This is a securities class action lawsuit against Harmony Gold Mining Company Ltd. and certain of its officers and directors.
Harmony Gold is a gold producer that operates 22 individual mines and projects across the world.
The class action complaint alleges that Harmony Gold failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them:
(1) that Harmony Gold's costs had significantly increased throughout 2007;
(2) that Harmony Gold had underreported these increased costs in its previously issued financial statements;
(3) that Harmony Gold had experienced a significant decrease in gold production for the third quarter 2007 due to production problems at various sites, which had already materialized at the time its Class Period statements were made;
(4) that Harmony Gold had failed to disclose the full impact that these production problems would have on Harmony Gold's financial and operational results;
(5) that, as a result of Harmony Gold's understatement of its costs and its lower production for the quarter, Harmony Gold had understated its operating costs and overstated its net profit for the third quarter;
(6) that, as a result of the foregoing, Harmony Gold's financial statements were materially false and misleading at all relevant times;
(7) that Harmony Gold would be forced to take substantial charges in the fourth quarter 2007 to remedy such failures, causing Harmony Gold to report a net loss for the quarter;
(8) that Harmony Gold lacked adequate internal and financial controls; and
(9) that, as a result of the above, Harmony Gold's statements about its financial well-being and future business prospects were lacking in any reasonable basis when made.
On August 6, 2007, Harmony Gold reported preliminary financial and operational results for its fourth quarter and fiscal year 2007 (ended June 30, 2007). Harmony Gold warned that its financial results for the quarter were "expected to differ significantly from those of the three previous quarters as well as from the analysts' consensus. For the fourth quarter, Harmony Gold stated that it expected to report a headline loss of between 130 and 160 SA cents per share, compared with a headline profit of 58 SA cents per share for the third quarter. This quarterly loss was primarily the result of Harmony Gold recording significantly higher costs for the quarter, and included a 25 to 28 percent increase in Harmony Gold's total cash operating costs as a result of "the newly installed accounting software system that resulted in some of the March quarter's costs being captured in the June 2007 quarter."
Thus, Harmony Gold had substantially understated its costs in previous quarters and was forced to take substantial charges in the fourth quarter to remedy such underreported costs. Additionally, Harmony Gold reported that its cost base had increased by 8 to 12 percent from the previous six months. Finally, Harmony Gold announced that its Chief Executive Officer had resigned, "with immediate effect." On this news, Harmony Gold's shares fell $2.45 per share, or over 18 percent, to close on August 6, 2007 at $11.02 per share, on unusually heavy trading volume.
The following day, Harmony Gold's shares declined an additional $1.57 per share, or over 14 percent, to close on August 7, 2007 at $9.45 per share, again on heavy trading volume. This closing price on August 7, 2007 represented a two-day decline in Harmony Gold's shares of $4.02 per share, or 29.8 percent, and a cumulative decline of $7.25 per share, or over 43.4 percent, from the value of Harmony Gold's shares at their Class Period high of $16.70 on April 25, 2007.
Name (Stock Symbol)
Harmony Gold Mining Company Limited (HMY)
Harmony Gold Mining Company Limited conducts underground and surface gold mining.
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