9 months ended March months ended March 2013* oz (12) R/kg (11) (2)

Transcription

1 Harmony Gold Mining Company Limited ( Harmony or Company ) Incorporated in the Republic of South Africa Registration number 1950/038232/06 JSE share code: HAR NYSE share code: HMY ISIN: ZAE Q3 FY14 Results for the third quarter FY14 and nine months ended KEY FEATURES Quarter on quarter 5% increase in underground recovered grade to 5.10g/t 3 consecutive quarters of grade increases, representing a cumulative increase of 17% 3% increase in gold production in the first 9 months of FY14 6% decrease in production profit during the March quarter, due to a 12% decrease in gold produced Turned prior quarter s loss into a profit net profit of R31 million (US$3 million) headline earnings per share of 12 SA cents (1 US cent) Net debt 13% lower and cash balance of R2 billion RESULTS FOR THE THIRD QUARTER FY14 ENDED 31 MARCH Gold produced Cash operating costs Quarter March Quarter December Q-on-Q variance % 9 months ended March 9 months ended March * % Variance kg (12) oz (12) R/kg (11) (2) US$/oz (4) kg (13) Gold sold oz (13) Underground grade g/t All-in sustaining costs Gold price received Production profit* Basic earnings/(loss) per share*¹ Headline earnings/ (loss)*¹ R/kg (7) US$/oz R/kg (7) US$/oz (22) R million (6) (25) US$ million (13) (37) SAc/s 7 (21) >100 (11) 266 >(100) USc/s 1 (2) >100 (1) 30 >(100) Rm 52 (91) >100 (19) >(100) US$m 5 (9) >100 (2) 119 >(100) Headline earnings/ SAc/s 12 (21) >100 (4) 238 >(100) (loss) per share*¹ USc/s 1 (2) > (100) Exchange rate R/US$ * Comparative figures in these line items have been restated as a result of the adoption of IFRIC 20 Stripping costs in the production phase of a surface mine ¹ The nine months ended March include discontinued operations Shareholder information Issued ordinary share capital at Issued ordinary share capital at 31 December Market capitalisation (ZARm) (US$m) December (ZARm) December (US$m) Harmony ordinary share and ADR* prices 12-month high (1 April ) for ordinary shares R month low (1 April ) for ordinary shares R month high (1 April ) for ADRs US$ month low (1 April ) for ADRs US$2.36 Free float 100% ADR* ratio 1:1 JSE Limited HAR Range for quarter (1 January closing prices) R27.25 R40.32 Average daily volume for the quarter (1 January ) shares Range for quarter (1 October 31 December closing prices) R24.48 R36.14 Average daily volume for the quarter (1 October 31 December ) shares New York Stock Exchange including other US trading platforms HMY Range for quarter (1 January closing prices) US$2.52 US$3.77 Average daily volume for the quarter (1 January ) Range for quarter (1 October 31 December closing prices) US$2.36 US$3.67 Average daily volume for the quarter (1 October 31 December ) Investors calendar Q4 FY14 and year-end live presentation in Johannesburg 14 August Release of Harmony s Integrated Annual Report of FY14 23 October Q1 FY15 presentation (webcast and conference calls only) 5 November Annual General Meeting 21 November Q2 FY15 live presentation in Cape Town 9 February 2015 *ADR: American Depository Receipts

2 CONTACT DETAILS Corporate Office Randfontein Office Park PO Box 2, Randfontein, 1760, South Africa Corner Main Reef Road/Ward Avenue Randfontein, 1759, South Africa Telephone: +27 (0) Website: Directors P T Motsepe* Chairman M Motloba*^ Deputy Chairman G P Briggs Chief Executive Officer F Abbott Financial Director H E Mashego Executive Director F F T De Buck*^ Lead independent director J A Chissano* 1^, K V Dicks*^, Dr D S Lushaba*^, C Markus*^, M Msimang*^, K T Nondumo*^, V P Pillay *^, J Wetton*^, A J Wilkens* * Non-executive ^ Independent 1 Mozambican Investor relations team HarmonyIR@harmony.co.za Henrika Ninham Investor Relations Manager Tel: +27 (0) Mobile: +27 (0) henrika@harmony.co.za Marian van der Walt Executive: Corporate and Investor Relations Tel: +27 (0) Mobile: +27 (0) marian@harmony.co.za Company Secretary Riana Bisschoff Telephone: +27 (0) Mobile: +27 (0) riana.bisschoff@harmony.co.za South African Share Transfer Secretaries Link Market Services South Africa (Proprietary) Limited (Registration number 2000/007239/07) 13th Floor, Rennie House 19 Ameshoff Street Braamfontein, 2001 PO Box 4844, Johannesburg, 2000, South Africa Telephone: +27 (0) Fax: +27 (0) ADR Depositary Deutsche Bank Trust Company Americas c/o American Stock Transfer and Trust Company Peck Slip Station PO Box 2050, New York, NY queries: db@amstock.com Toll free: Intl: Fax: Sponsor J.P. Morgan Equities South Africa (Pty) Ltd 1 Fricker Road, corner Hurlingham Road Illovo Johannesburg, 2196 Private Bag X9936, Sandton, 2146, South Africa Telephone: +27 (0) Fax: +27 (0) Trading Symbols JSE Limited: HAR New York Stock Exchange, Inc: HMY Euronext, Brussels: HMY Berlin Stock Exchange: HAM1 Registration number 1950/038232/06 Incorporated in the Republic of South Africa ISIN ZAE Harmony s Integrated Annual Report, the Sustainable Development Information which serves as supplemental information to the Integrated Annual Report and its annual report filed on a Form 20F with the United States Securities and Exchange Commission for the financial year ended are available on our website at 2

