals of companies, businesses and properties
233
Annexure 10 Schedule of material loans to Harmony Group
235
Annexure 11 Schedule of material loans by Harmony Group
237
Annexure 12 Contingent liabilities and capital commitments
238
Annexure 13 Subsidiary operating companies incorporated in South Africa
239
Annexure 14 Details regarding inter-company finance
240
Annexure 15 Schedule of pending legal proceedings
241
Notice of general meeting
242
Form of proxy (blue)
Attached
Important dates and times
2003
Last day to lodge forms of proxy for the general meeting to be received by 09:00 on
28 August 2003
Forms of proxy for the scheme meeting to be received by
29 August 2003
General meeting to be held at Harmony's corporate office, Randfontein Office Park, Corner of Main Reef Road and Ward Avenue, Randfontein, P.O. Box 2, Randfontein, 1760, South Africa, at 09:00 on
1 September 2003
Announcement regarding results of general meeting of shareholders released on SENS and other relevant exchanges on
1 September 2003
Scheme meeting to be held at 10:00 on
1 September 2003
Announcement regarding results of scheme meeting and declaration of ARMgold dividend released on SENS and other relevant exchanges on
1 September 2003
Announcement regarding results of general meeting published in the South African press on
2 September 2003
Court hearing to sanction the scheme on
9 September 2003
Expected announcement regarding results of scheme released on SENS and other relevant exchanges on
9 September 2003
Expected announcement regarding results of scheme published in the South African press on
10 September 2003
Last day to trade for ARMgold shareholders wishing to receive the consideration shares and the ARMgold dividend on
12 September 2003
Suspension of listing of ARMgold shares at commencement of trading on
15 September 2003
Consideration record date, being the date on which shareholders must be recorded in the register of ARMgold by 17:00 to receive the consideration shares on
19 September 2003
Operative date of the scheme at commencement of trading on
22 September 2003
Termination of listing of the ARMgold shares on the JSE at commencement of trading on
23 September 2003
Notes:
1.
The definitions set out on pages 4 to 6 apply to the information on this page.
2.
All times shown in this circular are South African local times.
3.
4.
Copies of this circular may be obtained from:
- Harmony;
- Ultra Registrars (Pty) Limited; and
- St James's Corporate Services Limited,
at the addresses set out on the inside front cover.
3
4
Definitions
In this circular and its annexures, unless otherwise indicated:
- the words in the first column have the meanings stated opposite them in the second column, words in the singular
include the plural and vice versa, words signifying one gender include the other genders, and references to a person include references to juristic persons and associations of persons and vice versa;
- all monetary values are in South African rands and cents unless otherwise stated; and
- all times indicated are South African local times.
"Act"
the Companies Act, 1973 (Act 61 of 1973), as amended;
"ADRs"
American Depository Receipts;
"ARMgold"
African Rainbow Minerals Gold Limited (registration number 1997/015869/06), incorporated in South Africa and listed on the JSE;
"ARMI"
African Rainbow Minerals and Exploration Investment (Proprietary) Limited (registration number 1997/020158/07), incorporated in South Africa;
"ARMgold shares"
ordinary shares having a par value of 0.1 cents each in the issued share capital of ARMgold;
"ARMgold shareholders"
holders of ARMgold shares;
"Articles"
the articles of association of Harmony;
"Avmin"
Anglovaal Mining Limited (registration number 1933/004580/06), incorporated in South Africa and listed on the JSE;
"board of directors" or "directors"
the board of directors of Harmony;
or "board"
"business day"
any day, excluding Saturday and Sunday, on which banking institutions are generally open for normal banking business in Johannesburg;
"certificated shares"
Harmony shares which have not yet been dematerialised in terms of STRATE, title to which is represented by a share certificate or other document of title;
"certificated shareholders"
holders of certificated shares;
"circular"
this bound document, dated 7 August 2003, including the annexures, the attached notice of general meeting and form of proxy;
"completion date"
the date upon which the merger becomes effective;
"conditions"
the conditions precedent to which the merger is subject as reflected in paragraph 7;
"consideration shares"
"CSDP"
a Central Securities Depository Participant as defined in section 91A of the Act;
"dematerialised shares"
Harmony shares which have been dematerialised through a CSDP or broker;
"dematerialised shareholders"
holders of dematerialised shares;
"Employee Share Schemes"
"Free Gold"
"general meeting"
"Harmony"
"Harmony Group"
Harmony and its subsidiaries;
"Harmony shares"
"Harmony shareholders" or
holders of Harmony shares from time to time;
"shareholders"
"IDC"
Industrial Development Corporation of South Africa Limited;
"JSE"
the JSE Securities Exchange South Africa;
"Kalgold"
"last practicable date"
the last practicable date prior to finalisation of this circular, being 1 August 2003;
"LSE"
the London Stock Exchange plc;
"merger"
"merger agreement'
"NYSE"
the New York Stock Exchange;
"scheme"
"scheme meeting"
5
6
"SENS"
the Securities Exchange News Service;
"Simane"
Simane Security Investments (Pty) Limited;
"South Africa"
the Republic of South Africa;
"SRK"
"SRP"
the Securities Regulation Panel;
"St. Helena"
the St. Helena Mine located in the south-western rim of the Witswatersrand Basin;
"STRATE"
"substitute offer"
"transfer secretaries"
Harmony Gold Mining Company Limited
(Incorporated in the Republic of South Africa) (Registration number 1950/038232/06)
Directors
Adam Fleming*# Bernard Swanepoel Ferdi Dippenaar Frank Abbott Ted Grobicki John Smithies*# Mike Pleming*# Nolitha Fakude*# Lord Renwick of Clifton KCMG*# Simo Lushaba*#
* Independent # Non-executive
Circular to shareholders
PART I
1.
INTRODUCTION
2.
INCREASE IN AUTHORISED ORDINARY SHARE CAPITAL
7
TM
8
PART II
3.
BACKGROUND AND RATIONALE FOR THE MERGER
4.
BACKGROUND INFORMATION ON ARMGOLD
4.1
Introduction
4.2
Nature of business
4.3
Strategy and prospects
4.4
Litigation statement
4.5
Financial information on ARMgold
All financial information on ARMgold is set out in Annexure 5.
4.6
Details of any significant contracts
ARMgold's significant contracts are reflected in Annexure 6.
4.7
Material changes
5.
THE MERGER CONSIDERATION AND SALIENT TERMS
The merger consideration
As consideration for the merger, Harmony will issue the consideration shares to ARMgold shareholders.
In addition:
- prior to the completion date, ARMgold has the right to declare and pay a cash dividend of 500 cents per ARMgold
share to ARMgold shareholders recorded as such on a date prior to the completion date, provided that it shall be entitled to increase the amount of such dividend if the circumstances envisaged below arise;
- Harmony shall be entitled, at any time prior to the date which is not less than 7 days prior to the date of the
scheme meeting, to declare and pay any cash dividend to Harmony shareholders recorded as such on any day prior to the completion date, provided that, upon declaration of such dividend, ARMgold shall be entitled to increase the amount of the dividend it is obliged to declare and pay as aforesaid by an amount equal to two-thirds of the dividend declared per Harmony share or 100 cents per ARMgold share, whichever is the greater.
Harmony has undertaken in favour of ARMgold as follows:
- it will not declare and pay any dividend during the period reckoned from 7 days prior to the scheme meeting and
the completion date; and
- insofar as it is lawfully able, its next dividend following the completion date will be:
- not less than 150 cents per Harmony share, so as to ensure that each ARMgold shareholder who receives
consideration shares pursuant to the merger will, together with the dividend which ARMgold is obliged to declare, receive a minimum dividend of 600 cents per ARMgold share acquired from him;
- declared and paid as soon as possible after the completion date.
9
10
Salient terms
- ARMgold and Harmony intend to integrate their respective boards and executive teams in an effective manner so
as to retain their respective strengths and attributes, particularly ARMgold's strong empowerment credentials and Harmony's international profile and global reach;
- with that objective in mind, ARMgold and Harmony intend to reorganise the board of directors so that on or as
soon as possible after the completion date the board will conform with the following requirements:
- it will consist of not more than 19 (nineteen) directors, of whom not more than 8 (eight) will be executive
directors;
- it will include 10 (ten) directors who will be nominated by ARMgold, of whom not more than 4 (four) will be
executive directors;
- any resignations from the present board which are necessary to permit the appointment of ARMgold's
nominees will be obtained; and
- Mr Patrice Motsepe will be appointed non-executive chairman of the board for a period of at least 3 (three)
years from the completion date.
- In order to retain in Harmony the significant empowerment credentials present in and identified with ARMgold
following the completion date, Mr Patrice Motsepe's functions and responsibilities as the non-executive chairman of Harmony will be broader and more extensive than those normally allocated to a non-executive chairman.
The identities of the directors nominated to the board of directors by ARMgold are as follows:
Executive directors
A J Wilkens P Taljaard W M Gule D V Simelane
Non-executive directors
P T Motsepe Dr M M M M Bakane-Tuoane M W King C M L Savage Dr R V Simelane Dr S P Sibisi
6.
FINANCIAL EFFECTS OF THE MERGER ON HARMONY AND ARMGOLD
Harmony before
Harmony after %
merger
1
merger
Change
Basic earnings per share (cents)2
635
645
1,6
Headline earnings per share (cents)2
622
657
5,6
Net asset value per share (cents)3
4 850
5 858
20,8
Net tangible asset value per share (cents)3
4 850
5 274
8,7
Weighted average number of shares in issue
175 850 256
239 516 923
Number of shares in issue
184 163 265
247 829 932
Notes:
1. The Harmony before merger financial information was extracted from Harmony's published quarterly reports for the nine-month period
ended 31 March 2003.
2. The basic and headline earnings per share effects are based on the assumption that the merger was effective 1 July 2002.
3. The net asset and net tangible asset value per share effects are based on the assumption that the merger was effective 31 March 2003.
4. Earnings and headline earnings per share after the merger are after the following adjustments:
(a) the consolidation of ARMgold's earnings and headline earnings for the nine months ended 31 March 2003, after adjusting for the after
tax effect of the lower interest earned during the period as the result of the payment of a special dividend of 500 cents per ARMgold share, assumed to have been paid at the beginning of the period;
(b) the fair value adjustment, arising on the merger, is amortised over the lives of the mines, resulting in a charge of R105,9 million for the
nine months period (after tax);
(c) goodwill, arising from the merger, is amortised over a period of 17 years and results in a charge of R65,1 million for the nine month
period; and
(d) amortisation of the goodwill arising on the merger is reversed for determination of headline earnings.
5. Net asset and tangible asset values per share after the merger are after the following adjustments:
(a) the consolidation of ARMgold's assets and liabilities, at fair value, as at 31 March 2003, after adjusting for the payment of a special
dividend of 500 cents per ARMgold share;
(b) the issue of 63 666 667 shares at R87,75 per share as consideration.
7.
CONDITIONS PRECEDENT
7.1
The implementation of the scheme is conditional, inter alia, upon:
-
the passing of the special resolution and ordinary resolutions set out in the notice of general meeting attached to this circular by the Harmony shareholders at the general meeting, to enable Harmony to propose and implement the scheme;
-
the approval of the scheme by ARMgold shareholders at the scheme meeting;
-
the sanctioning of the scheme by the High Court of South Africa in accordance with the requirements of the Act;
-
the registration of the High Court's Order sanctioning the scheme by the Registrar of Companies in accordance with the requirements of the Act;
-
the obtaining of all rulings and approvals required from any regulatory authorities and from the JSE and the SRP;
-
the JSE approving the listing of the consideration shares on the JSE; and
- the completion date occurring by no later than 31 December 2003
7.2
The implementation of the substitute offer, which will be deemed to be made if the scheme fails as a result of the non-fulfilment of the conditions which specifically relate to the scheme, is conditional upon:
-
the passing of the special resolution and ordinary resolutions set out in the notice of general meeting attached to this circular by the Harmony shareholders at the general meeting, to enable Harmony to propose and implement the substitute offer;
-
offerees holding at least 90% (or such lesser percentage as Harmony may determine) of the ARMgold shares accepting the substitute offer;
-
the registration of the Harmony shares comprising the substitute offer consideration in the United States of America if and to the extent required by the Securities Exchange Commission; and
-
the substitute offer becoming unconditional by 31 December 2003.
11
12
8.
GENERAL MEETING AND SHAREHOLDER APPROVAL
8.1
General meeting
8.2
Shareholder approvals
9.
