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In its March 2003 quarterly report Harmony Gold (Outperform/Above Average Risk) made the following key announcements.

* Strong South African Rand posing significant challenges for the company. Could see significant production curtailments if the Rand stays at R7.20 to the dollar. No plans yet to curtail production since planning for the next 12 months is being done using an exchange rate of R8.50 to the dollar.

* Cost obsession continued this quarter with Rand costs down 2% in nominal terms as well as in Rand per tonne terms - indication of very good cost management. But grade weakness contributed to an 8% decline in gold production. Largely as a result of the inclusion of 6 public holidays in the quarter - tendency to push low grade material and stockpiles through the mill. In US dollars terms, costs per ounce increased 22.5% from US$222/oz to US$272/oz. We expect grades to rebound 10-15% this year as indicated by historic development grades.

* Wage negotiations expected to be concluded during Q2. With inflation running at around 11% and with inflation over the past 2 years having exceeded the previous 2 year wage increases by a wide margin, this year's negotiations are expected to be tough. I expect that we will see a figure of 9-10% per year over the next 2 years. Wages make up around 50% of the cost base.

* Squeeze on margins in South Africa is opening up the way for corporate activity in the region. Harmony have never had such a strong balance sheet coming into a margin squeeze environment. Cash on the balance sheet now US$390 million although US$90 million is expected to be used to acquire Abelle this quarter. We expect that the company will conduct further value-enhancing deals over the next few months.

* Margin squeeze is also helping to resolve the royalty payment issue - more operations are looking to claim marginal status and could get relief from royalty payments. Looking increasingly likely that the conversion process from old mineral rights to new mineral rights will be de-linked from the royalty payments. Also looks more and more likely that Freegold will get an agreement on full calendar operations this quarter. This could pave the way for an agreement right across Harmony's operations.

* Further restructuring of the hedge book has led to a reduction in committed ounces from 1.6 million ounces to 995,000 ounces at quarter end. The company alluded to further closure of hedge positions in Q2.

* Decision on Bendigo expected October or November. No new developments to report. Kalplats project has moved into a full feasibility phase. Expected to be brought to the Board probably in January.

* Freegold's Tshepong mine was the star performer this quarter - this should be very positive for ARMgold when they report on Tuesday, May 6.

A full review and analysis of the quarterly result is pending.

Georges Lequime

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>In its March 2003 quarterly report Harmony Gold (Outperform/Above Average Risk) made the following key announcements.
>* Strong South African Rand posing significant challenges for the company. Could see significant production curtailments if the Rand stays at R7.20 to the dollar. No plans yet to curtail production since planning for the next 12 months is being done using an exchange rate of R8.50 to the dollar.
>* Cost obsession continued this quarter with Rand costs down 2% in nominal terms as well as in Rand per tonne terms - indication of very good cost management. But grade weakness contributed to an 8% decline in gold production. Largely as a result of the inclusion of 6 public holidays in the quarter - tendency to push low grade material and stockpiles through the mill. In US dollars terms, costs per ounce increased 22.5% from US$222/oz to US$272/oz. We expect grades to rebound 10-15% this year as indicated by historic development grades.
>* Wage negotiations expected to be concluded during Q2. With inflation running at around 11% and with inflation over the past 2 years having exceeded the previous 2 year wage increases by a wide margin, this year's negotiations are expected to be tough. I expect that we will see a figure of 9-10% per year over the next 2 years. Wages make up around 50% of the cost base.
>* Squeeze on margins in South Africa is opening up the way for corporate activity in the region. Harmony have never had such a strong balance sheet coming into a margin squeeze environment. Cash on the balance sheet now US$390 million although US$90 million is expected to be used to acquire Abelle this quarter. We expect that the company will conduct further value-enhancing deals over the next few months.
>* Margin squeeze is also helping to resolve the royalty payment issue - more operations are looking to claim marginal status and could get relief from royalty payments. Looking increasingly likely that the conversion process from old mineral rights to new mineral rights will be de-linked from the royalty payments. Also looks more and more likely that Freegold will get an agreement on full calendar operations this quarter. This could pave the way for an agreement right across Harmony's operations.
>* Further restructuring of the hedge book has led to a reduction in committed ounces from 1.6 million ounces to 995,000 ounces at quarter end. The company alluded to further closure of hedge positions in Q2.
>* Decision on Bendigo expected October or November. No new developments to report. Kalplats project has moved into a full feasibility phase. Expected to be brought to the Board probably in January.
>* Freegold's Tshepong mine was the star performer this quarter - this should be very positive for ARMgold when they report on Tuesday, May 6.
>A full review and analysis of the quarterly result is pending.
>Georges Lequime