3 FORWARD-LOOKING STATEMENTS This quarterly report contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 with respect to Harmony s financial condition, results of operations, business strategies, operating efficiencies, competitive positions, growth opportunities for existing services, plans and objectives of management, markets for stock and other matters. Statements in this quarter that are not historical facts are forward-looking statements for the purpose of the safe harbour provided by Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and Section 27A of the U.S. Securities Act of 1933, as amended. Forward-looking statements are statements that are not historical facts. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forwardlooking statements are generally identified by the words expect, anticipates, believes, intends, estimates and similar expressions. These statements are only predictions. All forward-looking statements involve a number of risks, uncertainties and other factors and we cannot assure you that such statements will prove to be correct. Risks, uncertainties and other factors could cause actual events or results to differ from those expressed or implied by the forward-looking statements. These forwardlooking statements, including, among others, those relating to the future business prospects, revenues and income of Harmony, wherever they may occur in this quarterly report and the exhibits to this quarterly report, are necessarily estimates reflecting the best judgement of the senior management of Harmony and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. As a consequence, these forwardlooking statements should be considered in light of various important factors, including those set forth in this quarterly report. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation: overall economic and business conditions in the countries in which we operate; the ability to achieve anticipated efficiencies and other cost savings in connection with past and future acquisitions; increases or decreases in the market price of gold; the occurrence of hazards associated with underground and surface gold mining; the occurrence of labour disruptions; availability, terms and deployment of capital; changes in government regulations, particularly mining rights and environmental regulations; fluctuations in exchange rates; currency devaluations and other macro-economic monetary policies; and socio-economic instability in the countries in which we operate. CONTENTS 2 Contact details 4 Message from the chief executive officer 6 Operational results (Rand/Metric) (US$/Imperial) 8 Condensed consolidated income statements (Rand) 9 Condensed consolidated statements of comprehensive income (Rand) 9 Condensed consolidated statements of changes in equity (Rand) 10 Condensed consolidated balance sheets (Rand) 11 Condensed consolidated cash flow statements (Rand) 12 Notes to the condensed consolidated financial statements 19 Segment report (Rand/Metric) 20 Operating results (US$/Imperial) 22 Condensed consolidated income statements (US$) 23 Condensed consolidated statements of comprehensive income (US$) 23 Condensed consolidated statements of changes in equity (US$) 24 Condensed consolidated balance sheets (US$) 25 Condensed consolidated cash flow statements (US$) 26 Segment report (US$/Imperial) 27 Development results Metric and Imperial Competent person s declaration Harmony reports in terms of the South African Code for the Reporting of Exploration results, Mineral Resources and Ore Reserves (SAMREC). Harmony employs an ore reserve manager at each of its operations who takes responsibility for reporting mineral resources and mineral reserves at his operation. The mineral resources and mineral reserves in this report are based on information compiled by the following competent persons: Resources and Reserves South Africa: Jaco Boshoff, Pr. Sci. Nat., who has 18 years relevant experience and is registered with the South African Council for Natural Scientific Professions (SACNASP). Resources and Reserves Papua New Guinea: Gregory Job, BSc, MSc, who has 25 years relevant experience and is a member of the Australian Institute of Mining and Metallurgy (AusIMM). Mr Boshoff and Mr Job are full-time employees of Harmony Gold Mining Company Limited. These competent persons consent to the inclusion in the report of the matters based on the information in the form and context in which it appears. Mineral Resource and Reserve information as at have not changed. 3

