Edgar Filing: HARMONY GOLD MINING CO LTD

Page 1

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO

RULE 13a-16 OR 15d-16 UNDER THE SECURITIES

EXCHANGE ACT OF 1934

For the Month of April 2004

Harmony Gold Mining Company

Limited

Suite No. 1

Private Bag X1

Melrose Arch, 2076

South Africa

(Address of principal executive offices)

(Indicate by check mark whether the registrant files or will file annual reports under cover of

Form 20-F or Form 40-F.)

Form 20-F X Form 40-F

(Indicate by check mark whether the registrant by

furnishing the information contained in this form

is also thereby furnishing the information to the

Commission pursuant to Rule 12g3-2(b) under the

Securities Exchange Act of 1934.)

Yes No X

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to the action that you should take, please consult your broker, banker, accountant, legal adviser or other professional adviser immediately. If you have sold or otherwise disposed of all your shares in Harmony Gold Mining Company Limited ("Harmony") this document should be handed to the purchaser of such shares, or to the broker, banker or agent through whom the disposal was effected.

Certificated shareholders and shareholders who hold dematerialised shares and have elected "own name" registration in the sub-register through a Central Securities Depository Participant ("CSDP") and who are unable to attend the general meeting of shareholders of Harmony, to be held at 10:00 on Friday, 7 May 2004, at Harmony's Corporate Office, Randfontein Office Park, Corner Main Reef Road and Ward Avenue, Randfontein, but wish to be represented thereat, should complete and return the attached form of proxy (blue) in accordance with the instructions contained therein to the transfer secretaries of Harmony, Ultra Registrars (Pty) Limited, 11 Diagonal Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000) or Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU England, so as to be received by not later than 10:00 on Wednesday, 5 May 2004.

Shareholders who hold dematerialised shares through a CSDP or broker, other than those who have elected "own name" registration, and who wish to attend the general meeting must request their CSDP or broker to provide them with a Letter of Representation or should advise their CSDP or broker as to what action they wish to take. This must be done in terms of the agreement entered into between them and their CSDP or broker. Shareholders who have dematerialised their shares, other than those who have elected "own name" registration, must not complete and return the attached form of proxy.

Harmony Gold Mining Company Limited

(Incorporated in the Republic of South Africa)
(Registration number 1950/038232/06)
Share code: HAR

ISIN: ZAE 000015228

("Harmony")

CIRCULAR TO SHAREHOLDERS

relating to

agreement reached between Harmony, Anglovaal Mining Limited ("Avmin") and African Rainbow Minerals & Exploration Investments (Proprietary) Limited regarding a range of indivisible transactions which, if implemented, will result in the creation of the largest black controlled mineral resources company in South Africa;

the acquisition by Harmony of 42,1% of the issued share capital of Avgold Limited ("Avgold") from Avmin;

the offer by Harmony for the balance of Avgold's issued share capital, to be implemented by way of a scheme of arrangement in terms of section 311 of the Companies Act, 1973 (Act 61 of 1973), as amended, proposed by Harmony between Avgold and its shareholders, other than Harmony;

the proposed issue of convertible bonds to the value of up to R1,700 million, convertible into approximately 14 million new ordinary shares in Harmony, representing 5% of Harmony's issued ordinary share capital, by way of a specific issue for cash in terms of Rule 5.51 of the Listings Requirements of the JSE Securities Exchange South Africa;

and incorporating

a notice of general meeting of shareholders; and

a form of proxy for certificated and own name dematerialised shareholders.

Financial adviser and sponsor to Harmony

Attorneys to Harmony

Reporting accountants

Independent technical adviser

JPMorgan

PricewaterhouseCoopers Inc

Chartered Accountants (SA)
Registered Accountants and Auditors
(Registration no 1998/012055/21)

SRK Consulting

Engineers and Scientists

Date of issue: 15 April 2004

Corporate information

Company secretary

Marian van der Walt
B.Com (Law) LL.B; H Dip Tax; Dip (Ins Law)
Randfontein Office Park
Corner Main Reef Road and Ward Avenue
Randfontein, 1759
(PO Box 2, Randfontein 1760)

Registered office

Remaining extent of portion 3 of the farm
Harmony Farm 222
Private Road, Glen Harmony
Virginia, 9430
South Africa

Financial adviser

JP Morgan Chase Bank, Johannesburg Branch
1 Fricker Road, corner Hurlingham Road
Illovo, 2196
(PO Box 934, Johannesburg, 2000)

Sponsor

J.P. Morgan Equities Limited
(Registration number 1995/011815/06)
1 Fricker Road, corner Hurlingham Road
Illovo, 2196
(PO Box 934, Johannesburg, 2000)

Attorneys

Cliffe Dekker Inc.
(Registration number 1998/018173/21)
1 Protea Place
Sandown, 2196
(Private Bag X7, Benmore, 2010)

Commercial bankers

ABSA Bank Limited
(Registration number 1986/004794/06)
2nd Floor, ABSA Towers North
180 Commissioner Street
Johannesburg, 2001
(PO Box 7735, Johannesburg, 2000)

Reporting accountants

PricewaterhouseCoopers Inc.
(Registration number 1998/012055/21)
2 Eglin Road
Sunninghill, 2157
(Private Bag X36, Sunninghill, 2157)

Transfer secretaries

In South Africa

Ultra Registrars (Pty) Limited
(Registration number 2000/007239/07)
11 Diagonal Street
Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)

In England

Capital IRG plc
t/a Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU

Independent technical adviser

Steffen, Robertson and Kirsten
(South Africa) (Proprietary) Limited
(Registration number 1995/012890/07)
SRK House
265 Oxford Road
Illovo, 2196
(PO Box 55291, Northlands, 2116)

United Kingdom secretaries

St James's Corporate Services Limited
6 St James's Place
London SW1A 1NP

Table of contents

Page

Corporate information

Inside front cover

Definitions

Circular to shareholders

Introduction and background

The Transaction

2.1

Description of the Transaction

2.2

Transaction conditions precedent

2.3

The ARM voting agreement

Rationale for the Avgold share exchange and Avgold offer

The Avgold share exchange

4.1

Terms and consideration

4.2

Warranties

4.3

Conditions precedent

The Avgold offer

5.1

Terms of the Avgold offer

5.2

Consideration paid pursuant to the Avgold offer

5.3

Avgold conditions precedent

Financial effects of the acquisition on Harmony

6.1

Pro forma financial effects

6.2

Pro forma balance sheet and income statement of Harmony

6.3

Independent reporting accountants' report

Information in respect of Avgold

7.1

Background

7.2

Nature of business

7.3

Historical financial information

7.4

Material loans

7.5

Material contracts

7.6

Material changes

7.7

Litigation statement

The Kalplats disposal

The specific issue

9.1

Terms of the convertible bonds

9.2

Pro forma effects of the specific issue

9.3

Shareholder approval

9.4

Use of proceeds

Page

10.

Information on Harmony

10.1

Background

10.2

Nature of business

10.3

Prospects

10.4

Material loans

10.5

Material contracts

10.6

Material changes

10.7

Litigation statement

10.8

Share capital

10.9

Price history of Harmony shares

10.10 Major shareholders

10.11 Directors

10.11.1

Directors and management

10.11.2

Directors' remuneration to 30 June 2003

10.11.3

Directors' service contracts

10.11.4

Directors' interests in Harmony shares

10.12 Directors' interests in the acquisition

11.

Corporate Governance

12.

Significant contracts

13.

Working capital

14.

Expenses

15.

Consents

16.

Opinion of the directors of Harmony

17.

Directors' responsibility statement

18.

Documents available for inspection

Annexure 1

Summary of the terms and conditions of convertible bonds

Annexure 2

Pro forma balance sheet and income statement of Harmony

Annexure 3

Independent reporting accountants' report on the pro forma financial information of Harmony

Annexure 4

Interim financial results of Harmony

Annexure 5

Historical financial information of Avgold

Annexure 6

Interim financial information of Avgold

Annexure 7

A competent person's report containing information on the mining assets of Harmony including Avgold

Annexure 8

Independent reporting accountants' report on the pro forma financial effects of the issue

235

Annexure 9

Details of material loans to the Harmony group

236

Annexure 10

Agreements relating to the acquisitions and disposals of companies, businesses and properties

238

Annexure 11

Material changes in the financial or trading position of Harmony

239

Annexure 12

Price history of Harmony shares on the JSE

240

Notice of general meeting

241

Form of proxy (blue)

Attached

Definitions

Throughout this circular and the annexures hereto unless otherwise indicated:

the words in the first column have the meanings stated opposite them in the second column; words in the singular include the plural andvice versa; words importing one gender include the other genders; and references to a person include references to a body corporate and vice versa;

- all monetary values are in South African Rands and cents; and

- all times indicated are South African local times.

"the Act"

the Companies Act, 1973 (Act 61 of 1973), as amended;

"acquisition"

collectively, the acquisition by Harmony of the entire issued share capital of Avgold pursuant to the implementation of the Avgold share exchange and the Avgold offer;

"Afrikander Lease"

The Afrikander Lease Limited, a public company incorporated in South Africa, the ordinary shares of which are listed on the JSE;

"Anglo South Africa"

Anglo South Africa Capital (Proprietary) Limited (registration number 1999/002391/07), a private company incorporated in South Africa;

"ARM Platinum"

African Rainbow Minerals Platinum (Proprietary) Limited (registration number 1999/018332/07), a private company incorporated in South Africa;

"the ARM voting agreement"

the agreement entered into between ARMI, Harmony and Clidet No. 454 (Proprietary) Limited, in terms of which ARMI will vote Harmony's shares in Avmin following implementation of the Transaction;

"ARMgold"

African Rainbow Minerals Gold Limited (registration number 1997/015869/06), a public company incorporated in South Africa and a wholly-owned subsidiary of Harmony;

"ARMI"

African Rainbow Minerals & Exploration Investments (Proprietary) Limited (registration number 1997/020155/07), a private company incorporated in South Africa;

"Assmang"

Assmang Limited (registration number 1935/007343/06), a public company incorporated in South Africa and a subsidiary of Avmin;

"Assore"

Assore Limited (registration number 1950/037394/06), a public company incorporated in South Africa and listed on the JSE;

"Avgold"

Avgold Limited (registration number 1990/007025/06), a public company incorporated in South Africa, the shares of which are listed on the JSE, Euronext Brussels in the form of International Depository Receipts and on the New York Stock Exchange Inc. in the form of American Depositary Receipts;

"Avgold consideration"

the consideration to be paid by Harmony to Avmin and to Avgold shareholders comprising 1 new Harmony share for every 10 Avgold shares held;

"Avgold offer"

the offer made by Harmony to Avgold shareholders, excluding Avmin, to acquire the entire issued share capital of Avgold which it does not already own by way of the scheme;

"Avgold offer conditions precedent"

the conditions precedent to which implementation of the Avgold offer is subject, as reflected in paragraph 5.3;

"Avgold shareholders"

holders of Avgold shares, other than Harmony;

"Avgold share exchange"

the transaction in terms of which Harmony will acquire 286 305 263 Avgold shares, comprising 42,1% of the issued share capital of Avgold, from Avmin, in exchange for the issue to Avmin of the Avgold consideration;

"Avgold share exchange agreement"

the agreement entered into between Harmony and Avmin in respect of the Avgold share exchange;

"Avgold share exchange

the conditions precedent to which implementation of the Avgold share exchange is subject conditions precedent"

as reflected in paragraph 4.3;

"Avgold shares"

ordinary shares with a par value of 1 cent each in the issued share capital of Avgold;

"Avmin"

Anglovaal Mining Limited (registration number 1933/004580/06), a public company incorporated in South Africa, the shares of which are listed on the JSE and the LSE, which is to be renamed African Rainbow Minerals Limited;

"Avmin shareholders"

holders of Avmin shares;

"Avmin shares"

ordinary shares with a par value of 5 cents each in the share capital of Avmin;

"business day"

any day other than a Saturday, Sunday or official public holiday in South Africa;

"circular"

this bound document, dated 15 April 2004, including the annexures attached hereto;

"Competition Authorities"

the authorities established in terms of the Competitions Act, 1998 (Act 89 of 1998), as amended;

"directors"

the directors of the company;

"Harmony" or "the company"

Harmony Gold Mining Company Limited (registration number 1950/038232/06), a public company incorporated in South Africa, the shares of which are listed on the JSE, the LSE and Euronext Paris and are quoted on Euronext Brussels in the form of International Depository Receipts and on the New York Stock Exchange, Inc. in the form of American Depositary Receipts;

"Harmony group"

Harmony and its subsidiaries;

"Harmony shares"

ordinary shares with a par value of 50 cents each in the share capital of Harmony;

"the JSE"

the JSE Securities Exchange South Africa;

"Kalgold"

Kalahari Goldridge Mining Company Limited (registration number 1982/002818/06), a public company incorporated in South Africa;

"Kalplats"

a platinum exploration project of Kalgold which comprises certain platinum discovery and associated mineral rights;

"last practicable date"

5 April 2004, being the last practicable date prior to finalisation of this circular;

"Nkomati"

a division of Avmin which, through the Nkomati mine, produces nickel, copper, cobalt and PGMs by-products;

"LSE"

London Stock Exchange plc;

"shareholders"

holders of Harmony shares;

"scheme" or "scheme of arrangement"

the scheme of arrangement proposed by Harmony between Avgold and the Avgold shareholders, in terms of section 311 of the Act;

"the scheme meeting"

the meeting of scheme members, convened in terms of an Order of Court, which is expected to be held at 10:00 at 56 Main Street, Johannesburg on Monday, 3 May 2004, at which meeting scheme members will consider and vote on the scheme;

"scheme members"

Avgold shareholders who are entitled to vote at the scheme meeting, being all Avgold shareholders registered as such on the voting record date, excluding Avmin, if the Avgold share exchange agreement has not been ratified;

"South Africa"

the Republic of South Africa;

"specific issue"

the specific issue for cash of convertible bonds to international investors to the value of up to R1,700 million, convertible into approximately 14 million Harmony shares, a summary of the terms and conditions of which are reflected in Annexure 1;

"SRP"

the Securities Regulation Panel;

"SRP Code"

the Securities Regulation Code on Takeovers and Mergers and the Rules of the SRP;

"Transaction"

collectively, the indivisible transactions reflected in paragraph 2, excluding the specific issue;

"Transaction conditions precedent"

the conditions precedent to which implementation of the Transaction is subject, as reflected in paragraph 2.2;

"transfer secretaries"

in South Africa, Ultra Registrars (Proprietary) Limited (registration number 2000/007239/07) and in England, Capita IRG plc (registration number 2605568) trading as Capita Registrars;

"Two Rivers"

Two Rivers Platinum (Proprietary) Limited (registration number 2001/007354/07), a private company incorporated in South Africa and a subsidiary of Avmin;

"United Kingdom Secretaries"

St James's Corporate Services Limited; and

"voting record date"

the latest time and date for Avgold shareholders to be recorded in the register as shareholders of Avgold in order to vote at the scheme meeting, which is expected to be at 17:00 on Friday 30 April 2004.

Harmony Gold Mining Company Limited

(Incorporated in the Republic of South Africa)
(Registration number 1950/038232/06)
Share code: HAR

ISIN: ZAE 000015228

Directors

P T Motsepe

Z B Swanepoel

F Abbott

Dr M M M M Bakane-Tuoane

F Dippenaar

V Fakude

T Grobicki

W M Gule

M W King

D S Lushaba

M F Pleming

Lord Renwick of Clifton KCMG*

C M L Savage

Dr S P Sibisi

D V Simelane

Dr R V Simelane

M V Sisulu

* British

Circular to shareholders

INTRODUCTION AND BACKGROUND

In a detailed joint cautionary announcement published on 13 November 2003, shareholders were advised that Harmony, Avmin and ARMI had reached agreement in principle regarding a range of indivisible transactions which, if implemented, would result in the creation of the largest black controlled mineral resources company in South Africa, under the leadership of mining entrepreneur, Patrice Motsepe. In terms of the Transaction:

- Avmin will exchange its entire 42,1% interest in Avgold for the issue to it of new Harmony shares;

- Avmin will acquire from ARMI:

ARMI's entire indirect 13,6% interest in Harmony, for a cash consideration which will be applied by ARMI in subscription for new Avmin shares;

ARMI's 41,5% effective interest in the Modikwa Joint Venture, in exchange for the issue to ARMI of new ordinary shares in ARM Platinum;

Avmin will acquire Kalplats from Kalgold for a cash consideration. Kalgold will then apply the cash in the subscription for new Avmin shares in renounceable form and will renounce these shares to Harmony;

- ARMI will vote Harmony's remaining shares in Avmin, post the above transactions, through the ARM voting agreement.

The acquisition, by Harmony, of Avmin's stake in Avgold constitutes an affected transaction in terms of the SRP Code and, as a result, Harmony would be required to extend a mandatory offer to the Avgold shareholders on the same terms and conditions, mutatis mutandis, as those offered to Avmin. Harmony wishes to acquire 100% of Avgold and has therefore extended an offer to Avgold

shareholders by way of the scheme, subject to the Avgold offer conditions precedent, prior to triggering a mandatory offer in terms of the SRP Code.

If the scheme does not become operative due to the non-fulfilment of the conditions to which it is subject and the Avgold share exchange agreement becomes unconditional, Harmony will be obliged to make a mandatory offer to the Avgold shareholders in terms of Rule 8.1 of the SRP Code on the same terms and conditions offered to Avmin. The Harmony shares comprising the consideration under such offer will first have to be registered under the U.S. Securities Act of 1933, as amended. Harmony has undertaken to the SRP to use its best endeavours to procure registration of the Harmony shares comprising the offer consideration with the SEC as a matter of urgency to enable it to make such mandatory offer without undue delay.

It was announced on 31 March 2004 that Harmony intends to issue convertible bonds to international investors to the value of up to R1,700 million. The proceeds of the specific issue will be used primarily to refinance Harmony's existing South African Rand debt, benefiting from the attractive financing opportunities currently available in the convertible bond market. Details of the specific issue are reflected in paragraph 9.

The convertible bonds will be issued pursuant to a specific issue for cash in terms of Rule 5.51 of the Listings Requirements of the JSE. Attached to this circular is a notice convening a general meeting of shareholders at which the ordinary resolutions necessary to implement the specific issue will be proposed.

The purpose of this circular is to provide shareholders with information regarding the Transaction, the Avgold offer and the specific issue. Shareholders should note that details regarding the Transaction are included for information purposes only and that the only action they are required to take is in respect of the specific issue.

THE TRANSACTION

2.1

Description of the Transaction

Following the implementation of the Transaction, ARMI will become the effective controlling shareholder of a larger diversified and empowered Avmin, which will have significant holdings in gold, PGMs, nickel and ferrous metal assets. Avmin's gold interests will be held through its resultant 22% interest in Harmony. Pursuant to the Transaction, Avmin will change its name to African Rainbow Minerals Limited and will be well-positioned to secure adequate funding for its existing projects and to participate in further growth opportunities that the South African mining sector offers, taking advantage of its black economic empowerment controlled status.

The current structure of Harmony and Avmin is as follows:

Avgold

(listed)

Assmang

(listed)

Avmin

(listed)

Harmony

(listed)

Two Rivers

Nkomati

Other assets

- Iron ore
- Manganese
- Chrome

- Assore (8,5%)
- AvAlloys (100,0%)
- Other (including exploration activities)

33,9%

42,1%

11,4%

50,3%

55,0%

100,0%

Following the implementation of the Transaction, the structure of Harmony, Avmin and ARMI will be as follows:

*Prior to implementation of Avgold offer.

The Transaction is subject to the fulfilment of the Transaction conditions precedent and is expected to be implemented by no later than 30 April 2004.

2.2

Transaction conditions precedent

The Transaction is subject to the fulfilment of the following conditions precedent:

- the requisite legal agreements necessary to implement the Transaction becoming unconditional;

the passing of the ordinary and special resolutions necessary to implement the Transaction by the Avmin shareholders in general meeting; and

- the approval of contractual third parties to the proposed change of control of Avgold.

2.3

The ARM voting agreement

In terms of the ARM voting agreement, ARMI will exercise the votes attaching to Harmony's entire holding of 40 789 761 Avmin shares (approximately 20% of Avmin) following implementation of the Transaction.

RATIONALE FOR THE AVGOLD SHARE EXCHANGE AND AVGOLD OFFER

Avgold operates the Target Mine in the Free State which, at full production, is expected to produce 350 000 gold ounces per annum, at a cash cost below US$180 per ounce. In addition, an extensive exploration programme in an area known as Target North, which has a resource base of approximately 80 million ounces, is currently underway.

In July 2003, Harmony acquired 11,4% of the issued share capital of Avgold from Anglo South Africa in exchange for the issue to Anglo South Africa of renounceable letters of allocation representing the right to the issue of 6 960 964 new Harmony shares. The Avgold share exchange and the Avgold offer represent the final steps in the transaction in terms of which Harmony will acquire full control of the Target Mine. The acquisition of the Target Mine is expected to further enhance the overall quality of Harmony's production base.

THE AVGOLD SHARE EXCHANGE

4.1

Terms and consideration

In terms of the Avgold share exchange agreement, subject to the fulfilment of the Avgold share exchange conditions precedent, Avmin will exchange its entire holding of 286 305 263 Avgold shares, comprising 42,1% of Avgold's issued share capital, for 28 630 526 new Harmony shares with effect from the date upon which all the Avgold share exchange conditions precedent are fulfilled, which date is expected to be on or before 30 April 2004.

This represents a ratio of 1 Harmony share for every 10 Avgold shares. The value attributable to the new Harmony shares is R2 893 687 263.

Harmony

(listed)

Avgold

(listed)

Assmang

(listed)

Avmin

(listed)

Public and

institutional

shareholders

ARM Platinum

(unlisted)

Other assets

- Assore (8,5%)
- AvAlloys (100,0%)
- Other (including exploration activities)

- Nkomati (100,0%)
- Two Rivers (55,0%)
- Modikwa JV (41,5%)
- Kalplats (100,0%)

- Iron ore
- Manganese
- Chrome

37,0%

63,0%

22,0%

53,6%*

50,3%

20,0% of Avmin

ARM Control

Structure

ARMI

43,0% of

Avmin

4.2

Warranties

In terms of the Avgold share exchange agreement, Avmin has given Harmony limited warranties as to ownership and title to the Avgold shares sold by it and Harmony has given Avmin limited warranties as to its ability to allot and issue Harmony shares, which are normal in transactions of this nature.

4.3

Conditions precedent

The Avgold share exchange is subject to:

- the requisite legal agreements necessary to implement the Transaction becoming unconditional;

the passing of the requisite ordinary and special resolutions necessary to give effect to the Transaction by the shareholders of Avmin in general meeting (excluding the increase in authorised share capital and change of name of Avmin);

- the approval of the JSE to the listing of the Harmony shares comprising the Avgold offer consideration on the JSE;
and

- the approval of contractual third parties to the proposed change of control of Avgold.

THE AVGOLD OFFER

5.1

Terms of the Avgold offer

The acquisition by Harmony of Avmin's stake in Avgold constitutes an affected transaction in terms of the SRP Code and, as a result, Harmony would be required to extend a mandatory offer to the Avgold shareholders on the same terms and conditions, mutatis mutandis, as those offered to Avmin. Harmony wishes to acquire 100% of Avgold and has therefore extended an offer to Avgold shareholders by way of the scheme, subject to the Avgold conditions precedent, prior to triggering a mandatory offer in terms of the SRP Code.

If the scheme does not become operative due to the non-fulfilment of the conditions to which it is subject and the Avgold share exchange agreement becomes unconditional, Harmony will be obliged to make a mandatory offer to the Avgold shareholders in terms of Rule 8.1 of the SRP Code on the same terms and conditions offered to Avmin. The Harmony shares comprising the consideration under such offer will first have to be registered under the U.S. Securities Act of 1933 as amended. Harmony has undertaken to the SRP to use its best endeavours to procure registration of the Harmony shares comprising the offer consideration with the SEC as a matter of urgency to enable it to make such mandatory offer without undue delay.

5.2

Consideration paid pursuant to the Avgold offer

Pursuant to the Avgold offer, Avgold shareholders will receive a consideration equivalent to 1 Harmony share for every 10 Avgold shares held.

If successfully implemented, an aggregate amount of R3 239 286 577 will be paid in the form of Harmony shares, to the Avgold shareholders.

The aggregate number of new Harmony shares to be issued in terms of the Avgold offer is 32 049 932, representing approximately 11% of the Harmony issued share capital post the Avgold share exchange and prior to the implementation of the Avgold offer. The new Harmony shares issued will rank pari passu in all respects with the existing ordinary shares in Harmony.

It is expected that the listing of Avgold shares on the JSE will terminate on Tuesday 18 May 2004.

5.3

Avgold offer conditions precedent

The Avgold offer is subject to the fulfilment of the following conditions precedent:

5.3.1

the Avgold share exchange agreement becoming unconditional;

5.3.2

the approval of the scheme by a majority representing not less than 75% of the votes exercisable by the scheme members present and voting, either in person or by proxy, at the scheme meeting;

5.3.3

the High Court of South Africa (Transvaal Provincial Division) sanctioning the scheme;

5.3.4

a certified copy of the Order of Court sanctioning the scheme being registered by the Registrar of Companies in terms of the Act.

FINANCIAL EFFECTS OF THE ACQUISITION ON HARMONY

6.1

Pro forma financial effects for the Transaction and the Avgold offer

The table below sets out the illustrative pro forma financial effects of the Avgold share exchange and the Avgold offer based on the published consolidated financial results of Harmony for the six months ended 31 December 2003, and assumes that the Avgold share exchange and the Avgold offer were implemented for income statement purposes on 1 July 2003 and for balance sheet purposes on 31 December 2003:

Pro forma

after the

Transaction

(excluding

(including

Cents per Harmony share

Before

(1)

Avgold offer)

Change

Avgold offer)

Change

Basic earnings

(2)

(32%)

(1)

(102%)

Headline earnings

(2)

(129)

(131)

Net asset value

(3)

6 350

7 352

16%

7 326

15%

Net tangible asset value

(3)

5 265

5 850

11%

5 566

Weighted average number of
Harmony shares

231 707 291

262 023 354

293 715 856

Number of Harmony shares issued

258 350 934

288 666 997

320 359 499

Notes to table:

(1)

Extracted from the quarterly published unaudited financial results of Harmony for the six months ended 31 December
2003.

(2)

The pro forma effects on earnings and headline earnings per share after the Transaction excluding and including the Avgold offer have been prepared on the following assumptions:

the Transaction was effective 1 July 2003;

the Harmony share price for determining the purchase consideration was the share price at close of business on 19 March 2004, being R101,60 per share; and

for purposes of illustrating the pro forma effects after the Transaction including the Avgold offer, it has been assumed that all minorities accept the Avgold offer.

(3)

The pro forma effects on net asset and intangible asset value per Harmony share after the Transaction excluding and including the Avgold offer have been prepared on the following assumptions:

the Transaction was effective 31 December 2003;

the Harmony share price for determining the purchase consideration was the share price at close of business on 19 March 2004, being R101,60 per share; and

for purposes of illustrating the pro forma effects after the Transaction including the Avgold offer, it has been assumed that all minorities accept the Avgold offer.

6.2

Pro forma balance sheet and income statement of Harmony

The pro forma balance sheet and income statement of Harmony, before and after the acquisition, are set out in Annexure 2.

6.3

Independent reporting accountants' report

The independent reporting accountants' report on the pro forma financial information relating to the acquisition and on the pro forma balance sheet and income statement of Harmony, before and after the acquisition, is set out in Annexure 3. The interim financial results of Harmony are attached as Annexure 4.

The pro forma financial information reflected herein is the responsibility of the directors.

INFORMATION IN RESPECT OF AVGOLD

7.1

Background

Avgold was incorporated in South Africa on 23 November 1990. Avgold has its primary listing on the JSE, with listings on Euronext Brussels in the form of International Depository Receipts and on the New York Stock Exchange, Inc. in the form of American Depositary Receipts.

Avgold's registered address is:
56 Main Street
Johannesburg
2001

7.2

Nature of business

The business of Avgold is to explore for, develop and operate gold mines. Following the sale of the ETC division, situated in the Mpumalanga province, on 15 June 2003, Avgold's assets comprise the Target Gold Mine situated in the Free State province and a significant unexploited resource north of the Target Mine.

7.3

Historical financial information

Historical financial information of Avgold and the interim financial information of Avgold is set out in Annexure 5 and Annexure 6, respectively.

A competent person's report containing information on the mining assets of Harmony including Avgold is set out in Annexure 7.

7.4

Material loans

The loans raised from a syndicate of banks to fund the completion of the Target Gold Mine were repaid in full on 30 June 2003. This was achieved by utilising existing cash resources, which included the proceeds from the sale of the ETC division. The balance of the funds were sourced by drawing down on a R200 million unsecured general term banking facility concluded with Standard Corporate and Merchant Bank.

7.5

Material contracts

Save for the Avgold share exchange agreement and the agreement in respect of the sale of the ETC division to Barberton Mines Limited on 15 June 2003, Avgold has not entered into any material contracts, other than in the ordinary course of business, during the two-year period immediately preceding the date of this circular.

The loans that were repaid on 30 June 2003 were secured in part by Rand gold hedges. On repayment of this loan, the Rand gold hedge book was restructured into Dollar gold commodity hedges by the purchase of Rand/Dollar forward exchange contracts.

7.6

Material changes

There have been no material changes in the financial or trading position of Avgold, other than as disclosed in this circular, between the date of the last audited financial statements of Avgold, being 30 June 2003, and the date of this circular.

7.7

Litigation statement

There are no legal or arbitration proceedings that are pending or threatened of which Avgold is aware which may have, or have had during the 12-month period preceding the date of this circular, a material effect on the financial position of Avgold.

THE KALPLATS DISPOSAL

On 7 November 2003, prior to the announcement of the terms of the Transaction on 13 November 2003, Harmony announced that it had agreed to sell the entire issued share capital of Kalgold to Afrikander Lease for a purchase consideration of R275 million. However, on 17 March 2004, Harmony announced the cancellation of the sale agreement in respect of Kalgold. Consequently Kalgold remains a wholly-owned subsidiary of Harmony. As previously announced, Kalgold will sell Kalplats to ARM Platinum, which will become an Avmin subsidiary following implementation of the Transaction, for a consideration based on the weighted average traded price of an Avmin share for the seven trading days prior to the closing date of the sale, subject to a maximum of R100 000 000. The purchase consideration will be credited to a loan account in the books of Kalgold which loan account will be sold to Avmin for cash. Kalgold will use the cash to subscribe for renounceable letters of allocation in respect of 2 million new Avmin shares. Kalgold intends to renounce such letters of allocation in favour of Harmony so that the 2 million new Avmin shares will be held in Harmony.

