The Complaint brought forth claims for violations of the Securities Exchange Act of 1934 against Harmony Gold Mining Company Limited (“Harmony Gold” or the “Company”). The Complaint alleged that Harmony made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired, and/or sold certain Harmony Gold securities during the Class Period.
Harmony is a gold producer that operates twenty two individual mines and projects across the world. The Company is incorporated in the Republic of South Africa. Harmony’s operations had grown significantly since 1995, when through a series of acquisitions, the Company expanded from a single lease-bound mine operation into a self-described “independent world-class gold producer.” As of June 30, 2007, the Company reported that it had total proven and probable reserves of approximately 53.67 million ounces of gold, and Harmony emphasized that the Company was benefitting from a rising gold price environment.
Specifically, the Complaint alleged that throughout the Class Period, Harmony knew and/or recklessly disregarded that the Company had materially misstated its financial results by ignoring suspense accounts in the Company’s newly established and implemented Enterprise Resource Planning (“ERP”) accounting system, that resulted in more than $34.5 million in costs and other expenses that were not reported in the Company’s Third Quarter 2007 financial results. Then, on August 6, 2007, Harmony’s Form 6-K announced that its financial results were “expected to differ significantly from … three previous quarters as well as from the analysts’ consensus.” On this news, the Company’s ADRs fell $2.45, over 18%, to close the day at $11.02. In response to additional news that the Harmony’s CEO had resigned and that Fitch placed the Company’s long-term debt default rating on Watch Negative, Harmony’s ADRs declined an additional $1.57, or over 14%, to close on August 7, 2007 at $9.45 per ADR. This closing price on August 7, 2007 represented a two-day decline in the Company’s ADRs of 29.8%, and a cumulative decline of over 43.4% from the value of the Company’s ADRs at their Class Period high.