Harmony continues to use the principle of integrated reporting for its 2011 annual and sustainability reports. We recognise that integrated reporting combines our financial and non-financial performances to provide a holistic view of the company by explaining the cause and effect of various issues affecting the bottom line.
Our aim is improved communication with all stakeholders, to build up a formal, approved record of our financial and non-financial performance, and to comply with the listings requirements of the various stock exchanges on which Harmony is listed.
The social, environmental, governance and economic aspects of our business, and the opportunities and challenges these present, are detailed throughout the annual report. Because we believe it is important to report in greater detail than feasible in the printed annual report, and given our commitment to report in line with the Global Reporting Initiative (GRI), we have also produced a more detailed sustainable development report 2011, available online at www.harmony.co.za/sd/reports/2011.
Certain key performance indicators have been assured by PwC and the assurance statement appears on pages 52 and 53.
We have identified our most material issues in this year’s sustainable development report, with a summary in this report. These issues are the culmination of a thorough process that proceeds, discipline by discipline, through workshops and regular feedback from stakeholders. Harmony’s performance in FY11 and targets for FY12 are tabulated below.
Governance and economic sustainability
The economic dimension of sustainability concerns the impact Harmony has on the economic conditions of its stakeholders and on economic systems at local, national and global levels. The company’s economic imperatives in turn are achieved within a framework of sound corporate governance. Accordingly, we report on these areas in a combined section in the sustainable development report.
Governance
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Issue |
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Performance in FY11 |
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Targets for FY12 |
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Establishment and maintenance of board and management structures |
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Harmony has a solid governance structure. This is regularly reviewed to ensure we comply with legislation and standards in the countries in which we operate and with the stock exchanges on which Harmony is listed. |
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Ongoing compliance |
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Implementation of good practice in governance and reporting |
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In line with our primary listing on the JSE Limited, disclosure is guided by the new South African Companies Act 2008, JSE regulations and King III. We also comply with the regulations of other exchanges on which Harmony is listed, the US Securities and Exchange Commission (SEC) and the Sarbanes-Oxley Act of 2002. We use an integrated approach that combines financial and non-financial reporting, and our sustainable development report is aligned with GRI and King III. |
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Continual improvement |
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Integrity and ethics |
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A code of ethics aligned with King III governs our behaviour, while an ethics committee meets quarterly to monitor ethical behaviour within Harmony. |
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Continual improvement |
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Issue |
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Performance in FY11 |
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Targets for FY12 |
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Compliance with legislation |
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No significant fines were paid by the company in any areas of operation in FY11, and no actions were brought against the company for anti-competitive behaviour, anti-trust or monopoly practices. |
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Ongoing compliance |
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Risk management and mitigation |
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Under a formal risk policy framework and risk management structure, primary risks identified in FY11 are covered on page 179 of this report and in the Form 20-F. These include safety, health, environment and human rights risks. Appropriate levels of due diligence are applied before finalising significant contracts. The precautionary approach is used in planning and developing new projects, in line with relevant legislation and good practice. |
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Ongoing adoption of best practice and alignment with King III |
Economic sustainability
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Issue |
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Performance in FY11 |
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Targets for FY12 |
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Economic context and relevance |
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Harmony is one of the world’s leading producers of gold, and South Africa’s third largest. Regionally, Harmony has an even bigger impact, for example in South Africa’s Free State province where mining accounts for a significant portion of provincial GDP. In FY11, the company employed close to 40 000 people. |
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To play a meaningful role in the regional economies where we operate |
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Producing safe, profitable ounces |
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Harmony delivered a satisfactory performance for the year. Total gold production of 1.3Moz (40 535kg) declined, largely due to mine closures, safety stoppages and underperformance at some shafts and shaft closures. Regrettably, there were 16 fatalities – see safety discussion overleaf. |
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We aim to produce 1.8–2Moz* of gold in FY15. Equally, we aim to achieve this target safely – eliminating all fatal accidents |
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The gold market |
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Gold remains a desirable product and we expect the price to be around US$1 850/oz in our next financial year, especially with continued global uncertainty and a weaker dollar. Harmony remains highly exposed to the R/US$ exchange rate, as most of our operations are in South Africa. While our earnings are in dollars the exchange rate impacts our revenue in rands. The rand strengthened against the dollar throughout FY11, keeping profit margins flat. |
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We remain positive on gold. However, the gold price and exchange rate are not within our control. Our strategic plans for FY12 are based on a gold price of R280 000/kg (an exchange rate of R7.57/US$ and a gold price of US$1 150/oz) |
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Investing in the future |
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In FY11, we continued restructuring our asset base in line with our strategy to deliver 1.8 – 2 million* safe, profitable ounces by 2015. We invested R3.1 billion in our mines and our mineral reserves now stand at 41.6Moz of gold across South Africa and Papua New Guinea. |
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Ongoing development of mines: R3.6 billion allocated for capital expenditure and R474 million for exploration in FY12 |
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Economic transformation and empowerment |
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South Africa:
Harmony complies with the Mining Charter through partnerships and the sale to HDSA companies of interests in the company and its underlying operations. To date, approximately 36% of production was attributable to HDSA interests. |
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Maintain HDSA interests at current levels |
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PNG:
Contracts are in place with landowner groups for a range of services. We continue to offer business development opportunities to landowners as Hidden Valley moves towards full production and more opportunities become available. |
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Ensure ongoing dialogue with stakeholders and seek opportunities to enhance community development |
* Excludes future acquisitions or disposals.
Social performance
The social dimension of sustainability concerns the impact Harmony has on the social environment in which it operates. The sustainable development report includes comprehensive discussions on safety, occupational health and well-being, labour practices and community issues.
Safety
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Issue |
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Performance in FY11 |
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Targets for FY12 |
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Eliminating accidents by managing risk and ensuring appropriate structures, systems and training are in place |
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Regrettably, 16 employees lost their lives in mine-related incidents in FY11 (FY10: 22). Fifteen of these were at our South African operations.
South Africa:
The FIFR improved to 0.17, while the LTIFR deteriorated to 8.32 per million hours worked.
- A comprehensive programme to prevent falls of ground has reduced fatal injuries from this source by 64%
- Over 16 300 employees are completing e-learning programmes focused on safety literacy.
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FIFR: 0
LTIFR:
SA – 5.79
Harmony – 5.57
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PNG:
The FIFR deteriorated slightly to 0.22 per million hours worked (FY10: 0.20), while LTIFR improved significantly to 0.20 (FY10: 0.7). |
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FIFR: 0
LTIFR: 0.45
PNG – 0.20
Harmony – 5.57 |
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Reducing falls of ground |
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Falls of ground account for a large portion of all lost-time injuries in Harmony. Our new ground control strategy formalises and consolidates efforts to prevent fall-of-ground incidents and accidents, and promotes an even safer and more stable underground environment.
- The combination of netting in selected spaces with better control and awareness reduced gravity-related falls of ground from 12 in FY10 to three in FY11.
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Fall-of-ground injury frequency rate of 1.42 per million hours worked |
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Addressing the issue of illegal miners in South Africa |
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Illegal or criminal mining activities endanger the criminals’ own safety as well as that of company employees. Harmony again proactively addressed illegal mining activities in FY11 by liaising with the authorities, unions, private security companies, local businesses and affected communities.
- In FY11, our focus on communicating the risks and consequences of illegal mining and fraud to our own workforces paid off, with the number of employees dismissed for related offences dropping from 314 in FY10 to 133.
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Eliminate illegal mining as far as practically possible |
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