THE SPECIFIC ISSUE

9.1

Terms of the convertible bonds

Harmony intends to raise up to R1,700 million by way of a specific issue of convertible bonds for cash to international investors. The convertible bonds will be denominated in Rand and will be issued at 100% of their principal amount. Interest will be payable on the convertible bonds semi-annually in arrears at the rate of 4,875% per annum.

The convertible bonds may be converted into ordinary shares at the election of the holders at any time from the 41st day after their issue, expected to be on or about 21 May 2004, until the 7th day prior to the maturity date which is expected to be on or about 21 May 2009.

The convertible bonds may be converted into new Harmony shares issued as fully paid at a price, including premium, of R121,00 representing a premium of 22,7% to the closing price of Harmony shares on the JSE on 31 March 2004, the date of the launch of the offer for the convertible bonds.

As the discount to current market price of Harmony shares will not be known at the time of their issue following conversion, the issue of the convertible bonds will be subject to the issue of a favourable fair and reasonable opinion regarding their terms from an independent professional expert acceptable to the JSE. Investec Bank Limited has been appointed and their opinion in this regard is expected by no later than 5 May 2004 so that it is available at the general meeting of shareholders on 7 May 2004.

To the extent that the convertible bonds are not converted, or redeemed early at the option of the company, they will be redeemed at the end of the five-year period following their issue, at their issue price.

Application will be made to list the convertible bonds on the LSE.

A summary of the terms and conditions of the convertible bonds is reflected in Annexure 1.

9.2

Pro forma financial effects for the specific issue

The table below sets out the illustrative pro forma financial effects of the specific issue on the published consolidated financial results of Harmony for the six months ended 31 December 2003, and assumes that the Avgold share exchange, the Avgold offer and the specific issue were implemented for income statement purposes on 1 July 2003 and for balance sheet purposes on 31 December 2003:

Pro forma

after the

specific

Cents per Harmony share

Before

(1)

issue

Change

Basic earnings

(2)

(1)

300%

Headline earnings

(2)

(131)

(126)

Net asset value

(3)

7 326

7 400

Net tangible asset value

(3)

5 566

5 639

Weighted average number of Harmony shares

293 715 856

Number of Harmony shares issued

320 359 499

Notes to table:

Extracted from the unaudited pro forma financial effects of Harmony for the six months ended 31 December 2003, assuming implementationof the Transaction and the Avgold offer, as set out in the "Pro forma after the Transaction (including the Avgold offer)" column presented in paragraph 6.1 above.

The unaudited pro forma effects on earnings and headline earnings per Harmony share after the specific issue have been prepared on the assumption that the specific issue was effective on 1 July 2003.

The unaudited pro forma effects on net asset and intangible asset value per Harmony share after the specific issue have been prepared on the following assumptions:

- the specific issue was effective 31 December 2003; and

the specific issue amount was allocated between long-term liabilities and equity, based on a market-related interest rate of 10%.

The pro forma financial information reflected herein is the responsibility of the directors. The independent reporting accountants' report on the pro forma financial information relating to the specific issue is set out in Annexure 8.

9.3

Shareholder approval

Attached hereto is a notice of general meeting convening a general meeting of Harmony shareholders to be held at Harmony's Corporate Office, Randfontein Office Park, Corner Main Reef Road and Ward Avenue, Randfontein, at 10:00 on Friday, 7 May 2004. At the general meeting, ordinary resolutions will be proposed regarding the specific issue.

The issue of the convertible bonds and new Harmony shares following their conversion does not constitute an affected transaction as defined in the SRP Code.

The convertible bonds will not be issued to non-public shareholders.

9.4

Use of proceeds

The proceeds of the specific issue will be used primarily to refinance Harmony's existing South African Rand debt, hence benefiting from the attractive financing opportunities currently available in the convertible bond market.

10. INFORMATION ON HARMONY

10.1

Background

Harmony was incorporated in South Africa on 25 August 1950. The primary listing of Harmony's shares is on the JSE. The Harmony shares are also listed on the LSE and Euronext Paris and are quoted on Euronext Brussels in the form of International Depository Receipts and on the New York Stock Exchange, Inc. in the form of American Depositary Receipts.

Harmony's registered address is:
Remaining extent of portion 3 of the farm Harmony Farm 222
Private Road
Glen Harmony
Virginia
Free State Province.

10.2

Nature of business

Harmony is a gold miner and producer with an international diversified portfolio of gold mining projects in South Africa, Australia and Papua New Guinea. Harmony adopts focused operational and management philosophies throughout the organisation. Its growth strategy is focused on building a leading international gold mining company through acquisitions, organic growth and focused exploration. The bulk of its assets are located in the Witwatersrand Basin of South Africa. The deep level gold mines located in this basin include those in the Free State province, the Evander gold mine in Mpumalanga province, the Randfontein and Elandskraal mines on the West Rand, goldfields in Gauteng province and the Orkney operations in North West province. In May 2003, Harmony and ARMgold, through a Harmony/ARMgold joint venture company, acquired 38 789 761 Avmin shares, in July 2003, Harmony acquired 77 540 830 Avgold shares, representing 11,4% of Avgold's issued share capital, from Anglo South Africa and in September 2003 Harmony acquired the entire issued share capital of ARMgold.

Harmony's international operations are held under Harmony Gold (Australia) (Proprietary) Limited and comprise the wholly-owned New Hampton Goldfields Limited and Hill 50 Limited, a 31,8% interest in the Bendigo Mining NL operation and an 83,2% shareholding in Abelle Limited.

On 15 March 2003, Harmony announced its intention to propose an off market cash offer to acquire all the ordinary shares and listed and unlisted options in Abelle Limited that it does not already own. The offer is subject to the fulfilment of certain conditions precedent and is valued at R620 million or A$125 million.

10.3

Prospects

Harmony is a growth oriented company in the gold production business and is distinguished by the focused operational and management philosophies which it employs throughout the organisation. Its growth strategy is focused on building a leading international gold mining company through acquisitions, organic growth and focused exploration.

Since undergoing a change in management in 1995, Harmony has employed a successful strategy of growth through a series of acquisitions and through the evolution and implementation of a simple set of management systems and philosophies, which Harmony refers to as the "Harmony Way" and which it believes is unique in the South African gold mining industry. A significant component of the success of Harmony's strategy to date has been its ability to acquire underperforming mining assets, mainly in South Africa, and within a relatively short time frame, to transform these mines into cost-effective production units.

Harmony is managed according to the philosophy that Harmony shareholders have invested in Harmony in order to hold a growth stock that will also participate in movements in the gold price. Accordingly, Harmony has consistently maintained a policy of not hedging its future gold production.

10.4

Material loans

The details of material loans to the Harmony group are reflected in Annexure 9.

10.5

Material contracts

Save for the merger agreement, dated 22 July 2003, entered into between Harmony, ARMgold and ARMI, whereby the parties undertook to merge their gold producing assets, the agreements relating to the acquisitions and disposals of companies, businesses and properties set out in Annexure 10 and the agreements referred to in this circular, Harmony has not entered into any material contracts, other than in the ordinary course of business, during the two-year period immediately preceding the date of this circular.

10.6

Material changes

The details of material changes in the financial or trading position of Harmony are reflected in Annexure 11.

10.7

Litigation statement

There are no legal or arbitration proceedings that are pending or threatened of which Harmony is aware that may have, or have had during the 12-month period preceding the date of this circular, a material effect on the financial position of Harmony.

A claim has been instituted against Harmony by Wadethru Security Company (Proprietary) Limited (in liquidation) in respect of alleged damages arising out of the termination of a sale of business agreement in relation to Brand No. 2 Shaft. Even if successful, this is not expected to have a material effect on the financial position of Harmony.

10.8

Share capital

Harmony's authorised and issued share capital, at the last practicable date, was as follows:

BEFORE THE TRANSACTION AND THE AVGOLD OFFER

ZAR'm

Authorised

350 000 000 ordinary shares of 50 cents each

175

Issued

258 469 684 ordinary shares of 50 cents each

129

Following implementation of the Transaction and the Avgold offer, Harmony's authorised and issued share capital is expected to be as follows:

AFTER THE TRANSACTION, THE AVGOLD OFFER AND THE SPECIFIC ISSUE

ZAR'm

Authorised

350 000 000 ordinary shares of 50 cents each

175

Issued

320 805 079 ordinary shares of 50 cents each

160

Assuming full conversion of the convertible bonds into Harmony shares, Harmony's authorised and issued share capital is expected to be as follows:

AFTER THE TRANSACTION, THE AVGOLD OFFER AND THE SPECIFIC ISSUE

ZAR'm

Authorised

350 000 000 ordinary shares of 50 cents each

175

Issued

334 805 079 ordinary shares of 50 cents each

167

10.9

Price history of Harmony shares

The price history of Harmony shares is reflected in Annexure 12.

10.10 Major shareholders

At the last practicable date, the following shareholders beneficially held more than 5% of the issued ordinary share capital of Harmony:

Name of shareholder

Number of shares

Percentage

(million)

shareholding

The Bank of New York

113,5

43,9

ARMI

35,0

13,5

JPMorgan Chase Bank

15,3

5,9

Harmony has no controlling shareholder, as the shares held by The Bank of New York are held on behalf of shareholders who participate in Harmony's American Depositary Receipt program.

10.11 Directors

10.11.1 Directors and management

The full names, business address and function of the directors are as follows:

Name

Function

Address

P T Motsepe

Non-executive Chairman

Harmony Corporate Office, Randfontein Office Park,

(South African)

Corner Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa

Z B Swanepoel

Chief Executive

Harmony Corporate Office, Randfontein Office Park,

(South African)

Corner Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa

F Abbott

Financial Director

Harmony Corporate Office, Randfontein Office Park,

(South African)

Corner Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa

Dr M M M M Bakane-Tuoane

Non-executive Director

Harmony Corporate Office, Randfontein Office Park,

(South African)

Corner Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa

F Dippenaar

Marketing Director

Harmony Corporate Office, Randfontein Office Park,

(South African)

Corner Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa

V N Fakude

Non-executive Director

1st Floor Block C, Sandhurst Office Park, corner Katherine

(South African)

Street and Rivonia Road, Sandton, PO Box 781220, Sandton, 2146

T S A Grobicki

Executive Director

Harmony Corporate Office, Level 1, 10 Ord Street, West

(South African)

Perth, WA, 6005

W M Gule

Executive Director

Harmony Corporate Office, Randfontein Office Park,

(South African)

Corner Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa

M W King

Non-executive Director

Harmony Corporate Office, Randfontein Office Park,

(South African)

Corner Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa

D S Lushaba

Non-executive Director

522 Impala Road, Glenvista, 2058, PO Box 1127,

(South African)

Johannesburg, 2000

M F Pleming

Non-executive Director

30 Hydewoods, Townshend Road, Hyde Park, 2196

(South African)

Lord Renwick of Clifton KCMG

Non-executive Director

JPMorgan plc., 125 London Wall, London EC2Y 6AJ,

(British)

United Kingdom

C M L Savage

Non-executive Director

Harmony Corporate Office, Randfontein Office Park,

(South African)

Corner Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa

Dr S P Sibisi

Non-executive Director

Harmony Corporate Office, Randfontein Office Park,

(South African)

Corner Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa

D V Simelane

Executive Director

Harmony Corporate Office, Randfontein Office Park,

(South African)

Corner Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa

Dr R V Simelane

Non-executive Director

Harmony Corporate Office, Randfontein Office Park,

(South African)

Corner Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa

M V Sisulu

Non-executive Director

Harmony Corporate Office, Randfontein Office Park,

(South African)

Corner Main Reef Road and Ward Avenue, Randfontein, PO Box 2, Randfontein, 1760, South Africa

Further details on the executive directors of Harmony are as follows:

Bernard Swanepoel (42) BSc (Mining Engineering), B Com (Hons), Chief Executive Officer and an Executive Director. Bernard has over 20 years' experience in the gold mining industry. He started his career in gold mining at Grootvlei in 1983. As part of his training he spent time on various Gengold operations including Kinross (Evander) and Barberton. He then moved into senior management with the Gengold group, culminating in his appointment as general manager and a director of Beatrix Mines in 1993. He joined Randgold in 1995 as Managing Director of Harmony and has been the driving force in making the company the fifth largest independent gold producer in the world and the largest in South Africa.

Frank Abbott (48), BCom, CA(SA), MBL, Chief Financial Officer and an Executive Director. Frank joined the Rand Mines/Barlow Rand Group in 1981, where he obtained broad financial management experience at operational level. He was appointed as financial controller to the newly formed Randgold in 1992 and was promoted to financial director of that group in October 1994. Until 1997, he was also a director of the gold mining companies Blyvooruitzicht, Buffelsfontein, Durban Roodepoort Deep and East Rand Proprietary Mines and a non-executive director of Harmony, which culminated in his appointment as financial director of Harmony in the same year.

Ferdinand Dippenaar (42), BCom, BProc, MBA, Marketing Director and an Executive Director. Ferdi started his career at the Buffelsfontein gold mine in 1983 and completed his degrees through part-time studies while employed in various financial and administrative capacities at the Gengold mines. In 1996, he became managing director of Grootvlei and of East Rand Proprietary Mines. Following Harmony's acquisition of Grootvlei and Cons Modder, he was appointed Marketing Director of Harmony in 1997. He oversees Harmony's refinery and direct marketing activities, as well as the company's investor relations programme.

Ted Grobicki (54), BSc (Hons) (Geology) MSc (Minerals Exploration) PrSciNat, FIMM, Executive Officer for Harmony's Australian operations and an Executive Director. After fulfilling various roles within mining and exploration companies in South Africa, Namibia and Zimbabwe, Ted was appointed chief executive of Texas Gulf Inc South Africa in 1979. He has since served at a senior executive level in a wide range of public and private companies in the mining sector and was appointed as non- executive director of Harmony in 1994. With Harmony's merger with Kalgold and West Rand Cons in 1999, he was appointed as executive director focusing on new business. Ted has 30 years' experience in all aspects of the mining industry, including exploration, evaluation, development, mine management and financial and corporate management.

Mangisi Gule (51), BA (Hons) and an Executive Director. Mangisi has 23 years' experience in training and human resources and is a member of the Association of Mine Human Resource Practitioners. Mangisi joined the company on 23 September 2003, following the ARMgold merger. He oversees the company's human resources and communication activities.

Dan Simelane (41) BA, LLB, LLM and an Executive Director. Dan Simelane has seven years' legal experience and acted as legal advisor to Avmin Limited and the Swaziland Electricity Board. He has extensive tax experience and was a senior tax consultant with Arthur Andersen. Dan joined Harmony on 23 September 2003 following the ARMgold merger.

Further details on the non-executive directors of Harmony are set out below:

Patrice Motsepe (41) BA (Legal), LLB, Non-executive Director. Founder and former Executive Chairman of ARMgold which merged with Harmony in 2003. Patrice is now Harmony's non-executive Chairman. In 2002 he was voted South Africa's Entrepreneur of the year. In the same year, he was voted by the CEO's of the top 100 companies in South Africa as South Africa's Business Leader of the Year. Patrice has significant entrepreneurial expertise and knowledge of the new business environment in South Africa and will be central in helping to steer Harmony to grow and be competitive. Patrice was a partner specialising in mining and business law at Bowman Gilfillan Inc, a leading South African law firm. He was employed for approximately four years by McGuire Woods LLP, a law firm in Richmond, Virginia, USA. He was initially based in Richmond and thereafter moved to South Africa where he was their legal consultant for their southern African legal practice. In 1994, he founded Future Mining (Proprietary) Limited which grew rapidly to become a competitive contract mining company. In 1998 he founded African Rainbow Minerals (Proprietary) Limited which in 2000 became ARMgold which was successfully listed on the JSE in 2002. In 2001, he founded African Rainbow Minerals Platinum (Proprietary) Limited and ARM Mining Consortium Limited which entered into a 50/50 joint venture with Anglo American Platinum Corporation Limited for the establishment of a new platinum mine. He was Senior Vice President of the Chamber of Mines and is a "Global Leader of Tomorrow" of the World Economic Forum (WEF). He is a member of National Economic Development and Labour Council (NEDLAC), which is South Africa's primary institution for social dialogue between organised business, Government, labour and community on issues of social and economic policy. He is currently the President of the first non-racial, united and recognised business organisation in South Africa, namely Business Unity South Africa (BUSA), which is the "voice of business" in South Africa as well as President of the first non-racial, united and recognised organisation representing the various chambers of commerce and industry in South Africa, namely Chamber of Commerce and Industry South Africa (CHAMSA).

Dr Manana Bakane-Tuoane (55) PhD, BA, MA and independent non-executive Director. Dr Bakane-Tuoane has extensive experience in the economic disciplines as lecturer and professor at the University of Fort Hare, Eastern Cape. She has held various senior management positions in the public service and currently holds the post of Director General in the North West Provincial Government. Dr Bakane-Tuoane was appointed to the advisory Board of the African Economic Research Consortium, Nairobi, Kenya in 2000. Dr Bakane-Tuoane was appointed a non-executive director of the company on 23 September 2003 following the ARMgold merger.

Nolitha Fakude (39) BA (Hons) (Psychology, Education and English) and an independent non-executive director. Nolitha has been a director of Harmony since September 2002. Nolitha Fakude is the Managing Director of the Black Management Forum

(BMF). Her role involves stakeholder management, policy formulation and advocacy work on issues of Black Economic Empowerment and organisational transformation. Nolitha was a Group Human Resources Manager for Retail at Woolworths, as well as head of Corporate Affairs, which included, amongst others, Communication and Community Affairs. She serves on various boards, including BMF Investment Company, The People's Bank, Business Partners as well as Wheat Trust. Nolitha was recently appointed by the Gauteng MEC for Economic Affairs as one for the Rainmakers for the Blue IQ project.

Simo Lushaba (37) BSc (Advanced Biochemistry), MBA, non-executive Director and an independent non-executive Director. Simo has been a director of Harmony since October 2002. Simo started his career at the University of Zululand in 1988 as a research technician. In 1990, he joined South African Breweries and two years later National Sorghum Breweries where he served as Divisional Executive of the Khangela Division nine coastal depots. In 1995, Simo was appointed by SpoorNet, where he worked for seven years in various managerial positions and ultimately as the General Manager for Rail and Terminal Services. In April 2002, Simo was brought into Rand Water to drive both business and social transformation in the organisation which included internal restructuring, focusing on creating a customer-driven organisation, as well as new business opportunities, both in South Africa and internationally. Simo also serves as non-executive Chairman of PIKITUP Johannesburg (Pty) Limited and as a non-executive director of Trans-Caledon Tunnel Agency (TCTA). He is currently the Chief Executive of Rand Water.

Lord Renwick of Clifton KCMG (66), an independent non-executive director. Lord Renwick has been a director of Harmony since December 1999. Having formerly served as British Ambassador to South Africa and the United States, Lord Renwick is Vice Chairman, Investment Banking, of JPMorgan plc. He is also Chairman of Flour Limited and serves on the boards of a number of other public companies including British Airways, SABMiller plc and Richemont.

Mike Pleming (68), Pr Eng, FIMM and an independent non-executive director. Mr Pleming has been a director of Harmony since September 1998. Mike started his career in mining engineering on the Zambian Copperbelt. He joined TransNatal (now Ingwe) in 1975 as general manager, Optimum Collieries and was later appointed project manager and consulting engineer. He joined Liberty Asset Management in 1982 where he was responsible for mining investment research. He retired in 1995 and has since undertaken a series of mining investment-related assignments. Following Harmony's acquisition of Evander in 1998, he joined the company as a non-executive director. He is also a director of Impala Platinum Holdings Limited. Mike also serves as a non-executive director of Highlands Gold Limited. Mike has approximately 31 years' mining and approximately 15 years' mining investment experience.

Michael King (66) CA(SA), FCA, Non-executive director. Michael King served articles with Deloitte, Plender, Griffiths, Annan & Co. (now Deloitte & Touche) and qualified as a Chartered Accountant (SA). He later became a Fellow of the Institute of Chartered Accountants in England and Wales (FCA). He joined Anglo American Corporation of South Africa as a manager in the finance division. In 1979, he became director of Anglo American Corporation and in 1980 an executive director and head of its finance division. In 1997, he was appointed executive deputy chairman of Anglo American Corporation. He was the executive vice-chairman of Anglo American plc, in May 1999, until his retirement in May 2001. Michael was appointed a non-executive director of Harmony on 23 September 2003 following the ARMgold merger.

Cedric Savage (64) BSc Eng, MBA, ISMP, an independent non-executive director. Cedric commenced his career in the United Kingdom in 1960 as a graduate engineer with Fairey Aviation and in 1963 returned to South Africa where he worked in the oil (Mobil), textile (Felt & Textiles) and the chicken (Rainbow Chickens Limited) industries. In 1993/1994, he was appointed President of the South African Chamber of Business. He has also served as Chairman of the Board of Governors on the Natal University Development Foundation and as a member of Council of the University of Natal. He joined the Tongaat- Hulett Group in 1977 as Managing Director of Tongaat Foods and thereafter progressed to Executive Chairman of the Building Materials Division, Chief Executive Officer of The Tongaat-Hulett Group Limited in 1991 and in May 2000, he assumed the dual roles of Chief Executive Officer and Executive Chairman. Cedric was appointed a non-executive director of Harmony on 23 September 2003 following the ARMgold merger.

Dr Sibusiso Sibisi (48) BSc (Hons), PhD, Non-executive Director. Dr Sibusiso Sibisi's working career commenced in 1983 in the software development industry with MEDC Limited, Cambridge, UK. His career developed to that of Systems Engineer at IBM (SA), lecturer and senior lecturer (Wits) and deputy vice-chancellor for research (University of Cape Town). He spent 1988 as a Fulbright Fellow at the California Institute of Technology where he collaborated with eminent researchers in computational chemistry and the development of associated medical diagnosis tools. In 1989, he took up a research position at Cambridge where he consolidated his academic research in mathematical modelling and computational simulations to environmental, geophysical and biomedical problems to develop solutions. This evolved to the formation of a start-up company dedicated to providing consulting services to Glaxo, Welcome, Fisons, Shell and Mobil. He entered the corporate world in 1997 as executive director of Plessey (SA), with the responsibility of managing and directing research and development in telecommunication technologies. As chairperson of the National Advisory Council on Innovations, he is involved in making recommendations on research and innovation policy to the Government. Dr Sibisi was appointed a non-executive directory of the company on 23 September 2003 following the ARMgold merger.

Dr Rejoice Simelane (51) BCom, MCom, PhD and an independent non-executive director. Dr Rejoice Simelane's career commenced as a lecturer at the University of Swaziland where she lectured from 1978 to 1997 on Development Economics, Micro-economics and Macro-economics Theory, Research Methods, Mathematical Economics, Econometrics, Economic Planning and Economic Integration. She then joined the Department of Trade and Industry as a macro-economist and later joined the National Treasury as a micro-economist (public utility regulation and pricing) before joining the Premiers Office in the Mpumalanga Province as an Economic Adviser. Dr Simelane was appointed a non-executive director of the company on 23 September 2003 following the ARMgold merger.

Max Sisulu (58) MPA, MSc and an independent non-executive director. Max was appointed as director of Harmony in August 2003. Max is currently the General Manager at Sasol and prior to that held the position of deputy chief executive officer at Denel, a post he held since November 1998. From 2001 to 2003 he was the chairperson of the South African Aerospace, Maritime and Defence Industries. He is also a council member of the Human Sciences Research Council and a member of the Premier of the Free State's Economic Advisory Council. From 1977 to 1981 Max served as the ANC representative in Hungary and was South Africa's representative in the "World Federation of Democratic Youth". In January 1995 he was elected to the National Executive Committee and National Working Committee of the ANC. From 1986, he helped establish the ANC economics department and was instrumental in developing the ANC's economic policy. In 1990 he spearheaded the drafting of the ANC's first policy statement on the environment. From 1992 to 1993 Max completed a Masters degree in Public Administration at the Kennedy School of Government at Harvard University in the United States. He returned to South Africa in September 1993 and took up the post of Director of the National Institute of Economic Policy until he became a Member of Parliament in 1994.

10.11.2 Directors' remuneration to 30 June 2003

Directors'

Salaries and

Retirement

Bonuses paid

fees

benefits

contributions

during year

Total

R'000

Executive

F Abbott

1 001

110

2 000

3 111

F Dippenaar

927

119

2 000

3 046

T S A Grobicki

1 770

121

2 000

3 891

Z B Swanepoel

1 640

196

3 000

4 836

M Gule

D V Simelane

Total executive

5 338

546

9 000

14 884

Non-executive

P T Motsepe

Dr M M M M Bakane-Tuoane

V N Fakude

M W King

D S Lushaba

Dr R V Simelane

C M L Savage

M F Pleming

100

Lord Renwick of Clifton KCMG

100

Dr S P Sibisi

M V Sisulu

Total non-executive

350

Total directors' remuneration

350

5 338

546

9 000

15 234

The directors' remuneration will not change after the Transaction.

10.11.3 Directors' service contracts

Harmony's executive directors have standard service contracts, details of which are reflected in paragraph 11. None of the non-executive directors have service contracts.

10.11.4 Directors' interests in Harmony shares

On the last practicable date, Harmony held 77 540 880 Avgold shares representing 11,4% of Avgold's issued share capital.

On the last practicable date, the directors held the following interests in Harmony shares:

Percentage of

Director

Direct

Indirect

Harmony shares

Non-executive

P T Motsepe

35 002 396

13,5

Dr M M M M Bakane-Tuoane

V N Fakude

M King

33 333

D S Lushaba

M F Pleming

Lord Renwick of Clifton KCMG

5 105

C M L Savage

Dr S P Sibisi

Dr R V Simelane

M V Sisulu

Executive

Z B Swanepoel

F Abbott

F Dippenaar

T Grobicki

10 000

30 000

W M Gule

D V Simelane

* Indicates beneficial ownership of less than 1%.

On the last practicable date, the directors held the following interests in Harmony options:

Percentage

of total

Number of

options

Expiry

Director

options

in issue

Issue date

Issue price

date

(Rand)

F Abbott

73 400

0,35

20/11/2001

49,60

20/11/2011

F Dippenaar

36 700

0,18

20/11/2001

49,60

20/11/2011

T S A Grobicki

20 000

0,50

21/09/1999

22,90

21/09/2010

87 400

20/01/2001

49,60

20/11/2011

Z B Swanepoel

128 800

0,60

20/11/2001

49,60

20/11/2011

P T Motsepe

Dr M M M M Bakane-Tuoane

M F Pleming

Lord Renwick of Clifton KCMG

V N Fakude

D S Lushaba

M W King

C M L Savage

W M Gule

Dr S P Sibisi

D V Simelane

Dr R V Simelane

M V Sisulu

10.12 Directors' interests in the acquisition

On the last practicable date none of the directors of Harmony held any shares in Avgold.

Save as disclosed above, none of the directors have any material beneficial interests, whether direct or indirect, in the acquisition or in any other transactions entered into by Harmony during the current or immediately preceding financial year or during any previous financial year which remain outstanding or unperformed.

11. CORPORATE GOVERNANCE

Introduction

The King II Report ("King II") became operative in March 2002 and goes beyond financial and regulatory aspects of Corporate Governance in that it advocates an integrated approach by including principles of sound social, ethical and environmental practice. This includes a shift in focus from the "single bottom line", i.e. financial, towards the "triple bottom line" approach, namely economic, social and environmental reporting. Furthermore, King II places major emphasis on enterprise risk management as the cornerstone of internal controls and, in directing its focus thereon, states that risk goes to the very essence of an organisation's ability to meet its objectives and sustain its existence.

The Harmony board of directors ("the board") are aware of all the onerous duties, responsibilities and personal liabilities which are imposed on them as directors under both common and statutory law, not only in South Africa, but also in the US, Australia and the UK, due to its operations in these countries and its listings in South Africa, London, Paris, Brussels, Berlin and New York. In addition to King II, the Sarbanes Oxley Act of 2002 ("SOx"), applicable to non-US companies which trade securities in the US, imposse additional prohibitions and responsibilities on all directors within Harmony.

To ensure compliance with the numerous legal requirements and to show Harmony's commitment to Corporate Governance, the company has adopted formal charters for the board and each of its committees to give clear guidance to all board members and employees on how governance should be put into practice. These charters were compiled in a way which enables Harmony to achieve a balance between performance and conformance of Corporate Governance principles. Harmony aims to adhere to the provisions and recommendations of King II and therefore these charters will be reviewed, updated and maintained on an on-going basis.

In addition to acting in good faith and with due diligence and care, the board supervises and monitors management to ensure that good Corporate Governance is part of doing business the Harmony Way.

Board structure

Harmony has a unitary board structure, comprising 17 directors, with a balance between executive and non-executive directors. Harmony has 11 non-executive directors, of whom 10 are independent. Harmony has six executive directors and no shadow directors. The non-executive and independent directors are of sufficient calibre and number for their views to carry significant weight in the board's decisions. In considering new appointments to the board, Harmony has cognisance of the gender and racial mix and believes that the company has achieved an acceptable balance of members on the board.

Chairman and Chief Executive

The roles of chairman and chief executive are not vested in the same person and their performances are subject to review by the Remuneration Committee at least once a year.

Board Charter

The board's fiduciary duties are incorporated in Harmony's Board Charter, which sets out the purpose and role of the board, its responsibilities, its authority, composition, meetings and self-assessment. The Board Charter stipulates that Harmony directors have to exercise leadership, enterprise, integrity and judgement based on fairness, accountability, responsibility and transparency.

The responsibility to ensure that Harmony complies with all the relevant laws, regulations and codes of best business practice vests in the board. For this purpose the board has direct access to the advice and services of the company secretary and they are also entitled to seek independent professional legal advice about Harmony's affairs at the company's expense.

The board is also responsible for identifying the principal risks and key performance indicators of Harmony's businesses and ensuring the implementation and regular evaluation of systems to manage those risks through the Audit Committee. Strategies are developed in such a way that the purpose is achieved, the company's values implemented and shareholders and other stakeholders are satisfied. The board also accepts responsibility for monitoring and supervising executive management and the induction of new or inexperienced directors. Harmony's non-executive directors also have access to management should they wish to discuss any matter separate from the executive directors. Harmony is dedicated to ensuring that the directors are familiar with Harmony's operations, its business environment and their fiduciary duties and responsibilities.