EXCHANGE CONTROL REGULATIONS
In terms of the Exchange Control Regulations of the Republic of South Africa:
- the share certificates of non-resident shareholders issued by the transfer secretaries in South Africa will be
endorsed "Non-Resident";
- new share certificates, dividend and residual cash payments based on emigrants' shares controlled in terms of the
Exchange Control Regulations will be forwarded to the Authorised Dealer in foreign exchange controlling their blocked assets. The election by emigrants for the above purpose must be made through the Authorised Dealer in foreign exchange controlling their blocked assets; and
- dividend and residual cash payments due to non-residents are freely transferable from South Africa.
PART III
10. INFORMATION ON HARMONY
10.1 Introduction
10.2 Nature of business
10.3 Strategy and prospects
11. DIRECTORATE
11.1 Directors
The current functions, nationalities and addresses of the directors of Harmony are set out below:
Name
Function
Address
A R Fleming
Non-executive Chairman
Harmony Corporate Office, Randfontein Office Park,
(British)
Corner of Main Reef Road and Ward Avenue, Randfontein, PO. Box 2, Randfontein, 1760, South Africa
Z B Swanepoel
Chief Executive
Harmony Corporate Office, Randfontein Office Park,
(South African)
Corner of Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa
F Abbott
Financial Director
Harmony Corporate Office, Randfontein Office Park,
(South African)
Corner of Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa
T S A Grobicki
Executive Director
Harmony Corporate Office, Level 1, 10 Ord Street,
(South African)
West Perth, WA, 6005
F Dippenaar
Marketing Director
Harmony Corporate Office, Randfontein Office Park,
(South African)
Corner of Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa
V N Fakude
Non-executive Director
1st Floor Block C, Sandhurst Office Park,
(South African)
Corner Katherine Street and Rivonia Road, Sandton, PO Box 781220, Sandton, 2146
Lord Renwick of Clifton
Non-executive Director
JPMorgan plc., 125 London Wall, London EC2Y 6A J,
KCMG
United Kingdom
(British)
13
14
Name
Function
Address
D S Lushaba
Non-executive Director
522 Impala Road, Glenvista, 2058, PO Box 1127,
(South African)
Johannesburg, 2000
M F Pleming
Non-executive Director
30 Hydewoods, Townshend Road, Hyde Park, 2196
(South African)
J G Smithies
Non-executive Director
Point House, Eastford, Knysna 6570, PO Box 930,
(South African)
Knysna, 6570
Further details on the executive directors of Harmony are as follows:
11.2 Appointment and remuneration of directors
The remuneration of directors for the year ended 30 June 2002 was as follows:
Directors'
Salaries
Retirement
Bonuses paid
fees
and benefits
Contributions
during the year
Total
R'000
R'000
R'000
R'000
R'000
Executives:
F Abbott
-
977
81
2 000
3 058
F Dippenaar
-
923
75
2 000
2 998
T S A Grobicki
-
1 279
115
2 000
3 394
Z B Swanepoel
-
1 597
150
3 000
4 747
Total executive _
4 776
421
9 000
14 197
Non-executives:
A R Fleming
100
-
-
-
100
A M Edwards
100
-
-
-
100
M F Pleming
100
-
-
-
100
R W Renwick
100
-
-
-
100
G S Sibiya
100
-
-
-
100
J G Smithies
Total non-executive
500
-
-
-
500
Total
500
4 776
421
9 000
14 697
Remuneration is not expected to change as a result of the transaction.
15
16
- disqualified by any court from acting as a director of a company or from acting in the management or
conduct of the affairs of any company or been the subject of any public criticisms by statutory or regulatory authorities (including recognised professional bodies);
- convicted of an offence resulting from dishonesty, fraud or embezzlement or convicted in any jurisdiction
of any criminal offence or any offence under legislation relating to the Act;
jurisdiction or been a director of any company at the time or within the 12 months preceding any of the following events taking place: receiverships, compulsory liquidations, creditors voluntary liquidations, administrations, company voluntary arrangements or any composition or arrangement with creditors generally or any class of creditors; or
barred from entry into any profession or occupation.
11.3 Directors' interests in capital of Harmony
11.3.1 Details of Harmony shares held by directors at 31 March 2003 are set out below:
31 March 2003
Beneficial
Non beneficial
Share Held Held
schemes
%
directly
%
indirectly
%
F Abbott
-
-
-
-
-
-
F Dippenaar
-
-
-
-
-
-
T S A Grobicki
-
-
10 000
0,003
30 000
0,01
Z B Swanepoel
-
-
-
-
-
-
A R Fleming
-
-
-
-
4 600 000
1,84
A M Edwards
-
-
-
-
-
-
M F Pleming
-
-
-
-
-
-
V N Fakude
-
-
-
-
-
-
D S Lushaba
-
-
-
-
-
-
J G Smithies
-
-
-
-
-
-
11.3.2 Details of share options held by directors at 31 March 2003 are set out below:
% of total
Number of
option in
Issue price
options
issue
Issue date
(Rands)
Expiry date
F Abbott
73 400
0,57
20/11/2001
49,60
20/11/2011
F Dippenaar
20 000
0,16
31/01/2001
35,40
31/01/2010
73 400
0.57
20/11/2001
49,60
20/11/2011
T S A Grobicki
98 000
0,76
21/09/1999
22,90
21/09/2009
40 000
0,31
31/01/2000
35,40
31/01/2010
131 000
1,02
20/11/2001
49,60
20/11/2011
Z B Swanepoel
13 350
0,10
31/01/2000
35,40
31/01/2010
128 800
1,00
20/09/2001
49,60
20/09/2011
A R Fleming
-
-
-
-
-
A M Edwards
-
-
-
-
-
M F Pleming
-
-
-
-
-
J G Smithies
-
-
-
-
-
V N Fakude
-
-
-
-
-
D S Lushaba
-
-
-
-
-
11.4 Directors' responsibility statement
12. SHARE CAPITAL
12.1 Capitalisation
At 31 March 2003
Actual
Pro forma
Authorised ordinary share capital
Ordinary shares
(millions)
250
350
R millions
125
175
Issued ordinary share capital
Ordinary shares
(millions)
184
248
R millions
92
124
Share premium (additional paid-in capital)
R millions
6 760
12 314
Retained earnings
R millions
2 480
2 480
Other
R millions
(400)
(400)
Total shareholders' equity
R millions
8 932
14 518
12.2 Voting rights and rights to dividends
17
18
12.3 Share issues, consolidation, and sub-division of shares
12.3.1
12.3.2
12.3.3
12.3.4
12.3.5
12.3.6
12.3.7
12.3.8
12.3.9
12.4 Preferential rights over Harmony shares
12.4.1 Employee Share Schemes
12.4.2 Listed warrants in respect of Harmony shares
12.5 Major shareholders
Number of shares
Percentage
Name of shareholder
(million)
shareholding
Bank of New York
78,4
42,6
JP Morgan Chase Bank
11,3
6,13
JP Morgan (Pty) Limited
10,9
5,97
Simane Security Investments (Pty) Limited
10,9
5,95
13. FINANCIAL INFORMATION ON HARMONY
13.1 Information relating to Harmony
13.1.1 Financial information relating to Harmony is set out in Annexure 4.
13.1.2 Annexure 2 contains the accountant's report on Harmony
13.1.3 Annexure 7 sets out the trading history of Harmony shares on the JSE since 1 June 2000.
13.1.4 There have been no material changes with regards to the financial or trading position of Harmony since
the quarter ended 31 March 2003.
13.1.5 Pro forma financial effects are set out in Annexure 3.
13.1.6 A competent person's report on the mining assets of Harmony is reflected in Annexure 8.
13.2 Working capital
13.3 Borrowings and material loans
No loan capital is outstanding.
19
20
13.4 Material inter-company finance
All details regarding inter-company finance are set out in Annexure 14.
13.5 Contingent liabilities and capital commitments
Details of contingent liabilities and capital commitments are reflected in Annexure 12.
13.6 Details of material loans by Harmony Group
Details of material loans made by Harmony Group are reflected in Annexure 11.
PART V
14. GENERAL
14.1 Litigation statement
14.2 Expenses
14.3 Experts consent
14.4 Corporate Governance
Board of directors and board committees
Audit Committee
Health Safety and Environmental Audit Committee
Remuneration Committee
Insider trading
Risk management and internal control
21
22
Integrated sustainability
14.5 Significant contracts
14.6 Acquisitions and disposals of property
15. DOCUMENTS AVAILABLE FOR INSPECTION
- a signed copy of this circular;
- the Memorandum of Association and the Articles;
- the merger agreement;
- the significant contracts relating to ARMgold referred to in paragraph 4.6;
- the written consents of advisers to Harmony to the publication of their names in this circular in the form and
context in which they appear;
- copies of service agreements with directors;
- the Competent Person's Report;
- the audited annual reports of Harmony for the three financial years ended 30 June 2002; and
- report of PricewaterhouseCoopers Inc. on the pro forma financial information of Harmony.
Signed by Frank Abbott and Ferdi Dippenaar on 5 August 2003 on behalf of the directors.
Harmony Gold Mining Company Limited
Annexure 1
Extracts from the Memorandum and Articles relating to the directors of Harmony
Extracts from the Articles of Association of Harmony:
1.
Qualification of directors
directors."
2.
Remuneration of directors
"85. The directors shall be entitled to such remuneration as may be determined from time to time by the Company
in general meeting or by a quorum of disinterested directors. In addition, the directors shall be entitled to all reasonable expenses in travelling to and from meetings of the directors."
"86. If any director be called upon to perform extra services or to make any special exertions in going or residing
abroad, or otherwise, for any of the purposes of the Company, the Company in general meeting or a quorum of disinterested directors may determine the remuneration to be paid to any such director for such extra services or special exertions. Such remuneration may be so determined either by way of a salary or a fixed sum or a percentage of profits or otherwise and such remuneration may be either in addition to, or in substitution for any other remuneration determined under article 85. The Company may also refund to such director all reasonable expenses incurred by him while acting in the course of the business of the Company."
3.
Disclosure of interests
"88.(a) Save as set out in sub-paragraph (d), a director shall not vote in respect of any contract or arrangement in
which he is interested (and if he shall do so his vote shall not be counted) nor shall he be counted for the purpose of any resolution regarding the same, in the quorum present at the meeting, but this shall not apply to any of the following matters:
(i)
Any arrangement for giving to him any security or indemnity in respect of money lent by him or obligation undertaken by him for the benefit of the Company.
(ii) Any arrangement for the giving by the Company of any security to a third party in respect of a debt
or obligation of the Company for which he himself has assumed responsibility in whole or in part under a guarantee or indemnity or by the deposit of a security.
(iii) Any contract by him to subscribe for or underwrite shares or debentures of the Company.
(iv) Any contract or arrangement with any other company in which he is interested in shares representing
no more than one per cent of either any class of the equity share capital, or the voting rights of that company.
(v) Any such scheme or fund as is referred to in Article 146, which relates both to 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.
(vi) Any contracts, transactions or dealings of any nature whatsoever between the Company and any other
company:
(a) which is its subsidiary, where the director's interest in the contract, transaction or dealing is only
by virtue of the other company being a subsidiary of the Company; or
(b) in which it is a shareholder or is otherwise interested, where the director's interest in the contract,
transaction or dealing is only by virtue of the Company being a shareholder of or otherwise interested in the other company; or
23
24
(c) which is its holding company, where the director's interest in the contract, transaction or dealing
is only by virtue of the other company being the Company's holding company; or
(d) which is a subsidiary of its holding company, where the director's interest in the contract,
transaction or dealing is only by virtue of the other company being a subsidiary of the Company's holding company; or
(e) in which its holding company is a shareholder or is otherwise interested, where the director's
interest in the contract, transaction or dealing is only by virtue of the Company's holding company being a shareholder or otherwise interested in the other company."
"88.(b) The provisions of this Article may by the Company in general meeting at any time be suspended or relaxed
to any extent and either generally or in respect of any particular contract, arrangement or transaction and any particular contract, arrangement or transaction carried out in contravention of this Article may be ratified by the Company in general meeting. Notwithstanding the provisions of article 58, any decision by the Company in general meeting in terms of this article 88(b) shall be decided by a 75% (seventy five percent) majority of votes."
"88.(c) A director, notwithstanding his interest may be counted in the quorum present at any meeting whereat he
or any other director is appointed to hold any office or place of profit under the Company or whereat the directors resolve to exercise any of the rights of the Company (whether by the exercise of voting rights or otherwise) to appoint or concur in the appointment of a director to hold any office or place of profit under any other company or whereat the terms of any such appointment as hereinbefore mentioned are considered or varied, and he may vote on any such matter other than in respect of his own appointment or the arrangement or variation of the terms thereof."
4.