4 Results for the third quarter FY14 and nine months ended Message from the chief executive officer 1. SAFETY Safe mining remains at the core of our values. The unprecedented and tragic safety accidents of the quarter under review have led to various actions and initiatives to reinforce our safety practices and behaviour one being an external review of Harmony s safety and health strategy, which is scheduled to be completed during May. During the quarter we reported on the various safety accidents extensively (see company-announcements-2/announcements-). More information on how we approach safety at Harmony can be found in our safety fact sheet at: fact-sheets. 2. OPERATIONAL RESULTS Gold production for the March quarter decreased by 12% to 8 368kg, from 9 515kg in the December quarter. Production stoppages at Doornkop due to the accident in February, flooding of the shaft bottom at Joel and a slower turnaround and technical issues at Kusasalethu were the main contributors to lower production quarter on quarter. Production at Steyn 2 was suspended six months earlier than the planned life of mine, due to increased seismicity in the working areas. Harmony s underground recovered grade increased for a third consecutive quarter. Quarter on quarter, underground recovered grade was 5% higher at 5.10g/t (4.85g/t in the December quarter). The underground operations recorded a production profit of R765 million. The following operations showed an increase in production: Tshepong (+62kg), mainly as a result of a 6% increase in tonnes milled; Phakisa (+46kg), due to a 6% increase in the recovered grade to 5.45g/t for the March quarter; Hidden Valley (+44kg) increased recovered grade by 14% to 1.75g/t for the March quarter. The increase in grade was partially offset by an 8% decrease in tonnes milled quarter on quarter; and Bambanani and Target 3 also increased production. Gold production decreased at the following operations, when compared to the December quarter: Doornkop ( 438kg) production was affected by the accident in February. Rehabilitation work is currently taking place on 192 level with the aim of re-establishing the working area for production; Joel ( 329kg) production was hampered by flooding of the shaft bottom, resulting in tonnes less milled than in the previous quarter; Kusasalethu ( 211kg) experienced production losses due to safety stoppages and water availability during the quarter and milled 25% less tonnes than in the December quarter. The decrease in tonnes was, however, partially offset by a 9% increase in the recovered grade to 4.11g/t; Dumps ( 71kg) milled tonnes less than in the December quarter and the recovered grade decreased to 0.25g/t, compared to 0.30g/t in the previous quarter; Target 1 ( 68kg) milled tonnes less than in the December quarter; Kalgold ( 60kg) was affected by a lower than expected grade and excessive rain delaying blasting in higher grade blocks; and Masimong and Steyn 2 also had lower gold production. Lower gold production resulted in a 6% decrease in the company s production profit for the March quarter (from R986 million in the December quarter to R924 million in the March quarter). The rand gold price received increased by 8% to R /kg in the March quarter, compared to R /kg in the December quarter. The rand weakened by 7% against the US dollar to R10.83/US$, from R10.12/US$ in the December quarter. There was a slight increase in the dollar gold price received quarter on quarter (from US$1 277/oz in the previous quarter to US$1 294/oz in the March quarter). Cash operating costs decreased by 2% (to R2.87 billion) in the March quarter. The decrease is mainly attributed to a decrease in consumables for the South African operations. Capital expenditure for the March quarter decreased by 10% to R579 million, compared to R640 million in the December quarter. Lower gold production resulted in a 7% increase in all-in sustaining unit costs to R /kg. 3. FINANCIAL RESULTS Gross profit The 13% decrease in the gold sold was partially offset by the higher average gold price received, resulting in revenue decreasing by only 6%, while production costs were lower mainly due to inventory movements and cost savings. As a result gross profit was at a similar level compared to the previous quarter. Net profit/(loss) The net profit for the March quarter was R31 million, compared to a net loss of R91 million in the December quarter, mainly due to a smaller foreign exchange translation loss recorded on the US$-denominated loan. The profit in the current quarter was achieved after expensing R29 million on the impairment of Steyn 2 and R90 million on employment retrenchment and restructuring costs. Impairment of assets An impairment of R29 million was recorded on Steyn 2 following the decision to cease mining at the operation. Other expenses (net) Included in other expenses (net) in the March quarter is a loss of R29 million (December quarter R111 million) for the foreign exchange movement on the US$-denominated syndicated loan, resulting from the Rand weakening during the quarter. Borrowings A repayment of the drawn amount on the R1.3 billion Nedbank Revolving Credit Facility of R467 million was made at the end of the March quarter and is now fully repaid. The only outstanding debt is the US$270 million drawn under the US$300 million syndicated revolving credit facility. 4