Internal control

The board is ultimately responsible for ensuring that Harmony remains a going concern and that it thrives. The board retains full and effective control over Harmony by monitoring and supervising its executive management, being involved in all material decisions affecting Harmony and ensuring that adequate systems of financial and operational internal controls are monitored. The procedures and systems which act as checks and balances on the information are reviewed by the board from time to time. An adequate budgeting and planning process exists and performance is monitored against these budgets and plans.

Self-assessment

The board conducts a self-assessment or self-evaluation annually. The chairman assesses the performance of the individual board members and the members evaluate the chairman, based on several factors, which include expertise, inquiring attitude, objectivity and independence, judgement, understanding of Harmony's business, understanding and commitment to the board's duties and responsibilities, willingness to devote the time needed to prepare for and participate in committee deliberations, timely responses and attendance at meetings.

In keeping with good Corporate Governance, the board has agreed that a Nomination Committee should assist in the evaluation of the board members.

Meetings

The board meets at least four times a year. The number of meetings held during a period is sufficient to ensure that the board meets its objectives and all members are required to attend all meetings. Dates of meeting are planned annually in advance.

Directors' terms of employment

Executive directors

Harmony's executive directors have standard employee service agreements and none may give notice of less than one month. Their employment letters also do not make provision for pre-determining compensation on termination of an amount which equals or exceeds one year's salary and benefits in kind. The executive directors have waived their rights to directors' fees. Executive directors participate in the company's share scheme and a discretionary Executive Profit Share Scheme, provided that in respect of the latter, certain profit targets (set by the Remuneration Committee) are achieved. The executive directors also benefit from pension contributions, life insurance and medical aid.

Non-executive directors

None of the non-executive directors have service contracts with Harmony. The non-executive directors are entitled to fees as agreed at Harmony's annual general meeting, reimbursement of out-of-pocket expenses incurred on the company's behalf, and remuneration for other services, such as serving on committees. Currently, each non-executive director is entitled to R20 000 per quarter, plus R5 000 per quarter for each committee on which he or she serves.

Rotation

The articles of association of Harmony provide that the longest serving one-third of directors retire from office at each annual general meeting. Retiring directors making themselves available for re-election are re-elected at the annual general meeting at which they retire.

Board committees

To enable the board to properly discharge its onerous responsibilities and duties, certain responsibilities have been delegated to board committees. The creation of committees does not, however, reduce the board's overall responsibility and therefore all committees must report and make recommendations to the board. All the board committees are chaired by an independent non-executive director.

The various board committees are as follows:

Audit Committee

Harmony's Audit Committee provides additional assurance to the board regarding the quality and reliability of financial information used by the board and the financial statement issued by the company. The committee assists the board in the discharge of its responsibilities with regard to safeguarding our assets, maintenance of accounting records and maintenance of an effective system of control. An Audit Committee Charter has been established which sets out the role, responsibilities, duties, authority, membership and meetings of the Audit Committee. All non-audit services provided by our external auditors must be, and are, pre-approved by the Audit Committee.

The Audit Committee meets periodically with Harmony's external and independent internal auditors and executive management to review accounting, auditing and financial reporting matters so as to ensure that an effective control environment is maintained. The committee also monitors proposed changes in accounting policy, reviews the internal audit function and discusses the accounting implications of major transactions. In terms of SOx the Audit Committee is directly responsible for the appointment, compensation and oversight of any auditor employed by the company.

All members of the committee are knowledgeable about company affairs and have a working familiarity with finance and accounting practices. Certain members of management also attend the Audit Committee meetings to answer any questions posed by members. The Audit Committee always has at least one financial expert present during meetings.

The members of the committee are:

M W King (Chairman)
D S Lushaba
C M L Savage
M F Pleming
Dr R V Simelane

Nomination Committee

In terms of the requirements of King II, a Nomination Committee was formed to ensure that the procedures for appointments to the board are formal and transparent, by making recommendations to the board on all new appointments. The Nomination Committee Charter which sets out the role and responsibilities of the Nomination Committee, has been adopted and implemented.

The members of the Nomination Committee are:

P T Motsepe (Chairman)
Dr R V Simelane
Lord Renwick of Clifton KCMG
M V Sisulu
V N Fakude.

Remuneration Committee

The Remuneration Committee meets at least once a year and comprises three independent non-executive directors. The primary purposes of the Remuneration Committee are to ensure that the group's directors and senior executives are fairly rewarded for their individual contributions to Harmony's overall performance, to demonstrate to all stakeholders that the remuneration of senior executive members are set by a committee of board members who have no personal interest in the outcomes of their decisions, and who will give due regard to the interests of the shareholders as well as the financial and commercial health of Harmony. The Remuneration Committee's primary objectives are to serve as a party to monitor and strengthen the objectivity and credibility of Harmony directors' and senior executives' remuneration system and to make recommendations to the board on remuneration packages and policies applicable to directors.

The committee meets whenever it is necessary to make recommendations relating to the remuneration of senior executives and executive directors. A Remuneration Committee Charter has been adopted which sets out the objectives, role, responsibilities, authority, membership and meeting requirements of the committee.

The members of the committee are:

P T Motsepe (Chairman)
M F Pleming
C M L Savage
Dr R V Simelane
Dr M M M M Bakane-Tuoane

Health, Safety and the Environmental Audit Committee

The Health, Safety and Environmental Audit Committee ("HSE") monitors health, safety and environmental performance and makes recommendations to the board where it deems particular attention is required. The committee operates in accordance with specific terms of reference confirmed by the board. The committee meets periodically.

The members of the committee are:

M F Pleming (Chairman)
V N Fakude
Dr S P Sibisi
Dr M M M M Bakane-Tuoane

Investment Committee

The Investment Committee was formed in January 2004 and will focus on major capital projects and acquisitions or mergers. The board is in the process of approving an Investment Committee Charter.

The members of the committee are:

Dr S P Sibisi (Chairman)
M F Pleming
C M L Savage
Dr M M M M Bakane-Tuoane
D S Lushaba
M W King

Empowerment Committee

The Empowerment Committee was formed in January 2004 and will focus on ensuring that the company meets its empowerment targets. The board is in the process of approving an Empowerment Committee Charter.

The members of the committee are:

V N Fakue (Chairwoman)

M V Sisulu

M F Pleming

P T Motsepe (Ex Officio)

Company secretary

Harmony's company secretary, M P van der Walt, plays a pivotal role in the achievement of good Corporate Governance and the board has empowered her accordingly. The company secretary supports the chairman in ensuring the effective functioning of the board, provides guidance to the chairman and the board and the directors of Harmony's subsidiaries on their responsibilities and duties within the prevailing regulatory and statutory environment, provides the board with guidance as to how they can, in the best interest of the company, discharge these responsibilities and duties, and is expected to and does raise matters that may warrant the attention of the board.

12. SIGNIFICANT CONTRACTS

Save as set out in paragraph 10.5, the company has not entered into any contract, other than in the ordinary course of business, within the period of two years immediately preceding the date of this circular which is or may be material to the company nor has it entered into any other contract, other than in the ordinary course of business, and the company has not entered into any contract which contains provisions, in terms of which there are any obligations or entitlements, which are material to the company.

13. WORKING CAPITAL

The directors are of the opinion that the working capital available to the Harmony group, including Avgold, is sufficient for its present requirements, that is for the next 12 months from date of issue of this circular.

14. EXPENSES

The costs of the scheme, including fees payable to professional advisers, the JSE, the SRP and printing and advertising costs will be borne and paid by Avgold. The cost of this circular, printing and posting will be borne and paid by Harmony and is estimated to be in the region of R1 450 000. Other costs to be paid by Harmony in connection with the Transaction include: R350 000 to the Reporting Accountants (PricewaterhouseCoopers Inc.); R1 970 000 to the Attorneys (Cliffe Dekker Inc.) and a success-based completion fee, still to be agreed, to the Financial Advisers (JP Morgan Chase Bank, Johannesburg Branch).

15. CONSENTS

PricewaterhouseCoopers Inc. and SRK have given, and have not withdrawn, their consents to the inclusion of their names and reports in this circular in the form and context in which they appear.

16. OPINION OF THE DIRECTORS OF HARMONY

The directors are of the opinion that the terms and conditions of the acquisition are fair and reasonable to shareholders.

17. DIRECTORS' RESPONSIBILITY STATEMENT

The directors, whose names appear on page 5 of this circular, collectively and individually, accept full responsibility for the accuracy of the information given in this circular and certify that, to the best of their knowledge and belief there are no facts that have been omitted which would make any statement in this circular false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this circular contains all information required by the JSE Listings Requirements.

18. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) from 15 April 2004 (the date of issue of this circular) up to and including 7 May 2004, at the registered office of Harmony and the company's United Kingdom Secretaries:

- a signed copy of this circular;

- the memorandum and the articles of association of Avgold;

the written consents of advisers to Harmony to the publication of their names in this circular in the form and context in which they appear;

- a copy of the Avgold share exchange agreement;

- a copy of the ARM voting agreement;

- a summary of the terms and conditions of the convertible bonds;

- the audited annual reports of Harmony for the three financial years ended 31 December 2003; and

- the report of PricewaterhouseCoopers Inc. on the pro forma financial information of Harmony.

By order of the board

Marian van der Walt
Secretary

Virginia
15 April 2004

Annexure 1

Summary of the terms and conditions of convertible bonds

ZAR1,700 million Harmony Gold Mining Company Limited

Convertible Bonds due 2009

Issuer:

Harmony Gold Mining Company Limited.

Underlying shares:

New ordinary shares of Harmony.

Issue size:

Up to ZAR1,700,000,000.

Over allotment option:

None.

Status:

Direct, unconditional, unsubordinated and unsecured obligations of the Issuer.

Maturity date:

21 May 2009.

Issue price:

100%.

Coupon:

4.875% payable semi-annually in arrear on 21 November and 21 May of each year, commencing 21 November 2004.

Yield to maturity:

4.875% at the closing date, which is expected to be 21 May 2004 (the "Closing Date").

Redemption price:

100%.

Conversion price:

ZAR121.00.

Conversion ratio:

8,264.4628.

Conversion period:

From the 41st day after the Closing Date until the 7th day prior to the Maturity Date.

Early redemption:

Callable on or after 5 June 2007 at par plus accrued interest, subject to the daily VWAP of Harmony shares exceeding 130% of the Conversion Price for a period of 20 out of 30 consecutive trading days.

Callable at any time if less than 15% of the Bonds remain outstanding.

Tax call:

Gross-up and tax call at higher of (a) par plus accrued or (b) parity plus make-whole, unless investors opt for Bonds to remain outstanding and receive coupons net of withholding tax. Make-whole will be based on a formula aiming to approximate lost premium to parity.

Anti-dilution protection:

Standard Euromarket anti-dilution provisions dealing with, inter alia, share consolidations, share splits, capital distributions, rights issues and bonus issues.

Extraordinary dividend protection:

Dividend in any given year exceeds higher of (a) 110% of previous year's dividend and (b) 4% of the average share price over the 180-day period preceding the payment. Adjustment to the Conversion Price by the amount of the excess.

Change of control protection:

Investors will be entitled to convert the Bonds for a period of 60 days at a price that may be adjusted downward in accordance with a ratcheting mechanism.

Negative Pledge:

Yes, in line with Euromarket standard (covering Issuer and Material Subsidiaries).

Events of default:

Yes, in line with outstanding ZAR1,200,000,000 13% Bonds 2001 - 2006 (covering Issuer and Material Subsidiaries and including higher cross-default threshold of ZAR[100,000,000]).

Lock-up:

For 90 days following the Closing Date subject to carve-outs including the announced transaction with Avgold Limited.

Form:

Registered.

The Convertible Bonds are not for distribution into or in the United States, Canada, Australia, Italy or Japan or to U.S., Canadian, Australian, Italian or Japanese persons.

Annexure 2

Pro forma balance sheet and income statement of Harmony

Pro forma financial information

The unaudited pro forma balance sheet of Harmony at 31 December 2003 and income statement for the six months then ended, are set out below and have been prepared to illustrate the effect of the Transaction. The unaudited pro forma balance sheet and income statement have been prepared for illustrative purposes only and, because of their nature, may not give a fair view of Harmony's financial position or the effect on earnings going forward.

Excluding offer to minorities

Harmony

Pro forma

Before the

After the

Income statements

Transaction

Avgold

Avmin

Transaction

R' million

Note 1

Note 2

Note 3

Note 4

Revenue

4 454

447

4 901

Cash operating costs

(3 966)

(268)

(4 234)

Cash operating profit

488

179

667

Other income - net

114

Employment termination and
restructuring costs

(32)

Corporate, marketing and
new business expenditure

(74)

Exploration expenditure

(49)

Profit on sale of listed investments

522

(2)

525

Interest paid

(162)

(4)

(166)

Cash profit

747

180

(2)

985

Depreciation and amortisation

(388)

(127)

(69)

(584)

Provision for rehabilitation costs

(28)

Mark-to-market of financial instruments

(161)

(183)

(298)

Income from associates

(41)

(26)

Income before tax

129

(130)

(25)

Taxation expense

(6)

(4)

(7)

(17)

Net income before minority interests

123

(134)

(32)

Minority interests

(6)

Net income

117

(72)

(32)

Weighted average issued shares

231 707 291

262 023 354

Basic earnings per share (cents)

Basic headline earnings per share (cents)

(129)

Notes:

(1) Extracted from the quarterly published unaudited financial results of Harmony for the six months ended 31 December 2003.

(2) Extracted from the quarterly published unaudited financial results of Avgold for the six months ended 31 December 2003.

(3)

Amortisation on fair value adjustments and consolidation adjustments relating to the acquisition of Avgold. For purposes of determining the purchaseconsideration the Harmony share price at close of business on 19 March 2003 was used, being R101,60.

(4)

Adjustments relating to the acquisition by Avmin of ARMI's 41,5% effective interest in the Modikwa Joint Venture, the disposal of Kalplats to Avmin andthe resulting dilution in the equity accounted loss from Avmin.

(5) The pro forma income statement has been prepared on the assumption that the Transaction was effective on 1 July 2003.

Harmony

Pro forma

Before the

After the

Balance sheets

Transaction

Avgold

Avmin

Transaction

R' million

Note 1

Note 2

Note 3

Note 4

ASSETS

Non-current assets

21 376

2 480

2 843

26 759

Tangible assets

14 911

2 455

1 310

(40)

18 636

Intangible assets

2 803

1 532

4 335

Investments

3 662

100

3 787

Current assets

1 964

(1)

1 963

Net current liabilities - excluding cash

(924)

(2)

(926)

Cash and cash equivalents

2 888

2 889

Total assets

23 340

2 479

2 843

28 722

EQUITY AND LIABILITIES

Ordinary shareholders' interest

16 251

2 154

1 604

20 069

Outside shareholders' interest

155

999

1 154

Total shareholders' interest

16 406

2 154

2 603

21 223

Long-term borrowings

2 863

Deferred taxation

2 779

232

3 011

Deferred financial liabilities

432

286

726

Long-term provisions

860

899

Total equity and liabilities

23 340

2 479

2 843

28 722

Shares in issue

258 350 934

288 666 997

Net asset value per share (cents)

6 350

7 352

Net tangible asset value per share (cents)

5 265

5 850

Notes:

(1) Extracted from the quarterly published unaudited financial results of Harmony for the six months ended 31 December 2003.

(2) Extracted from the quarterly published unaudited financial results of Avgold for the six months ended 31 December 2003.

(3)

Fair value and consolidation adjustments relating to the acquisition of Avgold. For purposes of determining the purchase consideration the Harmony share price at close of business on 19 March 2003 was used, being R101,60 per share.

(4) Adjustments relating to the acquisition by Avmin of ARMI's 41,5% effective interest in the Modikwa Joint Venture and the
disposal of Kalplats to Avmin.

(5) The pro forma balance sheet has been prepared on the assumption that the Transaction was effective on 31 December 2003.

Including offer to minorities

Harmony

Pro forma

Before the

After the

Income statements

Transaction

Avgold

Avmin

Transaction

R' million

Note 1

Note 2

Note 3

Note 4

Revenue

4 454

447

4 901

Cash operating costs

(3 966)

(268)

(4 234)

Cash operating profit

488

179

667

Other income - net

114

Employment termination and
restructuring costs

(32)

Corporate, marketing and
new business expenditure

(74)

Exploration expenditure

(49)

Profit on sale of listed investments

522

(5)

522

Interest paid

(162)

(4)

(166)

Cash profit

747

180

(5)

982

Depreciation and amortisation

(388)

(127)

(129)

(644)

Provision for rehabilitation costs

(28)

Mark-to-market of financial instruments

(161)

(183)

(258)

Income from associates

(41)

(26)

Income before tax

129

(130)

(48)

Taxation expense

(6)

(4)

(12)

(22)

Net income before minority interests

123

(134)

(60)

Minority interests

(6)

Net income

117

(134)

(60)

(2)

Weighted average issued shares

231 707 291

293 715 856

Basic earnings per share (cents)

(1)

Basic headline earnings per share (cents)

(129)

(131)

Notes:

(1) Extracted from the quarterly published unaudited financial results of Harmony for the six months ended 31 December 2003.

(2) Extracted from the quarterly published unaudited financial results of Avgold for the six months ended 31 December 2003.

(3)

(4)

Adjustments relating to the acquisition by Avmin of ARMI's 41,5% effective interest in the Modikwa Joint Venture, the disposal of Kalplats to Avmin and the resulting dilution in the equity accounted loss from Avmin.

(5) The pro forma income statement has been prepared on the assumption that the Transaction was effective on 1 July 2003.

(6)

For purposes of illustrating the pro forma effects, After the Transaction, including the offer to minorities, it has been assumed that all minorities accept the offer.

Harmony

Pro forma

Before the

After the

Balance sheets

Transaction

Avgold

Avmin

Transaction

R' million

Note 1

Note 2

Note 3

Note 4

ASSETS

Non-current assets

21 376

2 480

5 289

29 205

Tangible assets

14 911

2 455

2 451

(40)

19 777

Intangible assets

2 803

2 838

5 641

Investments

3 662

100

3 787

Current assets

1 964

(1)

1 963

Net current liabilities - excluding cash

(924)

(2)

(926)

Cash and cash equivalents

2 888

2 889

Total assets

23 340

2 479

5 289

31 168

EQUITY AND LIABILITIES

Ordinary shareholders' interest

16 251

2 154

4 851

23 316

Outside shareholders' interest

155

Total shareholders' interest

16 406

2 154

4 851

23 471

Long-term borrowings

2 863

Deferred taxation

2 779

419

3 198

Deferred financial liabilities

432

286

737

Long-term provisions

860

899

Total equity and liabilities

23 340

2 479

5 289

31 168

Shares in issue

258 350 934

320 359 499

Net asset value per share (cents)

6 350

7 326

Net tangible asset value per share (cents)

5 265

5 566

Notes:

(1) Extracted from the quarterly published unaudited financial results of Harmony for the six months ended 31 December 2003.

(2) Extracted from the quarterly published unaudited financial results of Avgold for the six months ended 31 December 2003.

(3)

(4) Adjustments relating to the acquisition by Avmin of ARMI's 41,5% effective interest in the Modikwa Joint Venture and the
disposal of Kalplats to Avmin.

(5) The pro forma balance sheet has been prepared on the assumption that the Transaction was effective on 31 December 2003.

(6)

For purposes of illustrating the pro forma effects, After the Transaction, including the offer to minorities, it has been assumed that all minorities accept the offer.

Annexure 3

Independent reporting accountants' report on the pro forma financial information of Harmony

"The Directors
Harmony Gold Mining Company Limited
PO Box 2
Randfontein
1760

7 April 2004

Dear Sirs

INDEPENDENT REPORTING ACCOUNTANTS' REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF HARMONY GOLD MINING COMPANY LIMITED ("Harmony")

Introduction

Harmony has reached agreement for the following transactions:

- the acquisition of 42,1% of the issued share capital of Avgold Limited ("Avgold") from Anglovaal Mining Limited ("Avmin"); and

- the disposal of its Kalplats platinum discovery project and associated mineral rights (collectively, "the Transactions").

In addition, Harmony is making an offer for the balance of Avgold's issued share capital, to be implemented by way of a scheme of arrangement in terms of section 311 of the Companies Act, 1973 (Act 61 of 1973), as amended, proposed by Harmony between Avgold and its shareholders, other than Harmony ("the Avgold Offer").

We report on the unaudited pro forma balance sheets, income statements and financial effects of Harmony after the Transactions and Avgold Offer ("the pro forma financial information"), included in paragraph 6.1 and as Annexure 2 to the circular to shareholders to be dated on or about 15 April 2004 (the "Circular").

The unaudited pro forma financial information has been prepared for illustrative purposes only and to provide information as to how the Transactions and the Avgold Offer will impact on the financial position and results of Harmony. Because of its nature, the unaudited pro forma financial information may not give a fair reflection of Harmony's financial position nor the effect on future earnings.

At your request, and for purposes of the Transactions and the Avgold Offer, we present our report on the pro forma financial information of Harmony in compliance with the Listings Requirements of the JSE Securities Exchange South Africa ("JSE").

Responsibilities

The directors of Harmony are solely responsible for the preparation of the pro forma financial information to which this independent reporting accountants' report relates, and for the financial statements and financial information from which it has been prepared.

It is our responsibility to form an opinion on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information, beyond that owed to those to whom those reports were addressed at their dates of issue.

Basis of opinion

Our work, which did not involve any independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information to the unaudited published quarterly financial results of Harmony for the six months ended 31 December 2003, considering the evidence supporting the adjustments to the unaudited pro forma financial information, recalculating the amounts based on the information obtained and discussing the pro forma financial information with the directors of Harmony.

Because the above procedures do not constitute an audit or a review in accordance with Statements of South African Auditing Standards, we do not express any assurance on the fair presentation of the unaudited pro forma financial information.

Had we performed additional procedures or had we performed an audit or review of the financial statements in accordance with Statements of South African Auditing Standards, other matters might have come to our attention that would have been reported to you.

Opinion

In our opinion:

- the unaudited pro forma financial information has been properly compiled on the basis stated;

- such basis is consistent with the accounting policies of Harmony; and

- the adjustments are appropriate for the purposes of the unaudited pro forma financial information in terms of Section 8.29 of the JSE

Listings Requirements.

Yours faithfully

PricewaterhouseCoopers Inc.
Chartered Accountants (SA)
Registered Accountants and Auditors

Sunninghill"

Annexure 4

Interim financial results of Harmony

TOTAL OPERATIONS FINANCIAL RESULTS

(Rand/Metric) - unaudited

Quarter ended

Six

31 December

30 September

months

2003

ended

(including

(excluding

31 December

ARMgold)

2002

2003

Ore milled

t'000

8 183

6 854

13 941

15 037

Gold produced

29 294

22 725

48 852

52 019

Gold price received

R/kg

85 139

86 258

103 362

85 623

Cash operating costs

R/kg

75 888

76 693

68 302

76 241

R'm

Gold sales

2 494

1 960

5 049

4 484

Cash operating costs

2 223

1 743

3 337

3 966

Cash operating profit

271

217

1 713

488

Income from associates

(34)

(7)

(41)

Amortisation

(246)

(142)

(271)

(388)

Profit on sale of Highland & High River

522

522

Profit on sale of Aurion Gold shares

469

Mark-to-market of financial instruments

(172)

(161)

Rehabilitation cost provision

(18)

(10)

(21)

(28)

Employment termination costs

(20)

(12)

(27)

(32)

Other income net

101

135

Minority interest

(6)

(6)

Interest paid

(107)

(55)

(119)

(162)

Corporate, marketing and new business expenditure

(43)

(31)

(58)

(74)

Exploration expenditure

(35)

(14)

(57)

(48)

Foreign exchange losses

(50)

(31)

(81)

Mark-to-market of listed investments

(506)

Profit before taxation

310

(187)

1 301

123

South African normal taxation - Current tax

(84)

(18)

(245)

(102)

- Deferred tax

(173)

Net earnings

236

(119)

883

117

Earnings per share (cents)*
- Basic earnings

(62)

509

- Headline earnings

(66)

(67)

500

(129)

- Fully diluted earnings**

(62)

500

Dividends per share (cents)
- Proposed interim

125

Reconciliation of headline earnings
Net earnings

236

(119)

883

117

Adjustments:

Profit on sale of assets

(3)

(9)

(16)

(12)

Profit on sale of Highland & High River, net of tax

(444)

(444)

Amortisation on goodwill

Headline earnings

(170)

(128)

867

(298)

Prepared in accordance with International Financial Reporting Standards.

Calculated on weighted number of shares in issue at quarter-end December 2003: 257,9 million (September 2003: 192,3 million) (December 2002: 173,6 million).

Calculated on weighted average number of diluted shares in issue at quarter-end December 2003: 256,5 million (September 2003: 190,9 million) (December 2002: 176,5 million).

ABRIDGED BALANCE SHEETS

(Rand) - unaudited

31 December

30 September

31 December

2003

2002

R'm

EMPLOYMENT OF CAPITAL

Mining assets after amortisation

14 911

14 729

8 945

Intangible assets

2 803

2 843

Investments

1 098

1 260

1 409

Investments in associates

2 564

2 896

Short-term investments - Placer Dome

723

Net current liabilities, excluding cash

(924)

(1 300)

(431)

Cash

2 888

2 561

1 439

Total assets

23 340

22 989

12 085

CAPITAL EMPLOYED

Shareholders' equity

16 251

15 937

7 863

Loans

2 863

2 881

2 009

Long-term provisions

860

840

698

Minority interest

155

139

Unrealised hedging loss

432

450

736

Deferred tax

2 779

2 742

779

Total equity and liabilities

23 340

22 989

12 085

Basis of accounting

The unaudited results for the quarter have been prepared on the International Financial Reporting Standards ("IFRS") basis. These consolidated quarterly statements are prepared in accordance with IFRS 34, Interim Financial Reporting. The accounting policies are consistent with those applied in the previous financial year.

Issued share capital: 258,4 million ordinary shares of 50 cents each (September 2003: 257,9 million shares) (December 2002: 174,6 million).

CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - unaudited

31 December

2003

2002

R'm

Balance at beginning of financial year

8 628

7 963

Currency translation adjustment and other

(455)

Issue of share capital

7 798

213

Net earnings

117

883

Dividends paid

(292)

(741)

Balance at end of December

16 251

7 863

Prepared in accordance with IFRS.

ABRIDGED CASH FLOW STATEMENTS - unaudited

Six months

ended

31 December 2003

31 December 2002

R'000

Cash flow from operating activities

133

1 251

Cash utilised in investing activities

1 350

(618)

Cash utilised in financing activities

(282)

(635)

Increase/(Decrease) in cash and equivalents

1 201

(2)

Opening cash and equivalents

1 687

1 441

Closing cash and equivalents

2 888

1 439

Prepared in accordance with IFRS.

Hedging

Maturity schedule of the Harmony group's commodity contracts by type at 31 December 2003:

30 June 2005

30 June 2006

30 June 2007

30 June 2008

30 June 2009

Total

Forward sales agreements
Ounces

175 000

108 000

147 000

100 000

630 000

A$/ounce

513

510

515

518

514,27

Calls contracts sold Ounces

127 100

40 000

167 100

A$/ounce

513

552

522

302 100

148 000

147 000

100 000

797 100

These contracts are classified as speculative and the marked-to-market movement is reflected in the income statement.

During the quarter 62 900 ounces of the hedge books were closed out at a cost of R5 million (US$1 million). The market-to-market of the remaining contracts was a negative R380 million (US$57 million) at 31 December 2003. These values were based on a gold price of US$414 (A$552) per ounce, exchange rates of US$/R6.70 and A$/US$0.75 and prevailing market interest rates at the time. These valuations were provided by independent risk and treasury management experts.

Gold lease rates

Harmony holds certain gold lease rate swaps which were acquired through its acquisitions of New Hampton and Hill 50. These instruments are all treated as speculative. The mark-to-market of the above contracts was a negative R10 million (US$1.5 million) at 31 December 2003, based on valuations provided by independent treasury and risk management experts.

Interest rate swaps

The group has interest rate swap agreements to convert R600 million of its R1, 2 billion fixed rate bond to variable rate debt. The interest rate swap runs over the term of the bond, interest is received at a fixed rate of 13% and the company pays floating rate based on JIBAR plus a spread raging from 1,8% to 2,2%.

These transactions which mature in June 2006 are designated as fair value hedges. The marked-to-market value of the transactions was a negative R42 million (US$6 million) at 31 December 2003, based on the prevailing interest rates and volatilities at the time.

Dividend

A dividend No. 78 of 40 cents per ordinary share being the interim dividend for the six-month period ended 31 December 2003, has been declared payable on 8 March 2004 to those shareholders registered as such in the books of the company at the close of business on 5 March 2004.

