Directors' report
OUR BUSINESS
The Harmony group of companies has underground and surface operations and conducts gold mining and exploration in South Africa and Papua New Guinea. A general review of the group’s business and operations is provided here in the integrated annual report (the report).
The company does not have a controlling shareholder and is managed by its directors for its stakeholders. The company’s primary listing is in South Africa on the securities exchange operated by the Johannesburg Stock Exchange Limited. Harmony’s ordinary shares are further listed in the form of American Depositary Receipts (ADRs) on the New York Stock Exchange and as International Depositary Receipts on the Berlin exchange.
ANNUAL INTEGRATED REPORT 2014
As required by the King Report on Governance for South Africa and the King Code of Governance Principles (King III), the board has reviewed and approved the 2014 integrated annual report on recommendation from the audit and risk committee.
STATEMENT BY THE BOARD
The board of directors is of the opinion that the annual integrated report 2014 and the accompanying consolidated financial statements fairly reflect the true financial position of the group at 30 June 2014 and its performance for the year.
COMPANY SECRETARY
The company secretary is Riana Bisschoff. Her business and postal addresses appear under directorate and administration. See the company secretary certification.
BOARD OF DIRECTORS
There were no changes to the board during the 2014 financial year.
DIRECTORS’ SHAREHOLDINGS
At 30 June 2014, the chief executive officer, Graham Briggs held 14 347 shares, the financial director, Frank Abbott held 139 500 shares in Harmony while non-executive directors André Wilkens and Ken Dicks, held 101 303 and 20 000 shares in Harmony respectively. None of the directors’ immediate families and associates held any direct shareholding in the company’s issued share capital. No other executive director held or acquired any shares in the company, other than through share incentive schemes, for the year to 30 June 2014.
GOING CONCERN
In accordance with the solvency and liquidity test in terms of section 4 of the Companies Act, the board is of the opinion that the company has adequate resources and that:
- the company’s assets, fairly valued, exceed its liabilities, fairly valued; and
- the company will be able to pay its debts as they become due in the ordinary course of business for the 12 months following 30 June 2014.
FINANCIAL RESULTS
Details of the group’s financial performance are discussed in the financial director’s review.
SHARE CAPITAL
Full details of the authorised, issued and unissued share capital of the company as at 30 June 2014 are set out in the consolidated statements of changes in shareholders’ equity.
SHAREHOLDERS
Information on shareholder spread, range of shareholdings and public shareholders, as well as major shareholders, is presented in the shareholder information section of this report.
INVESTMENTS
A schedule of investments in subsidiaries, associates and joint arrangements is available in Annexure A of the financial report.
CONTINGENCIES
None of Harmony’s properties is the subject of pending material legal proceedings. We are involved in legal and arbitration proceedings that are incidental to the normal conduct of our business. Refer to note 34 of the consolidated financial statements for further discussion.
BORROWINGS
- Movement in borrowings: see note 28 to the consolidated financial statements
- Borrowing powers are detailed in the company’s memorandum of incorporation
SPECIAL RESOLUTIONS BY SUBSIDIARY COMPANIES
There were no special resolutions passed by subsidiary companies during the financial year.
DISPOSALS
During 2014, Harmony and Sibanye Gold Limited (Sibanye) entered into an agreement whereby Joel mine exchanged two portions of its mining right for two portions of Sibanye’s Beatrix mine’s mining right, and acquired two additional mining right portions from Beatrix (sale portions). The transaction was completed in May 2014. The purchase consideration of the sale portions acquired by Joel is payable as a royalty of 3% on gold revenue generated from these two portions.
RELATED PARTY TRANSACTIONS
None of the directors or major shareholders of Harmony or, to the knowledge of Harmony, their families, had an interest, directly or indirectly, in any transaction during the period under review or in any proposed transaction that has affected or will materially affect Harmony or its subsidiaries, other than as stated below.
African Rainbow Minerals Limited (ARM) currently holds 14.62% of Harmony’s shares. The following directors of Harmony, Patrice Motsepe, André Wilkens, Frank Abbott and Joaquim Chissano are directors of ARM.
MATERIAL TRANSACTIONS WITH ASSOCIATES, JOINT ARRANGEMENTS AND STRUCTURED ENTITIES
All transactions with related parties are conducted at arm’s length. Refer to note 33 of the consolidated financial statements for details on transactions conducted during the period under review.
RECENT DEVELOPMENTS
- During July 2014, Harmony extended an irrevocable, subordinated loan facility to Rand Refinery as a precautionary measure following the challenges experienced by Rand Refinery following the implementation of a new Enterprise Resource Planning (ERP) system. The facility can only be drawn down when the confirmation that the active loss relating to the inventory discrepancy noted by Rand Refinery has been incurred. The facility, if drawn down, is convertible to equity after a period of two years. Harmony’s maximum commitment in terms of this facility is R140 million.
- During August 2014, Harmony announced its intention to place Target 3 on care and maintenance. This is due to the shaft having experienced a sustained period of cash flow losses resulting from the significant capital investment required to sustain operations. As far as it is possible to do so, measures will be taken to minimise and/or avoid job losses. Consultation with the Department of Mineral Resources, the Matjhabeng Local Municipality and the Free State Provincial government has begun.