5 Earnings/loss per share The earnings per share of 7 SA cents in the March quarter increased from the loss per share of 21 SA cents in the December quarter. Employee Share Option Plan (ESOP) share vesting The vesting of the second tranche of Scheme Shares and Share Appreciation Rights awarded to qualifying employees took place during March. Payments to all eligible employees were made in April. 4. NEW CHIEF OPERATING OFFICER APPOINTED Alwyn Pretorius was appointed as Harmony s new Chief Operating Officer on 3 March. Alwyn joined Harmony during its merger with ARMgold in He has been an executive of Harmony since 2007 and holds degrees in both BSc Mining Engineering and BSc Industrial Engineering. With 20 years of underground deep-level gold mining experience in different supervisory and management positions, supported by three regional managers and several general managers, we are confident that Alwyn will lead the change in operational improvement in South Africa. 5. GOOD PROGRESS AT WAFI-GOLPU Study work during the quarter continued to evaluate underground access options and a substantially lower capital expenditure development option for Wafi-Golpu. Drilling completed at Golpu during the quarter is expected to have a positive impact on the grade of the upper mining block due to an increase in the volume of the higher grade hornblende porphyry compared with the previous estimate. Drilling has also confirmed continuity of porphyry and high grade mineralisation in the lower mining block. Results from two holes were received during the quarter. WR499 was a long section hole drilled from north to south that confirmed the northern boundary of the deposit and demonstrated the continuity of higher grade porphyry mineralisation through and well below the existing resource. WR504 was a west to east cross section hole that confirmed the fault structures controlling the distribution of higher grade in the deposit. These include: WR499* 1 1.0g/t Au and 1.2% Cu from 966m, including 1.9g/t Au and 2.1% Cu from 1 252m; WR g/t Au and 1.7% Cu from 399m, including 2.2g/t Au and 2.9% Cu from 1 191m. *Partial result reported last quarter. The surface drilling program at Golpu is now complete for the financial year. Results from the last two holes WR499 and WR504 are being incorporated into a new planning model for integration into the ongoing study. 6. IN CONCLUSION Various structural changes have been effected which will aid in the pro-active management of unplanned events which have negatively impacted on our production. In parallel, our revised planning strategy will shift the focus toward de-bottlenecking and optimisation, and should also result in an increase in the Company s margins. We remain committed to increasing our profits and cash flow to enable us to pay dividends in future. Graham Briggs Chief Executive Officer 5

6 Results for the third quarter FY14 and nine months ended OPERATIONAL RESULTS (Rand/Metric) (US$/Imperial) Underground production Ore milled t 000 Gold produced Gold produced Yield Cash operating costs Cash operating costs Cash operating costs Gold sold Gold sold Revenue Cash operating costs Inventory movement Operating costs Production profit kg oz g/tonne R/kg $/oz R/tonne Kg oz (R 000) (R 000) (R 000) (R 000) (R 000) Production profit ($ 000) Capital expenditure Capital expenditure Adjusted operating costs Adjusted operating costs All-in sustaining costs All-in sustaining costs (R 000) ($ 000) R/kg $/oz R/kg $/oz Three months ended Kusasalethu Doornkop Phakisa Tshepong Masimong Target 1 Bambanani Joel Mar Dec Mar Dec Mar Dec Mar Dec Mar Dec Mar Dec Mar Dec Mar Dec Mar Dec Mar Dec Mar Dec Mar (11 605) (15 785) (9 651) (36 805) (10 628) Dec (6 288) Mar Dec Mar (50 321) Dec Mar (4 647) Dec Mar Dec Mar Dec Mar Dec Mar Dec Mar Dec Mar Dec

7 South Africa Unisel Target 3 Steyn 2 Surface production Total Underground Phoenix Dumps Kalgold Total Surface Total South Africa Hidden Valley Total Harmony (6 375) (19 718) (1 061) (22 442) (415) (11 068) 143 (13 675) (24 600) (20 733) (39) (4)