Annexure 5

Historical financial information of Avgold

The salient financial information set out below has been extracted without adjustment from the audited annual financial statements of Avgold for the three financial years ended 30 June 2003:

FINANCIAL INFORMATION FOR THE YEARS ENDED 30 JUNE 2003, 2002 AND 2001

INCOME STATEMENTS

Notes

2003

2002

2001

R'000

Revenue

1 and 2

999 480

363 802

217 864

Costs and expenses

889 560

346 468

189 614

- operating

673 344

265 137

163 394

- amortisation and depreciation

186 900

57 389

19 737

- retrenchments

4 747

165

- general and administration

29 316

19 195

5 981

- exploration

337

Operating profit

109 920

17 334

28 250

Investment income

12 987

2 147

10 654

Finance cost

57 946

8 419

Foreign exchange gain

66 745

30 335

Unrealised non-hedge derivatives

(102 715)

Income before exceptional item

28 991

41 397

38 904

Exceptional items

7 085

Income before taxation

36 076

41 397

38 904

Taxation

9 207

5 000

Net earnings for year

26 869

36 397

38 904

Additional information:

Net earnings for year excluding unrealised non-hedge derivatives

129 584

36 397

38 904

Headline earnings

25 385

36 397

38 904

Headline earnings before unrealised non-hedge derivatives

128 100

36 397

38 904

Earnings per share (cents)

4,0

5,4

6,5

Headline earnings per share (cents)

3,8

5,4

6,5

Headline earnings per share before unrealised
non-hedged derivatives (cents)

19,0

5,4

6,5

Weighted number of shares in issue (million)

674,0

670,2

595,4

Reconciliation of earnings and headline earnings:

Earnings per income statement

26 869

36 397

38 904

Exceptional items:

- Profit on sale of ETC

(7 085)

- Recoupments tax on sale of ETC

5 601

Headline earnings

25 385

36 397

38 904

BALANCE SHEETS

Notes

2003

2002

2001

R'000

ASSETS

Non-current assets

2 569 795

2 931 207

2 551 085

Property, plant and equipment

2 543 841

2 883 336

2 506 592

Investments

25 954

47 871

44 493

Current assets

84 382

208 742

137 021

Inventories

46 407

44 761

33 247

Trade and other receivables

37 214

55 171

47 867

Deposits and cash

761

108 810

55 907

Total assets

2 654 177

3 139 949

2 688 106

EQUITY AND LIABILITIES

Capital and reserves

Share capital

6 765

6 729

6 658

Share premium

2 219 900

2 206 385

2 183 589

Retained income/(accumulated loss)

43 827

16 958

(19 439)

Total shareholders' equity

2 270 492

2 230 072

2 170 808

Non-current liabilities

144 639

630 105

378 594

Long-term loans

548 072

302 453

Non-hedge derivatives

102 715

Long-term provisions

41 924

82 033

76 141

Current liabilities

239 046

279 772

138 704

Trade and other payables

104 126

153 343

134 044

Overdrafts and short-term borrowings

134 920

126 429

4 660

Total equity and liabilities

2 654 177

3 139 949

2 688 106

CASH FLOW STATEMENTS

Notes

2003

2002

2001

R'000

Cash generated from/(utilised by) operations

Operating profit

109 920

17 334

28 250

Non-cash items and adjustments:

Provisions

(5 546)

7 788

8 078

Profit on sale of property, plant and equipment

(1 519)

(3 709)

Amortisation and depreciation

186 900

57 389

19 737

289 755

78 802

56 065

Net withdrawals from/(payments to) environmental trust fund

3 925

(4 151)

(3 161)

Retrenchment payments

(5 873)

(6 587)

Investment income

12 987

2 147

10 654

Finance charges

(57 946)

(8 419)

Taxation

(2 910)

248 722

62 506

54 061

Cash provided by/(reinvested in) working capital

Inventories

(18 351)

(11 514)

(4 179)

Trade and other receivables

13 578

(7 303)

6 476

Trade and other payables

(30 390)

10 155

(1 355)

Net cash generated from operating activities

213 558

53 844

55 003

Cash utilised in investment activities

Property, plant and equipment acquired

(124 364)

(345 645)

(599 051)

Investments acquired

(483)

(1 124)

853

Proceeds on disposal of property, plant and equipment

3 558

9 240

1 199

Proceeds on sale of ETC mine

251 817

130 528

(337 529)

(596 999)

Cash provided by financing activities

Net increase in shareholders' funding

13 551

22 868

498 200

(Decrease)/Increase in long-term loans

(376 189)

191 952

300 000

(Decrease)/Increase in overdrafts and short-term borrowings

(77 658)

121 768

(201 829)

(440 296)

336 588

596 371

(Decrease)/Increase in cash and cash equivalents

(96 210)

52 903

54 375

Cash and cash equivalents at beginning of year

108 810

55 907

1 532

Translation adjustment

(11 839)

Cash and cash equivalents at end of year

761

108 810

55 907

STATEMENTS OF CHANGES IN EQUITY

Ordinary

share capital

Retained

Total

and premium

income

2003

2002

2001

R'000

Changes in shareholders' equity

Balance at beginning of year

2 213 114

16 958

2 230 072

2 170 808

1 633 704

Shares allotted - rights issue

500 355

Share options exercised

13 584

13 584

22 867

6 507

Expenses written-off against share premium

(33)

(33)

(8 662)

Net earnings for year

26 869

26 869

36 397

38 904

Balance at end of year

2 226 665

43 827

2 270 492

2 230 072

2 170 808

Details of shares

2003

2002

2001

Share capital and premium

Authorised

1 000 000 000 ordinary shares of one cent each

10 000

10 000

(2002: 1 000 000 000 ordinary shares of one cent each)

(2001: 1 000 000 000 ordinary shares of one cent each)

Issued

676 453 556 ordinary shares of one cent each

6 765

6 729

6 658

(2002: 672 943 402 ordinary shares of one cent each)

(2001: 665 784 171 ordinary shares of one cent each)

Share premium

2 219 900

2 206 385

2 183 589

2 226 665

2 213 114

2 190 247

The unissued shares of 323 546 444 (2002: 327 056 598, 2001: 334 215 829), of which 33 822 678 (2002: 33 647 170, 2001: 33 289 209) shares are specifically reserved for purposes of the share incentive scheme, are under the control of the directors.

ACCOUNTING POLICIES

The annual financial statements are prepared in accordance with the historical cost convention except for financial instruments, which are accounted for at fair value, and in accordance with South African Statements of Generally Accepted Accounting Practice and the requirements of the Companies Act. The principal accounting policies, set out below, have been consistently applied, except those relating to financial instruments following the implementation of AC 133 - "Financial Instruments: Recognition and Measurement" from 1 July 2002.

Revenue recognition

Revenue comprises the Rand amount received and receivable in respect of the supply of metals mined. Revenue is recognised when the risks and rewards of ownership transfer.

Other revenues earned are recognised on the following bases:

- Interest income: as it accrues.

- Dividend income from industry-related investments: when received.

Borrowing costs

Borrowing costs that are directly attributable to the acquisition or construction of mining assets that require a substantial period of time to prepare for their intended use, are capitalised.

Borrowing costs are expensed from the time that mining production becomes commercially viable.

Deferred taxation

Deferred taxation is provided using the balance sheet liability method on all temporary differences between the carrying amounts for financial reporting purposes and the amounts used for taxation purposes, except for differences relating to the initial recognition of assets which affect neither accounting nor taxable profit.

The tax value of losses and unredeemed capital expenditure expected to be available for utilisation against future taxable income are set-off against the deferred tax liability. Deferred tax assets are recognised only when it is probable that the related tax benefit will be realised.

Deferred tax is calculated at the mining cost formula rate. The effect on deferred tax of any changes in tax rates is charged to the income statement.

Exploration and development

Exploration costs are expensed as incurred. When it has been established that a mineral property has development potential and following a positive detailed economic evaluation, further development, exploration and other expenditure prior to the commencement of commercial production is capitalised.

Ongoing development expenditure on existing mines is expensed as incurred. Major development and exploration expenditure incurred to expose the ore, increase production or extend the life of an existing mine is capitalised.

Financial instruments

Financial instruments recognised on the balance sheet include cash and cash equivalents, non-hedge forward exchange contracts, investments, trade receivables, trade creditors and borrowings. Initial recognition is at cost. Subsequent recognition is at fair value. The recognition methods adopted are disclosed in the individual policy statements associated with each item.

Non-hedge derivatives

Non-hedge forward exchange contracts are mark-to-market at financial reporting dates and changes in their fair values are included in the income statement. Gains or losses on contracts maturing between reporting dates are recognised in revenue.

Hedging

The company enters into hedging transactions on a portion of its planned gold production to ensure a degree of certainty on future gold sales prices and to provide a guaranteed minimum cash flow for known major capital expenditures and debt servicing.

Gains and losses on derivative instruments that effectively establish the prices for future production are recognised in revenue when the related production is delivered. In the event of early settlement of hedging contracts, gains and losses are taken to revenue at the date of settlement. Any potential loss on hedge positions below the current cost of production is recognised in the period in which it arises.

Property, plant and equipment

Mining assets are recorded at cost of acquisition less sales, recoupments and amounts written-off. Interest on borrowings, specifically to finance the establishment of mining assets, are capitalised until commercial levels of production are achieved.

Depreciation and amortisation is provided over the useful life of mine assets from the time that mining production becomes commercially viable, as follows:

Where orebodies are well-defined, assets are amortised using the units of production method based on the estimated proved and probable ore reserves.

- Where orebodies are not well-defined, the straight-line method is used based on the estimated life of each mine, limited to
25 years.

- Other assets are depreciated to estimated net realisable values using the straight-line method over their expected useful lives.

Land and mineral rights prior to production are not depreciated.

Impairment

The recoverability of the long-term assets is reviewed by management on a continuous basis, based on estimates of future net cash flows. These estimates are subject to risks and uncertainties including future metal prices and exchange rates. It is therefore possible that changes could occur which may affect the recoverability of the long-term assets. Where the estimated recoverability is less than net book value, the impairment is charged against income to reduce the carrying value of the asset.

Investments

- Unlisted investments are stated at cost less amounts written-off where there has been a permanent diminution in value.

Environmental trust fund investments are stated at cost. Annual payments are made to the environmental trust fund in accordance with statutory requirements.

Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand and deposits held with banks.

Foreign currencies

Foreign currency transactions are recorded at the exchange rate ruling at the transaction date. Assets and liabilities designated in foreign currencies are translated at exchange rates ruling at the balance sheet date. Both realised and unrealised gains and losses arising from exchange differences are recognised in operating results.

Inventories

Gold inventory is carried at the lower of weighted average cost and net realisable value and includes work-in-progress at the earliest stage of production when reliable estimates of quantities and costs are capable of being made, including the breaking of ore in the stopes.

By-products are carried at the lower of the estimated variable cost associated with their production and net realisable value.

Consumables and stores are carried at weighted average cost with due allowance for obsolete and slow-moving items.

Trade receivables

Trade receivables are carried at anticipated realisable value. An estimate is made for doubtful receivables based on a review of all outstanding amounts at year-end. Bad debts are written-off during the year in which they are identified.

Provisions

Provisions are recognised when the company has a present legal or constructive obligation as a result of past events where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made.

Employee post-retirement obligations

The company participates in defined contribution retirement plans for employees. The pension plans are funded by payments from the employees and by the company and charged to income as incurred. The assets of the different plans are held by independently managed trust funds. These funds are governed by the Pension Funds Act, 1956, as amended. Certain employees and retired employees are entitled to post- retirement medical benefits. The estimated cost of these benefits is charged to income based on actuarial valuations made every three years.

Environmental rehabilitation

The estimated cost of final rehabilitation, comprising liabilities for decommissioning and restoration, is based on current legal requirements, existing technology and costs and is re-assessed annually.

Decommissioning costs

The estimated cost of future decommissioning obligations at the end of the operating life of the mines is included in long-term provisions. These estimated costs are reviewed regularly and adjusted for legal, technological and environmental circumstances that affect the estimates of the decommissioning obligations.

Restoration costs

The estimated cost of restoration at the end of the operating life of the mines is included in long-term provisions. Cost estimates are not reduced by the potential proceeds from the sale of assets.

Expenditure on ongoing rehabilitation is charged to the income statement as incurred.

Comparative figures

Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.

NOTES TO THE ANNUAL FINANCIAL STATEMENTS

2003

2002

2001

R'000

REVENUE

Gold sales

998 217

362 709

217 647

By-products

1 263

1 093

217

999 480

363 802

217 864

GOLD HEDGING

The company entered into US dollar gold and Rand gold forward sales contracts as a result of the financing of the Target Mine. These contracts are not recognised on the balance sheet as financial assets and liabilities. The revenue is recognised when the related production is delivered. The company purchased Rand/US Dollar forward exchange contracts ("FEC's") to convert the Rand gold forward sales contracts into Dollar gold commodity hedges. The negative mark-to-market value of these non-hedge FEC's of R103 million are included in the income statement (refer note 7). At 30 June 2003 the total hedge book had a negative mark-to-market value of R192 million. This was calculated at a gold price of US$346,15/oz and an exchange rate of US$1.00: R7,51.

The hedge book at 30 June 2003, after the restructuring, was as follows:

2004

2005

2006

2007

Net dollar forward sales contracts:

Quantity sold

9 162

9 137

4 403

294 579

293 762

141 545

US$/oz

313

316

323

The company does not use derivative instruments for speculative purposes. All forward sales contacts are unmargined.

2003

2002

2001

R'000

OPERATING PROFIT IS STATED AFTER

Auditors' remuneration
- audit fees

820

899

809

Directors' emoluments
- executive directors

6 184

5 128

3 307

- non-executive directors

327

334

126

Operating lease expenditure
- buildings/equipment

1 856

160

187

Amortisation and depreciation

186 900

57 389

19 737

Profit on sale of property, plant and equipment

1 519

3 709

INVESTMENT INCOME

Interest received

11 996

1 973

1 104

Dividends received

966

207

Surplus on realisation in Rand Refinery Limited

5 029

Other

174

4 314

12 987

2 147

10 654

FINANCE COST

Interest paid

57 946

47 801

7 741

Capitalised to pre-mining assets

(39 382)

(7 741)

57 946

8 419

2003

2002

2001

R'000

FOREIGN EXCHANGE GAIN

Realised foreign exchange gain

66 745

Unrealised foreign exchange gain

30 335

66 745

30 335

Foreign exchange gains are recorded on the translation and repayment of the
US Dollar denominated loans raised to fund the completion of Target Mine.

UNREALISED NON-HEDGE DERIVATIVES

Forward exchange contracts
- Cost

- Fair value adjustment at year-end - unrealised

102 715

Forward exchange contracts entered into to convert Rand gold hedges are
fair valued in terms of AC 133, based upon the year-end Rand/US Dollar
exchange rate of US$1.00: R7,51.

EXCEPTIONAL ITEMS

The profit realised on the sale of ETC Mine is calculated as follows:

Assets

314 479

- property, plant and equipment

274 920

- investments

18 475

- inventories

16 705

- receivables

4 379

Liabilities

69 747

- long-term provisions

34 563

- trade and other payables

28 034

- overdrafts and short-term borrowings

7 150

Net assets at date of sale

244 732

Net cash received on sale

251 817

Net profit on sale

7 085

Gross cash received on sale

255 000

Less: Attributable expenses

3 183

Attributable expenses include legal and professional fees, bonuses to
employees and other administrative costs.

TAXATION

9.1

Non-mining tax

3 603

The South African normal tax rate of 30 per cent (2002: 30 per cent)
is applied on the non-mining taxable income which consists
primarily of interest received.

9.2

Mining tax

Income from gold mining is taxable at a rate determined by the following formula:

y = 37 - 185/x where y is the calculated percentage tax rate and x is the
ratio of taxable income from mining to total revenue from mining
expressed as a percentage. Taxable income is determined after the
deduction of mining capital expenditure.

Estimated mining recoupments tax attributable to the sale of
Hartebeestfontein Mine

5 000

Estimated mining recoupments tax attributable to the sale of ETC Mine

5 601

Estimated unredeemed capital expenditure carried forward for
deduction from future mining taxable income amounts to

3 578 100

3 280 200

2 449 000

To date of commencement of commercial production the only temporary difference arising on Target relates to the Section 36(11)(c) allowance on the unredeemed capital expenditure. This deductible temporary difference amounts to R1,3 billion. A deferred tax asset was not recognised due to the fact that the above temporary difference does not affect either accounting profit or taxable profit on initial recognition of the assets.

9.3

Secondary Taxation on Companies ("STC")

The company did not elect to be exempt from the payment of STC. Currently, the applicable rate for STC is 12,5 per cent of dividends paid.

9.4

Tax assessments

The company has not been assessed since 1996. All returns of income, including June 2001, have been submitted. The 2002 return has been finalised and will be submitted shortly.

The tax authorities have allocated specific resources to ensure that the outstanding assessments are brought up to date.

2003

2002

2001

R'000

10. EARNINGS PER SHARE

Earnings per share are calculated by dividing the net income attributable to
shareholders by the weighted number of ordinary shares in issue during year.

Net income attributable to shareholders

26 869

36 397

38 904

Weighted average number of ordinary shares in issue (millions)

674,0

670,2

595,4

Earnings per share (cents)

4,0

5,4

6,5

11. PROPERTY, PLANT AND EQUIPMENT

Pre-

Mine

Plant

mining

Furniture

develop-

and

Mineral

Mine

costs

and

ment machinery

rights properties capitalised equipment

2003

2002

2001

R'000

Cost

Opening balance

1 772 049

732 065

142 824

31 367

307 602

82 966

3 068 873

2 635 880

2 042 708

Additions

50 730

48 344

1 277

12 246

11 767

124 364

439 664

604 216

Disposals

481

403

1 828

2 712

6 671

11 044

Sold with ETC Mine

300 016

104 101

131

4 186

8 018

416 452

Reclassification

187 506

(30 040)

(706)

(421)

(150 980)

(5 359)

1 709 788

645 865

141 987

26 209

168 868

81 356

2 774 073

3 068 873

2 635 880

Amortisation and depreciation

Opening balance

126 891

43 388

5 316

1 904

7 985

185 537

129 288

119 395

Charge for year

109 342

57 510

1 549

9 719

8 731

186 900

57 389

19 737

Disposals

178

442

673

1 140

9 844

Sold with ETC Mine

99 557

35 503

200

6 222

141 532

Reclassification

10 070

2 668

(52)

(14)

(11 623)

(1 049)

146 568

68 010

6 209

9 445

230 232

185 537

129 288

Net book value at 30 June 2003

1 563 220

577 855

141 987

20 000

168 868

71 911

2 543 841

2 883 336

2 506 592

A register of land and buildings is available for inspection at the registered office.

R311 million (2002: R283 million, 2001: R2 159 million), capitalised in respect of properties which have not yet commenced production, are included in mineral rights and pre-mining costs capitalised.

2003

2002

2001

R'000

12. INVESTMENTS

Unlisted mining industry investments - cost

2 374

1 891

767

Environmental trust fund
The balance in the environmental trust fund is as follows:

Balance at beginning of year

45 980

43 726

38 668

Contributions

2 889

2 923

954

Interest earned

5 458

4 822

4 104

Payments made for work completed

(12 272)

(5 491)

Sold with ETC Mine

(18 475)

Balance at end of year

23 580

45 980

43 726

Total investments

25 954

47 871

44 493

12.1

Directors' valuation of unlisted mining industry investments

4 471

3 926

2 690

12.2

The environmental trust fund is recognised separately from
the related liability on the balance sheet.

13. INVENTORIES

At cost:
Gold in process

25 435

29 362

21 523

Consumable stores

20 972

15 399

11 724

46 407

44 761

33 247

14. LONG-TERM LOANS

Secured syndicated loan to fund Target completion
- Rand loans

250 242

150 000

Long-term loan

300 290

150 000

Short-term portion

(50 048)

- US dollar loan expressed in Rand

297 830

152 453

Long-term loan

357 396

152 453

Short-term portion

(59 566)

548 072

302 453

15. LONG-TERM PROVISIONS

Long-term provisions consist of the following:

15.1

Environmental rehabilitation obligation

Provision for decommissioning:
Gross liability at beginning of year

30 253

34 299

32 055

Revision in estimate

(4 312)

Sold with ETC Mine

(8 014)

Net provision for year

(5 499)

266

2 244

Gross liability at end of year

16 740

30 253

34 299

Provision for restoration:
Gross liability at beginning of year

46 162

36 224

27 897

Sold with ETC Mine

(24 304)

Additional obligation recognised

4 312

Payments made

(4 975)

(1 702)

Net provision for year

4 917

7 328

8 327

Gross liability at end of year

21 800

46 162

36 224

Total environmental rehabilitation obligation

38 540

76 415

70 523

2003

2002

2001

R'000

The provisions are based on management's best estimates of the cost of all known obligations. It is, however, reasonable to expect that changes will occur in rehabilitation costs as a result of changes in regulations or cost estimates. Cost estimates are not reduced by potential proceeds from the sale of assets or from future revenue from the clean up of gold plants in view of the uncertainty in estimating those proceeds. Environmental liabilities not directly relating to rehabilitation are expensed as incurred.

15.2

Post-retirement medical benefits

Balance at beginning of year

5 618

5 618

Sold with ETC Mine

(2 234)

Balance at end of year

3 384

5 618

The company has obligations to provide specific post-retirement medical benefits to certain of its employees and pensioners.

The liability is assessed periodically by an independent actuarial survey which uses assumptions consistent with those adopted in determining pension costs and, in addition, includes long-term estimates of the increases in medical costs at appropriate discount rates.

15.3

Retrenchment

Balance at beginning of year

7 183

Payments made during year

(6 422)

Re-allocation to short-term provisions

(761)

Balance at end of year

16. TRADE AND OTHER PAYABLES

Trade payables

53 934

87 990

95 797

Accruals

6 517

15 915

17 126

Taxation payable

14 207

5 000

Other payables

29 468

44 438

21 121

104 126

153 343

134 044

17. OVERDRAFTS AND SHORT-TERM BORROWINGS

Overdrafts

604

1 404

Short-term borrowings

134 316

15 411

4 660

Current portion of long-term borrowings:

Foreign

59 566

Local

50 048

134 920

126 429

4 660

18. PROPERTY, PLANT AND EQUIPMENT ACQUIRED

Opening balance

2 883 336

2 506 592

1 923 313

Non-cash flow movements:

Depreciation

(186 900)

(57 389)

(19 737)

Interest accrued

10 017

2 453

Foreign exchange losses capitalised

84 002

2 711

Property, plant and equipment sold

(2 039)

(5 531)

(1 199)

Assets sold with ETC Mine

(274 920)

Closing balance

(2 543 841)

(2 883 336)

(2 506 592)

Property, plant and equipment acquired

(124 364)

(345 645)

(599 051)

2003

2002

2001

R'000

19. (DECREASE)/INCREASE IN LONG-TERM LOANS

Opening balance

(548 072)

(302 453)

Non-cash flow movements:

Foreign exchange loss capitalised

(84 002)

Foreign exchange gain

59 891

30 335

Transferred to short-term loans

111 992

Closing balance

548 072

300 000

Increase in long-term loans

(376 189)

191 952

300 000

20. (DECREASE)/INCREASE IN OVERDRAFTS AND

SHORT-TERM BORROWINGS

Opening balance

(126 428)

(4 660)

(206 489)

Liabilities sold with ETC business

7 150

Transferred from long-term borrowings

(111 992)

Translation adjustments and foreign exchange gains

18 693

Closing balance

134 919

126 428

4 660

(Decrease)/Increase in overdrafts and short-term borrowings during year

(77 658)

121 768

(201 829)

21. COMMITMENTS AND CONTINGENT LIABILITIES

21.1

Capital expenditure authorised by the directors

Contracted for - Target

12 666

22 242

139 527

- Other

3 249

891

Not contracted for

- Target

30 940

171 791

- Other

16 520

20 065

43 606

42 011

332 274

Capital commitments will be funded from cash generated by operations.

21.2

Contingent liabilities

Arising from an agreement with LTA Process Engineering where under the company is liable for the erection costs of a tailings dam, should a dump reclamation project at ETC be cancelled

518

1 543

22. RETIREMENT FUNDS

The company participates in two retirement funds for its employees. These funds are defined contribution funds and are governed by the Pension Funds Act, 1956, as amended. Contributions paid for retirement benefits are charged to the income statement as they are incurred

13 985

4 793

3 167

23. RELATED PARTY TRANSACTIONS

Related party transactions occurred at arm's length.

The only significant related transaction is:
Anglovaal Mining Limited - provision of services

2 273

2 862

1 056

Annexure 6

Interim financial information of Avgold

UNAUDITED FINANCIAL RESULTS FOR THE QUARTER AND HALF-YEAR ENDED 31 DECEMBER 2003

INCOME STATEMENTS

Audited

Unaudited

Year

Quarter ended

Half-year ended

ended

December

December September

December

June

2003

2002*

2003

2002*

2003*

Revenue

202 717

241 635

244 190

446 907

502 363

999 480

- gold revenue

202 389

241 170

243 933

446 322

501 708

998 217

- by-products

328

465

257

585

655

1 263

Costs and expenses

193 839

225 230

201 300

395 139

452 784

889 560

- gold operating

132 486

176 053

127 360

259 846

348 663

673 344

- amortisation

58 768

42 918

68 343

127 111

92 030

186 900

- administration and general

2 585

6 259

5 597

8 182

12 091

29 316

Operating profit

8 878

16 405

42 890

51 768

49 579

109 920

Investment income

284

3 469

572

856

6 582

12 987

Finance cost

972

14 991

2 902

3 874

29 128

57 946

Foreign exchange gain

62 573

52 075

66 745

Unrealised non-hedge derivatives

(59 785)

(123 730)

(183 515)

(102 715)

Income/(Loss) before exceptional item

(51 595)

67 456

(83 170)

(134 765)

79 108

28 991

Exceptional items

4 661

4 661

7 085

Income/(Loss) before taxation

(51 595)

67 456

(78 509)

(130 104)

79 108

36 076

Taxation

3 750

3 750

9 207

Net earnings/(loss) for period

(51 595)

67 456

(82 259)

(133 854)

79 108

26 869

Additional information:

Net earnings for period excluding unrealised
non-hedge derivatives

8 190

67 456

41 471

49 661

79 108

129 584

Headline earnings/(loss)

(51 395)

67 456

(83 170)

(134 765)

79 108

25 385

Headline earnings before unrealised
non-hedge derivatives

8 190

67 456

40 560

48 750

79 108

128 100

Headline earnings/(loss) per share (cents)

(8)

(12)

(20)

Headline earnings per share before unrealised
non-hedge derivatives (cents)

Earnings/(Loss) per share (cents)

(8)

(12)

(20)

Weighted number of shares in issue (million)

679

674

677

678

674

Reconciliation of earnings and headline earnings:

Net earnings/(loss) per income statement

(51 595)

67 456

(82 259)

(133 854)

79 108

26 869

Exceptional item:

Profit on sale of ETC Mine

(4 661)

(4 661)

(7 085)

Recoupments tax:

On sale of ETC Mine

3 750

3 750

5 601

(51 595)

67 456

(83 170)

(134 765)

79 108

25 385

BALANCE SHEETS

Unaudited

Audited

31 December

30 June

2003

2003*

R'000

ASSETS

Non-current assets

2 480 241

2 569 795

Property, plant and equipment

2 454 841

2 543 841

Investments

25 400

25 954

Current assets

94 205

84 382

Inventories

46 280

46 407

Trade and other receivables

47 003

37 214

Deposits and cash

922

761

Total assets

2 574 446

2 654 177

EQUITY AND LIABILITIES

Capital and reserves

Share capital

6 801

6 765

Share premium

2 236 766

2 219 900

Retained income/(Accumulated loss)

(90 027)

43 827

Total shareholders' equity

2 153 540

2 270 492

Non-current liabilities

324 770

144 639

Non-hedge derivatives

286 230

102 715

Long-term provisions

38 540

41 924

Current liabilities

96 136

239 046

Trade and other payables

92 549

104 126

Short-term borrowings

3 587

134 920

Total equity and liabilities

2 574 446

2 654 177

* Comparative figures for December 2002 include ETC. The year ended 30 June 2003 figures include ETC to 15 June 2003.

CASH FLOW STATEMENTS

Audited

Unaudited

Year

Half-year ended

ended

December

June

2003

2002*

2003*

R'000

Cash generated from/(utilised by) operations
Operating profit

51 768

49 579

109 920

Non-cash items and adjustments
Amortisation and depreciation

127 111

92 030

186 900

Provisions

(2 908)

(808)

(5 546)

Profit on sale of property, plant and equipment

(1 519)

175 971

140 801

289 755

Net withdrawal from environmental trust fund

3 925

Investment income

938

6 582

12 987

Finance charges

(3 874)

(29 128)

(57 946)

173 035

118 255

248 721

Cash provided by/(reinvested in) working capital
Inventories

127

(10 740)

(18 351)

Trade and other payables

(15 327)

(34 457)

(30 390)

Trade and other receivables

(9 789)

1 043

13 578

Net cash generated from operating activities

148 046

74 101

213 558

Cash utilised in investment activities
Property, plant and equipment acquired

(50 050)

58 584

(124 364)

Investments acquired

(2)

(483)

Property, plant and equipment sold

16 598

1 777

3 558

Proceeds on sale of ETC Mine

251 817

(33 454)

(56 807)

130 528

Cash provided by financing activities
Net increase in shareholders' funding

16 902

7 910

13 551

Leased assets

(691)

(1 434)

Decrease in long-term loans

(376 189)

(Decrease)/Increase in overdrafts and short-term borrowings

(131 333)

3 776

(76 224)

(114 431)

10 995

(440 296)

Increase/(Decrease) in cash balances

161

28 289

(96 210)

Cash and cash equivalents at beginning of period

761

108 810

Translation adjustment

(3 712)

(11 839)

Cash and cash equivalents at end of period

922

133 387

761

STATEMENTS OF SHAREHOLDERS' EQUITY

Retained

Unaudited

Audited

Ordinary

income/

Half-year ended

Year ended

share capital (Accumulated

December

June

and premium

loss)

2003

2002

2003

R'000

Changes in shareholders' equity
Balance at beginning of period

2 226 665

43 827

2 270 492

2 230 072

Share options exercised

16 932

16 932

7 936

13 584

Derivative instruments

(30)

(30)

Expenses written-off against share premium

(26)

(33)

Transfer to equity reserves

(3 301)

Net earnings/(loss) for period

(133 854)

(133 854)

79 108

26 869

Balance at end of period

2 243 567

(90 027)

2 153 540

2 313 789

2 270 492

* Comparative figures for December 2002 include ETC. The year ended 30 June 2003 figures include ETC to 15 June 2003.

Hedging

At 31 December 2003, Avgold's hedge book represented 72 per cent of forecast gold production to June 2006 and had a mark-to market value of a negative R394 million. This was calculated at a gold price of US$414.82/oz and an exchange rate of US$1.00:ZAR6, 65. This mark-to-market valuation is inclusive of a negative R286 million pertaining to the Rand/US$ forward exchange contracts utilised to convert the Rand gold hedges into Dollar gold hedges. The fair value adjustment on these FEC's has been included in the income statement. The hedges are unmargined and Avgold is maintaining its policy of not using derivatives instruments for speculative purposes.

Earnings are significantly distorted as a result and do not present an accurate economic picture of the company's results during the reporting period.

Subsequent changes to exchange rates will result in adjustments to the income statement thereby creating further variability in earnings.

Borrowings

Net borrowings reduced significantly during the quarter to R3 million (R46 million) following continuing positive cash flows from Target.

Prospects

We remain confident about achieving our production objective of 350 000 oz for the year to 30 June 2004 and are committed to maintain the critical path and optimise the orebody extraction. We are fully focused on achieving cost efficiencies and will minimise our cash costs. Earnings will, however, continue to be affected by future fluctuations in the Rand/US$ exchange rate.

Dividend policy

The dividend policy will be reviewed pending the outcome of the Harmony offer referred to below.

Accounting policies

The accounting policies used are in accordance with South African Statements of Generally Accepted Accounting Practice and are consistent with those applied in the previous financial year.