Borrowing powers
"124. Subject to articles 125 and 127 the directors may from time to time at their discretion raise or borrow or
secure the payment of any sum or sums of money for the purposes of the Company as they see fit, and in particular may pass mortgage bonds or issue debentures or debenture stock of the Company whether unsecured or secured by all or any part of the property of the Company, whether present or future."
"125. Where the Company is a listed company and is not a subsidiary of a listed company, the directors shall so
restrict the borrowing of the Company and exercise all voting and other rights or powers of control exercisable by the Company in relation to its subsidiary companies (as regards subsidiary companies in so far as by such exercise they can procure) and that the aggregate principal amount outstanding in respect of monies so raised, borrowed or secured by the Company and any of its subsidiary companies for the time being (hereinafter referred to as "the Group"), as the case may be, exclusive of inter-company borrowings, shall not except with the consent of the Company in general meeting, exceed R40 000 000 (forty million Rand) or the aggregate from time to time of the issued and paid-up capital of the Company, together with the aggregate of the amounts standing to the credit of all distributable and non-distributable reserves (including minority interests in subsidiary companies and provision for deferred taxation), any share premium accounts of the Company and its subsidiaries certified by the Company's auditors and as attached to or forming part of the last annual financial statements of the Company or of the Group, as the case may be, which shall have been drawn up to be laid before the Company in general meeting at the relevant time, whichever is the greater; provided that no such sanction shall be required to the borrowing of any monies intended to be applied and actually applied within 90 (ninety) days in the repayment (with or without any premium) of any monies then already borrowed and outstanding and notwithstanding that such new borrowing may result in the abovementioned limit being exceeded."
"126. For the purposes of article 125 "borrowings" shall:
(a) without limitation, include monetary guarantees executed by the Company or by any controlled
company or subsidiary of the Company other than:
(i) guarantees in respect of the borrowing of moneys, where the amount of such borrowing is already
included in the aggregate referred to in article 125;
(ii) guarantees of the obligations of any subsidiary where such obligations arise from acts which, if they
had been performed by the Company as principal, would not constitute borrowings within the meaning of this Article;
provided that where the guarantees have been executed to secure bank overdraft or other facilities, of a variable nature, such guarantees shall only be deemed to be borrowings to the extent to which such overdraft or other facilities are used from time to time;
(b) not include any borrowing by the Company from any of its subsidiaries or by any of its subsidiaries from
the Company or from any other of its subsidiaries."
"127. In the event that the Company is a subsidiary of a listed holding company, the total amount owing by the
Company in respect of monies so raised, borrowed or secured shall not exceed the amount authorised by its listed holding company."
"128. No lender or person dealing with the Company shall be obliged to see or enquire whether the restrictions
imposed by articles 125 and 127 are observed."
"129. Debentures, debenture stock, bonds and other instruments of debt may be issued at par or at a discount or
at a premium, and with any special privileges as to redemption, surrender and drawings, provided that no special privileges as to allotment of shares or stock, attending and voting at general meetings, appointment of directors or otherwise shall be given save with the sanction of the Company in general meeting."
5.
Appointment of directors and managing directors
"79.
The directors shall have power at any time to appoint any eligible person as a director, either to fill a casual vacancy, or as an addition to the Board, but the total number of the directors shall not at any time exceed the maximum number fixed. Any director so appointed shall hold office only until the next following annual general meeting of the Company and then shall be eligible for election."
"110. The directors may from time to time appoint one or more of their body to any executive office in the
Company, and may from time to time remove or dismiss the person or persons so appointed and appoint another person or persons in his or their place or places. Every such appointment shall be made by a quorum of disinterested directors. No director shall be appointed to any such office for a period in excess of 5 (five) years at any one time."
"111. If a director is appointed to any executive office in the Company the contract under which he is appointed
may provide that he shall not for a period of 5 (five) years or for the period during which he continues to hold that office, whichever period is the shorter, be subject to retirement by rotation. In such case he shall not be taken into account in determining the retirement of directors by rotation. Notwithstanding the foregoing, where the Company is a listed company the number of directors who may be appointed to an executive office on the condition that they shall not be subject to retirement by rotation shall not equal or exceed one-half of the total number of the directors at the time of such appointment."
"112. The remuneration of executive directors appointed in terms of article 110 shall from time to time be fixed by
a quorum of disinterested directors or by the Company in general meeting."
"113. The directors may from time to time entrust to and confer upon a managing director or other executive
director for the time being such of the powers exercisable under these Articles by the directors as they may deem fit, and may confer such powers either collaterally with or to the exclusion of and in substitution for all or any of the powers of the directors in that behalf, and may from time to time revoke, withdraw, alter or vary all or any of such powers."
"114. A person appointed to an executive office in terms of article 110 shall be subject to the like provisions relating
to vacation of office as the other directors of the Company, and if he ceases to hold the office of director from any cause he shall ipso facto cease to hold such executive office."
25
26
Annexure 2
"The Directors Harmony Gold Mining Company Limited PO Box 2 Randfontein 1760
25 July 2003
INTRODUCTION
RESPONSIBILITIES
BASIS OF OPINION
OPINION
In our opinion:
- the unaudited pro forma financial information has been properly compiled on the basis stated;
- such basis is consistent with the accounting policies of Harmony; and
- the adjustments are appropriate for the purposes of the unaudited pro forma financial information in terms of
section 8.29 of the JSE Listings Requirements.
Yours faithfully
PricewaterhouseCoopers Inc. Chartered Accountants (SA) Registered Accountants and Auditors
Sunninghill"
27
28
Annexure 3
Pro forma financial information of Harmony
The report thereon of PricewaterhouseCoopers Inc. is set out in Annexure 2 of this circular.
Specific issue
Harmony
ARMgold
of shares in
before
before Dividend consideration
Harmony
merger
merger
adjustment
of merger
after merger
R'million
R'million
R'million
R'million
R'million
Note 1
Note 2
Note 3
Note 4
BALANCE SHEET
ASSETS
Non-current assets
10 361
1 571
-
4 819
16 751
Tangible assets
8 986
1 571
-
3 371
13 928
Intangible assets
- -
-
1
448
1
448
Investments
1 375
-
-
-
1 375
Current assets
3 899
2 575
(471)
-
6 003
Inventories
449
-
-
449
Trade and other receivables
322
178
-
-
500
Cash and cash equivalents
3 128
2 397
(471)
-
5 054
Total assets
14 260
4 146
(471)
4 819
22 754
EQUITY AND LIABILITIES
Ordinary shareholders' interest
8 932
2 249
(471)
3 808
14 518
Outside shareholders' interest
Total shareholders' interest
8 932
2 249
(471)
3 808
14 518
Long-term borrowings
2 015
529
-
-
2 544
Deferred taxation
851
-
1 011
1 862
Deferred financial liabilities
491 491
Long-term provisions
686 248
-
-
934
Current liabilities
1 285
1 120
-
-
2 405
Trade and other payables
1 008
1 120
-
-
2 128
Taxation
272
-
-
272
Shareholders for dividends
5
-
-
-
5
Total equity and liabilities
14 260
4 146
(471)
4 819
22 754
Shares in issue (`000)
184 163
-
-
-
247 830
Net asset value per shares (cents)
4 850
-
-
-
5 858
Net tangible asset value per share (cents)
4 850
-
-
-
5 274
Notes:
1. Extracted from Harmony's published quarterly report for the period ended 31 March 2003.
2. Extracted from ARMgold's published quarterly report for the period ended 31 March 2003.
3. The net asset value per share has been adjusted to take account of a special dividend of 500 cents per ARMgold share before the merger. This
dividend is a condition of the merger and will be paid prior to the completion date.
4. The purchase price was calculated as 95 500 000 ARMgold shares at R58,50 per share on the date of the transaction (based on a Harmony share
price of R87,75 at close of business on 22 July 2003, being the most recent share price). The difference between the purchase price of R5 587 million and the net asset value at 31 March 2003 of R2 249 million, as well as the decrease in the net asset value due to the special dividend payment, is R3 808 million. After the deferred tax gross up of R1 011 million the total fair value adjustment of R4 819 million was allocated as follows:
- R3 371 million to tangible assets; and
- R1 448 million to intangible assets.
29
30
Annexure 4
Historical financial information of Harmony
Harmony income statement
Unaudited
Audited
Audited
Audited
9 months
Year
Year
Year
ended
ended
ended
ended
31 March
30 June
30 June
30 June
R'million
2003
2002
2001
2000
Revenue
7 152
7 806
4 495
2 996
Cash operating costs
(4 962)
(5 215)
(3 822)
(2 535)
Cash operating profit
2 190
2 591
673
461
Income from associates
24
-
-
-
Interest and dividends
-
138
45
63
Other income - net
141
94
81
54
Employment termination and restructuring costs
(35)
(83)
(36)
(1)
Corporate, administration and other expenses
(90)
(78)
(19)
(12)
Exploration expenditure
(80)
(61)
(27)
(16)
Marketing and benefication development
(89)
(38)
(12)
Profit/(Loss) of sale of listed investments
469
46
(11)
16
Interest paid
(182)
(230)
(114)
(20)
Cash profit
2 437
2 328
554
533
Depreciation and amortisation
(403)
(308)
(237)
(136)
(Provision)/Reversal of provision for rehabilitation costs
(34)
(20)
52
2
Gain/(Loss) on financial instruments
210
48
58
54
Gain on listed investments
(523)
595
-
(9)
Foreign exchange losses
(49)
-
-
-
Impairment of assets
-
(362)
(215)
-
(Provision)/Reversal of provision for former employees' post-retirement benefits
-
(2)
17
25
Profit before tax
1 638
2 279
229
469
Tax (520)
(583)
(111)
(86)
Net profit before minority interests
1 118
1 696
118
383
Minority interests
(16)
(3)
(19)
Net profit
1 118
1 680
115
364
Basic earnings per share (cents)
1 094
112
435
Fully diluted earnings per share (cents)
1 017
108
425
Basic headline earnings per share (cents)
1 316
254
382
Fully diluted headline earnings per share (cents)
1 223
246
373
Interim dividends per share (cents)
75
50
50
Proposed final/final dividends per share (cents)
425
70
70
Total dividends per share (cents)
500
120
120
31
Harmony balance sheet
Unaudited at
Audited at
Audited at
Audited at
31 March
30 June
30 June
30 June
2003
2002
2001
2000
R'million
R'million
R'million
R'million
ASSETS
Non-current assets
10 361
11 502
5 996
4 259
Property, plant and equipment
8 986
9 433
5 424
3 738
Investments
1 375
1 778
572
425
Investment in associate
-
291
-
-
Investments in subsidiaries
-
-
-
-
Other assets
-
-
-
47
Restricted cash
-
-
-
49
Current assets
3 128
2 574
2 258
932
Inventories
-
448
300
189
Receivables
-
685
799
215
Cash and cash equivalents
3 128
1 441
1 159
528
Total assets
13 489
14 076
8 254
5 191
EQUITY AND LIABILITIES
Ordinary shareholders' interest
8 932
7 963
4 594
2 875
Share capital
-
85
72
49
Share premium
-
5 462
3 727
2 021
Options issued
-
-
69
69
Non-distributable reserves
-
88
54
(16)
Retained earnings
-
2 328
672
752
Non-current liabilities
4 043
4 232
2 420
1 299
Long-term borrowings
-
1 771
1 212
316
Preference shares
-
-
6
-
Deferred taxation
-
770
368
330
Deferred financial liability
-
971
397
272
Provision for environmental rehabilitation
-
711
427
356
Provision for post-retirement benefits
-
9
8
25
Minority interests
-
-
2
-
Current liabilities
514
1 881
1 240
1 017
Accounts payable and accrued liabilities
-
1 648
1 083
926
Income and mining taxes
-
228
50
17
Shareholders for dividends
-
5
107
74
Total equity and liabilities
13 489