8 Results for the third quarter FY14 and nine months ended CONDENSED CONSOLIDATED INCOME STATEMENTS (Rand) Note Quarter ended Nine months ended Year ended 31 December (Audited) Continuing operations Revenue Cost of sales 3 (3 595) (3 817) (3 260) (11 147) (10 277) (16 448) Production costs (2 906) (3 086) (2 675) (8 973) (8 509) (11 321) Amortisation and depreciation (475) (565) (468) (1 617) (1 470) (2 001) Impairment of assets (29) (29) (2 733) Other items (185) (166) (117) (528) (298) (393) Gross profit/(loss) (546) Corporate, administration and other expenditure (109) (102) (121) (319) (338) (465) Social investment expenditure (8) (21) (25) (67) (70) (127) Exploration expenditure (90) (112) (157) (344) (454) (673) Profit on sale of property, plant and equipment Other expenses (net) 7 (22) (140) (138) (161) (182) (350) Operating profit/(loss) 6 (121) (158) (119) (2 022) Profit from associates Impairment of investments (39) (7) (88) (88) Net gain on financial instruments Investment income Finance cost (59) (57) (65) (176) (198) (256) Profit/(loss) before taxation 46 (85) (200) (2 008) Taxation (15) (6) (44) (59) (416) (655) Normal taxation 24 (124) (25) (349) (271) Deferred taxation (39) (6) 80 (34) (67) (384) Net profit/(loss) from continuing operations 31 (91) (244) (47) 834 (2 663) Discontinued operations Profit from discontinued operations Net profit/(loss) for the period 31 (91) (101) (47) (2 349) tributable to: Owners of the parent 31 (91) (101) (47) (2 349) Earnings/(loss) per ordinary share (cents) 4 Earnings/(loss) from continuing operations 7 (21) (57) (11) 193 (616) Earnings from discontinued operations Total earnings/(loss) 7 (21) (24) (11) 266 (543) Diluted earnings/(loss) per ordinary share (cents) 4 Earnings/(loss) from continuing operations 7 (21) (57) (11) 192 (616) Earnings from discontinued operations Total diluted earnings/(loss) 7 (21) (24) (11) 265 (543) * The audited June annual results, unaudited nine months ended March and unaudited March quarter results have been restated due to a change in accounting policy. Refer to note 2 for details. The restatements to the comparative information have not been audited. The accompanying notes are an integral part of these condensed consolidated financial statements. 8

9 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Rand) Quarter ended Nine months ended Year ended 31 December (Audited) Net profit/(loss) for the period 31 (91) (101) (47) (2 349) Other comprehensive (loss)/income for the period, net of income tax (416) (733) Foreign exchange translation (421) (745) Movements on investments 5 8 (13) (5) Total comprehensive (loss)/income for the period (385) (780) (1 612) tributable to: Owners of the parent (385) (780) (1 612) * The audited June annual results, unaudited nine months ended March and unaudited March quarter results have been restated due to a change in accounting policy. Refer to note 2 for details. The restatements to the comparative information have not been audited. The accompanying notes are an integral part of these condensed consolidated financial statements. All items in Other comprehensive income will be reclassified subsequently to profit or loss when specific conditions are met. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Rand) for the nine months ended Note Share capital Other reserves Retained earnings Total Balance as previously reported Restatement for IFRIC 20 2 (22) (74) (96) Restated balance Share-based payments Net loss for the period (47) (47) Other comprehensive loss for the period (733) (733) Balance Balance 2012 as previously reported Restatement for IFRIC 20 2 (15) (94) (109) Restated balance Share-based payments Net profit for the period Other comprehensive income for the period Dividends paid 1 (435) (435) Balance Dividend of 50 SA cents declared on 13 August 2012 and 50 SA cents on 1 February. The accompanying notes are an integral part of these condensed consolidated financial statements. The condensed consolidated financial statements for the nine months ended have been prepared by Harmony Gold Mining Company Limited s corporate reporting team headed by Mr Herman Perry. This process was supervised by the financial director, Mr Frank Abbott, and approved by the board of Harmony Gold Mining Company Limited. 9

10 Results for the third quarter FY14 and nine months ended CONDENSED CONSOLIDATED BALANCE SHEETS (Rand) Note 31 December (Audited) ASSETS Non-current assets Property, plant and equipment Intangible assets Restricted cash Restricted investments Deferred tax assets Investments in associates Investments in financial assets Inventories Trade and other receivables 6 Total non-current assets Current assets Inventories Trade and other receivables Income and mining taxes Restricted cash Cash and cash equivalents Non-current assets and assets of disposal groups classified as held for sale Total current assets Total assets EQUITY AND LIABILITIES Share capital and reserves Share capital Other reserves Retained earnings Total equity Non-current liabilities Deferred tax liabilities Provision for environmental rehabilitation Retirement benefit obligation Other provisions Borrowings Total non-current liabilities Current liabilities Borrowings Income and mining taxes Trade and other payables Total current liabilities Total equity and liabilities * The audited June annual results and unaudited March results have been restated due to a change in accounting policy. Refer to note 2 for details. The restatements to the comparative information have not been audited. The accompanying notes are an integral part of these condensed consolidated financial statements. 10