Annexure 7

A COMPETENT PERSON'S REPORT CONTAINING INFORMATION ON THE MINING ASSETS OF HARMONY INCLUDING AVGOLD

AN INDEPENDENT COMPETENT PERSON'S REPORT ON CERTAIN MINING ASSETS OF

HARMONY GOLD MINING COMPANY LIMITED AND AVGOLD LIMITED

Prepared for:

HARMONY GOLD MINING COMPANY LIMITED

AND

AVGOLD LIMITED

Prepared by:

Steffen, Robertson and Kirsten

(South Africa) (Proprietary) Limited

SRK House, 265 Oxford Road

Illovo, Johannesburg

Gauteng Province

Republic of South Africa

Tel: +27-(0)11-441 1111

Fax: +27-(0)11-441 1101

Annexure 7

CONTENTS

Section

Description

Page

INTRODUCTION

1.1

Background

1.2

Requirement for the CPR

1.3

Structure of the CPR

1.4

Valuation Date and Base Technical Information

1.5

Verification, Validation and Reliance

1.5.1

Technical Reliance

1.5.2

Financial Reliance - the Companies

1.5.3

Financial Reliance - Deutsche Bank (South Africa)

1.5.4

Legal Reliance

1.6

Valuation Techniques

1.7

JSE Compliance

1.8

Warranties and Limitations

1.9

Disclaimers and Cautionary Statements for US Investors

1.10

Qualifications of Consultants

1.11

Valuation Summary

MINING ASSETS

2.1

Introduction

2.2

The Companies and Operating Structures

2.2.1

Avgold

2.2.2

Harmony

2.3

Overview of the Mining Assets

2.3.1

Target Operations

2.3.2

Free Gold Operations

2.3.3

Harmony Free State Operations

2.3.4

Welkom Operations

2.3.5

West Wits Operations

2.3.6

Evander Operations

2.3.7

Orkney Operations

2.3.8

Kalgold Operation

2.3.9

Harmony Australian Operations

2.3.10

Harmony Canadian Operations

2.4

Significant Exploration Properties

2.4.1

Avgold

2.4.2

Harmony

2.5

Mining Authorisations and Mining Leases

2.5.1

South African Law: Current Status

2.5.2

South African Law: The Minerals and Petroleum Resources Development Act

2.5.3

South African Law: Prospecting Permits

2.5.4

South African Law: Mining Authorisations

2.5.5

South African Law: The Royalty Bill

2.5.6

Australian Law

2.5.7

Avgold: Current Status

2.5.8

Harmony: Current Status

Annexure 7

Section

Description

Page

GEOLOGY

3.1

Introduction

3.2

South African Goldfields

3.2.1

Free State Goldfield

3.2.2

West Rand Goldfield

3.2.3

Far West Rand Goldfield

3.2.4

Evander Goldfield

3.2.5

Klerksdorp Goldfield

3.3

Deposit Geology

3.3.1

Target Operations

3.3.2

Free Gold Operations

3.3.3

Harmony Free State Operations

100

3.3.4

Welkom Operations

101

3.3.5

West Wits Operations

101

3.3.6

Evander Operations

103

3.3.7

Orkney Operations

103

3.3.8

Kalgold Operations

104

3.3.9

Harmony Australian Operations

104

3.3.10

Harmony Canadian Operations

105

3.4

Exploration Potential

105

MINERAL RESOURCES AND MINERAL RESERVES

106

4.1

Introduction

106

4.2

Review Procedures

106

4.3

South African Deposits: Mineral Resource and Mineral Reserve Estimation Methodologies

107

4.3.1

Quality and Quantity of Data

107

4.3.2

Orebody and Block Definition

109

4.3.3

Grade and Tonnage Estimation

109

4.3.4

Classification

111

4.3.5

Selective Mining Units

112

4.3.6

Grade Control and Reconciliation

113

4.3.7

Reserve Estimation

113

4.4

International Deposits: Mineral Resource and Mineral Reserve Estimation Methodologies

115

4.4.1

Quality and Quantity of Data

115

4.4.2

Orebody Definition

116

4.4.3

Grade and Tonnage Estimation

116

4.4.4

Grade Control and Reconciliation

116

4.4.5

Reserve Estimation

116

4.5

Mineral Resource and Mineral Reserve Statements

116

4.5.1

Target Operations

118

4.5.2

Free Gold Operations

119

4.5.3

Harmony Free State Operations

120

4.5.4

Welkom Operations

121

4.5.5

West Wits Operations

122

4.5.6

Evander Operations

123

4.5.7

Orkney Operations

124

4.5.8

Kalgold Operation

125

4.5.9

Harmony Australian Operations

125

4.5.10

Harmony Canadian Operations

126

4.5.11

Avgold

127

4.5.12

Harmony

127

4.6

Mineral Resource and Mineral Reserve Potential

128

Annexure 7

Section

Description

Page

MINING

128

5.1

Introduction

128

5.2

Mine Planning

128

5.3

Overview of Mining Operations

129

5.3.1

Target Operations - Target Mine

129

5.3.2

Free Gold Operations

132

5.3.3

Harmony Free State Operations

134

5.3.4

Welkom Operations

135

5.3.5

West Wits Operations

136

5.3.6

Evander Operations

137

5.3.7

Orkney Operations

138

5.3.8

Kalgold Operation

139

5.3.9

Harmony Australian Operations

140

5.4

Contribution to LoM Production

141

METALLURGY

142

6.1

Introduction

142

6.2

Processing Facilities

142

6.2.1

Target Operations - Target Mine

142

6.2.2

Free Gold Operations

143

6.2.3

Harmony Free State Operations

144

6.2.4

Welkom Operations

145

6.2.5

West Wits Operations

145

6.2.6

Evander Operations

146

6.2.7

Orkney Operations

146

6.2.8

Kalgold Operations

146

6.2.9

Harmony Australian Operations

147

6.2.10

Harmony Canadian Operations

147

6.3

Sampling, Analysis, Gold Accounting and Security

148

6.3.1

Avgold

148

6.3.2

Harmony

148

6.4

Plant Clean-Up

149

TAILINGS

153

7.1

Introduction

153

7.2

Target Operations - Target Mine

153

7.3

Free Gold Operations

153

7.4

Harmony Free State Operations

154

7.5

Welkom Operations

154

7.6

West Wits Operations

154

7.7

Evander Operations

154

7.8

Orkney Operations

154

7.9

Kalgold Operation

155

7.10

Harmony Australian Operations

155

7.11

Harmony Canadian Operations

155

7.12

LoM Tailings Deposition Assessment

155

ENGINEERING INFRASTRUCTURE AND CAPITAL PROJECTS

146

8.1

Introduction

156

8.2

Engineering Infrastructure of the Mining Assets

156

8.3

LoM Capital Expenditures Programmes

157

Annexure 7

Section

Description

Page

HUMAN RESOURCES

158

9.1

Introduction

158

9.2

Legislation

158

9.3

Organisational Structures and Operational Management

159

9.4

Recruitment, Training, Productivity Initiatives and Remuneration Policies

159

9.5

Industrial Relations

160

9.6

Productivity Assumptions

160

9.7

Separation Liability

161

10.

HEALTH AND SAFETY

161

10.1

Introduction

161

10.2

Legislation

161

10.3

Statistics

162

10.4

Health and Safety Management

163

10.5

Future Considerations

163

11.

ENVIRONMENTAL

164

11.1

Introduction

164

11.2

South African Legislation and Compliance

164

11.2.1

Legislation and Environment

164

11.2.2

Compliance

165

11.3

International Legislation and Compliance

166

11.3.1

Harmony Australian Operations

166

11.3.2

Harmony Canadian Operations

166

11.4

Environmental Policy and Management

166

11.4.1

Avgold

166

11.4.2

Harmony

167

11.5

Environmental Issues

167

11.5.1

Target Operations

167

11.5.2

Free Gold Operations

168

11.5.3

Harmony Free State Operations

169

11.5.4

Welkom Operations

169

11.5.5

West Wits Operations

169

11.5.6

Evander Operations

170

11.5.7

Orkney Operations

170

11.5.8

Kalgold Operation

170

11.5.9

Harmony Australian Operations

170

11.5.10

Harmony Canadian Operations

171

11.6

Liabilities and Risks

171

11.7

Environmental Liabilities

171

12.

TECHNICAL-ECONOMIC INPUT PARAMETERS

172

12.1

Introduction

172

12.2

Basis of Valuation and Technical-Economic Parameters

172

12.3

Technical-Economic Parameters

173

12.4

Avgold

178

12.5

Harmony

179

12.6

Special Factors

181

12.6.1

General Risks and Opportunities

181

12.6.2

Operational Specific Risks and Opportunities

181

Annexure 7

Section

Description

Page

13.

MINING ASSETS VALUATION

183

13.1

Introduction

183

13.2

Basis of Valuation of the Mining Assets

183

13.3

Limitations and Reliance on Information

184

13.4

Valuation Methodology

184

13.5

Post-Tax Pre-Finance Cash Flows

186

13.6

Net Present Values and Sensitivities

200

13.6.1

Target Tax Entity

200

13.6.2

Free Gold Tax Entity

201

13.6.3

Joel Tax Entity

202

13.6.4

Harmony Free State Tax Entity

203

13.6.5

Welkom Tax Entity

204

13.6.6

Randfontein Tax Entity

205

13.6.7

Orkney Tax Entity

206

13.6.8

Evander Tax Entity

207

13.6.9

Kalgold Tax Entity

208

13.6.10 Mt. Magnet & Cue Tax Entity

209

13.6.11 South Kalgoorlie Tax Entity

210

13.7

Avgold's Tax Entities

211

13.8

Harmony's Tax Entities

212

14.

SUMMARY EQUITY VALUATION AND CONCLUDING REMARKS

213

14.1

Summary Equity Valuation

213

14.2

Hedge Books

214

14.2.1

Avgold

214

14.2.2

Harmony

215

14.3

Precedent Transactions

216

14.4

Concluding Remarks

218

GLOSSARY, ABBREVIATIONS AND UNITS

219

Appendage 1 OTHER INVESTMENTS

233

Table No.

Description

TABLES

Table

1.1

Base Case Macro-Economic Parameters

Table

1.2

JSE Compliance Cross-reference

Table

2.1

Avgold: Company Development

Table

2.2

Avgold: Salient Historical Operating Statistics

Table

2.3

Harmony: Company Development

Table

2.4

Harmony: Salient Historical Operating Statistics

Table

2.5

Target Operations - Target Mine: Salient Operating Statistics

Table

2.6

Target Operations - Target Mine: Salient Historical Operating Statistics

Table

2.7

Free Gold Operations: Salient Operating Statistics

Table

2.8

Free Gold Operations: Salient Historical Operating Statistics

Table

2.9

Harmony Free State Operations: Salient Operating Statistics

Table

2.10

Harmony Free State Operations: Salient Historical Operating Statistics

Table

2.11

Welkom Operations: Salient Operating Statistics

Table

2.12

Welkom Operations: Salient Historical Operating Statistics

Table

2.13

West Wits Operations: Salient Operating Statistics

Table

2.14

West Wits Operations: Salient Historical Operating Statistics

Table

2.15

Evander Operations: Salient Operating Statistics

Annexure 7

Table No.

Description

Page

Table

2.16

Evander Operations: Salient Historical Operating Statistics

Table

2.17

Orkney Operations: Salient Operating Statistics

Table

2.18

Orkney Operations: Salient Historical Operating Statistics

Table

2.19

Kalgold Operation: Salient Operating Statistics

Table

2.20

Kalgold Operation: Salient Historical Operating Statistics

Table

2.21

Harmony Australian Operations: Salient Operating Statistics

Table

2.22

Harmony Australian Operations: Salient Historical Operating Statistics

Table

2.23

Harmony Canadian Operations: Salient Historical Operating Statistics

Table

2.24

Avgold: Land Holdings

Table

2.25

Harmony: South African Operations Land Holdings

Table

2.26

Harmony: Australian Operations Land Holdings

Table

4.1

Target Operations - Target Mine: Assumed Modifying Factors

114

Table

4.2

Free Gold Operations: Assumed Modifying Factors

114

Table

4.3

Harmony Free State Operations: Assumed Modifying Factors

114

Table

4.4

Welkom Operations: Assumed Modifying Factors

115

Table

4.5

West Wits Operations: Assumed Modifying Factors

115

Table

4.6

Evander Operations: Assumed Modifying Factors

115

Table

4.7

Orkney Operations: Assumed Modifying Factors

115

Table

4.8

Target Operations: Target Mine - Mineral Resource and Mineral Reserve Statement

118

Table

4.9

Target Operations: NFSEC - Mineral Resource and Mineral Reserve Statement

118

Table

4.10

Free Gold Operations: Mineral Resource and Mineral Reserve Statement

119

Table

4.11

Free Gold Operations: Mineral Resource, Mineral Reserve and LoM plan Sensitivity

119

Table

4.12

Harmony Free State Operations: Mineral Resource and Mineral Reserve Statement

120

Table

4.13

Harmony Free State Operations: Mineral Resource, Mineral Reserve and LoM plan Sensitivity 120

Table

4.14

Welkom Operations: Mineral Resource and Mineral Reserve Statement

121

Table

4.15

Welkom Operations: Mineral Resource, Mineral Reserve and LoM plan Sensitivity

121

Table

4.16

West Wits Operations: Mineral Resource and Mineral Reserve Statement

122

Table

4.17

West Wits Operations: Mineral Resource, Mineral Reserve and LoM plan Sensitivity

122

Table

4.18

Evander Operations: Mineral Resource and Mineral Reserve Statement

123

Table

4.19

Evander Operations: Mineral Resource, Mineral Reserve and LoM plan Sensitivity

123

Table

4.20

Orkney Operations: Mineral Resource and Mineral Reserve Statement

124

Table

4.21

Orkney Operations: Mineral Resource, Mineral Reserve and LoM plan Sensitivity

124

Table

4.22

Kalgold Operations: Mineral Resource and Mineral Reserve Statement

125

Table

4.23

Harmony Australia Operations - Mt. Magnet & Cue: Mineral Resource and Mineral Reserve Statement

125

Table

4.24

Harmony Australian Operations - South Kalgoorlie: Mineral Resource and Mineral Reserve Statement

126

Table

4.25

Harmony Canadian Operations: Mineral Resource and Mineral Reserve Statement

126

Table

4.26

Avgold: Mineral Resource and Mineral Reserve Statement

127

Table

4.27

Harmony: Mineral Resource and Mineral Reserve Statement

127

Table

5.1

Mining Assets: Production Contribution to LoM Plans

141

Table

6.1

Mining Assets: Clean-up Gold Estimates

149

Table

7.1

Mining Assets: Assessments of Tailings Storage Capacity for LoM Plans

156

Table

8.1

Mining Assets: Estimated Capital Expenditures

158

Table

9.1

Mining Assets: Historical TECs

159

Table

9.2

Mining Assets: Historical Productivity Initiatives

160

Table

9.3

Tax Entities: Separation Costs

161

Table

10.1

Mining Assets: Historical Safety Statistics

162

Table

11.1

Tax Entities: Environmental Liabilities

172

Table

12.1

Target Tax Entity: Total Assumed TEPs

174

Table

12.2

Free Gold Tax Entity: Total Assumed TEPs

174

Table

12.3

Joel Tax Entity: Total Assumed TEPs

175

Table

12.4

Harmony Free State Tax Entity: Total Assumed TEPs

175

Annexure 7

Table No.

Description

Page

Table

12.5

Welkom Tax Entity: Total Assumed TEPs

175

Table

12.6

Randfontein Tax Entity: Total Assumed TEPs

176

Table

12.7

Evander Tax Entity: Total Assumed TEPs

176

Table

12.8

Orkney Tax Entity: Total Assumed TEPs

177

Table

12.9

Kalgold Tax Entity: Total Assumed TEPs

177

Table

12.10 Mt. Magnet & Cue Tax Entity: Total Assumed TEPs

177

Table

12.11

South Kalgoorlie Tax Entity: Total Assumed TEPs

177

Table

12.12 Avgold: Total Assumed TEPs

178

Table

12.13 Harmony: Total Assumed TEPs

179

Table

13.1

Assessed Losses and Unredeemed Capital at 31 December 2003

184

Table

13.2

Working Capital Opening Balances at 31 December 2003

185

Table

13.3

Target Tax Entity: TEM in ZAR (nominal terms)

187

Table

13.4

Free Gold Tax Entity: TEM in ZAR (nominal terms)

188

Table

13.5

Joel Tax Entity: TEM in ZAR (nominal terms)

189

Table

13.6

Harmony Free State Tax Entity: TEM in ZAR (nominal terms)

190

Table

13.7

Welkom Tax Entity: TEM in ZAR (nominal terms)

191

Table

13.8

Randfontein Tax Entity: TEM in ZAR (nominal terms)

192

Table

13.9

Evander Tax Entity: TEM in ZAR (nominal terms)

193

Table

13.10 Orkney Tax Entity: TEM in ZAR (nominal terms)

194

Table

13.11

Kalgold Tax Entity: TEM in ZAR (nominal terms)

195

Table

13.12 Mt. Magnet & Cue Tax Entity: TEM in ZAR (nominal terms)

196

Table

13.13 South Kalgoorlie: TEM in ZAR (nominal terms)

197

Table

13.14 Avgold: TEM in ZAR (nominal terms)

198

Table

13.15 Harmony: TEM in ZAR (nominal terms)

199

Table

13.16 Target Tax Entity: NPV at a Range of Discount Factors

200

Table

13.17 Target Tax Entity: NPV Sensitivity - Varying Single Parameter

200

Table

13.18 Target Tax Entity: NPV Sensitivity - Varying Twin Parameter at 12.0% Discount

200

Table

13.19 Free Gold Tax Entity: NPV at a Range of Discount Factors

201

Table

13.20 Free Gold Tax Entity: NPV Sensitivity - Varying Single Parameter

201

Table

13.21 Free Gold Tax Entity: NPV Sensitivity - Varying Twin Parameter at 12.0% Discount

210

Table

13.22 Joel Tax Entity: NPV at a Range of Discount Factors

202

Table

13.23 Joel Tax Entity: NPV Sensitivity - Varying Single Parameter

202

Table

13.24 Joel Tax Entity: NPV Sensitivity - Varying Twin Parameter at 12.0% Discount

202

Table

13.25 Harmony Free State Tax Entity: NPV at a Range of Discount Factors

203

Table

13.26 Harmony Free State Tax Entity: NPV Sensitivity - Varying Single Parameter

203

Table

13.27 Harmony Free State Tax Entity: NPV Sensitivity - Varying Twin Parameter at 12.0% Discount

203

Table

13.28 Welkom Tax Entity: NPV at a Range of Discount Factors

204

Table

13.29 Welkom Tax Entity: NPV Sensitivity - Varying Single Parameter

204

Table

13.30 Welkom Tax Entity: NPV Sensitivity - Varying Twin Parameter at 12.0% Discount

204

Table

13.31 Randfontein Tax Entity: NPV at a Range of Discount Factors

205

Table

13.32 Randfontein Tax Entity: NPV Sensitivity - Varying Single Parameter

205

Table

13.33 Randfontein Tax Entity: NPV Sensitivity - Varying Twin Parameter at 12.0% Discount

205

Table

13.34 Orkney Tax Entity: NPV at a Range of Discount Factors

206

Table

13.35 Orkney Tax Entity: NPV Sensitivity - Varying Single Parameter

206

Table

13.36 Orkney Tax Entity: NPV Sensitivity - Varying Twin Parameter at 12.0% Discount

206

Table

13.37 Evander Tax Entity: NPV at a Range of Discount Factors

207

Table

13.38 Evander Tax Entity: NPV Sensitivity - Varying Single Parameter

207

Table

13.39 Evander Tax Entity: NPV Sensitivity - Varying Twin Parameter at 12.0% Discount

207

Table

13.40 Kalgold Tax Entity: NPV at a Range of Discount Factors

208

Table

13.41 Kalgold Tax Entity: NPV Sensitivity - Varying Single Parameter

208

Table

13.42 Kalgold Tax Entity: NPV Sensitivity - Varying Twin Parameter at 12.0% Discount

208

Table

13.43 Mt. Magnet & Cue Tax Entity: NPV at a Range of Discount Factors

209

Table

13.44 Mt. Magnet & Cue Tax Entity: NPV Sensitivity - Varying Single Parameter

209

Annexure 7

Table No.

Description

Page

Table

13.45 Mt. Magnet & Cue Tax Entity: NPV Sensitivity - Varying Twin Parameter at 12.0% Discount

209

Table

13.46 South Kalgoorlie Tax Entity: NPV at a Range of Discount Factors

210

Table

13.47 South Kalgoorlie Tax Entity: NPV Sensitivity - Varying Single Parameter

210

Table

13.48 South Kalgoorlie Tax Entity: NPV Sensitivity - Varying Twin Parameter at 12.0% Discount

210

Table

13.49 Summations of Avgold Tax Entities: NPV at a Range of Discount Factors

211

Table

13.50 Summations of Avgold Tax Entities: NPV Sensitivity - Varying Single Parameter

211

Table

13.51 Summations of Avgold Tax Entities: NPV Sensitivity - Varying Twin Parameter

at 12.0% Discount

211

Table

13.52 Summations of Harmony Tax Entities: NPV at a Range of Discount Factors

212

Table

13.53 Summations of Harmony Tax Entities: NPV Sensitivity - Varying Single Parameter

212

Table

13.54 Summations of Harmony Tax Entities: NPV Sensitivity - Varying Twin Parameter

at 12.0% Discount

212

Table

14.1

Avgold: Summary Equity Valuation

213

Table

14.2

Harmony: Summary Equity Valuation

214

Table

14.3

Avgold: Net Hedge Book

215

Table

14.4

Harmony: Net Hedge Book

215

Table

14.5

Recent Gold Transactions in Africa

216

Figure No.

Description

FIGURES

Figure

2.1

Mining Assets: General Location Map

Figure

2.2

Avgold: Location Map and Lease Area for Target Operations

Figure

2.3

Harmony: Location Map and Lease Area Harmony Free Gold Operations, Free State Operations and Welkom Operations

Figure

2.4

Harmony: Location Map and Lease Area for Evander Operations

Figure

2.5

Harmony: Location Map and Lease Area for Orkney Operations

Figure

2.6

Harmony: Location Map and Lease Area for West Wits Operations, Elandsrand and Deelkraal

Figure

2.7

Harmony: Location Map and Lease Area for West Wits Operations, Randfontein Estates

Figure

6.1

Avgold/Harmony: Schematic Flow Diagram of a Typical Carbon in Pulp Plant

150

Figure

6.2

Avgold/Harmony: Schematic Flow Diagram of a Typical Carbon in Leach Plant

151

Figure

6.3

Avgold/Harmony: Schematic Flow Diagram of a Typical Filtration and Zinc Precipitation Plant

152

Figure

12.1

Avgold: Projected LoM Recovered Gold

178

Figure

12.2

Avgold: Projected LoM Tonnes Milled

179

Figure

12.3

Harmony: Projected LoM Recovered Gold

180

Figure

12.4

Harmony: Projected LoM Tonnes Milled

180

Annexure 7

AN INDEPENDENT COMPETENT PERSON'S REPORT ON CERTAIN MINING ASSETS OF

AVGOLD LIMITED AND HARMONY GOLD MINING COMPANY LIMITED

INTRODUCTION

1.1

Background

Steffen, Robertson and Kirsten (South Africa) (Pty) Limited ("SRK") is a subsidiary of the international Group holding company, SRK Global Limited (the "SRK Group"). SRK has been commissioned by the Directors of Avgold Limited ("Avgold") and Harmony Gold Mining Company Limited ("Harmony") to prepare an independent competent person's report ("CPR") on certain mining assets (the "Mining Assets") of Avgold and Harmony (the "Companies").

The Mining Assets of Avgold include:

a 100% interest in the Target Gold Mine ("Target Mine") located in the Free State Province, South Africa; and

a 100% interest in Target North, Oribi and Sun South deposits to the north of the existing Target Mine.

The Mining Assets of Harmony include:

a 100% interest in Free Gold Joint Venture Company (Proprietary) Limited ("Free Gold");

a 100% interest in Joel Mine situated in the Free State Goldfield, South Africa, hereinafter defined as ("Joel"). Ownership of this assets is held at the Harmony level;

a 100% interest in Randfontein Estates Limited ("Randfontein");

a 100% interest in Evander Gold Mining Company Limited ("Evander");

a 100% interest in Kalahari Goldridge Mining Company Limited ("Kalgold"). Harmony is in the process of disposing of its entire interest in Kalgold to Afrikander Lease Limited ("Aflease"). The sale will be effective after all the legal conditions of the transaction have been met, which is anticipated by the end of February 2004. Conditional to the sale is that Harmony retains its interests in the company's Kalplats platinum discovery and associated mineral rights;

a 100% interest in Harmony Gold (Australia) Proprietary Limited ("Harmony Australia");

a 100% interest in Harmony Gold (Canada) Inc ("Harmony Canada");

a 100% interest in various mining operations situated in the Free State Goldfield, South Africa, hereinafter defined as ("Harmony Free State"). Ownership of these assets is held at the Harmony level;

a 100% interest in various significant exploration properties, notably the Rolspruit gold project ("Rolspruit"), the Poplar gold project ("Poplar") and the Kalplats PGM project ("Kalplats");

a 100% interest in the mining operations situated in Orkney, South Africa, previously owned and operated by African Rainbow Minerals Gold Limited ("ARMgold") herein defined as ("Harmony Orkney"). Ownership of these assets is currently held at Harmony level; and

a 100% interest in the mining operations situated in Welkom, South Africa, previously owned and operated by ARMgold herein defined as ("Harmony Welkom"). Ownership of these assets is currently held at Harmony level.

In addition, Harmony holds interests in wholly-owned, joint venture and associate companies via direct and indirect subsidiaries. These interests comprise dormant companies, exploration companies, investment holding companies, management service companies, marketing companies, beneficiation companies, mineral rights holding companies and property holding companies.

All assets incorporating operating mines and exploration properties, for which Harmony holds less than 100% and/or does not have legal rights to disclose information, other than that already reported in the public domain, have therefore been excluded from the collective term Mining Assets and do not form part of this CPR. Specifically, Harmony's material interests that are not reported upon in this CPR, include:

a 33.9% interest in Anglovaal Mining Limited ("Avmin") which was recently acquired through an ARMgold/Harmony joint venture. The principal assets in Avmin include:

50.3% of Assmang Limited which operates various manganese ore, iron ore and chrome ore operations located in the Republic of South Africa ("South Africa");

55.0% of Two Rivers Platinum (Proprietary) Limited ("Two Rivers") which is currently developing a platinum mining operation located in Mpumalanga Province, South Africa;

- 100% of the Nkomati nickel mine ("Nkomati") located in Mpumalanga Province, South Africa;

Annexure 7

Harmony's 87% interest in Abelle Limited ("Abelle") a company listed on the Australian Stock Exchange Limited ("ASX"), which operates a gold mining operation in Australia and has various interests in exploration properties in Australia and Papua New Guinea; and

Harmony's 31.8% interest in Bendigo Mining NL ("Bendigo") a company listed on the ASX which owns a single gold development project in Australia.

Appendage 1 to this report includes brief technical summaries of these assets, which have been reproduced from information lawfully contained in the public domain. SRK has not had access to either the underlying information or supporting data, therefore no opinion has been provided herein.

1.2

Requirement for the CPR

SRK has been informed that Avgold and Harmony have reached an agreement, in terms of a merger agreement (the "Merger"). It is intended that the Merger will be implemented by means of a Scheme of Arrangement (the "Scheme") to be proposed by Avgold, between Harmony and its shareholders.

This CPR principally comprises a technical-economic appraisal of the Mining Assets and has been prepared in compliance with the Listings Requirements of the JSE Securities Exchange, South Africa (the "JSE"), specifically Sections 12.3, 12.8, 12.9 and 12.14.

A copy of this CPR will be included in the Scheme document and circular to be dispatched to the Companies' shareholders. In this CPR, SRK provides assurances to the directors of the Companies that the technical- economic projections ("TEPs"), including production profiles, operating expenditures and capital expenditures, of the Mining Assets as provided to SRK by the Companies and reviewed by SRK are reasonable, given the information currently available.

1.3

Structure of the CPR

For reporting purposes SRK note that the valuations of the Mining Assets have been grouped in accordance with the following Tax Entities, herein referred to as ("the Tax Entities") and that all entries (including text, tables and other data) are quoted assuming 100% ownership and not on an attributable basis according to the respective shareholdings:

the tax entity within which Target Mine is assessed ("Target Tax Entity");

the tax entity within which Free Gold is assessed ("Free Gold Tax Entity");

the tax entity within which Joel is assessed ("Joel Tax Entity");

the tax entity within which Harmony Free State is assessed ("Harmony Free State Tax Entity");

the tax entity within which Harmony Welkom is assessed ("Harmony Welkom Tax Entity");

the tax entity within which Randfontein Estates Limited is assessed ("Randfontein Tax Entity");

the tax entity within which Evander Gold Mines Limited is assessed ("Evander Tax Entity");

the tax entity within which Harmony Orkney is assessed ("Harmony Orkney Tax Entity");

the tax entity within which Kalahari Goldridge Mining Company Limited is assessed ("Kalgold Tax Entity"); and

Harmony Australia comprising:

- the tax entity within which Mt. Magnet & Cue is assessed ("Mt. Magnet & Cue Tax Entity"); and

- the tax entity within which South Kalgoorlie is assessed ("South Kalgoorlie Tax Entity").

Technical descriptions of the Mining Assets have been grouped into operations that broadly reflect the management structures and/or common geographical location. The Mining Assets are grouped into the following operations:

Target Operations: Includes Target Mine, Target North and Extensions and Oribi;

Free Gold Operations;

Harmony Free State Operations;

Welkom Operations;

West Wits Operations includes Randfontein, Elandsrand and Deelkraal;

Evander Operations;

Orkney Operations;

Kalgold Operation; and

International Operations, sub-divided into Harmony Australian Operations and Harmony Canadian Operations.

Annexure 7

In accordance with the Listings Requirements of the JSE and the SAMREC Code, this CPR has been prepared under the direction of the Competent Person (the "CP") which assumes overall professional responsibility for the document (Section 1.4). The CPR, however is published by SRK, the commissioned entity, and accordingly SRK assumes responsibility for the views expressed herein. On this basis, all references to SRK mean the CP and vice versa.

1.4

Valuation Date and Base Technical Information

The Mining Assets have been valued based on cash flow projections commencing 1 January 2004 which is dependent upon the following:

technical information as generated by the Companies in accordance with their annual planning process defined as the Base Information Date ("BID"): 1 July 2003; and

adjustments to all technical information to reflect depletion and historical performance from the respective BIDs to 31 December 2003.