14 076
8 254
5 191
32
Harmony cash flow statement
Unaudited Audited
Audited
Audited
9 months
year
year
year
ended
ended
ended
ended
31 March
30 June
30 June
30 June
R'million
2003
2002
2001
2000
Cash flow from operations
Cash generated from operations
2 436
473
298
Interest and dividends received
138
45
19
Interest paid
(230)
(114)
(20)
Income and mining tax paid
(88)
(30)
(8)
Net cash inflow from operating activities
1 687
2 256
374
289
Cash flows from investing activities
Net increase in amounts invested in environmental trusts
(61)
(6)
(5)
Decrease in short-term investments
-
-
65
Cash cost to close Randfontein Hedges
(250)
-
-
Restricted cash
-
50
(50)
Cash held by subsidiaries on acquisition
154
-
64
Cash paid for Randfontein
-
-
(349)
Cash paid for West Rand Cons and Kalgold
-
-
-
Cash paid for New Hampton mines
-
(229)
(6)
Cash paid for Elandskraal mines
(210)
(1 053)
-
Cash paid for Free Gold Mines
(900)
-
-
Cash paid for Hill 50 mines
(1 419)
-
-
Investment in associate acquired
(292)
-
-
Investment in Highland Gold acquired
(188)
-
-
Loan repaid by Khumo Bathong
90
-
-
Proceeds on disposal of listed investments
158
-
-
Increase in other non-current investments
(156)
(64)
24
Proceeds on disposal of mining assets
34
87
70
Additions to property plant and equipment
(733)
(422)
(158)
Foreign currency translation adjustments
105
-
-
Net cash utilised in investing activities
(228)
(3 668)
(1 532)
(345)
Cash flow from financing activities
Long term borrowings raised - net
335
468
353
Preference shares issued
-
6
-
Ordinary shares issued net of expenses
1 580
1 435
37
Dividends paid
(221)
(120)
(81)
Net cash generated by financing activities
228
1 694
1 789
309
Net increase in cash and cash equivalents
1 687
282
631
253
Cash and equivalents at beginning of period
1 441
1 159
528
275
Cash and equivalents at end of period
3 128
1 441
1 159
528
33
Harmony statement of changes in equity
Number of
Harmony
ordinary
Number of
listed
Non-
shares
options
Share
Share
options
Retained
distributable
issued
issued
capital
premium
issued
earnings
reserves
Total
R'million
R'million
R'million
R'million
R'million
R'million
Harmony Balance - 30 June 2000
97 310 435
7 579 900
49
2 021
69
752
(16)
2 875
Net income
-
-
-
-
-
115
-
115
Change in accounting policy
-
-
-
-
-
(43)
-
(43)
Dividends declared
-
-
-
-
-
(152)
-
(152)
Issue of shares
- Public offerings
31 784 200
-
16
1 324
-
-
-
1 340
- IDC/Simane offering
10 736 682
-
5
381
-
-
-
386
- Private offering
568 774
-
-
23
-
-
-
23
- Share trust
2 000 000
-
1
34
-
-
-
35
Exercise of employee share options
2 153 200
-
1
52
-
-
-
53
Share issue expenses
-
-
-
(108)
-
-
(108)
Issue of warrants
-
9 027 500
-
-
-
-
-
-
Reversal of marked-to-market Due to sale of Western Areas Limited shares
-
-
-
-
-
-
28
28
Foreign exchange translation reserve
-
-
-
-
-
-
(20)
(20)
Mark-to-market of listed and other investments
-
-
-
-
-
-
80
80
Mark-to-market of hedging instruments
-
-
-
-
-
-
(18)
(18)
Balance - 30 June 2001
144 553 291
16 607 400
72
3 727
69
672
54
4 594
Net income
-
-
-
-
-
1 680
-
1 680
Dividends declared
-
-
-
-
-
(119)
-
(119)
Issue of shares - Public offerings
222 300
-
-
8
-
-
-
8
- International private placement
8 500 000
-
4
1 139
-
-
-
1 143
Exercise of employee share options
3 998 800
-
2
132
-
-
-
134
Conversion of preference shares
10 958 904
-
6
455
-
-
-
461
Share issue expenses
-
-
-
(42)
-
-
-
(42)
Conversion of warrants
1 014 054
(1 014 054)
1
43
-
-
-
44
Listed options expired
-
(7 579 900)
-
-
(69)
95
(26)
-
Foreign exchange translation reserve
-
-
-
-
-
-
83
83
Mark-to-market of listed and other investments
-
-
-
-
-
-
(87)
(87)
Mark-to-market of hedging instruments
-
-
-
-
-
-
64
64
Balance - 30 June 2002
169 247 349
8 013 446
85
5 462
2 328
88
7 963
Currency translation reserve
(489)
Net earnings
1 118
Issue of share capital
1 305
Dividend paid
(965)
Balance - 30 March 2003
8 932
1.
Accounting policies
Basis of preparation
34
Use of estimates
Consolidation
Consolidated entities
Investments in associates
Investments in joint ventures
Foreign currencies
Foreign entities
35
Foreign currency transactions
Financial instruments
Cash and cash equivalents
Investments
Listed investments
Unlisted investments
Inventories
Receivables
Accounts payable
36
Hedging
-
a hedge of the fair value of a recognised asset or liability (fair value hedge);
-
a hedge of a forecasted transaction (cash flow hedge);
-
a hedge of a net investment in a foreign entity; or
-
a derivative to be marked-to-market.
Borrowings
Borrowings are recognised at amortised cost, comprising original debt less principal payments and amortisations.
Exploration costs
Property, plant and equipment
Mining assets
37
Mining operations placed on care and maintenance
Non-mining fixed assets
Depreciation and amortisation
Impairment
Environmental obligations
38
Environmental trust funds
Provisions
Deferred taxation
Pension plans and other employee benefits
Pension plans
Medical plans
Harmony provides medical cover to current employees and certain retirees through one fund.
Equity compensation benefits
Revenue recognition
Revenue
39
Interest income
Dividend income
Dividends declared
Comparatives
Where necessary comparative figures have been adjusted to conform with changes in presentation in the current year.
2.
CASH OPERATING COSTS
R'million
2002
2001
Cash operating 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. These costs, analysed by nature, consist of the following:
Labour costs, including contractors
2 458
2 388
Stores and materials
1 101
912
Water and electricity
475
457
Changes in inventory
(23)
(68)
Other
1 204
133
5 215
3 822
3.
INCOME BEFORE TAX
R'million
2002
2001
The following have been included in income before tax:
Professional fees
32
18
Auditors' remuneration
5
2
Fees current year
2
1
Fees other services
3
1
40
4.
OTHER INCOME NET
R'million
2002
2001
Profit on sale of property, plant and equipment
21
80
Foreign exchange gains
99
9
Other (expenditure)/income - net
(26)
(8)
94
81
5.
EMPLOYMENT TERMINATION AND RESTRUCTURING COSTS
R'million
2002
2001
Free State
16
-
Randfontein and Elandskraal
36
34
Evander
2
1
Kalgold
-
1
Australian operations
32
-
Bissett mine
(3)
-
83
36
6.
PROFIT/(LOSS) ON SALE OF LISTED INVESTMENTS
R'million
2002
2001
Profit/(Loss) on sale of listed investments
46
(11)
7.
GAIN ON LISTED INVESTMENTS
R'million
2002
2001
Gain on mark-to-market of listed investments
595
-
41
8.
IMPAIRMENT/(REVERSAL OF IMPAIRMENT) OF ASSETS
R'million
2002
2001
Free State operations
63
(43)
Randfontein operations
12
(12)
Evander operations
-
(11)
Bissett operations
-
(149)
New Hampton operations
(437)
-
(362)
(215)
9.
TAXATION
R'million
2002
2001
Current income and mining taxes
(265)
(63)
Deferred income and mining taxes
(318)
(48)
Total income and mining taxation (expense)/benefit
(583)
(111)
42
R'million
2002
2001
Tax on net income at estimated mining statutory rate
(659)
(26)
Valuation allowance raised against deferred tax assets
53
(75)
Non-taxable income/additional deductions
40
(4)
Difference between non-mining tax rate and estimated
mining statutory rate on non-mining income
(17)
(6)
Income and mining tax (expense)/benefit
(583)
(111)
Deferred income and mining tax liabilities
Depreciation and amortisation
1 257
653
Product inventory not taxed
33
35
Other
198
30
Gross deferred income and mining tax liability
1 488
718
Net deferred income and mining tax assets
(718)
(350)
Deferred financial liability
(238)
(55)
Unredeemed capital expenditure
(416)
(250)
Provisions, including rehabilitation accruals
(34)
(98)
Tax losses
(30)
(15)
Valuation allowance
68
770
368
The Group's net deferrred tax liability is made up as follows:
Deferred tax assets
(243)
-
Deferred tax liabilities
1 013
368
770
368
43
10. MINORITY INTERESTS
11. EARNINGS PER SHARE
2002
2001
R'million
R'million
Basic earnings per share
Basic earnings per share is calculated by dividing the net income attributable to shareholders by the weighted number of ordinary shares in issue during the year
Net income attributable to shareholders
1 680
115
Weighted average number of ordinary shares in issue
153 509 862
102 997 239
Basic earnings per share (cents)
1 094
112
Fully diluted earnings per share
For the diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all share options granted and warrants in issue. The average number of options used in the calculation of diluted earnings per share is calculated by taking the average number of ordinary options allocated in terms of the share option scheme multiplied by the weighted average option price divided by the average price of the ordinary shares on the JSE.
Weighted average number of ordinary shares in issue
153 509 862
102 997 239
Adjustments for share options
7 346 070
3 348 123
Adjustments for warrants in issue
4 361 156
-
Weighted average number of ordinary shares for diluted earnings per share
165 217 088
106 345 362
Fully diluted earnings per share (cents)
1 017
108
Headline earnings per share
The calculation of headline earnings per share is based on the basic earnings per share calculation adjusted for the following items:
Net income attributable to shareholders
1 680
115
Profit on sale of property, plant and equipment
(21)
(80)
Net impairment of assets
362
215
Other
- 11
Headline earnings
2 021
261
Basic headline earnings per share (cents)
1 316
254
Fully diluted headline earnings per share (cents)
1 223
246
44
12. DIVIDENDS DECLARED
2002
2001
R'million
R'million
Dividends declared
Interim dividend no. 74 of 75 cents per share (2001: 50 cents)
119
51
Final dividend (2001: 70 cents per share)
-
101
119 152
Under the previous accounting policy, the dividends proposed would have been as follows:
Dividends proposed
Final dividend no. 75 proposed of 425 cents per share (2001: Nil)
719
-
Dividend cover based on total declared and proposed (times)
Based on attributable income
2,0
0,8
Based on headline earnings
2,4
1,7
13. PROPERTY, PLANT, AND EQUIPMENT
2002
2001
R'million
R'million
Mining properties, mine development costs and mine plant facilities
9 285
5 273
Other non-mining assets
148
151
9 433
5 424
Mining properties, mine development costs and mine plant facilities
2002
2001
R'million
R'million
Cost at beginning of year
8 771
6 614
Acquired through the purchase of subsidiaries
3 843
1 751
Additions
735 411
Disposals
(22)
(5)
Foreign currency translation adjustments
1 060
-
14 387
8 771
Accumulated depreciation and amortisation at beginning of year
3 498
2 972
Acquired through the purchase of subsidiaries
515
93
Impairment of fixed assets
355
202
Disposals
(8)
(2)
Foreign currency translation adjustments
447 -
Charge
295 233
5 102
3 498
Net book value
9 285
5 273
45
Other non-mining assets
2002
2001
R'million
R'million
Cost at beginning of year
189
177
Additions
6 12
Disposals
(3)
-
Foreign currency translation adjustments
1
-
193 189
Accumulated depreciation and amortisation at beginning of year
38
33
Disposals
(3)
-
Foreign currency translation adjustments
2
-
Charge for the year
8
5
45
38
Net book value
148
151
Total net book value
9 433
5 424
Other non-mining assets consist of mineral subscription and participation rights, freehold land, computer equipment and motor vehicles.
14. NON-CURRENT INVESTMENTS
2002
2001
R'million
R'million
Listed investments
Investments in listed shares (a)
988
320
Other investments
Investment in Highland Gold Limited (b)
188
-
Unlisted investments and loans (c)
26
23
Amounts contributed to environmental trust funds (d)
487
193
Loan to Harmony Share Trust (e)
89
36
790 252
Total non-current investments
1 778
572
(a) Listed investments consist of 43 350 992 shares in Aurion Gold Limited (previously Goldfields Australia Limited)
valued at R22,78 per share. The shares are listed on the Australian Stock Exchange. The market value of these shares at the close of business on 30 June 2002 by reference to stock exchange quoted prices and closing exchange rates was R988 million (2001: R320 million). Subsequent to year end this investment was disposed of to Placer Dome (refer to note 34). Dividends received during the year from Aurion Gold amounted to R11 million.
(b) The company has acquired a strategic 32,5% shareholding in Highland Gold Limited on 31 May 2002 for
US$18 million. Highland Gold Limited is a Jersey-based company which holds Russian gold assets, comprising of a producing gold mine together with projects and potential projects at various stages of development.
(c) Unlisted investments comprise of various industry related investments and loans, which have been valued at
book value by the directors. The directors of the Company perform independent valuations of the investments on an annual basis to ensure that no permanent diminution in the value of the investments has occurred. Dividends received from these investments amounted to R2 million in the financial year.