11 CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (Rand) Quarter ended Nine months ended Year ended 31 December (Audited) Cash flow from operating activities Cash generated by operations Interest and dividends received Interest paid (39) (21) (27) (89) (85) (125) Income and mining taxes paid _ (28) (70) (28) (183) (312) Cash generated by operating activities Cash flow from investing activities Increase in restricted cash (3) (3) Restricted cash transferred from disposal group 252 Proceeds on disposal of investment in subsidiary Purchase of investments (33) (72) (86) Other investing activities (1) 3 (10) (3) (4) Net additions to property, plant and equipment 1 (599) (624) (835) (1 841) (2 714) (3 652) Cash (utilised)/generated by investing activities (602) (625) 651 (1 854) (1 525) (2 478) Cash flow from financing activities Borrowings raised Borrowings repaid (462) (3) (4) (468) (177) (333) Ordinary shares issued net of expenses 1 Option premium on BEE transaction 2 Dividends paid (217) (435) (435) Cash (utilised)/generated by financing activities (462) (3) (221) (87) Foreign currency translation adjustments (1) (20) 17 (39) Net (decrease)/increase in cash and cash equivalents (315) (81) Cash and cash equivalents beginning of period Cash and cash equivalents end of period The year includes capital expenditure for Wafi-Golpu and other international projects of R537 million, the March quarter R148 million and the nine months ended R403 million. The accompanying notes are an integral part of these condensed consolidated financial statements. 11

12 Results for the third quarter FY14 and nine months ended NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS for the period ended (Rand) 1. Accounting policies Basis of accounting The condensed consolidated financial statements for the nine months ended have been prepared in accordance with IAS 34, Interim Financial Reporting, JSE Listings Requirements, SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and in the manner required by the Companies Act of South Africa. They should be read in conjunction with the annual financial statements for the year ended, which have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS). The accounting policies are consistent with those described in the annual financial statements, except for the adoption of applicable revised and/or new standards issued by the International Accounting Standards Board. The following accounting standards, amendments to standards and new interpretations have been adopted with effect from 1 July. IFRS 7 Amendment Disclosures Offsetting Financial Assets and Financial Liabilities IFRS 10 Consolidated Financial Statements IFRS 11 Joint Arrangements IFRS12 Disclosure of Interests in Other Entities IFRS 13 Fair Value Measurement IFRSs Annual Improvements IAS 19 Employee Benefits (Revised 2011) IAS 27 Separate Financial Statements (Revised 2011) IAS 28 Investments in Associates and Joint Ventures (Revised 2011) IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine New standards and amendments which have an impact on the condensed consolidated financial statements of the group are described below: IAS 19 includes a number of amendments to the accounting for defined benefit plans, including actuarial gains and losses that are now recognised in other comprehensive income (OCI). Actuarial gains and losses recognised in OCI will not be recycled to profit or loss. The impact for the group was immaterial. IFRS 11 requires joint operations to be accounted at the group s interest in the assets, liabilities, revenue and expenses of the joint operation. Harmony previously accounted for joint operations using the proportional consolidation method. The change in accounting policy has not had an impact on any previously reported numbers. IFRIC 20 clarifies the requirements for accounting for costs of stripping activity in the production phase of surface mining. Stripping assets that cannot be attributed to an identifiable component of the orebody will be written off to retained earnings on adoption of IFRIC 20. Refer to note 2 for further details. 2. Change in accounting policies IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (IFRIC 20) which became effective on 1 January, clarifies the requirements for accounting for the costs of stripping activity in the production phase of surface mining when two benefits accrue: (i) usable ore that can be used to produce inventory; and (ii) improved access to further quantities of material that will be mined in future periods. Harmony has applied IFRIC 20 on a prospective basis from 1 July 2011 in compliance with the transitional requirements of IFRIC 20. Harmony previously accounted for stripping costs incurred during the production phase to remove waste material by deferring these costs, which were then charged to production costs on the basis of the average life-of-mine stripping ratio. A stripping activity asset shall be recognised if all of the following are met: (i) it is probable that the future economic benefit (improved access to the orebody) associated with the stripping activity will flow to the entity; (ii) the entity can identify the component of the orebody for which access has been improved; and (iii) the cost relating to the stripping activity associated with that component can be measure reliably. The stripping asset shall be depreciated over the expected useful life of the identified component of the orebody based on the units of production method. Where there were no identifiable components of the orebody to which the predecessor asset relates, the asset was written off to retained earnings at the beginning of the earliest period presented. An amount of R54 million was written off to opening retained earnings. The comparative periods presented have been restated. The restatement had no effect on the condensed consolidated cash flow statements. The results for the year ended and the financial position at this date have been reviewed and audited respectively, but the restatement of the results and balances affected by IFRIC 20 have not been audited. 12