The LoM plans and associated Mineral Reserve statements for the Mining Assets have been derived as follows:

Avgold: The LoM plans and associated Mineral Reserve statements for Target Mine have been derived using a gold price of ZAR107,000/kg. No sensitivity is currently available to assess the impact on the Mineral Reserves at current (approximately ZAR80,000/kg in December 2003) gold price; which represents a 25% reduction. This aspect is discussed further in Section 4 of this CPR; and

Harmony: The LoM plans and associated Mineral Reserve statements for the Mining Assets have been derived using a gold price of ZAR93,000/kg for the Mining Assets located in South Africa and AUS$522/oz for the Mining Assets located in Australia.

The post-tax pre-finance cash flows from each Tax Entity have been developed on the basis of a US$ gold price increasing in constant money terms from US$366/oz in 2004 to US$382/oz in 2005 and macro-economic factors as defined in Table 1.1.

1.5

Verification, Validation and Reliance

The valuation as reported herein is dependent upon technical, financial and legal aspects. The technical information as provided to and taken in good faith by SRK has not been independently verified by means of recalculation. SRK has however conducted:

inspection visits to surface and underground operations, processing facilities, surface structures and associated infrastructure at each of the Mining Assets during November 2003 for the Avgold Assets and between May and June 2003 for the Harmony Assets;

discussion and enquiry following access to key personnel based at the individual Business Units ("BUs") and head office;

a review and, where considered appropriate by SRK, modification of the Companies' estimates and their classification of Mineral Resources and Mineral Reserves;

a review of the Companies' plans and supporting documentation and, where considered appropriate by SRK, modification of the Companies' LoM plans and the associated TEPs, including assumptions regarding future operating costs, capital expenditures and gold production of the Mining Assets;

an examination of historical information and results made available by the Companies in respect of the Mining Assets the forecasts contained in the LoM plans and one-year budgets; and

an update undertaken in January 2004 to reflect the latest opinion of the Financial Advisors on the macro- economic parameters including commodity prices, exchange rates and inflation factors as presented in Table 1.1. In addition SRK has considered any material departures from the projections provided to and reviewed by SRK during the inspection visits to the Harmony Assets completed during May and June 2003. In addition SRK has accounted for depletion that has taken place during the six-month period that has elapsed between June 2003 and December 2003.

SRK's approach in undertaking a review of the Mineral Resource and Mineral Reserve estimations and classifications is detailed in Section 4 of this CPR. In summary, SRK has reported Mineral Resource and Mineral Reserve statements based on a review of the LoM plans and the methodologies applied for estimation and classification of both Mineral Resources and Mineral Reserves.

SRK consider that with respect to all material technical-economic matters it has undertaken all necessary investigations to ensure SAMREC compliance, both in terms of level of investigation and level of disclosure. In doing so SRK has not reproduced the information provided to it by the Companies without due consideration or appropriate modification. Notwithstanding this comment, SRK has not recalculated the base

Annexure 7

information supporting the Mineral Resource estimates as derived from bore-hole and assay data, this given the generally extensive history of the Mining Assets and geological investigations undertaken by the Companies, however has undertaken sufficient checks through the course of its investigations to enable an appropriate level of reliance to be placed on such data, as provided.

Where fundamental base data has been provided (LoM plans, capital expenditures, operating budgets etc) for the purposes of review, SRK recognise the requirements of 12.3(e) and accordingly state that SRK has performed all necessary validation and verification procedures deemed appropriate in order to to place an appropriate level of reliance on such information.

1.5.1

Technical Reliance

SRK places reliance on the Companies CPs that all technical information provided to SRK at the time of writing is both valid and accurate for the purpose of compiling this CPR.

The information with respect to Mineral Resources and Mineral Reserves as defined by the Companies has been prepared under the direction of the following individuals:

Avgold: Dr F Camisani-Calzolari, PrSciNat (SACNASP), FSAIMM, MAuIMM, FGSSA, CRIRSCO (Combined Reserve International Report Standards Committee of CMMI). Dr Camisani-Calzolari has over 30 years' experience in the mining industry and was responsible for Mineral Resource and Mineral Reserve reporting at Avmin for a number of years until recently, and is currently retained as a consultant to Avmin on a part-time basis; and

Harmony: Mr Graham Briggs, Pr. Sci. Nat, BSc (Hons) Geology. Mr Briggs is responsible for ore reserve management, organic growth and capital projects on the executive committee of Harmony. He has 29 years' experience in the gold mining industry and is a registered geological scientist.

1.5.2

Financial Reliance - the Companies

In consideration of all financial aspects relating to the valuation of the Mining Assets and the Summary equity valuation of the Companies, SRK has placed reliance of the Financial Officers of the Companies that the following information for the Tax Entities and the Companies is accurate at 1 January 2004:

unredeemed capital balances;

assessed losses;

opening balances for debtors, creditors and stores;

working capital and taxation logic;

values ascribed to interests in unlisted and listed entities; and

balance sheet items, specifically cash on hand, debt and mark-to-market value of derivative instruments (currency and commodity hedges).

The information with respect to the above financial data as defined by the Companies has been prepared under the direction of the following individuals:

Avgold: Mr Michael Arnold, BSc Eng (Mining Geology), CA(SA). Mr Arnold is the Chief Financial Officer for Avgold; and

Harmony: Mr Frank Abbot, BCom, CA(SA). MBL is the chief financial officer for Harmony and has 22 years' experience in financial management, 22 years of which has been within the mining industry.

1.5.3

Financial Reliance - Deutsche Bank (South Africa)

In generating the valuation of the Mining Assets, SRK has relied upon the commodity price and macro- economic forecasts as included in Table 1.1 below, which have been generated by Deutsche Bank South Africa. In respect of compliance with 12.3(e) of the Listings Requirements of the JSE, SRK has secured the JSE's dispensation from providing details of the individuals responsible for the generation of the information as presented in Table 1.1.

Annexure 7

Table 1.1 Base Case Macro-Economic Parameters

Parameter

Units

2004

2005

2006

2007

2008

Gold Price - Nominal

(US$/oz)

366

386

390

394

398

(ZAR/kg)

91,659

111,797

125,823

134,929

143,309

(AUS$/oz)

487

499

492

485

RSA CPI

(%)

2.55%

4.10%

4.77%

4.50%

AUS CPI

(%)

2.40%

US CPI

(%)

1.38%

1.03%

1.00%

Nominal Exchange Rate

(US$:ZAR)

7.80

9.01

10.04

10.66

11.21

(US$:AUS$)

1.33

1.32

1.34

(AUS$:ZAR)

5.85

5.95

6.08

6.21

6.34

Table 1.1 summaries the base-case macro-economic projections as generated by Deutsche Bank (South Africa), Financial Advisors to Avgold. Taking cognisance of the volatile nature of both the gold price (US$/ozt) and the exchange rate between the US$ and both the ZAR and AU$, SRK has run sensitivities on revenue ranging between -30% and +30% to these macro-economic projections as discussed in the risks and opportunities in Section 12 of this CPR.

1.5.4

Legal Reliance

In consideration of all legal aspects relating to the valuation of the Mining Assets SRK has placed reliance on the following representatives of the Companies that the following legal aspects are correct at 1 January 2004:

in respect of 12.8(e) and 12.10(g) that "a statement by the Directors of any legal proceedings that may have an influence on the rights to explore for minerals, or an appropriate negative statement" has been included in the body of the various circulars relating to the Transactions;

in respect of 12.10(e) that the legal ownership and of all mineral and surface rights has been verified;

in respect of 12.14(a)(xii) that no significant legal issue exists which would effect the "likely viability of a project and/or on the estimation and classification of the Mineral Reserves and Mineral Resources" as reported herein; and

The information with respect to the above legal data as defined by the Companies has been prepared under the direction of the following individuals:

Avgold: Mr Pieter Coetzee, BProc. Mr Coetzee is the general manager legal services for Avmin and has 20 years' experience in the mining industry,

Harmony: Mr Mike Wasserfall B.Com (Hons) LLM is legal advisor to Harmony and has 20 years experience, all of which is in the mining industry. Mr Wasserfall is assisted by Mr George Edward Warren de Wit who is the Group Surveyor for Harmony.

1.6

Valuation Techniques

The summary equity valuation for the Companies is based on a sum-of-the-parts approach comprising net asset values ("NAV") for the Mining Assets and supplemental information as provided by the Companies (Balance sheet items and interests in listed and unlisted companies).

The NAVs for the Mining Assets have been derived using discounted cash flow ("DCF") techniques applied on a post-tax pre-finance basis for the individual Tax Entities. These are based on the various LoM plans and where appropriate are sub-divided into valuations based on Mineral Reserves alone and Mineral Reserves and Mineral Resources where such LoM plans have been generated accordingly.

In respect of non-LoM Mineral Resources, these have not been valued separately and commentary is limited to technical disclosure requirements in accordance with the Listings Requirements of the JSE.

The post-tax pre-finance cash flows from each Tax Entity have been developed on the basis of the commodity price and macro-economic projections as presented in Table 1.1. For each Tax Entity SRK has developed Financial Models ("FM"), the results of which are presented in Section 13 and Section 14 of this CPR. The FMs are based on annual cash flow projections ending 30 June and technical-economic input parameters ("TEP") stated in 1 January 2004 money terms. As the valuation date is 1 January 2004, the cash flow projections for the first period present a six-month forecast to 30 June 2004.

Annexure 7

1.7

JSE Compliance

This CPR principally comprises a technical-economic appraisal of the Mining Assets and has been prepared in compliance with the Listings Requirements of the JSE, specifically Sections 12.3, 12.8, 12.9 and 12.14. In addition to the Mining Assets, technical information on a number of exploration properties has also been included.

In compliance with 12.6, Table 1.2 presents a cross-reference between the Listings Requirements of the JSE and the primary sections as included in this CPR.

Table 1.2 JSE Compliance cross-reference

CPR Section

Listings Requirements

12.3(a), 12.3(b), 12.3(c), 12.3(e); 12.6, 12.8(a), 12.9(a), 12.9(b), 12.9(c), 12.9(d), 12.9(e), 12.9(f); 12.11(a), 12.11(b) 12.14(a) - (viii), (xi), (xii), (xvi), (xvii), (xviii); 12.14(b) - (iv), (xvii)

12.10(d), 12.10(g), 12.10 (h) - (i), (ii), (iii); 12.10(i), 12.10(j) 12.11(a), 12.11(b) 12.14(a) - (ix), (x), (xii), (xvii)

12.10(a) - (xi); 12.10(b) - (i); 12.10(d)

12.10(a) - (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xii), (xiii), (xv), (xvi), 12.10(b) - (ii), (iii), (iv); 12.10(b) - (vi) - (1), (2), (3), (4), (5), (6), (7), (8), (9); 12.10(d); 12.10(f) - (i), (ii); 12.14(a) - (ii), (iii), (iv), (xii), (xiv), (xv); 12.14(b) - (ii)

12.10(b) - (v); 12.10(d); 12.14(a) - (iv), (x), (xii)

12.10(b) - (v); 12.14(a) - (v), (vi), (vii), (x), (xii); 12.14(b) - (iii)

12.14(a) - (xii)

12.14(a) - (viii); 12.14(b)(vi)

12.14(a) - (xii)

12.10(c), 12.14(a) - (i), (viii), (xii)

12.14(a) - (viii); 12.14(b) - (v), (vi)

12.10(b) - (v); 12(b) - (i), (iii), (iv), (vi), (viii), (ix), (xi), (xiv), (xv), (xvi), (xvii)

12.14(a) - (ii), (xiii), (xviii), (xix); 12.14(b) - (vi), (x), (xii), (xiii), (xvi), (xviii)

Glossary

12.10(k)

In respect of specific compliance items SRK note the following:

12.10(e) - (i), (ii): A detailed list of the Companies mineral and surface rights will be made available at the corporate offices of each of the respective companies. Dispensation has been granted in this regard from inclusion in the CPR for practical purposes of volume;

12.8(e); 12.10(g): A detailed statement of all legal proceedings which may have an influence on the rights to explore for minerals or an appropriate negative statement has been included in the body of the circulars;

12.14(a)(xvi): The Companies are in effect mature operating companies with a track record of operating history and accordingly, other than brief summaries of Directors (as included in the body of the Circular), details relating to qualifications of key technical and managerial staff have been excluded from this CPR. Dispensation has been granted in this regard from inclusion into this CPR for practical purposes relating to volume of information; and

12.10(x)(i), 12.10(d): SRK has, during the course of its investigations, reviewed technical plans in order to support its opinions on the geology, Mineral Resource and Mineral Reserves, mining plans and processing facilities, these together with land holdings, lease areas and surface infrastructure. Due to pure volume and scale of these plans it is not appropriate to include copies into this CPR for the 75 business units operated by Avgold and Harmony. Dispensation has been granted in this regard from inclusion into this CPR; however these plans are available for inspection at various company operating offices where they remain due to the fact that many are working plans required for the continual management of the respective business units.

1.8

Warranties and Limitations

SRK's opinion is effective 1 January 2004 and is based on information provided by the Companies throughout the course of SRK's investigations, which in turn reflect various technical-economic conditions prevailing at the time of writing. These conditions can change significantly over relatively short periods of time and as such the information and opinions contained in this report may be subject to change.

Annexure 7

In this CPR, SRK provides assurances to the Directors of the Companies that the technical-economic projections ("TEPs"), including production profiles, operating expenditures and capital expenditures, of the Mining Assets as provided to SRK by the Companies and reviewed by SRK are reasonable, given the information currently available.

The achievability of LoM plans, budgets and forecasts are neither warranted nor guaranteed by SRK. The forecasts as presented and discussed herein have been proposed by the Companies' management and cannot be assured; they are necessarily based on economic assumptions, many of which are beyond the control of the Companies. Future cash flows and profits derived from such forecasts are inherently uncertain and actual results may be significantly more or less favourable.

This report includes technical information, which requires subsequent calculations to derive subtotals, totals and weighted averages. Such calculations may involve a degree of rounding and consequently introduce an error. Where such errors occur, SRK does not consider them to be material.

1.9

Disclaimers and Cautionary Statements for US Investors

In considering the following statements SRK notes that the term "Mineral Reserve" for all practical purposes is synonymous with the term "ore reserve".

The United States Securities and Exchange Commission (the "SEC") permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce from. Certain terms are used in this report, such as "resources", that the SEC guidelines strictly prohibit companies from including in filings.

Mineral Reserve estimates are based on many factors, including, in this case, data with respect to drilling and sampling. Mineral Reserves are determined from estimates of future technical factors, future production costs, future capital expenditure, future product prices and the exchange rate between the South African Rand ("ZAR") and the United States Dollar ("US$"). The Mineral Reserve estimates contained in this report should not be interpreted as assurances of the economic life of the Mining Assets or the future profitability of operations. Because Mineral Reserves are only estimates based on the factors and assumptions described herein, future Mineral Reserve estimates may need to be revised. For example, if production costs increase or product prices decrease, a portion of the Mineral Resources, from which the Mineral Reserves are derived, may become uneconomical to recover and would therefore result in lower estimated Mineral Reserves.

The LoM plans and the TEPs include forward-looking statements that are required in compliance with the JSE Listings Requirements. These forward-looking statements are necessarily estimates and involve a number of risks and uncertainties that could cause actual results to differ materially.

1.10 Qualifications of Consultants

The SRK Group comprises 500 staff, offering expertise in a wide range of resource engineering disciplines. The SRK Group's independence is ensured by the fact that it holds no equity in any project. This permits the SRK Group to provide its clients with conflict-free and objective recommendations on crucial judgment issues. The SRK Group has a demonstrated track record in undertaking independent assessments of resources and reserves, project evaluations and audits, CPRs and independent feasibility evaluations to bankable standards on behalf of exploration and mining companies and financial institutions worldwide. The SRK Group has also worked with a large number of major international mining companies and their projects, providing mining industry consultancy service inputs. SRK also has specific experience in commissions of this nature.

This CPR has been prepared based on a technical and economic review by a team of 30 consultants sourced from the SRK Group's offices in South Africa, the United Kingdom and Australia over a two-month period. These consultants are specialists in the fields of geology, resource and reserve estimation and classification, underground and open pit mining, rock engineering, metallurgical processing, hydrogeology and hydrology, tailings management, infrastructure, environmental management and mineral economics.

Neither SRK nor any of its employees and associates employed in the preparation of this report has any significant beneficial interest in the Companies or in the assets of the Companies. SRK will be paid a fee for this work in accordance with normal professional consulting practice.

The individuals who have provided input to this CPR, who are listed below, have extensive experience in the mining industry and are members in good standing of appropriate professional institutions:

Andrew Pooley, Pr. Eng, MSAIMM, AMIMM, B.Eng (Mining);

Andrew Smithen, Pr. Eng., MBL, MSAICE, MSAIAE, MSAIMM, MSc;

Andrew Vigar, FAusIMM, BSc (Applied Geology);

Awie Swart, MSAIMM, MSANIRE, COM Adv. Rock Eng. Cert. B.Eng.;

Boet van der Vyfer, FMVS, Adv. Cert. Mine Env. Control;

Annexure 7

Dawood Wepener, BSc Eng., MSAIME, Govt. Cert of Comp.;

Ian Home, MIAIA, MSc;

Iestyn Humphreys, AM.I.Min.E, AIME, PhD;

Jim Williams, ACSM, C.Eng., FAusIMM;

Jonathan Suthers, B.Eng.;

John Miles, C. Eng., MIMMM, MSc;

Kenneth Owen, FSAIMM, MAMMSA, MSc Eng;

Kirsty Sells, CPEnv, FAuSIMM, BSc, MBS;

Lee Barnes, C.Eng, MIMMM, MSc;

Louis Voortman, CPGeo, FAusIMM, MAIG, MGAA, MGASA, SIA(aff), AIM(Aff), Sc MSc;

Louie Human, COM Adv. Rock Eng. Cert., NHD (Geology);

Mark Campadonic, FGS, AIQ, Msc;

Michael Armitage, C. Eng., C. Geol., MIMM, PhD;

Michael Boylett, C.Eng, MA (Met.), MSAIMM, MIMMM;

Michael Harley, Pr. Sci Nat., MSAIMM, MAusIMM, PhD;

Michael McWha, Pr.Sci Nat., FGSSA, MSAIMM, BSc Hons;

Oskar Steffen, Pr. Eng. (ECSA)., MSAIMM, PhD;

Peter Munro, MAuSIMM, B. Appl. Sc., B. Comm, B. Econ;

Richard Clayton, C.Geol, FGS, Msc;

Robert Wilson, Pr. Eng, FSAIMM, B.Sc.Eng.(Mech.);

Roger Dixon, Pr. Eng, FSAIMM, BSc (Mining);

Victor Hills, Pr.Eng., MSAIMM, B.Eng.;

Wally Waldeck, Pr. Eng (reg. ECSA), MSAIMM, BSc (Mining), MBA; and

William Schoeman, Pr. Eng, MSAIME, BSc.Eng (Mech).

In compliance with Section 12.3 of the JSE Listings Requirements, the following CPs are presented:

the Competent Person with overall responsibility for the compilation of this CPR is Mr H G Waldeck, Pr. Eng registered with the Engineering Council of South Africa ("ECSA") who is an employee of SRK. Mr Waldeck is a mining engineer with 28 years' experience in the mining industry and has supervised numerous due-diligence reviews and various technical studies on the Witwatersrand Basin during the past five years. In compliance with the SAMREC requirements, Mr. Waldeck also assumes responsibility for the reporting of Mineral Reserves as included in this CPR; and

in compliance with the SAMREC requirements and definitions, the Competent Person with overall responsibility for Mineral Resources is Dr Michael Harley, Pr. Sci Nat., MSAIMM, MAusIMM, PhD who is an employee of SRK. Dr Michael Harley is a mining geologist with 14 years' experience in the mining industry and has been responsible for the reporting of Mineral Resources on various properties in South Africa and internationally during the past five years.

1.11 Valuation Summary

The summary equity valuation for the Companies is presented in Section 14 of this CPR, specifically Table 14.1 for Avgold, Table 14.2 for Harmony. In respect of the Kalgold Tax Entity, a DCF valuation is included; however reference is made to the circular which details the terms and associated proceeds relating to the disposal of Kalgold by Harmony.

In addition SRK has been informed by Harmony that it has recently disposed of its interests in the following companies:

Harmony's 31.7% interest in Highland Gold Mining Limited ("Highland Gold"). In October 2003, Harmony disposed of its 31.7% shareholding in Highland Gold in a placing arranged by City Capital Corporation Limited in London; and

Harmony's 17.0% interest in High River Gold Mines Limited ("High River"). In October 2003 Harmony disposed of its 17% shareholding in High River in a placing arranged by BMO Nesbitt Burns in Canada.

No summary equity valuation has been included and any proceeds have been incorporated into the net cash position of Harmony at 31 December 2003.

Annexure 7

MINING ASSETS

2.1

Introduction

This section gives a brief overview of the Companies and their respective Mining Assets including, location and historical company development, property description, mining methods and operating results. Specifically where reference is made to legal compliance within the regulatory environment in which the Companies operate, SRK has placed reliance on the Companies and their respective legal advisers.

2.2

The Companies and Operating Structures

2.2.1

Avgold

Avgold is a South African-based mining, development and exploration company, publicly listed on the JSE (primary listing), with International Depositary Receipts ("IDR") traded on the Brussels Bourse. Table 2.1 gives the recent historical company development of Avgold to date. By measure of annual gold production attributable to the company, Avgold is ranked 22nd in terms of the world's gold mining companies. Avgold states its core business as that directly associated with a gold mining and gold exploration whose activities include operating the recently commissioned Target Mine (May 2002) and the continued exploration in an area known as Target North.

Avgold's executive office is located at 56 Main Street, Johannesburg 2001, Gauteng Province South Africa. In addition Avgold has an operations office located at Target Mine situated between the towns of Bothaville and Welkom.

Table 2.1 Avgold: Company Development

Date

Activity

Late 1980s

Surface exploration intersected payable reef horizons in the Target area.

November, 1990

Target Exploration Company Limited ("Target Exploration") incorporated.

February, 1991

Target Exploration listed on the JSE.

January, 1993

23 surface boreholes completed at the Target area.

April, 1995

Commenced an underground exploration decline at Target from the Lorraine u/g workings.

July, 1996

106,000m of u/g exploration drilling completed and scope of Target Project increased to a 105ktpm mine.

November, 1996

Target Exploration changed its name to Avgold Limited and acquired the gold assets of Avmin, namely ETC Operations, Hartebeestfontein Mine and Lorraine Mine.

January, 1998

Acquired the Fairview Mine from Goldfields.

August, 1998

Mining operations at Lorraine ceased and No.1 Shaft became the principal access for the Target Project.

April, 1999

Mining Licence obtained for Target.

August, 1999

Disposed of the Hartebeestfontein Mine.

May, 2002

Target Mine commissioned.

February, 2003

Entered into an agreement to sell the assets of ETC.

June, 2003

Announcement of completion of surface drilling of Target North.

June, 2003

Disposal of ETC division to Metorex.

September, 2003

Announcement of completion of pre-feasibility study on Northern Free State.

November, 2003

Announcement that: Anglovaal Mining Limited ("Avmin") will dispose of its entire 42.2% interest in Avgold to Harmony.

Table 2.2 gives the historical operating statistics attributable to Avgold from 2001 through to 31 December 2003, inclusive.

Annexure 7

Table 2.2 Avgold: Salient Historical Operating Statistics

Statistic

(2)

Units

2001

2002

2003

2004

(1)

Production
Tonnes Milled

(kt)

492

782

1,389

540

Yield

(g/t)

3.0

6.6

8.6

11.1

Gold Production

(koz)

165

383

192

Development

(m)

5,144

6,022

14,677

4,226

Productivity TEC

(No.)

1,177

1,355

2,907

1,088

Milling

(t/TEC/month)

Gold Production

(g/TEC/month)

105

316

341

917

Health and Safety
Fatalities

(No.)

Fatality Rate

(per mmhrs)

0.35

LTIFR

(per mmhrs)

Expenditures
Cash Operating Costs

(ZARm)

290

523

673

260

Capital Expenditure

(ZARm)

521

102

123

Cost Performance
Cash Operating Costs

(ZAR/t)

589

669

485

481

(ZAR/kg)

189,949

98,496

56,588

43,409

Capital Expenditure

(ZAR/t)

1,059

130

(ZAR/kg)

341,252

19,181

10,329

8,361

(1)

2004 reports six-month actual results to December 2003.

(2)

Production from ETC mines is included, however those assets were sold during 2003.

2.2.2

Harmony

Harmony is a public listed company. Its primary listing is on the JSE and secondary listings are on the LSE, the Paris Bourse, with IDRs traded on the Brussels Bourse and an American Depositary Shares ("ADS") programme on the New York Stock Exchange, Inc. ("NYSE").

Harmony, through wholly-owned subsidiaries or joint venture agreements, manages and operates BUs, comprising operating and developing underground, open pit and surface reclamation operations in three countries. In addition, Harmony's exploration programme, targeting gold and PGEs, extends its country presence (through direct and indirect subsidiaries) into a total of five countries.

Harmony's company ownership comprises holdings in direct subsidiaries, indirect subsidiaries, direct and indirect joint venture companies and indirect associate companies. These comprise dormant companies, exploration companies, gold mining companies, investment holding companies, management service companies, marketing companies, beneficiation companies, mineral rights holding companies and property holding companies.

Harmony's operating structure principally comprises two reporting entities represented by South African Operations and International Operations. South African Operations are sub-divided into nine reporting entities: Free Gold Operations, Harmony Free State Operations, Welkom Operations, West Wits Operations (including Randfontein, Elandsrand and Deelkraal), Evander Operations, Orkney Operations, Kalgold Operations and International Operations (sub-divided into two operations, namely the Australian Operations and Canadian Operations).

Harmony's principal executive offices are located at 4 High Street, First Floor, Melrose Arch, Melrose North 2196, Johannesburg, Gauteng Province, South Africa.

Table 2.3 gives the historical company development of Harmony to date. By measure of attributable annual gold production Harmony is ranked 6th and by attributable total cash costs ranked 6th in terms of the world's gold mining companies. Harmony's core business is gold mining whose activities include the exploration, development and operation of gold mines, including direct interests in the marketing of gold and indirect interests in the manufacturing and retailing of gold jewellery.

Table 2.4 gives historical operating statistics attributable to Harmony from 2001 through to 31 December 2003, inclusive, with figures reported on a financial year basis.

Annexure 7

Table 2.3 Harmony: Company Development

Date

Activity

August, 1950

Harmony Gold Mining Company Limited incorporated and registered as a public company in South Africa.

1994

Management agreement between Randgold & Exploration Company Limited ("Randgold") and Harmony cancelled and replaced with service agreement.

1997

Service agreement between Randgold and Harmony cancelled resulting in Harmony operating as a completely independent gold mining company.

1997

Acquisition of Lydenburg Exploration Limited ("Lydex") for a consideration of ZAR204m.

June, 1998

Acquisition of Bissett gold mine from the liquidators of Rea Gold corporation for a consideration of ZAR26m.

July, 1998

The acquisition of Evander Gold Mines Limited for a consideration of ZAR545m.

October, 1999

Acquisition of Kalahari Goldridge Mining Company Limited and West Rand Consolidated Mines Limited for a consideration of ZAR321m.

March, 2000

Acquisition of Randfontein Estates Limited for a consideration of ZAR931m.

April, 2001

Acquisition of the Elandskraal mining operations from AngloGold Limited for a consideration of ZAR1,053m.

April, 2001

Acquisition of New Hampton Goldfields Limited for a consideration of ZAR229m.

September, 2001

Acquisition of 31.8% of the issued share capital of Bendigo Mining NL for a consideration of ZAR292m.

December, 2001

Acquisition of 50% of the issued share capital of Free Gold which purchased

(effective date 3 January 2002)

the Free Gold operations and certain other assets for approximately ZAR1,4bn.

April, 2002

Acquisition of Hill 50 Limited for a consideration of ZAR1,419m.

May, 2002

Acquisition of 32.5% of the ordinary share capital of Highland Gold Limited for a consideration of ZAR188m.

October, 2002

Joint acquisition by Free Gold of St. Helena BUs from Gold Fields Limited for a gross sale consideration of ZAR127m.

November, 2002

Harmony lists on the New York Stock Exchange ("NYSE").

November, 2002

Acquisition of 21% of the ordinary share capital of High River Gold Limited for a consideration of ZAR141m.

January, 2003

Randfontein Estates Limited ("Randfontein"), entered into agreement with Africa Vanguard Resources (Pty) Ltd ("AV"), in terms of which Randfontein sold 26% of its mineral rights in respect of Doornkop Mining Area to AV for a purchase consideration of R250m. Randfontein and AV entered into a JV agreement to jointly conduct mining operations at Doornkop.

February, 2003

Harmony announces offer for Abelle Limited ("Abelle") which values Abelle at ZAR689m.

May, 2003

Announcement of merger with ARMgold.

May, 2003

Announcement of an acquisition by Free Gold of 34.5% of the shares of Avmin for a consideration of ZAR844m in which Harmony and ARMgold each have 50%.

August 2003

Shareholder approval of the merger between Harmony and ARMgold for which 64,000,000 Harmony shares were issued to ARMgold, in the ratio of 2 Harmony shares for every 3 ARMgold shares.

August 2003

The arrangements between Randfontein and AV were implemented, and purchase price paid as per the agreement drawn up in January 2003. Gold at UK£2.05 per share valuing the shareholding at ZAR830.0m.

October 2003

Harmony disposed of its 17.0% shareholding in High River Gold at C$1.75 per share valuing the shareholding at ZAR156.7m.

November 2003

Announcement that: Anglovaal Mining Limited ("Avmin") will dispose of its entire 42.2% interest in Avgold to Harmony, Harmony will dispose of its Kalplats platinum discovery and associated mineral rights to Avmin.

November 2003

Harmony announced the sale of its Kalgold Operations to The Afrikander Lease Limited ("Aflease") for a consideration of ZAR275m. In terms of the agreement, Aflease will pay Harmony ZAR137.5m in cash, with the remaining ZAR137.5m being funded with the issue of ordinary shares. The sale will be effective after all legal conditions of the deal have been met, by approximately the end of February 2004. Harmony excluded its Kalplats deposit interests from this transaction.