(d) The environmental trust funds are irrevocable trusts under the Group's control. The monies in the trusts are
invested primarily in interest bearing short-term and other investments and opproximate their fair value.
(e) A loan of R89 million was made to the Harmony Share Trust to acquire 2 716 600 shares for employees
participating in the Harmony Share Option Scheme. Refer to note 29 for details on the share option scheme.
46
15. INVESTMENT IN ASSOCIATE AND SUBSIDIARIES
2002
2001
R'million
R'million
Listed investment in associate
Shares, at cost
292
-
Share of results before tax
(14)
-
Costs capitalised
14
-
Net share of results of associate
Exchange differences
(1)
-
Closing carrying amount
291
-
Valued by the directors at book value.
As at 30 June 2002 the Group held 294 222 437 shares in Bendigo Mining NL, a company incorporated in Australia. The investment represent a 31,8% interest in a single project gold company, listed on the Australian Stock Exchange. The company is developing into virgin underground orebodies which have been proved to exist beneath old workings which made up this gold field which closed in the early 1950's after 100 years of continuous production. All pre-production costs are capitalised. The market value of this investment as determined by closing prices on the Australian Stock Exchange at the close of business and closing exchange rates amounted to R503 million. Harmony has also been granted options to acquire 360 million shares in Bendigo any time before 31 December 2003 at Australian $0,30 per share.
The Group's interest of 31,8% in the summarised balance sheet of the associate is as follows:
2002
2001
R'million
R'million
Capital and reserves
79
-
Non-current liabilities
2
-
81
-
Fixed assets
6
-
Net current assets
75
-
81
-
16. INTEREST IN JOINT VENTURE
47
2002
2001
R'million
R'million
Property, plant and equipment
1 079
-
Investments
229 -
Current assets
571
-
1 879
-
Non-current interest-bearing borrowings
517
-
Non-current intergroup borrowings
907
-
Deferred income and mining taxes
(213)
-
Provision for environmental rehabilitation
200
-
Provision for post-retirement benefits
1
-
Current liabilities
181
-
1 593
-
Net assets
286 -
Profit before taxation
422
-
Taxation
(136)
-
Profit after taxation
286 -
Operating cash flows
525
-
Investing cash flows
(922)
-
Financing cash flows
900
-
Total cash flows
503 -
Proportionate interest in joint venture commitments
14
-
17. INVENTORIES
2002
2001
R'million
R'million
Gold in-process
286
195
Stores and materials at average cost
162
105
448 300
18. RECEIVABLES
2002
2001
R'million
R'million
Value-added tax
92
103
Trade receivables
103
70
Amount owing relating to share issue
-
292
Interest and other
490
334
685 799
48
19. SHARE CAPITAL AND SHARE PREMIUM
2002
2001
R'million
R'million
Share capital
Authorised
250 000 000 (2001: 250 000 000) ordinary shares of 50 cents each
10 958 904 (2001: 10 958 904) redeemable convertible preference shares of 50 cents each
Issued
169 247 349 (2001: 144 553 291) ordinary shares of 50 cents each
Ordinary shares of 50 cents each at 1 July 2001
72
49
Issued in terms of the share option scheme
2
2
Issued for cash to repay debt
4
21
Conversion of preference shares
6
-
Warrants converted
1
-
Balance at 30 June 2002
85
72
Share premium
5 462
3 727
20. HARMONY LISTED OPTIONS AND WARRANTS
2002
2001
R'million
R'million
For the acquisition of Vermeulenskraal Noord, 1 125 000 warrants were issued at a fair value of South African Rand 10 per warrant on 3 December 1996
-
11
For the acquisition of Lydex, 6 418 855 warrants were issued at a fair value of South African R8,89 per warrant during the period January through March 1997
-
58
For obtaining the credit facility from NM Rothschild 36 045 warrants were issued at fair value of South African R5,70 per warrant on 6 June 1998
-
0
- 69
49
21. NON-DISTRIBUTABLE RESERVES
2002
2001
R'million
R'million
Foreign exchange translation reserve
64
(19)
Mark-to-market of listed investments
-
86
Mark-to-market of financial instruments
47
(18)
Other
(23)
4
88 54
22. BORROWINGS
Long-term borrowings
2002
2001
R'million
R'million
Unsecured
Senior unsecured fixed rate bonds (a)
1 200
1 200
Fair value adjustment
(21)
9
Less: Amortised discount and bond issue costs
(20)
(25)
Total unsecured long-term borrowings
1 159
1 184
Secured
BAE Systems Plc (b)
37
28
BOE loan (c)
500
-
Less: Short term portion
(125)
-
375 -
Anglo Gold (d)
516
-
Less: Short-term portion
(316)
-
200 -
Total secured long-term borrowings
612 28
Total long-term borrowings
1 771
1 212
50
(a) On 16 June 2001, Harmony launched and priced an issue of senior unsecured fixed rate bonds in an aggregate
principal amount of Rand 1 200 million, with semi-annual interest payable at a rate of 13% per annum. These bonds will be repayable on 14 June 2006, subject to early redemption at Harmony's option. The bonds are listed on the Bond Exchange of South Africa. The bonds were issued to settle existing debt and fund the purchase of Elandskraal and New Hampton. As long as the bonds are outstanding, Harmony will not permit encumbrances on its present or future assets or revenues to secure indebtness for borrowed money, without securing the outstanding bonds equally and ratably with such indebtedness, except for certain specified permitted encumbrances. Including in the amortisation charge as per the income statement is R5 million for amortisation of the bond issue costs.
(b) The loan from BAE Systems Plc is a US dollar denominated term loan of R36 million ($3,5 million) for financing
the design, development and construction of a facility for the manufacture and sale of value-added gold products at Harmony's premises in the Free State. The loan is secured by a notarial covering bond over certain gold proceeds and other assets and is repayable in full on 30 April 2004. The loan bears interest at Libor plus 2% which is accrued daily from the drawdown date and interest is repayable on a quarterly basis.
(c) On 18 April 2002 Harmony entered into a term loan facility of R500 million with BOE Bank Limited for the
purpose of partially funding loans made by Harmony to the Free Gold in connection with the acquisition of mining assets. The facility is collateralised by a pledge of Harmony's shares in the Free Gold Joint Venture Company and is guaranteed by Randfontein, Evander, Kalgold and Lydex. The loan is repayable in full on 23 April 2006 by way of eight semi-annual capital installments which are due beginning 23 October 2002. The loan bears interest at a rate equal to the JIBAR rate for deposits in Rand plus 1,5% plus specified costs, which is accrued daily from the drawdown date and is payable quarterly in arrears commencing 23 July 2002. The following restrictive covenants apply:
(i) a consolidated net worth must be more than R4 600 million;
(ii) the total debt to EBITDA ratio not to exceed 1,5; and
(iii) EBITDA to total debt service ratio should not be less than 3,5.
(d) On 24 December 2001 Free Gold entered into a agreement with Anglogold Limited to purchase its Free Gold
assets for R2 832 million. R1 800 million was payable on 1 January 2002 at the call rate from this date until the 10th business day after the date of fulfilment of the last of the conditions precedent. R400 million is payable on 1 January 2005 at no interest charge. The balance of the consideration is payable five business days before Anglogold is obliged to pay recoupment tax, capital gains tax and any other income tax on the disposal of the assets at no interest charge. Harmony's 50% portion of the outstanding loan balance at 30 June 2002 was R516 million, which was proportionately consolidated.
Other borrowings
23. PREFERENCE SHARES
51
24. DEFERRED FINANCIAL LIABILITY/(ASSET)
2002
2001
R'million
R'million
Mark-to-market of speculative financial instruments at year-end
84
390
Amount owing on close out of derivatives
-
22
Mark-to-market of hedging financial instruments at year-end
887
(15)
971 397
25. PROVISION FOR ENVIRONMENTAL REHABILITATION
2002
2001
R'million
R'million
Provision raised for future rehabilitation
Opening balance
427
356
Acquisition of subsidiaries
264
123
Charge to income statement
20
(52)
Closing balance
711
427
The movements in the investments in the Group Environmental Trust Funds, were as follows:
2002
2001
R'million
R'million
Opening balance
193
124
Transferred from other trust funds
222
55
Interest accrued
23
13
Contributions made
50
3
Reimbursement of costs incurred
(1)
(2)
Closing balance
487
193
Future net obligations
598
462
52
26. PROVISION FOR POST-RETIREMENT BENEFITS
2002
2001
R'million
R'million
The amounts recognised in the balance sheet are as follows:
Present value of unfunded obligation
9
8
The amounts recognised in the income statement are as follows:
Interest cost
2
3
Additional liability raised Elandskraal
1
-
Benefits paid
3
-
Net actuarial gains
(5)
(20)
1 (17)
The movement in the liability recognised in the balance sheet is as follows:
At beginning of year
8
25
Total expenses as above
1
(17)
At end of year
9
8
The principal actuarial assumptions used for accounting purposes were:
Discount rate
12%
-
Assumed medical subsidy inflation
0% - 7%
-
27. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
2002
2001
R'million
R'million
Trade payables
263
220
Short-term portion of long-term borrowings
441
-
Short-term borrowings
36
78
Payroll and leave liabilities
408
253
Other (including accrued liabilities)
500
532
1 648
1 083
Leave liability
53
28. EMPLOYEE BENEFITS
2002
2001
R'million
R'million
Number of permanent employees:
Harmony Free State
12 644
14 671
Evander
7 384
6 909
Kalgold
222 229
Randfontein
7 455
9 700
Elandskraal
7 559
7 200
Australian operations
309
169
Bissett
6 208
Exploration
20 13
35 599
39 099
Free Gold Joint venture (50%)
6 867
-
Total
42 466
39 099
Aggregate earnings:
The aggregate earnings of employees including directors were: Salaries and wages and other benefits
1 780
1 667
Retirement benefit costs
191
123
Medical aid contributions
40
31
2 011
1 821
29. EMPLOYEE BENEFIT PLANS
54
Share option activity was as follows:
Number of
Average
share
exercise
options
price per
granted
share
Rand
Balance at 30 June 2000
6 899 000
-
Share options granted during year
1 728 400
-
Share options exercised during year
(2 835 700)
20,89
Balance at 30 June 2001
5 791 700
-
Share options granted during year
5 968 200
-
Share options exercised during year
(2 682 900)
26,88
Balance at 30 June 2002
9 077 000
-
The number of shares held by the Harmony Share Trust at year end amounted to 2 185 200 (2001: 1 158 800). The following table summarises the status of share options outstanding at 30 June 2002:
Grant
Number of
Option
date
options price
Rand
2 December 1997
18 500
11,70
31 August 1998
5 000
19,50
21 September 1999
1 268 800
22,90
23 February 1999
18 000
25,75
15 November 2000
584 500
27,20
31 January 2000
752 600
35,40
24 April 2001
461 500
36,50
20 November 2001
5 968 100
49,60
9 077 000
30,00
55
30. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE AND CREDIT RISK OF FINANCIAL
INSTRUMENTS
Commodity price sensitivity
The Harmony Group's commodity contracts by type as at 30 June 2002
Maturity scheduled for delivery in
2003
2004
2005
2006
2007
2008
2009
Total
Normal sales contracts
Forward Sales Agreements
Ounces
*1
425 792
229 000
205 000
187 500
125 000
100 000
100 000 1 372 292
A$/ounce
514
522
524
523
514
518
518
519
Variable price sales contracts (with "caps")
Ounces
*2
62 425
175 500
130 000
40 000
-
-
-
407 925
A$/ounce
545
544
512
552
-
-
-
535
Variable price sales contracts (with "floors")
Ounces
*3
33 000
-
-
-
-
-
-
33 000
A$/ounce
500
-
-
-
-
-
-
500
521 217
404 500
335 000
227 500
125 000
100 000
100 000 1 813 217
*1 The Group must deliver into these agreements at the prices indicated.
*2 The Group must deliver its production into these agreements subject to the capped price indicated in the table above.
*3 The Group must deliver its production into these agreements subject to the floor price indicated in the table above.