13 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED for the period ended (Rand) Reconciliation of the effect of the change in accounting standard: Condensed consolidated income statements Quarter ended Nine months ended Year ended (Audited) Cost of sales Production costs As previously reported (2 707) (8 556) (11 400) IFRIC 20 adjustment Restated (2 675) (8 509) (11 321) Amortisation and depreciation As previously reported (459) (1 441) (1 942) IFRIC 20 adjustment (9) (29) (59) Restated (468) (1 470) (2 001) Increase/decrease in net profit/loss for the period* * There is no material taxation effect on these items. Condensed consolidated statements of comprehensive income Quarter ended Nine months ended Year ended (Audited) Increase/decrease in net profit/loss for the period* Other comprehensive income for the period net of income tax Foreign exchange translation As previously reported IFRIC 20 adjustment (4) (7) (7) Restated Increase/decrease in total comprehensive income/loss for the period * There is no material taxation effect on these items. Condensed consolidated balance sheets (Audited) Non-current assets Property, plant and equipment As previously reported IFRIC 20 adjustment (88) (83) Restated Current assets Inventories As previously reported IFRIC 20 adjustment (8) (15) Restated Share capital and reserves Other reserves As previously reported IFRIC 20 adjustment 1 (22) (22) Restated Retained earnings As previously reported IFRIC 20 adjustment (74) (76) Restated Decrease in total equity (96) (98) 1 Translation effect of the IFRIC 20 adjustments on foreign operations (Hidden Valley). 13

14 Results for the third quarter FY14 and nine months ended NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED for the period ended (Rand) Earnings/(loss) and headline earnings/(loss) per share Quarter ended Nine months ended Year ended (Audited) Basic (loss)/earnings per share (cents) As previously reported (29) 262 (548) IFRIC 20 adjustment Restated (24) 266 (543) Diluted (loss)/earnings per share (cents) As previously reported (29) 261 (548) IFRIC 20 adjustment Restated (24) 265 (543) Total headline (loss)/earnings As previously reported (202) IFRIC 20 adjustment Restated (179) Headline (loss)/earnings per share (cents) As previously reported (47) IFRIC 20 adjustment Restated (42) Diluted headline (loss)/earnings (cents) As previously reported (47) IFRIC 20 adjustment Restated (42) Cost of sales Quarter ended Nine months ended Year ended 31 December (Audited) Production costs excluding royalty Royalty expense Amortisation and depreciation Impairment of assets Rehabilitation expenditure/(credit) 2 17 (15) (24) Care and maintenance cost of restructured shafts Employment termination and restructuring cost Share-based payments Other (4) (1) 2 37 Total cost of sales * The audited June annual results, unaudited nine months ended March and unaudited March quarter results have been restated due to a change in accounting policy. Refer to note 2 for details. The restatements to the comparative information have not been audited. 1. The decision to stop mining at the Steyn 2 shaft (included in the Bambanani segment) resulted in the remaining carrying value being impaired. 2. A credit of R24 million arose in the December quarter as a result of work performed in the Free State, resulting in a reduction in the rehabilitation liability. 3. Included in the December and March quarters are amounts relating to the restructuring at Hidden Valley and the voluntary retrenchment packages offered in South Africa. 4. This includes the cost relating to the Employee Share Ownership Plan (ESOP) awards that were granted in August

15 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED for the period ended (Rand) 4. Earnings/(loss) and net asset value per share Quarter ended Nine months ended Year ended 31 December (Audited) Weighted average number of shares (million) Weighted average number of diluted shares (million) Total earnings/(loss) per share (cents): Basic earnings/(loss) 7 (21) (24) (11) 266 (543) Diluted earnings/(loss) 7 (21) (24) (11) 265 (543) Headline earnings/(loss) 12 (21) (42) (4) from continuing operations 12 (21) (51) (4) from discontinued operations Diluted headline earnings/(loss) 12 (21) (42) (4) from continuing operations 12 (21) (51) (4) from discontinued operations Reconciliation of headline earnings/(loss): Continuing operations Net profit/(loss) 31 (91) (244) (47) 834 (2 663) Adjusted for: Impairment of investments Impairment of assets Taxation effect on impairment of assets (8) (8) (38) Profit on sale of property, plant and equipment (15) (139) (139) Taxation effect of profit on sale of property, plant and equipment Headline earnings/(loss) 52 (91) (220) (19) Discontinued operations Net profit Adjusted for: Profit on sale of investment in subsidiary 1 (102) (102) (102) Headline earnings Total headline earnings/(loss) 52 (91) (179) (19) There is no taxation effect on these items. Net asset value per share 31 December (Audited) Number of shares in issue Net asset value per share (cents) * The audited June annual results, unaudited nine months ended March and unaudited March quarter results have been restated due to a change in accounting policy. Refer to note 2 for details. The restatements to the comparative information have not been audited. 15