Annexure 7

Table 2.4 Harmony: Salient Historical Operating Statistics

(1), (2)

Statistic

Units

2001

2002

2003

2004

(3)

Production

Area Mined

)

2,027,043

2,286,395

3,301,125

1,690,296

Tonnes Milled

(kt)

17,074

22,934

35,259

16,777

Yield

(g/t)

3.9

3.6

3.5

Gold Production

(koz)

2,140

2,668

4,040

1,911

Development

(m)

128,625

152,006

207,272

109,746

Productivity

TEC

(No.)

43,448

46,873

58,886

59,451

Centares

/TEC/month)

3.9

4.8

4.7

Milling

(t/TEC/month)

Gold Production

(g/TEC/month)

125

147

178

167

Health and Safety

Fatalities

(No.)

Fatality Rate

(per mmhrs)

0.28

0.35

0.30

0.28

LTIFR

(per mmhrs)

Expenditures

Cash Operating Costs

(ZARm)

3,822

5,215

8,673

4,486

Capital Expenditure

(ZARm)

424

735

773

445

Cost Performance

Cash Operating Costs

(ZAR/t)

224

227

246

267

(ZAR/kg)

57,419

62,853

69,030

75,479

Capital Expenditure

(ZAR/t)

(ZAR/kg)

6,370

8,859

6,154

7,486

(1)

TEC and productivity statistics exclude the Canadian operations as TEC figures unavailable.

(2)

Health and Safety statistics for Canadian and Australian Operations for 2001 are unavailable.

(3)

2004 reports actual results to December 2003.

2.3

Overview of the Mining Assets

2.3.1

Target Operations

Target Operations comprise Target Mine, Target North and Extensions and Oribi Exploration Property situated near the town of Allanridge in the Free State Province, South Africa, some 270km southwest of Johannesburg. Located at approximately latitude 28°00'S and longitude 26°30'E on the northern limit of the Welkom Goldfields, the site is accessed via the R30 situated between the towns of Bothaville and Welkom.

The Target Operations area was initially explored through surface drilling in the late 1980s with further exploration being undertaken from a 5.6km long decline, commenced in 1995, driven from 203L at Lorraine No.1 shaft. A positive feasibility study into the development of a 105ktpm operation was produced in May 1998 resulting in the decision to develop Target Mine. A detailed mine design was produced in 2000 and the mine officially opened in May 2002. Upon the closure of Loraine Mine in August 1998 the Lorraine No.1 and No.2 shafts were transferred to Target Mine becoming Target No.1 Shaft and Target No.2 Shaft, respectively.

Mining operations comprise one primary underground mine commissioned in May 2002 making use of information systems and mechanisation, combined with process-driven organisational design that relies on a multi-skilled workforce. The majority of the production is derived from mechanised mining; however conventional stoping is still employed primarily to de-stress areas ahead of the mechanised mining. The mining operations feed one central process facility, namely the Target Gold Plant.

Table 2.5 gives the salient operating statistics and Table 2.6 gives the historical operating statistics for Target Mine from 1 July 2001 through to 31 December 2003, inclusive.

Annexure 7

Table 2.5 Target Operations - Target Mine: Salient Operating Statistics

Maximum

Design

Operating

Production Unit

Capacity

(1)

Life

Classification

(ktpa)

(years)

Business Units
Target Mine

1,500

1,404

Long-life

Total Hoisting Capacity

1,500

1,404

Long-life

Surface Sources

Processing Plants
Target Gold Plant

1,260

1,285

Long-life

Total Processing Capacity

1,260

1,285

Long-life

(1)

Maximum Operating Capacity represents the maximum planned annual throughput for the LoM period.

Table 2.6 Target Operations - Target Mine: Salient Historical Operating Statistics

Statistic

Units

2001

2002

2003

2004

(1)

Production
Tonnes Milled

(kt)

492

782

1,068

540

Yield

(g/t)

3.0

6.6

8.6

11.1

Gold Production

(koz)

165

294

192

Development

(m)

5,144

6,022

7,431

4,226

Productivity
TEC

(No.)

1,177

1,355

1,119

1,088

Milling

(t/TEC/month)

Gold Production

(g/TEC/month)

105

316

262

917

Health and Safety
Fatalities

(No.)

Fatality Rate

(per mmhrs)

0.35

LTIFR

(per mmhrs)

Expenditures
Cash Operating Costs

(ZARm)

290

523

470

260

Capital Expenditure

(ZARm)

521

102

101

Cost Performance
Cash Operating Costs

(ZAR/t)

589

669

440

482

(ZAR/kg)

189,949

98,496

51,327

43,461

Capital Expenditure

(ZAR/t)

1,059

130

(ZAR/kg)

341,252

19,181

10,982

8,002

(1)

2004 reports six-month actual results to December 2003.

2.3.2

Free Gold Operations

The Free Gold Operations are situated in the Free State Province, South Africa, some 270km southwest of Johannesburg. Located at approximately latitude 28°00'S and longitude 26°30'E, the site is accessed via the national highway N1 between Johannesburg and Bloemfontein.

Exploration, development and production history in the area dates from the early 1940s, leading to commercial production by 1947. Subsequent consolidation and restructuring led to the formation of Free State Consolidated, which in addition to HJ Joel, became a wholly-owned subsidiary of AngloGold Limited ("AngloGold") in June 1998. Free Gold acquired the assets from Anglogold in December 2001 and St. Helena BUs from Goldfields during May 2002.

Mining operations comprise nine underground mining BUs: Tshepong, Phakisa, Bambanani, West, Eland, Sable & Kudu, Nyala, Joel and St. Helena (comprising BUs No.2, No.4, No.8 and No.10). Phakisa is currently a project for which capital is committed and is anticipated to commence in 2004. The mining operations feed four process facilities: FS1 Plant; FS2 Plant; Joel Plant and St. Helena Plant.

Annexure 7

Table 2.7 gives the salient operating statistics and Table 2.8 gives the historical operating statistics for Free Gold Operations from 1 January 2001 through to 31 December 2003, inclusive. Note that 2001 is reported on a calendar year, 2002 comprises six-months to 30 June 2002 and 2003 comprises 12-month actual results to June 2003 and 2004 is reports actual results to 31 December 2003.

Table 2.7 Free Gold Operations: Salient Operating Statistics

Maximum

Design

Operating

Business Unit

Capacity

(1)

Life

Classification

(ktpa)

Production Shafts
Tshepong BU

2,400

3,026

Long-Life

Bambanani BU

2,340

1,835

Medium-life

West BU

960

306

Short-life

Eland BU

840

385

Short-life

Kudu & Sable BU

1,440

247

Short-life

Nyala BU

3,360

606

Medium-life

Joel North & South BU

4,200

544

Long-Life

Phasika BU

1,800

1,400

Long-Life

St. Helena BU

4,020

618

Medium-life

Total Hoisting Capacity

21,360

7,079

Long-Life

Surface Sources

3,547

Short-life

Processing Plants
FS1 Plant - Milling

5,280

5,006

Long-Life

FS1 Plant - Leaching

5,280

5,006

Long-Life

FS2 Plant - Milling

3,240

Short-life

FS2 Plant - Leaching

3,600

Short-life

Joel Plant - Milling

1,620

1,458

Long-Life

Joel Plant - Leaching

1,800

1,458

Long-Life

St. Helena Plant - Milling

1,080

Short-life

St. Helena Plant - Leaching

1,200

1,120

Short-life

Total Processing Milling Capacity

11,220

9,561

Long-Life

Total Processing Leaching Capacity

11,880

11,007

Long-Life

(1)

Maximum Operating Capacity represents the maximum planned annual throughput for the LoM period.

Table 2.8 Free Gold Operations: Salient Historical Operating Statistics

Statistic

Units

2001

2002

2003

2004

(1)

Production
Area Mined

)

1,045,758

395,496

964,142

508,968

Tonnes Milled

(kt)

8,479

4,371

9,362

6,997

Yield

(g/t)

4.4

4.0

3.8

4.8

Gold Production

(koz)

1,199

558

1,155

1,085

Development

(m)

41,455

19,324

53,551

29,231

Productivity
TEC

(No.)

20,368

14,722

16,106

17,119

Centares

/TEC/month)

4.3

4.5

5.0

Milling

(t/TEC/month)

Gold Production

(g/TEC/month)

153

197

186

329

Health and Safety
Fatalities

(No.)

Fatality Rate

(per mmhrs)

0.35

0.24

0.15

0.25

LTIFR

(per mmhrs)

Expenditures
Cash Operating Costs

(ZARm)

2,409

883

2,125

2,290

Capital Expenditure

(ZARm)

135

Cost Performance
Cash Operating Costs

(ZAR/t)

284

202

227

327

(ZAR/kg)

64,619

50,879

59,141

67,847

Capital Expenditure

(ZAR/t)

(ZAR/kg)

1,555

1,827

1,746

4,010

(1)

2004 reports six-month actual results to December 2003.

Annexure 7

2.3.3

Harmony Free State Operations

The Harmony Free State Operations are situated in the Free State Province, South Africa, some 270km southwest of Johannesburg. Located at approximately latitude 28°10'S and longitude 26°30'E, the site is accessed via the national highway N1 between Johannesburg and Bloemfontein.

Exploration, development and production history in the area dates from the early 1940s. Harmony's Free State Operations commenced with amalgamation of Harmony, Virginia and Merriespruit mining operations. Subsequent acquisitions included: Unisel BU in 1996; Saaiplaas BU in 1997; Brand BUs in 1998 and Masimong in 1998.

Table 2.9 gives the salient operating statistics and Table 2.10 gives the historical operating statistics for Harmony Operations from 1 January 2001 through to 31 December 2003, inclusive. Note that 2003 comprises twelve-month actual results to June 2003 and 2004 reports the actual results to 31 December 2003.

Table 2.9 Harmony Free State Operations: Salient Operating Statistics

Maximum

Design

Operating

Business Unit

Capacity

(1)

Life

Classification

(ktpa)

Production Shafts Harmony No.2 BU

2,724

550

Medium-life

Harmony No.3 BU

1,080

Not in use

Harmony No.4 BU

1,752

Not in use

Merriespruit No.1 BU

1,548

597

Medium-life

Merriespruit No.3 BU

2,364

826

Medium-life

Virginia No.2 BU

1,236

Not in use

Unisel BU

1,644

751

Long-Life

Saaiplaas No.3 BU

2,112

327

Long-Life

Brand No.2 BU

1,440

Not in use

Brand No.3 BU

1,440

461

Medium-life

Brand No.5 BU

1,812

Not in use

Masimong No.4 BU

840

341

Long-Life

Masimong No.5 BU

960

946

Long-Life

Total Hoisting Capacity

20,952

4,504

Long-Life

Surface Sources

2,822

Long-Life

Processing Plants Central Plant - Milling

2,160

Long-Life

Central Plant - Leaching

2,880

Long-Life

Virginia Plant - Milling

1,980

1,944

Medium-life

Virginia Plant - Leaching

2,160

1,944

Medium-life

Saaiplaas Plant - Milling

1,800

1,823

Long-Life

Saaiplaas Plant - Leaching

2,640

2,663

Long-Life

Total Processing Milling Capacity

5,940

5,927

Long-Life

Total Processing Leaching Capacity

7,680

7,487

Long-Life

(1)

Maximum Operating Capacity represents the maximum planned annual throughput for the LoM period.

Annexure 7

Table 2.10 Harmony Free State Operations: Salient Historical Operating Statistics

Statistic

Units

2001

2002

2003

2004

(1)

Production
Area Mined

)

721,709

738,793

767,555

427,929

Tonnes Milled

(kt)

5,289

4,536

5,338

2,950

Yield

(g/t)

4.0

4.2

3.6

3.5

Gold Production

(koz)

686

612

611

330

Development

(m)

50,027

51,188

53,691

28,047

Productivity
TEC

(No.)

15,668

12,776

11,178

12,673

Centares

/TEC/month)

3.8

4.8

5.7

5.6

Milling

(t/TEC/month)

Gold Production

(g/TEC/month)

114

124

142

135

Health and Safety
Fatalities

(No.)

Fatality Rate

(per mmhrs)

0.26

0.27

0.07

0.51

LTIFR

(per mmhrs)

Expenditures
Cash Operating Costs

(ZARm)

1,385

1,351

1,518

852

Capital Expenditure

(ZARm)

120

126

Cost Performance
Cash Operating Costs

(ZAR/t)

262

298

284

289

(ZAR/kg)

64,883

70,978

79,875

82,995

Capital Expenditure

(ZAR/t)

(ZAR/kg)

5,622

4,991

6,631

2,515

(1)

2004 reports six-month actual results to December 2003.

2.3.4

Welkom Operations

The Welkom Operations are situated in the Free State Province, South Africa, some 270km southwest of Johannesburg. Located at approximately latitude 28°00'S and longitude 26°30'E, the site is accessed via the national highway N1 between Johannesburg and Bloemfontein.

Exploration, development and production history in the area dates from the 1940s leading to commercial production by 1947. Mining operations comprise six underground mining BUs: BU No.1; BU No.2; BU No.3, BU No.4; BU No.6 and BU No.7 which have a combined rock hoisting capacity of 313ktpm. The mining operations process their ore via a toll agreement with Free Gold.

Table 2.11 gives the salient operating statistics and Table 2.12 gives the historical operating statistics for Welkom Operations from 1 January 2001 through to 31 December 2003, inclusive. Note that 2001 is reported on a calendar year, 2002 comprises six months to 30 June 2002 and 2003 comprises 12-month actual results to June 2003 and 2004 reports the actual results to 31 December 2003.

Table 2.11 Welkom Operations: Salient Operating Statistics

Maximum

Design

Operating

Business Unit

Capacity

(1)

Life

Classification

(ktpa)

Production Shafts
No.1 BU

816

305

Short-life

No.2 BU

648

Short-life

No.3 BU

660

Short-life

No.4 BU

660

Short-life

No.6 BU

816

105

Short-life

No.7 BU

816

288

Medium-life

Total Hoisting Capacity

4,416

864

Medium-life

No Surface Sources

Processing Plants
No operational plant

(1)

Maximum Operating Capacity represents the maximum planned annual throughput for the LoM period.

Annexure 7

Table 2.12 Welkom Operations: Salient Historical Operating Statistics

Statistic

Units

2001

2002

2003

2004

(1)

Production
Area mined

)

73,178

38,065

104,571

58,764

Tonnes Milled

(kt)

340

224

577

315

Yield

(g/t)

5.1

4.9

3.4

3.6

Gold Production

(koz)

Development

(2)

(m)

1,296

1,483

5,843

459

Productivity
TEC

(No.)

1,492

1,786

2,348

2,179

Centares

/TEC/month)

4.1

3.6

3.7

4.5

Milling

(t/TEC/month)

Gold Production

(g/TEC/month)

102

Health and Safety
Fatalities

(No.)

Fatality Rate

(per mmhrs)

0.92

0.38

0.35

LTIFR

(per mmhrs)

Expenditures
Cash Operating Costs

(ZARm)

144

101

203

115

Capital Expenditure

(ZARm)

Cost Performance
Cash Operating Costs

(ZAR/t)

425

449

352

366

(ZAR/kg)

82,737

92,093

104,211

102,703

Capital Expenditure

(ZAR/t)

(ZAR/kg)

5,444

6,778

15,236

(1)

2004 reports actual results to December 2003.

(2)

During 2003 high-speed development team was contracted for a specific development project required to improve ventilation aspects at BU No.1.

2.3.5

West Wits Operations

The West Wits Operations principally comprise Elandsrand BU, Deelkraal BU, Cooke 1 BU, Cooke 2 BU, Cooke 3 BU and Doornkop BU and the non-operational Randfontein No.4 BU. Elandsrand BU and Deelkraal BU are situated in the Gauteng and North West Province, South Africa, some 85km southwest of Johannesburg. Located at approximately latitude 26°00'S and longitude 27°00'E, the site is accessed via the national highway N12 between Johannesburg and Kimberley. Cooke BUs and Doornkop BU are situated in the Gauteng Province, South Africa, some 50km west of Johannesburg. Located at latitude 26°22'S and longitude 27°42'E, the site is accessed via the local R28 highway between Randfontein and Westonaria.

Exploration, development and production history in the West Wits area dates from 1930, leading to large-scale production by the 1940s whilst exploration, development and production history in the Cooke BUs and Doornkop BU areas dates back to 1889.

Table 2.13 gives the salient operating statistics and Table 2.14 gives the historical operating statistics for West Wits Operations from 1 January 2001 through to 31 December 2003, inclusive. Note that 2003 comprises 12-month actual results to June 2003 and 2004 reports the actual results to 31 December 2003.

Annexure 7

Table 2.13 West Wits Operations: Salient Operating Statistics

Maximum

Design

Operating

Business Unit

Capacity

(1)

Life

Classification

(ktpa)

Production Shafts

Elandsrand BU

3,972

2,168

Long-Life

Deelkraal BU

2,244

837

Medium-life

Cooke 1 BU

2,112

672

Medium-life

Cooke 2 BU

2,244

853

Long-Life

Cooke 3 BU

3,180

1,186

Long-Life

Cooke 4 BU

1,788

Not in use

Doornkop BU

2,400

2,383

Long-Life

Total Hoisting Capacity

17,940

6,605

Long-Life

Surface Sources

2,250

Medium-life

Processing Plants

Elandsrand Plant - Milling

2,280

1,775

Long-Life

Elandsrand Plant - Leaching

2,280

1,775

Long-Life

Deelkraal Plant - Milling

1,260

720

Medium-life

Deelkraal Plant - Leaching

1,260

720

Medium-life

Cooke Plant - Milling

3,360

3,173

Long-Life

Cooke Plant - Leaching

3,360

3,173

Long-Life

Doornkop Plant - Milling

2,400

2,220

Short-life

Doornkop Plant - Leaching

2,700

2,220

Short-life

Total Processing Milling Capacity

9,300

7,444

Long-Life

Total Processing Leaching Capacity

9,600

7,444

Long-Life

(1)

Maximum Operating Capacity represents the maximum planned annual throughput for the LoM period.

Table 2.14 West Wits Operations: Salient Historical Operating Statistics

Statistic

Units

2001

2002

2003

2004

(1)

Production

Area Mined

)

870,966

946,311

806,649

373,309

Tonnes Milled

(kt)

6,991

8,078

7,862

3,893

Yield

(g/t)

3.8

4.0

3.4

3.1

Gold Production

(koz)

846

1,038

859

394

Development

(m)

47,738

59,155

57,355

35,884

Productivity

TEC

(No.)

17,640

16,907

15,110

14,131

Centares

/TEC/month)

4.1

4.7

4.4

Milling

(t/TEC/month)

Gold Production

(g/TEC/month)

124

159

147

144

Health and Safety

Fatalities

(No.)

Fatality Rate

(per mmhrs)

0.32

0.47

0.54

0.23

LTIFR

(per mmhrs)

Expenditures

Cash Operating Costs

(ZARm)

1,400

1,963

1,869

1,017

Capital Expenditure

(ZARm)

115

262

169

134

Cost Performance

Cash Operating Costs

(ZAR/t)

200

243

238

261

(ZAR/kg)

53,187

60,819

69,973

83,048

Capital Expenditure

(ZAR/t)

(ZAR/kg)

4,369

8,117

6,335

10,915

(1)

2004 reports six-month actual results to December 2003.

Annexure 7

2.3.6

Evander Operations

Evander Operations are situated in the Mpumalanga Province, South Africa, some 120km east- southeast of Johannesburg. Located at latitude 28°28'S and longitude 29°06'E, the site is accessed via the local R29 road between Leandra and Bethel in the vicinity of Kinross.

Exploration, development and production history in the area dates from 1903, leading to full-scale production by 1955. Evander Operations originally comprised Kinross, Bracken, Leslie and Winkelhaak that were merged in 1996 due to declining Mineral Reserves. In August 1998, Harmony acquired Evander as a wholly-owned subsidiary.

Table 2.15 gives the salient operating statistics and Table 2.16 gives the historical operating statistics for Evander Operations from 1 January 2001 through to 31 December 2003 inclusive. Note that 2003 comprises 12-month actual results to June 2003 and 2004 reports the actual results to 31 December 2003.

Table 2.15 Evander Operations: Salient Operating Statistics

Maximum

Design

Operating

Business Unit

Capacity

(1)

Life

Classification

(ktpa)

Production Shafts
Evander No.2 BU

828

615

Long-Life

Evander No.3 BU

240

Not in use

Evander No.5 BU

1,128

332

Long-Life

Evander No.7 BU

1,272

602

Long-Life

Evander No.8 BU

1,764

824

Long-Life

Evander No.9 BU

996

235

Short-life

Total Hoisting Capacity

6,228

2,545

Long-Life

Surface Sources

237

Medium-life

Processing Plants
Kinross Plant - Milling

1,920

1,576

Long-Life

Kinross Plant - Leaching

2,400

2,428

Long-Life

Winkelhaak Plant - Milling

816

852

Long-Life

Winkelhaak Plant - Leaching

Not in use

Total Processing Milling Capacity

2,736

2,428

Long-Life

Total Processing Leaching Capacity

2,400

2,428

Long-Life

(1)

Maximum Operating Capacity represents the maximum planned annual throughput for the LoM period.

Table 2.16 Evander Operations: Salient Historical Operating Statistics

Statistic

Units

2001

2002

2003

2004

(1)

Production Area Mined

)

434,368

403,543

350,391

183,029

Tonnes Milled

(kt)

2,481

2,352

2,127

1,113

Yield

(g/t)

5.7

5.5

5.3

Gold Production

(koz)

458

415

360

188

Development

(m)

30,861

32,002

28,435

14,074

Productivity
TEC

(No.)

8,805

8,639

6,906

7,203

Centares

/TEC/month)

4.1

3.9

4.2

Milling

(t/TEC/month)

Gold Production

(g/TEC/month)

135

125

135

Health and Safety
Fatalities

(No.)

Fatality Rate

(per mmhrs)

0.27

0.33

0.23

0.41

LTIFR

(per mmhrs)

Expenditures
Cash Operating Costs

(ZARm)

693

723

796

441

Capital Expenditure

(ZARm)

Cost Performance
Cash Operating Costs

(ZAR/t)

279

307

374

396

(ZAR/kg)

48,628

55,960

71,006

75,433

Capital Expenditure

(ZAR/t)

(ZAR/kg)

4,842

7,585

8,776

8,405

(1)

2004 reports six-month actual results to December 2003.

Annexure 7

2.3.7

Orkney Operations

The Orkney Operations are situated in North West Province, South Africa, some 175km south-west of Johannesburg. Located at approximately latitude 26°30'S and longitude 26°45'E, the site is accessed via the national highway N12 between Johannesburg and Kimberley.

Exploration, development and production history in the area dates from 1886 and following dormant periods, large-scale production commenced during the 1940s with the formation of Vaal Reefs Gold Mining and Exploration Company Limited ("Vaal Reefs") in 1944.

Mining operations comprise six underground mining BUs: BU No.1, BU No.2, BU No.3, BU No.4, BU No.6 and BU No.7. BU No.1 will shortly become non-operational and BU No.5 has been closed. The mining operations process their ore via a toll agreement with Vaal River Operations ("VRO") belonging to AngloGold.

Table 2.17 gives the salient operating statistics and Table 2.18 gives the historical operating statistics for Orkney Operations from 1 January 2001 through to 31 December 2003, inclusive. Note that 2001 is reported on a calendar year basis, 2002 comprises six-months to 30 June 2002 and 2003 comprises 12-month actual results to June 2003 and 2004 is reported as the actual results to 31 December 2003.

Table 2.17 Orkney Operations: Salient Operating Statistics

Maximum

Design

Operating

Business Unit

Capacity

(1)

Life

Classification

(ktpa)

Production Shafts No.1 BU

1,644

Not in use

No.2 BU

1,704

468

Short-life

No.3 BU

1,560

279

Short-life

No.4 BU

1,920

443

Medium-life

No.5 BU

1,320

Not in use

No.6 BU

1,620

218

Medium-life

No.7 BU

1,620

108

Medium-life

Total Hoisting Capacity

11,388

1,484

Medium-life

No Surface Sources

Processing Plants No operational plant

(1)

Maximum Operating Capacity represents the maximum planned annual throughput for the LoM period.

Table 2.18 Orkney Operations: Salient Historical Operating Statistics

Statistic

Units

2001

2002

2003

2004

(1)

Production
Area Mined

)

348,345

164,939

307,817

138,297

Tonnes Milled

(kt)

2,060

942

1,761

783

Yield

(g/t)

7.1

7.6

7.2

6.4

Gold Production

(koz)

468

232

408

161

Development

(m)

6,944

2,628

4,398

2,053

Productivity
TEC

(No.)

6,579

6,174

5,854

4,696

Centares

/TEC/month)

4.4

2.2

4.4

4.9

Milling

(t/TEC/month)

Gold Production

(g/TEC/month)

184

180

178

Health and Safety
Fatalities

(No.)

Fatality Rate

(per mmhrs)

0.56

0.48

0.45

LTIFR

(per mmhrs)

Expenditures
Cash Operating Costs

(ZARm)

730

407

788

345

Capital Expenditure

(ZARm)

Cost Performance
Cash Operating Costs

(ZAR/t)

355

432

447

440

(ZAR/kg)

50,195

56,450

62,125

68,827

Capital Expenditure

(ZAR/t)

(ZAR/kg)

2,076

3,152

490

856

(1)

2004 reports six-month actual results to December 2003.

Annexure 7

2.3.8

Kalgold Operation

Kalgold Operation is currently subject to sale as described in more detail within the circular. Until such time as the sale agreement has become unconditionally effective, the asset still forms part of Harmony. As at the base valuation date of 31 December 2003, Kalgold was still contributing to the equity value of Harmony as reported in Section 14. Notwithstanding this statement, the valuation as reported in Section 14 considers the combined Mining Asset valuation with and without Kalgold.

The Kalgold Operation is situated some 50km southwest of Mafikeng in the North West Province, South Africa, some 300km west of Johannesburg. Located at latitude 26°10'S and longitude 26°14'E, the site is accessed via the local R49 road between Mafikeng and Vryburg.

The gold deposits at Kalgold were discovered by Shell South Africa (Pty) Limited ("Shell") in 1991 following an exploration programme focused on the poorly exposed Archaean Greenstone belts of the Kraaipan Group, which occur in the area. In 1995 a feasibility study was conducted by West Rand Consolidated Mines Limited ("WRCM") who acquired the mineral and surface rights leading to the development of an open pit operation in July 1996. Harmony acquired Kalgold in July 1999.

Table 2.19 gives the salient operating statistics and Table 2.20 gives the historical operating statistics for Kalgold Operations from 1 January 2001 through to 31 December 2003, inclusive. Note that 2003 comprises 12-month actual results to June 2003 and 2004 reports the actual results to 31 December 2003.

Table 2.19 Kalgold Operation: Salient Operating Statistics

Maximum

Design

Operating

Business Unit

Capacity

(1)

Life

Classification

(ktpa)

Business Units Processing Operations

1,620

1,572

Short-life

(1)

Maximum Operating Capacity represents the maximum planned annual throughput for the LoM period.

Table 2.20 Kalgold Operation

(1)

: Salient Historical Operating Statistics

Statistic

Units

2001

2002

2003

2004

(2)

Production
Waste Tonnes Mined

(kt)

8,542

7,323

7,711

4,763

Tonnes Milled

(kt)

959

961

1,084

694

Yield

(g/t)

1.6

2.0

2.1

2.0

Gold Production

(koz)

Stripping Ratio

waste:

ore

)

8.9

7.6

7.1

6.9

Productivity
TEC

(No.)

453

444

501

533

Milling

(t/TEC/month)

176

180

217

Gold Production

(g/TEC/month)

282

363

386

445

Health and Safety
Fatalities

(No.)

Fatality Rate

(per mmhrs)

0.00

LTIFR

(per mmhrs)

Expenditures
Cash Operating Costs

(ZARm)

130

150

Capital Expenditure

(ZARm)

1.8

Cost Performance
Cash Operating Costs

(ZAR/t)

102

135

138

143

(ZAR/kg)

63,844

67,218

64,583

69,845

Capital Expenditure

(ZAR/t)

(ZAR/kg)

21,498

12,927

16,785

1,232

(1)

The contribution from Kalgold is subject to a current sale agreement which may see a 100% disposal of the asset

in the near future.

(2)

2004 reports six-month actual results to December 2003.

Annexure 7

2.3.9

Harmony Australian Operations

The two main operating groups of Harmony Australia are the Mt. Magnet & Cue Operations and the South Kalgoorlie Operations. Mt. Magnet & Cue Operations are situated in the Murchison region, Western Australia whilst the South Kalgoorlie operations are located as part of the Eastern Goldfields near the town of Kalgoorlie. Mt. Magnet Operation comprises a number of open pits and decline operations at Morning Star and Hill 50 and the processing of surface stockpiles. The Cue Operation comprises a number of open pits at Big Bell, Cuddingwarra, Golden Crown and Tuckabianna. The Big Bell underground operation was recently closed. The South Kalgoorlie operations comprise the Jubilee and New Celebration facilities, the Mt. Marion mine comprises an underground and open pit operations.

Exploration, development and production history at Mt. Magnet & Cue and South Kalgoorlie areas dates from 1896 and 1937, respectively. Mining at Mt. Magnet began with the discovery of gold in 1896 and up to 30 June 2002 some 5Moz has been produced. Gold mining at Big Bell in the Cue area commenced in 1937 but closed between 1955 and 1989 and up until 30 June 2002 gold sales exceeded 2Moz. Mining at South Kalgoorlie substantively commenced in 1987 and up until 30 June 2002 gold production of some 2Moz has been realised.

Table 2.21 gives the salient operating statistics and Table 2.22 gives the historical operating statistics for Harmony Australia Operations from 1 January 2001 through to 31 December 2003 inclusive. Note 2003 comprises 12-month actual results to June 2003 and 2004 reports the actual results to 31 December 2003.

Table 2.21 Harmony Australian Operations: Salient Operating Statistics

Maximum

Design

Operating

Business Unit

Capacity

(1)

Life

Classification

(ktpa)

Business Units
Mount Magnet & Cue Plant

5,940

2,496

7.3

Medium-life

Jubilee Plant

1,320

1,176

3.0

Short-life

New Celebration Plant

1,656

504

0.3

Short-life

Total

8,916

4,176

7.3

Medium-life

(1)

Maximum Operating Capacity represents the maximum planned annual throughput for the LoM period.

Table 2.22 Harmony Australian Operations: Salient Historical Operating Statistics

Statistic

Units

2001

2002

2003

2004

(1)

Production
Tonnes Milled

(kt)

1,088

4,782

7,148

2,545

Yield

(g/t)

1.6

2.2

2.4

Gold Production

(koz)

253

510

193

Productivity
TEC

(No.)

