Harmony Gold Mining Company
Limited (Harmony), a gold
mining and exploration company
with 68 years of experience, has
operations in South Africa, one
of the world’s best known gold
mining regions, and in Papua
New Guinea, a premier new
gold-copper region.
At Harmony, we understand the
impact that our company has on the
lives of the people we employ, the
communities that surround our mines
and the environment, as well as of the
economic contribution that we make
to the countries in which we operate.
Key features year-on-year
Focus on safety remains a priority
Increase in underground recovered grade for sixth year in a row
Production guidance met for third year in a row
Successful integration of Moab Khotsong and excellent project delivery at Hidden Valley
Hedging strategy continues to generate positive cash flow
Harmony's timeline
TRANSFORMING HARMONY
Over close on seven decades,
Harmony has become a global,
multi-operational gold producer.
1950
Registered on 25 August as a public company with a single mine lease, the original Harmony gold mine
1951
Listed on the JSE
1954
First gold poured on 11 September
Early 1970s
Acquired the Merriespruit and Virginia mines to increase mining lease area to almost 10 000ha
1996
Initial listing in United States on Nasdaq
1998 – 2004
Acquired various mining rights, including the African Rainbow Minerals deal, in the Free State, Gauteng, Mpumalanga and North West Province in South Africa and various interests in Papua New Guinea, including Hidden valley.
ADR program launched on the NYSE in 2002.
2005
African Rainbow Minerals, a black empowerment company, acquired a 20% stake in Harmony for approximately R1.1 billion
2008
Morobe Mining Joint Ventures, a 50:50 partnership with Newcrest Mining Limited, established to explore, develop and manage projects and operations in Papua New Guinea, including Hidden Valley and Wafi-Golpu.
2010
Hidden Valley reaches commercial production
2011
Mineral resources exceeding 13Moz gold and 4Mt copper (50% basis) declared at Wafi-Golpu
2012
The Tlhakanelo employee share ownership scheme launched
2014
South African operations achieve first ever fatality-free quarter
2016
Full ownership of Hidden Valley acquired
2017
First ever company-wide fatality-free quarter achieved during the year
2018
Acquired Moab Khotsong, a 17.5Moz resource and a low unit cost, cash-generating operation
AVERAGE ANNUAL SPOT GOLD PRICE (CALENDAR YEARS):
1950
US$35/oz
na
1974
US$159/oz
R3 473/kg
1989
US$381/oz
R32 162/kg
1998
US$294/oz
R52 397/kg
2008
US$872/oz
R231 481/kg
2012
US$1 699/oz
R440 951/kg
2014
US$1 266/oz
R441 523/kg
2017
US$1 257/oz
R538 306/kg
From leadership
Chairman’s letter
“Harmony’s safety risk management strategy,
its values and visible leadership underpins its
determination to achieve zero harm.”
“Our commitment to
sustainable development
and all that it encompasses
is a moral responsibility
that is underpinned by our
values and integrated into
our business as we strive to
create shared value.”
Dr Simo Lushaba Chairman: social and ethics committee
“To ensure peak performance and that our
business objectives are responsibly met, it is
imperative that employees and directors
of the company are fairly rewarded.”
All-in sustaining cost of
R508 970/kg and US$1 231/oz (FY17: R516 687/kg and US$1 182/oz)
Underground recovered grade improved by
8% to 5.48g/t (FY17: 5.07g/t)
Sixth consecutive year of
higher grade at South African
underground operations
Mineral resources increased 13% to
117.8Moz at year-end (FY17: 104.3Moz)
Inclusion of Moab Khotsong
Underground resources and reserves
for South African operations up 31%
and 12% respectively
In South Africa, our nine underground operations are located within the world-renowned
Witwatersrand Basin – one in the Klerksdorp goldfield, two in the
West Rand and six in the Free State, in the southern portion of the Basin.
In addition, we have an open-pit mine on the
Kraaipan Greenstone Belt as well as several
surface operations.
In Papua New Guinea, Hidden Valley is
an open-pit gold and silver mine. Our
significant gold-copper portfolio includes
a 50% stake in the Wafi-Golpu project in
Morobe Province, through a 50:50 joint
venture with Newcrest Mining Limited
(Newcrest).