16 Results for the third quarter FY14 and nine months ended NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED for the period ended (Rand) 5. Investment in associate Investment in associate includes Harmony s 10.38% share of Rand Refinery Proprietary Limited (Rand Refinery) results amounting to R17 million for the nine months ended. Rand Refinery has not issued its audited results for its year ended 30 September and therefore Harmony s share of results has been based on unaudited management accounts. Rand Refinery implemented a new Enterprise Resource Planning (ERP) system on 1 April to conduct its financial and management accounting. Since the implementation of the ERP software, the customisation of the software has been problematic with the result that Rand Refinery has not been able to reconcile certain accounts at 30 September. Rand Refinery s management team is currently resolving the problems encountered with the ERP software and is in the process of investigating the transactions processed from 1 April on the ERP system to determine if any adjustments to their current financial records are required. this stage, the Rand Refinery management team cannot be certain that the results in its management accounts are accurate. 6. Non-current assets and assets of disposal groups classified as held for sale During the December quarter, a cash offer for Witwatersrand Consolidated Gold Resources Limited s (Wits Gold) entire share capital was made to all Wits Gold shareholders by Sibanye Gold Limited. Harmony has accepted the offer. Following this, the balance which represents Harmony s fair value stake in Wits Gold has been classified as a non-current asset held for sale (formerly classified as Investment in financial assets) under IFRS 5. See note 11 for developments after balance sheet date. 7. Borrowings Two draw downs of US$30 million each were made from the US$300 million syndicated revolving credit facility during the September quarter. There were no draw downs subsequently and the drawn level remains at US$270 million. The weakening of the Rand against the US$ resulted in a foreign exchange translation loss of R144 million being recorded for the year to date, increasing the borrowings balance and Other expenses (net). The facility is repayable by September Harmony refinanced its Nedbank revolving credit facility and entered into a new agreement for R1.3 billion revolving credit facility during the December quarter. the same time management also agreed an amended set of covenants with the leader group, to give the group more long-term financial flexibility. The interest rate is equivalent to JIBAR basis points. The outstanding amount at 28 March of R467 million was repaid. The facility is available until December Financial risk management activities Fair value determination The following table presents the group s assets and liabilities that are measured at fair value by level within the fair value hierarchy: Level 1: Quoted prices (unadjusted) in active markets for identical assets; Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset, either directly or indirectly (that is, as prices) or indirectly (that is derived from prices); Level 3: Inputs for the asset that are not based on observable market data, (that is unobservable inputs). 31 December (Audited) Available-for-sale financial assets 1 * Level Level 2 Level Fair value through profit and loss 2 * Level 1 Level Level 3 1 Level 1 fair values are directly derived from actively traded shares on the JSE. Level 3 fair values have been valued by the directors by performing independent valuations on an annual basis to ensure that significant prolonged decline in the value of the investments has occurred. the end of the financial year, the investment in Rand Refinery was reclassified as an investment in associate on obtaining significant influence. 2 The majority of the level 2 fair values are directly derived from the Shareholders Weighted Top 40 index (SWIX 40) on the JSE, and are discounted at market interest rate. * Includes non-current assets or disposal groups held for sale where applicable. 16

17 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED for the period ended (Rand) 9. Commitments and contingencies 31 December (Audited) Capital expenditure commitments: Contracts for capital expenditure Authorised by the directors but not contracted for This expenditure will be financed from existing resources and, where appropriate, borrowings. Contingent liability For a detailed disclosure on contingent liabilities refer to Harmony s integrated annual report for the financial year ended, available on the group s website ( There were no significant changes in contingencies since. 10. Related parties Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the group, directly or indirectly, including any director (whether executive or otherwise) of the group. During the September quarter, Frank Abbott purchased shares in the company. 11. Subsequent events (a) On 14 April the consideration for the sale of Wits Gold was received. (b) In April, the Department of Mineral Resources approved the ground swap transaction between Joel mine and Sibanye Gold Limited s Beatrix mine. However, the execution of the agreements is still pending and therefore the transaction is not effective. The execution is expected by June. (c) During April, the payment to employees was made for the second tranche of ESOP shares and SARs, following the vesting in March. 12. Segment report The segment report follows on page Reconciliation of segment information to condensed consolidated income statements and balance sheets Nine months ended The Reconciliation of segment information to condensed consolidated financial statements line item in the segment report is broken down in the following elements, to give a better understanding of the differences between the financial statements and segment report: Reconciliation of production profit to gross profit Total segment revenue Total segment production costs (8 973) (9 042) Production profit per segment report Discontinued operations (341) Production profit from continuing operations Cost of sales items, other than production costs and royalty expense (2 174) (1 768) Gross profit as per income statements The reconciliation was done up to the first recognisable line item on the income statement. The reconciliation will follow the income statement after that. 17