56
Foreign currency sensitivity
Concentration of credit risk
Interest rates and liquidity risk
2003
2004
2005
2006
2007
2008
2009
2010
Ounces
1 906 500 1 879 000 1170 000 1 170 000
900 000
675 000
675 000
-
Lease rate received
1,0%
1,0%
1,2%
1,2%
1,0%
1,1%
1,1%
-
57
31. CASH GENERATED FROM/(UTILISED IN) OPERATIONS
2002
2001
R'million
R'million
Reconciliation of profit before taxation to cash generated from operations:
Income before taxation
2 279
229
Adjustments for:
Interest and dividends received
(138)
(45)
Interest paid
230
114
Loss/(Profit) on sale of other assets and listed investments
(46)
7
Profit on sale of mining assets
(21)
(80)
Depreciation and amortisation
308
237
Impairment of assets
362
215
Gain on financial instruments
(46)
(140)
Mark-to-market of listed investments
(595)
-
Net (decrease)/increase in provision for environmental rehabilitation
20
(52)
Net decrease/(increase) in provision for former employees' post-retirement benefits
2
(17)
Other non cash transactions
(4)
(2)
Effect of changes in operating working capital items:
Receivables
127 (274)
Inventories (93)
(82)
Accounts payable and accrued liabilities
51
363
Cash generated by operations
2 436
473
58
32. ADDITIONAL CASH FLOW INFORMATION
The income and mining taxes paid in the statement of cash flow represents actual cash paid.
(a) Non cash-items
Excluded from the statements of consolidated cash flows are the following for the years ended 30 June 2002 and 30 June 2001:
The minorities' share in the profits of Elandskraal.
(b) Acquisitions of subsidiaries/businesses
(i) For the year ended 30 June 2002
(a) With effect from 3 January 2002, the Company had acquired a 50% shareholding in the ArmGold/Harmony
Free Gold Joint Venture Company (Proprietary) Limited. The aggregate fair value of the assets acquired and the liabilities assumed were as follows:
2002
R'million
Environmental Trust Fund
222
Property, plant and equipment
1 090
Accounts payable and accrued liabilities
(53)
Long-term liabilities
(190)
Deferred tax
347
Total purchase price
1 416
Paid for by way of borrowings
(516)
Paid for by cash
(900)
Cash and cash equivalents at acquisition
(b) With effect from 1 April 2002, Harmony acquired the remaining 10% interest in Elandskraal from Khuma
Bathong. The fair value of assets acquired were as follows:
2002
R'million
Property, plant and equipment
110
Net minority interest in Elandskraal
100
Total purchase price
210
Paid for by cash
(210)
59
(c) With effect from 1 April 2002, Harmony acquired the entire share capital of Hill 50 Gold NL and its
subsidiaries. The aggregate fair value of the assets acquired and the liabilities assumed were as follows:
2002
R'million
Inventories
54
Accounts receivable
29
Property, plant and equipment
2 754
Accounts payable and accrued liabilities
(134)
Long-term liabilities
(52)
Deferred financial liability
(944)
Deferred tax
(442)
Total purchase price
1 265
Paid for by cash
(1 419)
Cash and cash equivalents at acquisition
(154)
(ii) For the year ended 30 June 2001
(a) With effect from 9 April 2001, the Company acquired Elandskraal (Elandsrand and Deelkraal mines) from
Anglogold. The aggregate fair value of the assets required and liabilities assumed were as follows:
2002
R'million
Property, plant and equipment
1 053
Investments
55
Long-term liabilities
(55)
Total purchase price
1 053
Paid for by cash
(1 053)
(b) With effect from 1 April 2001, the Company had acquired a majority shareholding in New Hampton and
during the period to 30 June 2001 increased its shareholding such that as at 30 June 2001, the Company had acquired 100% of the issued share capital of New Hampton. The aggregate fair value of the assets acquired and liabilities assumed were:
2002
R'million
Inventories
44
Accounts receivable
18
Investments
26
Property, plant and equipment
610
Accounts payable and accrued liabilities
(149)
Long-term liabilities
(320)
Total purchase price
229
Paid for by cash
(229)
60
(c) Disposal of subsidiaries/businesses
(i) For the year ended 30 June 2001
(a) With effect from 24 April 2001, Harmony disposed of a 10% interest in Elandskraal to Khuma Bothong. The
book value of assets and liabilities disposed of were:
2002
R'million
Property, plant and equipment
107
Stores
7
Total sales price
114
Paid for by way of receivables
(114)
33. COMMITMENTS AND CONTINGENCIES
2002
2001
R'million
R'million
Capital expenditure commitments
Contracts for capital expenditure
33
123
Authorised by the directors but not contracted for
267
199
300 322
This expenditure will be financed from existing cash resources.
Contingent liabilities
Guarantees and suretyships
5
Environmental guarantees
82
87
34. SUBSEQUENT EVENTS AFTER BALANCE SHEET DATE
(a) On 27 May 2002, Harmony announced that it had entered into a pre-acceptance agreement with Placer Dome,
whereby it agreed to accept Placer Dome's offer for its 9,8% holding in AurionGold. The Company has subsequently accepted Placer Dome's increased, final and unconditional offer on 29 July 2002, which included an Australian $0,35 cash payment per AurionGold share held. Harmony held 43 350 992 shares in AurionGold which were converted into 7 586 422 shares in Placer Dome.
(b) Refer to note 16 for the proposed acquisition of the St Helena assets by Free Gold.
61
35. GEOGRAPHICAL AND SEGMENT INFORMATION
The results of the Free Gold joint venture have been included from 3 January 2002 and Hill 50 from 1 April 2002.
The segmental split on a geographical basis is:
Year ended 30 June 2002
FreeGold
New
Free State
Evander
Kalgold
Randfontein
Elandskraal
Joint Venture
Hampton
Hill 50
(*)
(South Africa)
(South Africa)
(South Africa)
(South Africa)
(South Africa)
(South Africa)
(Australia)
(Australia)
Other
Total
R'million
R'million
R'million
R'million
R'million
R'million
R'million
R'million
R'million
R'million
Profit and loss
Revenue
1 829
1 191
179
1
628
1
365 918 493 185 18
7
806
Production costs
(1 351)
(723)
(130)
(1 013)
(950)
(431)
(474)
(134)
(9)
(5 215)
Cash
operating
profit
478
468 49 615 415 487 19 51 9
2
591
Non-cash items:
Depreciation and amortisation
(82)
(26)
(11)
(51)
(36)
(30)
(25)
(44)
(3)
(308)
Impairment
63
12
(437)
(362)
Mark
to
market
of listed
investment
595
595
Financial
instruments
10
(121)
46
113 48
Operating
profit
before
tax
513
441 36 355 291 422 380 126 475
2
279
Taxation expense
(75)
(150)
43
(140)
(15)
(136)
(5)
(105)
(583)
Net profit/(loss) for the year before
minority
interest
438
291 79 215 276 286 (380) 121 370
1
696
Kilograms gold (**)
19 034
12 920
1 934
17 469
14 807
8 681
5 957
1 912
257
82 971
Tonnes milled (**) ('000)
4 536
2 352
961
4 799
3 279
2 186
3 833
949
39
22 934
Capital expenditure
95
98 25 15 247 32 233 (10)
735
Total assets
5 801
1 222
332
2 233
393
981
1 488
1 496
130
14 076
Total liabilities
2
443
372 (23)
504 133 608 656
1
373 47
6
113
(*)
The Bissett mine in Canada was placed on care and maintenance at the end of the previous financial year, and clean-up results amounting to R18 million revenue (257kg) and R9 million production costs were reflected under "other" for 2002.
(**)
Production statistics are unaudited.
Year ended 30 June 2001
Free State
Evander
Kalgold
Randfontein
Elandskraal
New Hampton
Bissett
(South Africa)
(South Africa)
(South Africa)
(South Africa)
(South Africa)
(Australia)
(Canada)
Other
Total
R'million
R'million
R'million
R'million
R'million
R'million
R'million
R'million
R'million
Profit and loss Revenue
1 431 952 103
1
479 283 137 108 2
4
495
Production costs
(1 385)
(693)
(98)
(1 205)
(195)
(135)
(111)
(3 822)
Cash operating profit
46
259
5
274
88
2
(3)
2
673
Non-cash items:
Depreciation and amortisation
(90)
(15)
(17)
(53)
(26)
(10)
(25)
(1)
(237)
Impairment
(43)
(11)
(12)
(149)
(215)
Financial
instruments
43 15 58
Operating profit/(loss) before tax
(135)
282
(12)
219
37
(1)
(187)
26
229
Taxation
expense
8 (76)
(31)
(16)
4 (111)
Net profit/(loss) for year before minority interest
(127)
206
(12)
188
21
(1)
(187)
30
118
Kilograms gold (**)
21 346
14 251
1 535
22 500
3 822
1 731
1 378
66 563
Tonnes milled (**) ('000)
5 289
2 481
959
6 285
706
1 088
266
17 074
Capital expenditure
120 69 33 53 62 18 49 20 424
Total assets
2 234
876
172
2 175
1 216
1 033
66
482
8 254
Total liabilities
2
035 286 30 697 159 248 23 182
3
660
(**)
Production statistics are unaudited.
63
Annexure 5
Historical information of ARMgold
ARMgold income statement
Unaudited
Audited
Audited
Audited
3 months
12 months
12 months
12 months
ended
ended
ended
ended
31 March
31 December
31 December
31 December
R'000
2003
2002
2001
2000
Revenue
718 480
3 537 791
1 181 947
1 090 791
Cost of sales
560 069
2 052 703
(911 119)
(937 542)
Profit from metals mined
158 411
1 485 088
270 828
153 249
Corporate, administration and other expenditure
14 145
(37 965)
(26 455)
(21 704)
Tribute expenditure
-
-
(53 653)
(124 828)
Profit from operations
144 266
1 447 123
190 720
6 717
Net non-mining income
6 652
31 258
6 000
-
Net finance income
49 560
69 790
19 325
10 333
Profit before tax
200 478
1 548 171
216 045
17 050
Tax
74 924
(565 588)
(83 574)
(3 225)
Net profit attributable to ordinary shareholders
125 554
982 583
132 471
13 825
Profit on sale of mining assets
(5 466)
(8 351)
-
-
Profit on redemption of long-term debt
-
-
(21 000)
-
Headline earnings
120 088
974 232
111 471
13 825
Earnings per share (cents)
131,47
1 222,43
264,94
27,65
Headline earnings per share (cents)
125,75
1 212,05
222,94
27,65
Diluted earnings per share (cents)
131,47
1 222,43
264,94
27,65
Dividends per share (cents)
-
3,60
40 000
-
64
ARMgold balance sheet
Unaudited
Audited
Audited
Audited
31 March
31 December
31 December
31 December
R'000
2003
2002
2001
2000
Assets
Non-current assets
1 868 659
1 855 116
101 172
101 935
Property, plant and equipment
1 095 700
1 103 286
77 219
81 767
Investments and loans
362 423
354 185
18 268
7 280
Deferred taxation
112 500
143 917
-
-
Restricted cash
298 036
253 728
5 685
5 685
Long-term receivables
-
-
-
7 203
Current assets
2 277 524
2 049 232
200 945
205 718
Inventories
34 749
26 502
10 833
6 895
Accounts receivable
143 378
135 687
78 217
54 009
Cash and cash equivalents
2 099 397
1 884 185
111 895
144 814
Short-term portion of deferred tax
-
2 858
-
-
Total assets
4 146 183
3 904 348
302 117
307 653
Equity and liabilities
Capital
Ordinary share capital
96
96
50
50
Share premium
1 132 454
1 132 454
-
-
Retained income
1 116 732
991 178
8 613
76 142
Ordinary shareholders' interest
2 249 282
2 123 728
8 663
76 192
Non-current liabilities
777 671
745 826
51 079
97 366
Long-term borrowings
529 305
503 963
-
51 786
Deferred taxation
-
-
9 539
395
Rehabilitation and closure cost obligations
247 253
240 750
41 540
45 185
Provision for post-retirement liability
1 113
1 113
-
-
Current liabilities
1 119 230
1 034 794
242 375
134 095
Accounts payable
334 519
282 089
144 971
124 296
Short-term portion of borrowings
452 288
450 695
30 786
-
Current tax liability
332 423
302 010
66 618
9 799
Total equity and liabilities
4 146 183
3 904 348
302 117
307 653
Weighed number of shares in issue ('000)
95 500
80 379
50 000
50 000
Net asset value per share (cents)
2 355,27
2 642,14
17,33
152,38
Net tangible asset value per share (cents)
2 355,27
2 642,14
17,33
152,38
65
ARMgold cash flow statement
Cash flow statements
Unaudited
Audited
Audited
Audited
3 months
12 months
12 months
12 months
ended
ended
ended
ended
31 March
31 December
31 December
31 December
R'000
Notes
2003
2002
2001
2000
Cash generated from operating activities
Cash receipts
710 789
3 525 656
1 157 739
1 081 500
Cash paid to suppliers and employees
(490 961)
(1 898 820)
(964 849)
(1 013 566)
Cash generated by operations
1
219 828
1 626 836
192 890
67 934
Net finance income
45 811
81 158
17 859
10 333
Normal taxation paid
2
(5 921)
(81 031)
(17 611)
(6 991)
Dividends paid
3
-
(12 196)
(187 822)
-
Net cash inflow from operating activities
259 718
1 614 767
5 316
71 276
Cash flows from investing activities
Acquisition of businesses
4
-
(960 000)
-
-
Mining and other fixed assets acquired
(23 805)
(115 201)
(39 716)
(14 795)
Proceeds on disposal of mining assets
-
11 469
3 800
54
Costs of acquisitions capitalised
-
(1 881)
-
-
Movement in investments
(8 232)
(75 149)
(2)
Movement in long-term receivables
-
-
7203
1 097
Net increase in investment in
Rehabilitation Trust Fund
(6 503)
(21 583)
(9 522)
(2 858)
Net cash outflow from investing activities
(25 540)
(1 162 345)
(38 235)
(16 504)
Cash flow from financing activities
Proceeds from shares issued - net of expenses
-
1 132 454
-
-
Movement in long-term borrowings
25 342
435 457
-
-
Net cash inflow from financing activities
25 342
1 567 911
-
-
Net movement in cash and cash equivalents
259 520
2 020 333
(32 919)
54 772
Cash and cash equivalents at beginning of period
2 137 913
117 580
150 499
95 727
Cash and cash equivalents at the end of period
2 397 433
2 137 913
117 580
150 499
66
Notes to cash flow statements:
Unaudited
Audited
Audited
Audited
3 months
12 months
12 months
12 months
ended
ended
ended
ended
31 March
31 December
31 December
31 December
R'000
2003
2002
2001
2000
1.