To produce safe,
profitable ounces and
increase our margins
STRATEGIC PILLARS
01 OPERATIONAL EXCELLENCE
Prioritising safety, strict cost
control and management of
grades mined, disciplined mining
and improved productivity
What we did in FY18
Production up 13% to 1.228Moz
At South African operations,
underground grade recovered
increased by 8% – sixth
consecutive annual increase
Lower unit costs as measured
by all-in sustaining costs
Improved lost-time injury
frequency rate by 13% to
6.26 per million hours worked
Focus in FY19
Improve safety performance
Realise synergies at Moab Khotsong
Deliver on Hidden Valley plan
02 CASH CERTAINTY
Achieving operational plans,
supported by the current
hedging strategy, contributes
to cash flow certainty
What we did in FY18
Achieved or exceeded production guidance for third consecutive year
Hedging strategy continued to boost cash flow margins
Focus in FY19
Exceed operational plans so generating free cash flow
Repay debt
Continue hedging programme
03 EFFECTIVE CAPITAL ALLOCATION
Evaluating and prioritising
organic growth opportunities
and value-accretive acquisitions
to ensure positive stakeholder
returns and increase margins
What we did in FY18
Hidden Valley re-investment plan delivered on time and on budget
Acquisition of Moab Khotsong has enhanced our portfolio
Focus in FY19
Secure Wafi-Golpu permitting and funding
Evaluate organic growth opportunities
OUR INVESTMENT CASE
Safe, profitable 1.5Moz producer
Focus on improving safety performance
Moab Khotsong and Hidden Valley to contribute to annual production of 1.5Moz
Consistent delivery on production guidance
Financially strong
Operational delivery
on business objectives
will generate positive
operational cash flow
Hedging programme
contributing positively to
cash flow
Real growth opportunities
Wafi-Golpu permitting underway
Organic brownfields opportunities include:
Tailings expansion
Kalgold exploration
Great Noligwa and Zaaiplaats
Hidden Valley extension
Offering share price uplift
Improved market capitalisation (up 12% year-on-year at 30 June 2018)
OUTLOOK
On track
to deliver a sustainable production performance
Driving
unit costs down by producing quality ounces
Cash flow
on our strategy to
increase margins
Cash flow
to be effectively
allocated to growth
opportunities
Our 2018 reports
The integrated report has been compiled
in line with the International Integrated
Reporting Council’s Framework, the Global
Reporting Initiative G4 guidelines and
the King Report on Governance for South
Africa 2016 (King IV report).
While the integrated report describes Harmony’s performance
in delivering on its strategy and creating value for FY18,
additional information is presented in the other reports
making up the set of 2018 reports:
Printed copies of all our reports are available upon request, free of charge from the Investor Relations Department at HarmonyIR@harmony.co.za.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the safe harbour provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, with respect to our financial condition, results of operations, business strategies, operating efficiencies, competitive positions, growth opportunities for existing services, plans and objectives of management, markets for stock and other matters. These include all statements other than statements of historical fact, including, without limitation, any statements preceded by, followed by, or that include the words “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “should”, “could”, “estimates”, “forecast”, “predict”, “continue” or similar expressions or the negative thereof.
These forward-looking statements, including, among others, those relating to our future business prospects, revenues and income, wherever they may occur in this report and the exhibits to this report, are essentially estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. As a consequence, these forward-looking statements should be considered in light of various important factors, including those set forth in this report. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation: overall economic and business conditions in South Africa, Papua New Guinea, Australia and elsewhere, estimates of future earnings, and the sensitivity of earnings to the gold and other metals prices, estimates of future gold and other metals production and sales, estimates of future cash costs, estimates of future cash flows, and the sensitivity of cash flows to the gold and other metals prices, statements regarding future debt repayments, estimates of future capital expenditures, the success of our business strategy, development activities and other initiatives, estimates of reserves statements regarding future exploration results and the replacement of reserves, the ability to achieve anticipated efficiencies and other cost savings in connection with past and future acquisitions,
fluctuations in the market price of gold, the occurrence of hazards associated with underground and surface gold mining, the occurrence of labour disruptions, power cost increases as well as power stoppages, fluctuations and usage constraints, supply chain shortages and increases in the prices of production imports, availability, terms and deployment of capital, changes in government regulation, particularly mining rights and environmental regulation, fluctuations in exchange rates, the adequacy of the Group’s insurance coverage and socio-economic or political instability in South Africa and Papua New Guinea and other countries in which we operate.
For a more detailed discussion of such risks and other factors (such as availability of credit or other sources of financing), see the company’s latest Integrated Annual Report and Form 20-F which is on file with the Securities and Exchange Commission, as well as the company’s other Securities and Exchange Commission filings. The company undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by law.
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OPERATIONAL EXCELLENCE
CASH CERTAINTY
EFFECTIVE CAPITAL ALLOCATION