CASH GENERATED FROM OPERATIONS
Profit before taxation
200 478
1 548 171
216 045
17 050
Adjusted for non-cash items:
- Amortisation and depreciation
31 391
121 171
40 464
37 850
- Profit on sale of mining assets
(5 466)
(8 351)
-
-
- Proceeds on loan waived
-
-
(21 000)
-
- Provision for irrevocable loans and debtors
-
15 000
-
- Movement in gold inventory
(1 564)
(7 216)
-
-
- Bad debts
275
-
-
- Movement in provision for
post-retirement benefits
1 113
(3 645)
2 151
- Movement in environmental
rehabilitation obligation
6 502
14 101
-
-
Adjustment for:
Net finance income
(49 569)
(69 790)
(19 325)
(10 333)
Operating profit before working capital changes
181 772
1 599 474
227 539
46 718
Working capital changes
- Movement in accounts receivable
(7 691)
(56 672)
(39 208)
(9 291)
- Movement in inventories
(6 683)
(8 453)
(3 938)
2 571
- Movement in accounts payable
52 430
92 487
8 497
27 936
Cash generated from operations
219 828
1 626 836
192 890
67 934
2.
TAXATION PAID
Charge as per the income statement
(74 924)
(565 588)
(83 574)
(3 225)
Liability - previous period
(302 010)
(66 618)
(9 799)
451
Liability - current period
332 423
302 010
66 618
9 799
Movement in deferred tax liability
38 590
249 165
9 144
(14 016)
Taxation paid
(5 921)
(81 031)
(17 611)
(6 991)
3.
DIVIDENDS PAID
Charge as per the statement of changes in equity
-
-
(200 000)
-
Capitalisation issue of 18 000 000 ordinary shares of R0,001 each
-
(18)
-
-
Shareholders for dividends at beginning of period
-
(12 178)
-
-
Shareholders for dividends at end of period
-
-
12 178
-
Dividends paid
-
(12 196)
(187 822)
-
67
Audited
Audited
Audited
12 months
12 months
12 months
ended
ended
ended
31 December
31 December
31 December
R'000
2002
2001
2000
4.
ACQUISITION OF BUSINESSES
With effect from 1 January 2002, Free Gold purchased the Free Gold assets and liabilities from Anglogold for R2 741 million of which R1 370,5 million relates to ARMgold's 50% portion. The aggregate fair value of the assets acquired and liabilities assumed were as follows:
Environmental trust fund
221 936
-
-
Property, plant and equipment
978 359
-
-
Accounts payable and accrued liabilities
(58 633)
-
-
Long-term borrowings
(158 590)
-
-
Deferred tax
387 457
-
-
Total purchase price
1 370 529
-
-
Paid for by way of borrowings
(470 529)
-
-
Paid for by cash
(900 000)
-
-
Cash and cash equivalents at acquisition
-
-
-
With effect from 30 October 2002, Free Gold purchased the St Helena assets and liabilities from Gold Fields for R120 million of which R60 million relates to ARMgold's 50% portion. The aggregate fair value of the assets acquired and liabilities assumed were as follows:
Environmental trust fund
17 250
-
-
Property, plant and equipment
54 879
-
-
Accounts payable and accrued liabilities
1 073
-
-
Long-term borrowings
(23 772)
-
-
Deferred tax
18 022
-
-
Total purchase price
67 452
-
-
Paid for by way of borrowings
(7 452)
-
-
Paid for by cash
(60 000)
-
-
Cash and cash equivalents at acquisition
-
-
-
68
ARMgold statement of changes in equity
Retained
R'000
Share capital
Share premium
income
Total
Audited movements
Balance at 31 December 1999
50
-
62 317
62 367
Net income for the year
-
-
13 825
13 825
Balance at 31 December 2000
50
-
76 142
76 192
Net income for the year
-
-
132 471
132 471
Dividends paid
-
-
(200 000)
(200 000)
Balance at 31 December 2001
50
-
8 613
8 663
Net income for the year
-
-
982 583
982 583
Dividends paid
-
-
(18)
(18)
Share premium raised during the period
-
1 209 973
-
1 209 973
Expenditure written-off against share premium
-
(77 519)
-
(77 519)
Shares issued during the period
46
-
-
46
Balance at 31 December 2002
96
1 132 454
991 178
2 123 728
Unaudited movements
Net income for the period
-
-
125 554
125 554
Balance at 31 March 2003
96
1 132 454
1 116 732
2 249 282
Accounting policies
Basis of preparation
Use of estimates
Consolidation
69
Goodwill
Foreign currencies
Revenue recognition
- Revenue from the sale of gold and silver is recognised when the risks and rewards of ownership and title passes to the
buyer of the products.
- Interest income is recognised as it accrues (taking into account the effective yield on the asset), unless collectability is
in doubt.
- Dividend income is accrued when ARMgold's right to receive payment, is established.
Exploration expenditure
Property, plant and equipment
Mining assets
Mine development costs
70
Undeveloped properties
Borrowing costs
Non-mining assets
Amortisation and depreciation
Mining assets
Non-mining assets
Office equipment
Vehicle
5 years
Computer equipment
3 years
Impairment property, plant and equipment
Investments
71
Unlisted investments are classified as available for sale financial assets and are measured at fair value.
Changes in the fair values of the investments are recognised in the income statement.
Investment in rehabilitation trust fund
Short-term investments
Short-term investments are measured at fair value and the changes in fair value are recognised in the income statement.
Inventories
Trade and other receivables
Cash and cash equivalents
Environmental expenditure
72
Deferred taxation
Pension obligations
Other post-retirement obligations
Financial liabilities
Provisions
Employee annual leave and holiday leave allowances
73
Leases
Financial instruments
Derivative instruments
AC 133 requires that derivative instruments be treated as follows:
- Commodity based ("normal purchase or normal sale") contracts that meet the requirements of AC 133 are recognised
in earnings when they are settled by physical delivery.
- Where the conditions in AC 133 for special hedge accounting are met the derivative is recognised on the balance sheet
as either a financial asset or financial liability, and recorded at fair value. When ARMgold enters into cash flow hedges, the effective portion of fair value gains or losses are recognised in equity until the underlying transaction occurs, then the gains or losses are recognised in earnings or included in the initial measurement of the asset or liability. The ineffective portion of fair value gains and losses is recorded in earnings in the period to which they relate.
- All other derivative instruments are subsequently measured at their estimated fair value, with the changes in estimated
fair value at each reporting date being reported in earnings in the period to which they relate.
- The estimated fair values of derivative instruments are determined at discrete points in time based on the relevant
market information. These estimates are calculated with reference to the market rates using industry standard valuation techniques.
Business segments
74
Annexure 6
Significant contracts of ARMgold
1.
2.
3.
4.
5.
6.
7.
8.
The purchase price is payable by Free Gold (50% of which is the responsibility of ARMgold) is as follows:
- R1,8 billion plus interest of R54,9 million that was paid on 23 April 2002;
- R400 million is payable on 1 January 2005; and
- tax payable by Anglogold resulting from the sale of the Free Gold Assets is payable five business days before
Anglogold is obliged to make any such tax payments. This amount has now been paid.
9.
75
10.
11.
76
Annexure 7
Trading history of Harmony shares
High
Low
Close
Volume
(cents)
(cents)
(cents)
Quarter ended 31 August 2000
3 900
3 300
3 670
8 610 069
30 November 2000
3 700
2 600
3 525
12 946 300
28 February 2001
4 700
3 080
3 860
12 254 756
31 May 2001
5 100
3 615
4 690
20 690 449
31 August 2001
4 920
3 850
4 900
22 217 718
30 November 2001
9 9700
4 800
7 850
38 280 991
28 February 2002
13 360
7 000
12 740
59 093 052
31 May 2002
18 730
11 000
14 200
86 643 890
31 August 2002
18 150
10 350
16 700
78 034 135
30 November 2002
16 520
11 550
14 700
61 230 817
28 February 2003
15 620
8 650
9 760
68 846 490
31 May 2003
11 750
7 100
9 850
102 654 014
Month ended 30 June 2002
17 400
12 000
14 200
30 361 439
31 July 2002
17 100
10 350
11 810
32 404 342
31 August 2002
15 200
10 400
14 850
15 174 230
30 September 2002
18 150
14 400
16 700
30 455 563
31 October 2002
16 520
11 910
13 500
20 341 047
30 November 2002
15 600
11 550
11 799
15 492 925
31 December 2002
15 800
11 560
14 700
25 396 845
31 January 2003
15 620
13 100
13 100
24 945 829
28 February 2003
13 600
10 540
11 050
23 470 805
31 March 2003
11 390
8 650
9 760
20 429 856
30 April 2003
9 850
7 100
7 700
19 952 328
31 May 2003
11 070
7 900
10 539
62 449 097
30 June 2003
11 750
9 600
9 850
20 252 589
Trading day
1 July 2003
10 280
9 950
10 250
1 642 970
2 July 2003
10 480
10 150
10 350
1 010 884
3 July 2003
10 470
10 150
10 350
782 947
4 July 2003
10 255
10 000
10 165
679 761
7 July 2003
10 050
9 620
9 688
1 759 006
8 July 2003
10 000
9 600
9 900
1 343 626
9 July 2003
9 950
9 700
9 700
664 135
10 July 2003
9 675
9 330
9 400
1 421 818
11 July 2003
9 575
9 360
9 456
856 481
14 July 2003
9 800
9 400
9 551
1 206 263
15 July 2003
9 900
9 275
9 275
1 234 498
16 July 2003
8 990
8 400
8 400
6 975 720
17 July 2003
8 690
8 475
8 580
4 410 245
18 July 2003
8 600
8 370
8 420
1 806 711
21 July 2003
8 699
8 381
8 699
2 390 159
22 July 2003
8 850
8 640
8 775
1 777 358
23 July 2003
8 900
8 650
8 900
2 146 532
24 July 2003
9 060
8 850
9 060
2 440 559
25 July 2003
9 400
9 070
9 270
1 053 470
77
Annexure 8
Competent person's report on Harmony and ARMgold
AN INDEPENDENT COMPETENT PERSON'S REPORT ON CERTAIN MINING ASSETS OF
HARMONY GOLD MINING COMPANY LIMITED
AND
AFRICAN RAINBOW MINERALS GOLD LIMITED
Prepared for:
HARMONY GOLD MINING COMPANY LIMITED AND AFRICAN RAINBOW MINERALS
GOLD LIMITED
Prepared by:
Steffen, Robertson and Kirsten
(South Africa) (Proprietary) Limited
SRK House, 265 Oxford Road
Illovo, Johannesburg
Gauteng Province
Republic of South Africa
Tel: +27-(0)11-441 1111
Fax: +27-(0)11-441 1139
July 2003
Contents
Section
Description
Page
1.
INTRODUCTION
87
1.1
Background
87
1.2
Requirement for the CPR
88
1.3
CPR Structure
88
1.4
Limitations and Reliance on Information
89
1.4.1
Disclaimers and Cautionary Statements for US Investors
89
1.5
Basis of Valuation of the Mining Assets
89
1.5.1
Technical-Economic Appraisal
89
1.5.2
Technical-Economic Models
90
1.5.3
LoM Plans
90
1.6
Qualifications of Consultant
91
2.
MINING ASSETS
92
2.1
Introduction
92
2.2
Companies and Operating Structures
92
2.2.1
Harmony
92
2.2.2
ARMgold
94
2.3
Overview of the Mining Assets
96
2.3.1
Free Gold Operations
96
2.3.2
Harmony Free State Operations
97
2.3.3
ARMgold Welkom Operations
99
2.3.4
West Wits Operations
100
2.3.5
Evander Operations
101
2.3.6
ARMgold Orkney Operations
102
2.3.7
Kalgold Operation
104
2.3.8
International Operations - Harmony Australian Operations
104
2.3.9
International Operations - Harmony Canadian Operations
106
2.4
Significant Exploration Properties
106
2.4.1
Harmony
106
2.5
Mining Authorisations and Mining Leases
107
2.5.1
South African Law: Current Status
107
2.5.2
South African Law: The Minerals and Petroleum Resources Development Act
107
2.5.3
South African Law: Prospecting Permits
108
2.5.4
South African Law: Mining Authorisations
108
2.5.5
Australian Law
109
2.5.6
Harmony: Current Status
109
2.5.7
ARMgold: Current Status
110
78
Section
Description
Page
3.
GEOLOGY
112
3.1
Introduction
112
3.2
Witwatersrand Basin Geology
112
3.2.1
Free State Goldfield
113
3.2.2
West Rand Goldfield
115
3.2.3
Far West Rand Goldfield
115
3.2.4
Evander Goldfield
116
3.2.5
Klerksdorp Goldfield
116
3.3
Deposit Geology
117
3.3.1
Free Gold Operations
117
3.3.2
Harmony Free State Operations
119
3.3.3
ARMgold Welkom Operations
121
3.3.4
West Wits Operations
121
3.3.5
Evander Operations
123
3.3.6
ARMgold Orkney Operations
123
3.3.7
Kalgold Operations
124
3.3.8
Harmony Australian Operations
124
3.3.9
Harmony Canadian Operations
125
3.3.10 Exploration Potential
126
4.
MINERAL RESOURCES AND MINERAL RESERVES
126
4.1
Introduction
126
4.2
SRK Review Procedures
126
4.3
Mineral Resource and Mineral Reserve Estimation Methodology
127
4.3.1
Quality and Quantity of Data
127
4.3.2
Block Definition
129
4.3.3
Grade and Tonnage Estimation
129
4.3.4
Classification
130
4.3.5
Selective Mining Units
131
4.3.6
Grade Control and Reconciliation
131
4.3.7
Reserve Estimation
131
4.4
International Operations
133
4.4.1
Mineral Resource and Mineral Reserve Estimation Methodology
133
4.4.2
Quality and Quantity of Data
133
4.4.3
Block Definition
134
4.4.4
Grade and Tonnage Estimation
134
4.4.5
Grade Control and Reconciliation
134
4.4.6
Reserve Estimation
135
4.5
SRK Mineral Resource and Mineral Reserve Statements
135
4.5.1
Free Gold Operations
136
4.5.2
Harmony Free State Operations
137
79
Section
Description
Page
4.5.3
ARMgold Welkom Operations
138
4.5.4
West Wits Operations
139
4.5.5
Evander Operations
140
4.5.6
ARMgold Orkney Operations
141
4.5.7
Kalgold Operation
142
4.5.8
Harmony Australia Operations
143
4.5.9
Harmony Canadian Operations
144
4.5.10 Harmony
144
4.5.11 ARMgold
145
4.6
Mineral Resource and Mineral Reserve Potential
145
5.
MINING
145
5.1
Introduction
145
5.2
Mine Planning
145
5.3
Overview of Mining Operations
146
5.3.1
Free Gold Operations
146
5.3.2
Harmony Free State Operations
148
5.3.3
ARMgold Welkom Operations
149
5.3.4
West Wits Operations
150
5.3.5
Evander Operations
152
5.3.6
ARMgold Orkney Operations
153
5.3.7
Kalgold Operation
154
5.3.8
Harmony Australian Operations
155
5.3.9
Harmony Canadian Operations
156
5.4
Contribution to LoM Production
157
6.
METALLURGY
158
6.1
Introduction
158
6.2
Processing Facilities
158
6.2.1
Free Gold Operations
158
6.2.2
Harmony Free State Operations
159
6.2.3
West Wits Operations
160
6.2.4
Evander Operations
161
6.2.5
Kalgold Operations
162
6.2.6
Harmony Australian Operations
162
6.3
Sampling, Analysis, Gold Accounting and Security
163
6.4
Plant Clean-Up
163
7.
TAILINGS
164
7.1
Introduction
164
7.2
Free Gold Operations
164
7.3
Harmony Free State Operations
165
80
Section
Description
Page
7.4
West Wits Operations
165
7.5
Evander Operations
165
7.6
Kalgold Operation
166
7.7
Harmony Australian Operations
166
7.8
Mining Assets - LoM Tailings Deposition Assessment
166
8.
ENGINEERING INFRASTRUCTURE AND CAPITAL PROJECTS
167
8.1
Introduction
167
8.2
Engineering Infrastructure of the Mining Assets
167
8.3
LoM Capital Expenditure Programmes
168
9.
HUMAN RESOURCES
169
9.1
Introduction
169
9.2
Legislation
169
9.3
Organisational Structures and Operational Management
170
9.4
Recruitment, Training, Productivity Initiatives and Remuneration Policies
170
9.5
Industrial Relations
171
9.6
Productivity Assumptions
171
9.7
Separation Liability
172
10.
HEALTH AND SAFETY
172
10.1
Introduction
172
10.2
Legislation
173
10.3
Statistics
173
10.4
Health and Safety Management
174
10.5
Future Considerations
175
11.
ENVIRONMENTAL
175
11.1
Introduction
175
11.2
South African Legislation and Compliance
175
11.2.1 Legislation and Environment
175
11.2.2 Compliance
176
11.3
Australian Legislation and Compliance
177
11.3.1 Harmony Australian Operations
177
11.3.2 Harmony Canadian Operations
177
11.4
Environmental Policy and Management
177
11.4.1 Harmony
177
11.4.2 ARMgold
178
11.5
Environmental Issues
178
11.5.1 Free Gold Operations
178
11.5.2 Harmony Free State Operations
178
11.5.3 ARMgold Welkom Operations
179
11.5.4 West Wits Operations
179
81
Section
Description
Page
11.5.5 Evander Operations
179
11.5.6 ARMgold Orkney Operations
179
11.5.7 Kalgold Operation
180
11.5.8 Harmony Australian Operations
180
11.5.9 Harmony Canadian Operations
181
11.6
Liabilities and Risks
181
12.
TECHNICAL-ECONOMIC INPUT PARAMETERS
182
12.1
Introduction
182
12.2
Basis of Valuation and Technical-Economic Parameters
182
12.3
Technical-Economic Parameters
183
12.3.1 Harmony
188
12.3.2 ARMgold
189
12.4
Special Factors
190
12.4.1 General Risks and Opportunities
190
12.4.2 Operational Specific Risks and Opportunities
191
13.
MINING ASSETS VALUATION
192
13.1
Introduction
192
13.2
Basis of Valuation of the Mining Assets
192
13.3
Limitations and Reliance on Information
192
13.4
Valuation Methodology
193
13.5
Post-Tax Pre-Finance Cash Flows
194
13.6
Net Present Values and Sensitivities
207
13.6.1 Free Gold Tax Entity
207
13.6.2 Joel Tax Entity
208
13.6.3 Harmony Free State Operations
208
13.6.4 ARMgold Welkom Operations
209
13.6.5 Randfontein Tax Entity
210
13.6.6 Evander Tax Entity
211
13.6.7 ARMgold Orkney Tax Entity
211
13.6.8 Kalgold Tax Entity
212
13.6.9 Mt. Magnet and Cue Tax Entity
213
13.6.10 South Kalgoorlie Tax Entity
214
13.6.11 Harmony
214
13.6.12 ARMgold
215
14.
SUMMARY EQUITY VALUATION AND CONCLUDING REMARKS
216
14.1
Summary Equity Valuation
216
14.2
Concluding Remarks
217
GLOSSARY, ABBREVIATIONS AND UNITS
218
APPENDIX 1 - Other investments
230
82
Table of tables
Table No.
Description
Page
Table 1.1
Base Case Macro-Economic Parameters
90
Table 2.1
Harmony: company development
93
Table 2.2
Harmony: salient historical and forecast operating statistics
94
Table 2.3
ARMgold: company development
95
Table 2.4
ARMgold: salient historical and forecast operating statistics
95
Table 2.5
Free Gold operations: salient operating statistics
96
Table 2.6
Free Gold Operations: salient historical and forecast operating statistics
97
Table 2.7
Harmony Free State Operations: salient operating statistics
98
Table 2.8
Harmony Free State Operations: salient historical and forecast operating statistics
98
Table 2.9
ARMgold Welkom Operations: salient operating statistics
99
Table 2.10
ARMgold Welkom Operations: salient historical and forecast operating statistics
99
Table 2.11
West Wits Operations: salient operating statistics
100
Table 2.12
West Wits Operations: salient historical and forecast operating statistics
101
Table 2.13
Evander Operations: salient operating statistics
102
Table 2.14
Evander Operations: salient historical and forecast operating statistics
102
Table 2.15
ARMgold Orkney: salient operating statistics
103
Table 2.16
ARMgold Orkney: salient historical and forecast operating statistics
103
Table 2.17
Kalgold Operation: salient operating statistics
104
Table 2.18
Kalgold Operation: salient historical and forecast operating statistics
104
Table 2.19
Harmony Australian Operation: salient operating statistics
105
Table 2.20
Harmony Australian Operation: salient historical and forecast operating statistics
105
Table 2.21
Harmony Canadian Operation: salient historical and forecast operating statistics
106
Table 2.22
Harmony South African Operations land holdings
109
Table 2.23
Harmony Australian Operations
110
Table 4.1
Free Gold Operations: assumed modifying factors
132
Table 4.2
Harmony Free State Operations: assumed modifying factors
132
Table 4.3
ARMgold Welkom Operations: assumed modifying factors
133
Table 4.4
West Wits Operations: assumed modifying factors
133
Table 4.5
Evander Operations: assumed modifying factors
133
Table 4.6
ARMgold Orkney Operations: historical and assumed modifying factors
133
Table 4.7
Free Gold Operations: Mineral Resource and Mineral Reserve statement
136
Table 4.8
Free Gold Operations: Mineral Resource, Mineral Reserve and LoM plan sensitivity
137
Table 4.9
Harmony Free State Operations: Mineral Resource and Mineral Reserve statement
137
Table 4.10
Harmony Free State Operations: Mineral Resource, Mineral Reserve and LoM plan sensitivity
138
Table 4.11
ARMgold Welkom Operations: Mineral Resource and Mineral Reserve statement
138
Table 4.12
ARMgold Welkom Operations: Mineral Resource, Mineral Reserve and LoM plan sensitivity
139
Table 4.13
West Wits Operations: Mineral Resource and Mineral Reserve statement
139
Table 4.14
West Wits Operations: Mineral Resource, Mineral Reserve and LoM plan sensitivity
140
Table 4.15
Evander Operations: Mineral Resource and Mineral Reserve statement
140
83
Table No.
Description
Page
Table 4.16
Evander Operations: Mineral Resource, Mineral Reserve and LoM plan sensitivity
141
Table 4.17
ARMgold Orkney Operations: Mineral Resource and Mineral Reserve statement
141
Table 4.18
ARMgold Orkney Operations: Mineral Resource, Mineral Reserve and LoM plan sensitivity
142
Table 4.19
Kalgold Operations: Mineral Resource and Mineral Reserve statement
142
Table 4.20
Harmony Australia Operations - Mt. Magnet & Cue: Mineral Resource and Mineral Reserve statement
143
Table 4.21
Harmony Australia Operations - South Kalgoorlie: Mineral Resource and Mineral Reserve statement
143
Table 4.22
Harmony Canadian Operations: Mineral Resource and Mineral Reserve statement
144
Table 4.23
Harmony: Mineral Resource and Mineral Reserve statement
144
Table 4.24
ARMgold: Mineral Resource and Mineral Reserve statement
145
Table 5.1
Mining Assets: contribution to LoM plan production
157
Table 6.1
Mining Assets: clean-up gold estimates
164
Table 7.1
Mining Assets: LoM Tailings Storage Facility Assessments
167
Table 8.1
Mining Assets: estimated capital expenditures
169
Table 9.1
Mining Assets: historical and 2004 forecast
170
Table 9.2
Productivity: Historical and assumed productivity initiatives
171
Table 9.3
Mining Assets: separation costs
172