882

917

Milling

(t/TEC/month)

103

452

675

463

Gold Production

(g/TEC/month)

164

743

1,498

1,092

Health and Safety
Fatalities

(No.)

Fatality Rate

(per mmhrs)

0.00

LTIFR

(per mmhrs)

Expenditures Cash Operating Costs

(ZARm)

135

608

1,226

431

Capital Expenditure

(ZARm)

233

242

Cost Performance
Cash Operating Costs

(ZAR/t)

124

127

171

169

(ZAR/kg)

77,990

77,265

77,311

71,643

Capital Expenditure

(ZAR/t)

(ZAR/kg)

10,399

29,610

15,274

15,798

(1)

2004 reports six-month actual results to December 2003.

Annexure 7

2.3.10 Harmony Canadian Operations

Harmony's Canadian Operations comprise the Bisset gold mine located near Bisset in the Manitoba Province, Canada. Mining activities were suspended in the second quarter of 2002 for economic reasons. The first mining at Bisset commenced in 1932 and continued until operations were ceased in June 1998 following the liquidation of the Bisset Gold Mine Company. Bisset had sold some 1.3Moz up until June 1995.

Table 2.23 gives the historical operating statistics for Harmony Canadian Operations from 1 July 2001 through to 31 December 2003, inclusive. For 2003, there was no production due to suspension of mining operations in the previous year.

Table 2.23 Harmony Canadian Operations: Salient Historical Operating Statistics

Statistic

Units

2001

2002

2003

2004

Production
Tonnes Milled

(kt)

266

Yield

(g/t)

5.2

6.6

Gold Production

(koz)

Productivity
TEC

(No.)

Milling

(t/TEC/month)

Gold Production

(g/TEC/month)

Health and Safety
Fatalities

(No.)

Fatality Rate

(per mmhrs)

0.00

LTIFR

(per mmhrs)

Expenditures
Cash Operating Costs

(ZARm)

111

Capital Expenditure

(ZARm)

-10

Cost Performance
Cash Operating Costs

(ZAR/t)

417

231

(ZAR/kg)

80,552

35,019

Capital Expenditure

(ZAR/t)

184

-256

(ZAR/kg)

35,559

-38,911

2.4

Significant Exploration Properties

2.4.1

Avgold

The Target North Project considers options to exploit the Sun South area comprising the Paradise, Siberia and Mariasdal blocks of ground located immediately north of the Eldorado block of the existing Target Mine. From the south, the Blast Fault separates the Eldorado and Paradise blocks whilst the Siberia Fault separates the Paradise and Siberia blocks. The Mariasdal block adjoins the Siberia block and is bounded to the north by the Mariasdal Fault. The Sun South area comprises an extension of the Elsburg and Dreyerskuil reefs mined at Target Mine. Mineral Resources (Table 4.9 in Section 4) have been identified, of which 60% are classed as Inferred. High-level pre-feasibility/scoping studies have been completed by Avgold that consider three options for possible future development:

a "greenfields" development comprising a newly developed two shaft system to exploit all the blocks;

the "brownfields" development comprising an initial twin shaft system sunk to 2,500m below surface adjacent to the Target Mine ground handling infrastructure at 282L, a third "North Shaft" to be sunk to 2,500m below surface located towards the north of the Siberia block. The twin shaft system would exploit the Paradise block and certain material of the Siberia block whilst the North Shaft would be used to exploit the remainder of the Siberia block and the Mariasdal block. Ground between 2,500m and 3,000m would be accessed by vehicle ramps; and

the "brownfields" development comprising an initial single shaft sunk to 2,500m below surface, adjacent to the Target Mine ground handling infrastructure at 282L (South Shaft) and a subsequent North Shaft located towards the north of the Siberia block. The South Shaft would cater for men, material, ventilation and limited rock handling facilities. These shafts, together with access ramps for ground between 2,500m and 3,000m, would be used to exploit the blocks of the Sun South area.

Annexure 7

High-level indicative cash flows derived negative NPVs for the first two options; however the third option did realise a positive NPV. For Option 3, the first phase of the two-shaft system would utilise the existing ground handling facilities of Target Mine to recover 120ktpm of high-grade ore whilst 40 ktpm of low-grade material would be hoisted directly by the South Shaft, resulting in overall production of some 160ktpm. Mining would be concentrated on material above 2,500m from the Target workings and the Paradise block. Phase 2 would focus on development into the Paradise and Siberia blocks and expand production to some 220ktpm. The final third phase would introduce the North Shaft for the provision of men, material and ventilation to the northern blocks maintaining production at some 220ktpm.

Installing the initial single shaft for Phase 1 is estimated, by Avgold, to cost ZAR0.9billion, a further ZAR1.5 billion is estimated for the expanded infrastructure to cater for a 220ktpm operation of Phase 2 and an additional ZAR4billion for Phase 3. A feasibility study will commence during 2004 to further define the technical and economic parameters of the project to ascertain the NPV prior to making any capital commitments.

Until such time as the appropriate level of technical detail has been completed no Mineral Reserves and associated DCF valuation can be applied and as such only reports Mineral Resources.

2.4.2

Harmony

Harmony has three significant exploration properties: namely Poplar, Rolspruit and Kalplats.

The Poplar Project considers the green-fields development through installation of a twin shaft system to some 1,200m below surface to access ore some 20km from the existing Evander Operations. Mineral Resources have been estimated and the project is currently the focus of a pre-feasibility study.

The Rolspruit Project considers the exploitation of deeper resources of the Kimberley Reef adjacent to the No.8 BU at Evander Operations. Harmony has recently (March 2003) completed a feasibility study, which assesses two distinct options:

green-fields option:

the installation of a twin shaft system from surface; and

brown-fields option:

the installation of a twin sub-vertical shaft system at No.8 BU.

Given the high capital expenditure requirements and long lead-time to full production, current focus is on improving project economic performance.

The Kalplats Project is situated some 90km southwest of Mafikeng in the North West Province, South Africa, some 340km west of Johannesburg. The project is located some 40km to the west of the Kalgold Operation and accessed via the local R49 road between Mafikeng and Vryburg.

Kalplats is a platinum group metal ("PGM") prospect that was discovered during the course of gold prospecting in the Kraaipan greenstone belt in 2000. Mineralisation is contained in some seven separate ore zones with strike lengths between 500m to 1,000m and widths between 15m and 45m. Exploration has been completed and comprised a combination of Rotary Air Blast, Reverse Circulation and Diamond Drilling and a Pre-feasibility Study was completed in July 2002.

The Pre-feasibility Study concluded that the future viability of commissioning a mining operation at Kalplats depended on selectively mining the higher-grade reef zones. A Feasibility Study was commissioned in 2003 and work included the excavation of a 500t bulk sample for metallurgical testing of anticipated flotation recoveries and concentrate grades. Harmony is currently commissioning a Feasibility Study in order to assess the potential development of an open pit mining operation.

2.5

Mining Authorisations and Mining Leases

SRK has not reviewed the various agreements relating to mineral rights, authorisations and leases from a legal perspective and has consequently relied on advice by the Companies to the effect that the Companies are entitled to mine all material falling within their respective mineral rights and/or mining rights and that all the necessary statutory mining authorisations are lawfully in place.

Notwithstanding this statement, SRK has been provided with sufficient documentation and a supporting letter confirming that following the completion of a recent and comprehensive internal audit all mineral rights, mynpatchen, claims and mining leases being in respect of said mining leases have been duly validated and verified by the individuals as identified in Section 1 and employed by Harmony's legal services.

Annexure 7

2.5.1

South African Law: Current Status

Ownership of mineral rights and statutory mining rights in South Africa may be affected through the common law or by statute. Under the common law, mineral rights vest with the owner of the land. The common law recognises the principal that mineral rights may be severed from title to land, rendering it possible for the surface rights, the rights to precious metals and the rights to base minerals to be owned by different persons.

Earlier mining legislation, which has since been repealed, granted, by way of mining leases, statutory rights to mine for precious metals. Despite the repeal of this earlier legislation, mining leases continue to be valid under the terms of the Minerals Act (Act 50 of 1991) (the "Act"). Registration of title to mineral rights ensures that real rights are constituted in and to the minerals concerned. Upon registration, those rights (either common law mineral rights or statutory mining rights) become effective against third parties. Registered title may be obtained in a number of ways. For example, where mineral right ownership has been separated from land ownership, registered title to the common law mineral rights is obtained by the registration of such ownership in the Deeds Registry Office. Alternatively, where a person has acquired statutory mining rights pursuant to a mining lease, registered title to the statutory mining rights is effected after receipt of the necessary consent from the Minister of Minerals and Energy and by registration of those rights in the Mining Titles Office.

The Act currently governs prospecting and mining activities in South Africa. The Act provides that statutory mining rights supersede common law mineral rights. Thus, pursuant to the Act, the holders of statutory mining rights are deemed to be the common law holders of the mineral rights.

2.5.2

South African Law: The Minerals and Petroleum Resources Development Act

The Minerals and Petroleum Resources Development Act (Act 28 of 2002) was promulgated by the South African Parliament during July 2002 as the Minerals Act (the "Minerals Act"). The Minerals Act sets out to "make provision for the equitable access and sustainable development of the nation's mineral and petroleum resources" by bringing the country's mining law up to internationally accepted standards. It is also expected to provide many opportunities for recognised empowerment exploration and mining companies.

The legislation will enforce the "use it or lose it" principle of mineral exploration and development. In platinum, in particular, it unlocks stagnant areas currently owned by private owners of mineral rights unwilling or unable to bring them to account and by mining companies wishing to hold reserves and resources for the next 30 years and longer. Government's view is that in order to redress the wrongs of the past, it needs to promote industry to provide employment and to generate revenue for the country-wide Reconstruction and Development Initiative.

The Minerals Act seeks to address the issue of Historically Disadvantaged South Africans ("HDSA") ownership. The South African Government's Mining Charter embodies the policy of facilitating the transfer of ownership within the South African mining industry to HDSA within the next 10 years. All stakeholders have agreed a target of 26% empowerment status to be achieved in a transparent manner and at fair market value.

The Mining Charter also aspires to achieve employment equity and targets of at least 40% HDSA participation in management within five years, with 10% being participation by women.

2.5.3

South African Law: Prospecting Permits

Prospecting is governed by the Act and is defined as "intentionally searching for any mineral by means which disturb the surface of the earth, including the portion under the sea or under other water or of any tailings, by means of excavation or drilling necessary for that purpose".

Section 5(2) states that no person may prospect or mine without the necessary authorisations. This requirement departs from the common law principles governing ownership of minerals and restricts the right of owners to prospect and exploit mineral resources that fall within their ownership. It is a requirement that the applicant for a prospecting permit be the holder of the mineral right or has acquired the written consent of the mineral right holder to prospect for his own account. The prospector may not remove or dispose of any mineral found during prospecting operations unless the Director of Mineral Development has given permission for such removal. Under the Act the Director of Mineral Development has the power to issue prospecting permits. A prospecting application must be submitted and be accompanied by proof of right to the minerals, details about the manner in which the applicant intends to prospect and rehabilitate disturbances of the surface which may be caused by the intended prospecting operations and particulars concerning the applicant's ability to make the necessary provision to rehabilitate disturbances of the surface which may be caused by the intended prospecting operations.

Annexure 7

The details of the manner in which the applicant intends to rehabilitate disturbances of the surface are to be submitted in the form of an environmental management programme ("EMP") for approval by the Director of Minerals Development. Such approval is in addition to the approval of the prospecting permit and no prospecting operation may commence without approval of the EMP.

A prospecting permit is issued for a period of 12 months but may be granted for longer should it be so determined by the Director of Minerals Development and can be renewed. The Act restricts and prohibits prospecting on certain lands including National Parks, townships or urban areas, land comprising public roads, a railway or cemetery and land that has been reserved for public purposes.

2.5.4

South African Law: Mining Authorisations

Under the Act, no person or mining entity may mine for minerals without being granted a mining authorisation, either temporary or permanent. Prior to granting a mining authorisation, two requirements must be fulfilled. Firstly, the mining entity must either be the registered holder of the mineral rights or have obtained the written consent of the registered holder of the mineral rights to mine the minerals concerned, for its own account. Secondly, the Department of Minerals and Energy must be satisfied with the scale, manner and duration of the intended mining operations and must approve an Environmental Management Programme Report ("EMPR").

The Act provides for two forms of permanent mining authorisations, namely mining permits and mining licences. A mining permit is issued where the minerals occur in limited quantities or will be mined on a limited scale and on a temporary basis. A mining licence is issued where the minerals occur in more than limited quantities or will be mined on a larger than limited scale and for a period longer than two years.

The Act allows a temporary mining authorisation to be issued either to ensure the continuation of existing operations or to accommodate circumstances where approval of an EMPR is outstanding. Temporary mining authorisations are generally issued for limited periods but are renewable until the EMPR has been approved.

2.5.5

South African Law: The Royalty Bill

On 10 March 2003, the Royalty Bill was released for public comment. The Royalty Bill is currently being revised and the date of release of the revised version is unknown.

The Royalty Bill proposes to impose a 3%, 4% and 8% revenue-based royalty on the South African gold mining sector, platinum sector and diamond sector respectively, payable to the South African Government. Under the terms of the Royalty Bill released for comment, the royalty is to take effect when companies convert to New Order Mining Rights in accordance with the New Minerals Act, although the Minister has indicated that the royalty is not expected to take effect until the transitional period for the conversion of mining rights under the New Minerals Act expires. If adopted, the Royalty Bill may have an impact on the operating results (technical) and will have a negative impact on the financial performance, hence valuation of the Mining Assets.

2.5.6

Australian Law

In Australia, with few exceptions, all onshore mineral rights are reserved to the government of the relevant state or territory. Exploration for and mining of minerals is regulated by the mining legislation of that state or territory and controlled by the relevant state or territory department. Where native title has not been extinguished, native title legislation may apply to the grant of tenure and some subsequent administrative processes. Heritage legislation may operate to preclude or regulate the disturbance of a particular area. In most Australian states, if the holder of an exploration license establishes indications of an economic mineral deposit and expends a minimum level of investment, it may apply for a mining lease which gives the holder exclusive mining rights with respect to all minerals on the property. It is possible for one person to own the surface of the property and for another to own the mineral rights. The maximum initial term of a mining lease is 21 years and the holder has the right to renew the lease for a further period of 21 years. Subsequent renewals are subject to the minister's discretion and the lease can only be assigned with the consent of the relevant minister. Royalties are payable as specified in the relevant legislation in each state or territory. A general-purpose lease may also be granted for one or more of a number of permitted purposes. These purposes include erecting, placing and operating machinery in connection with mining operations, depositing or treating minerals or tailings and using the land for any other specified purpose directly connected with mining operations.

Annexure 7

2.5.7

Avgold: Current Status

Avgold classifies their land holding position into three main categories: existing mining authorisation; contiguous mineral rights for which extensions may be applied; and all non-contiguous mineral rights. On approval of areas currently under consideration for extension Avgold will have mining authorisations totalling 4,151Ha.

Details relating to the EMPR status as required by section 39(1) of the Minerals Act are also included in Section 11 of this CPR.

Table 2.24 Avgold: Land Holdings

Existing Mining

Extension

Contiguous

Non-Contiguous

Mining Area

Authorisation

Application

Mineral Rights

(Ha)

Target

4,151

Sun - Target North

23,200

Oribi

3,251

Total

4,151

23,200

3,251

2.5.8

Harmony: Current Status

Harmony currently classifies their land holding position into four main categories: existing mining authorisation; area for which extensions have been applied; all contiguous mineral rights; and all non- contiguous mineral rights. On approval of areas currently under consideration for extension Harmony will have mining authorisations totalling 122,615Ha.

Being effectively lease bound, Harmony's South African mining operations do not include any significant mineral rights external to the current lease areas.

Details relating to the EMPR status as required by section 39(1) of the Minerals Act are also included in Section 11 of this CPR.

Table 2.25 Harmony: South African Operations Land Holdings

Existing Mining

Extension

Contiguous

Non-Contiguous

Tax Entity

Authorisation

Application

Mineral Rights

(Ha)

Free Gold including Joel

21,204

9,162

4,877

24,484

Harmony Free State

22,583

1,815

3,256

4,094

Welkom

5,511

Randfontein

24,266

3,006

572

Evander

(1)

36,898

2,262

2,837

1,462

Orkney Operations

9,317

Harmony Free State

22,583

1,815

3,256

4,094

Kalgold

(2)

615

3,810

Total

142,977

18,864

17,232

34,706

(1)

Evander excludes prospecting rights granted of 162,237Ha.

(2)

Kalgold is currently the subject of a sale agreement.

Harmony Australian Operations control exploration and mineral rights over a total area of 298,355Ha, of which the active mining areas currently total 75,516Ha.

In Australia, most mineral rights belong to the government and mining companies must pay royalties to the government based on production. There are, however, limited areas where the government granted freehold estates without reserving mineral rights. Harmony has freehold ownership of its Jubilee mining areas, but the other mineral rights in Harmony Australian Operations belong to the Australian Government and are subject to royalty payments. In addition, current Australian law generally requires native title approval to be obtained before a mining license can be granted and mining operations can commence. Harmony Australian Operations have approved mining leases for most of their Mineral Reserves, including all Mineral Reserves that are currently being mined and Mt. Magnet & Cue Operations, which have an approved mining license for the current development area. If Harmony Australia Operations expand into additional areas under exploration, these operations would need to convert the relevant exploration licenses prior to commencing mining and that process could require native title approval. There can be no assurance that any approval would be received.

Annexure 7

Table 2.26 Harmony: Australian Operations Land Holdings

(1)

Mt.Magnet &

Sth.

Regulatory Area

Units

Totals

Cue

Kalgoorlie

Other

Western Australia

Mining Lease

Active Permits

(1)

Areas/Blocks

(No.)

65,577

38,199

27,379

Total Area

(Ha)

655

382

274

Pending Permits

Areas/Blocks

(No.)

54,951

17,114

37,837

Total Area

(Ha)

550

171

378

Prospecting Licence

Active Permits
Areas/Blocks

(No.))

16,664

8,096

8,568

Total Area

(Ha)

167

Pending Permits

Areas/Blocks

(No.)

9,285

2,578

5,138

1,569

Total Area

(Ha)

Exploration Licence

Active Permits
Areas/Blocks

(No.)

311

127

185

Total Area

(Ha)

870

372

498

Pending Permits

Areas/Blocks

(No.)

454

198

218

Total Area

(Ha)

1,264

566

589

109

Miscellaneous Licence

Active Permits
Areas/Blocks

(No.)

6,848

532

6,316

Total Area

(Ha)

Pending Permits

Areas/Blocks

(No.)

177

Total Area

(Ha)

General Purpose Lease

Active Permits
Areas/Blocks

(No.)

936

936

Total Area

(Ha)

Pending Permits

Areas/Blocks

(No.)

Total Area

(Ha)

Special Lease

Active Permits
Areas/Blocks

(No.)

2,226

2,226

Total Area

(Ha)

Pending Permits

Areas/Blocks

(No.)

Total Area

(Ha)

(1)

The Mineral Reserves supporting the valuation reported in Section 14 are contained within the Active Permits and are valid for the LoM period.

Annexure 7

Figure 2.1 Mining Assets: General Location Map

Annexure 7

Figure 2.2 Avgold: Location Map and Lease Area for Target Operations

Annexure 7

Figure 2.3 Harmony: Location Map and Lease Area Harmony Free Gold Operations, Free State Operations and

Welkom Operations

Annexure 7

Figure 2.4 Harmony: Location Map and Lease Area for Evander Operations

Annexure 7

Figure 2.5 Harmony: Location Map and Lease Area for Orkney Operations

Annexure 7

Figure 2.6 Harmony: Location Map and Lease Area for West Wits Operations, Elandsrand and Deelkraal

Annexure 7

Figure 2.7 Harmony: Location Map and Lease Area for West Wits Operations, Randfontein Estates

Annexure 7

GEOLOGY

3.1

Introduction

This section describes the geology of the Mining Assets. The nature and geometry of the orebodies being or planned to be mined, their structural complexity and the variability of grades is also discussed. In addition to this, a brief description of the geological potential is presented.

3.2

South African Goldfields

Witwatersrand Basin Geology: Witwatersrand Basin operations are mostly deep-level underground mines exploiting gold bearing, shallow dipping tabular bodies, which have collectively produced over 50kt (1,608Moz) of gold over a period of more than 100 years.

The Witwatersrand Basin comprises a 6km vertical thickness of argillaceous and arenaceous sedimentary rocks situated within the Kaapvaal Craton, extending laterally for some 300km east-northeast and 150km south-southeast. The sedimentary rocks generally dip at shallow angles towards the centre of the basin though locally this may vary. The basin sediments outcrop to the south of Johannesburg but further to the west, south and east these are overlain by up to 4km of Archaean, Proterozoic and Mesozoic volcanic and sedimentary rocks. The Witwatersrand Basin sediments themselves are considered to be between 2,700 and 3,100 million years old.

Gold mineralisation in the Witwatersrand Basin occurs within laterally extensive quartz pebble conglomerate horizons, termed reefs. These occur within seven separate goldfields located along the eastern, northern and western margins of the basin. These goldfields are known as the Evander Goldfield, the East Rand Goldfield, the Central Rand Goldfield, the West Rand Goldfield, the Far West Rand Goldfield, the Klerksdorp Goldfield and the Free State Goldfield. As a result of faulting and other primary controls on mineralisation, the goldfields are not continuous and are characterised by the presence or dominance of different reef units. The reefs are generally less than 2m in thickness and are widely considered to represent laterally extensive braided fluvial deposits or unconfined flow deposits, which formed along the flanks of alluvial fan systems that developed around the edge of what was effectively an inland sea.

All major reef units are developed above unconformity surfaces. The extent of unconformity is typically greatest near the basin margin and decreases toward more distal areas. Complex patterns of syn-depositional faulting have caused complex variations in sediment thickness within the basin. Sub-vertical to over-folded reef structures is a characteristic of basin margin features within certain areas.

Most early theories believed the gold to be deposited syngenetically with the conglomerates, but recent research has confirmed that the Witwatersrand Basin has been subject to metamorphism and that some post- depositional redistribution of gold has occurred. Other experts regard the gold to be totally epigenetic and to have been deposited solely by hydrothermal fluids some time after deposition of the reef sediments.

Despite these varied viewpoints, the most fundamental control to the gold distribution remains the association with quartz-pebble conglomerates on intra-basinal unconformities. The reefs are extremely continuous, as a consequence of the regional nature of the erosional surfaces. Bedrock (footwall) controls have been established governing the distribution of many of the reefs. Preferential reef development within channel systems and sedimentary features such as facies variations and channel frequency assist in mapping out local gold distributions. In all cases the grade of the orebodies varies above and below the pay limit. Consequently, the identification and modeling of erosional/sedimentary features is the key to in-situ resource estimation.

3.2.1

Free State Goldfield

The Free State Goldfield lies some 270km southwest of Johannesburg on the southwest rim of the Witwatersrand Basin. Exploration within the Free State Goldfield dates from the mid-1940s when values within the Basal Reef, the predominant economic reef in the district, were intersected.

Structurally, the Free State Goldfield lies within a north-south trending syncline forming an apex in the southwestern corner of the Witwatersrand Basin. The northerly plunging syncline is roughly divided by two major faults into three major blocks: the Odendaalsrus section to the west of the De Bron fault, the Central Horst, between the De Bron and Homestead faults and the Virginia Section east of the Homestead Fault. The Central Horst was uplifted and the Central Rand Group rocks eroded away prior to Ventersdorp time.

The Central Rand Group in the Free State comprises some 2,000m of sedimentary sequences deposited over successive unconformity surfaces in an expanding depositional area. The lack of major faulting and folding of Central Rand Group age has led to the conclusion that subtle tectonic warping of the basin with granite doming on the margins controlled deposition.

Annexure 7

The auriferous horizons are most typically conglomeratic units deposited at the base of each depositional sequence, although they may also occur as scours within a given formation. The principal reefs mined in the Free State are the Basal Reef, the Saaiplaas Reef, the Leader Reef, the `B' Reef, the `A' Reef, Elsburg Reefs and the Dreyerkuil Reefs.

The Basal Reef is the most extensive, continuous and economically significant reef in the Free State Province, accounting for over one-half of all of the gold produced there to date.

3.2.2

West Rand Goldfield

The Cooke BUs and Doornkop BU of the West Wits Operations are situated in the West Rand Goldfield, the structure of which is dominated by the Witpoortjie and Panvlakte Horst blocks which are superimposed over broad folding associated with the southeast plunging West Rand Syncline. The northern limb of the syncline dips in a south-south-westerly direction and the southern limb in an east-south-easterly direction. The fold axis of the West Rand Syncline is located along a line that runs from the West Rand Consolidated Mines Limited lease area near Krugersdorp and trends south- eastwards through the northern part of the Doornkop section.

The structural geology in the north section of the Cooke shafts is dominated by a series of northeast trending dextral wrench faults. The most significant of these are the Roodepoort/Panvlakte Fault and the Saxon Fault, which have downthrows of 550m to the southeast and the Doornkop Fault which has a 250m down throw to the southeast. Several other smaller scale faults have downthrows ranging from 20m to 150m. Pilanesburg, Bushveld and Ventersdorp age doleritic dykes are also present. These strike in a northerly direction, with the exception of some of the latter dykes, some of which strike in an easterly direction.

At Cooke Section two major fault trends are present. The first set parallel the Panvlakte Fault striking NNE. These faults are steeply dipping, generally have small throws and do have any noticeable lateral movement to displace payshoots. A second major fault system, however trends north-westerly to east- west, which significantly displace these payshoots. They have small throws and tend to be water bearing showing a connection to the dolomites and indicating a Transvaal age. Many of them are mylonite or dyke filled.

Six main reef groupings have been identified at West Wits Operations on the West Rand Goldfield, the Elsburg Formations, the Kimberleys, the Black Reef, the Livingstone Reefs, the Ventersdorp Contact Reef (the "VCR") and the South Reef. Within these, a total of nine economic reef horizons have been mined at depths below surface between 600m and 1,260m.

3.2.3

Far West Rand Goldfield

Three primary reefs are exploited in the Far West Rand Goldfield, the VCR located at the top of the Central Rand Group, the Carbon Leader Reef near the base and the Middelvlei Reef, which occurs some 50m to 75m above the Carbon Leader Reef. Secondary reefs also occur in the area but the only examples of any significance are individual bands within the Mondeor Conglomerate Reef Zone that sub-crop beneath the VCR at Deelkraal BU and on the western side of Elandsrand BU.

The separation between the VCR and Carbon Leader Reef increases east to west from 900m to over 1,300m as a result of the relative angle of the VCR unconformity surface to the regional stratigraphic strike and dip. The Carbon Leader Reef strikes west-southwest and dips to the south at 25°. The VCR strikes east-northeast and has a regional dip of 21° to the south-southeast. Local variations in dip are largely due to the terrace-and-slope palaeotopographic surface developed during VCR deposition. In the location of the Mining Assets the Carbon Leader Reef occurs too deep to allow mining from current infrastructure and is lower in grade than elsewhere on the Far West Rand Goldfield. Consequently the VCR is the only reef currently exploited.

There are a series of east trending, north dipping normal faults with throws of up to 40m and a series of north-northeast striking normal faults with generally smaller displacements in the northwest. The original displacements on these faults are occasionally increased as a function of subsequent post-Bushveld displacement but overall faulting is much less prevalent than it is in other Witwatersrand goldfields. There are, for example, no major faults with throws of the order of several hundred meters or more. Moving to the eastern sections of the Far West Rand Goldfield the structure becomes simpler with few major faults. Most faults are high-angle normal faults trending north- northwest and eastwards and having throws of less than 70m.

Annexure 7

3.2.4

Evander Goldfield

The Evander Basin is a tectonically preserved sub-basin outside of the main Witwatersrand basin, the Devon Dome, a large granitoid cupola, separates it from the main Witwatersrand Basin. It is the most easterly mined Witwatersrand gold occurrence. The basin forms an asymmetric syncline, with the fold axis between No.5 BU and No.6 BU, plunging to the northwest and contains only one economic reef system, the Kimberley Reef.

The Evander Basin was a part of the main Witwatersrand Basin until post-Booysens shale times. It was separated from the East Rand and South Rand Basins by uplift in the areas now marked by the basement Devon and Cedarmont Domes. Deeper within the basin, the Central Rand Group is overlain by Ventersdorp Lavas and Transvaal Sequence sedimentary rocks. West Rand Group rocks are present beneath the Central Rand Group. A poorly mineralised reef, stratigraphically above the Kimberley Reef, termed the Intermediate Reef, is also developed but is not economic, except where it has eroded the sub-cropping Kimberley Reef in the south and west of the basin.

The Evander Basin is one of the more structurally complicated parts of the Witwatersrand. Mining and drilling have defined the larger elements of the structure of the shallow southern and western basin margins. The northern and north-eastern extent of the basin is poorly drilled because of the depth to the Kimberley Reef and because of poor grades encountered to the north. The geological structure there has been inferred from two-dimensional seismic survey lines.

3.2.5

Klerksdorp Goldfield

The Klerksdorp Goldfield is located on the northwest margin of the Witwatersrand Basin and lays some 150km south-southwest of Johannesburg. Exploration, development and production history in the area dates from 1886 and following dormant periods, large-scale production commenced during the 1940s.

The Witwatersrand Basin sedimentary rocks are overlain by up to 2,000m of cover rocks and the reefs themselves occur at depths of between 80m and 4,000m and, with the exception of the VCR, which dips moderately steeply west-northwest, generally dip gently to the southeast.

The most significant structural features of the Klerksdorp Goldfield are northeast striking normal faults, which dip to the northwest and southeast and have throws of several hundred metres. These features break up the stratigraphy containing the stratiform orebodies into a series of horsts and grabens, which vary in width from several hundred metres to over a thousand metres. These horsts and grabens are internally disturbed by small-scale faults sympathetic to the major faults, which typically have throws of tens of metres and break up the reef into continuous blocks of up to 100m in width. These brittle faults can be identified by drilling from access development and as the dip of the stratigraphy is reasonably consistent, can usually be negotiated without significant difficulty. There are, however, smaller-scale faults in the immediate vicinity of these larger faults, which disrupt the reefs and can result in increased losses and dilution.

All mining to date in the Klerksdorp Goldfield has taken place to the northwest of one of the major northeast-southwest striking normal faults, the Jersey Fault, which has a down throw to the southeast of up to 1,000m, displacing the Vaal Reef down to a depth below surface exceeding 3,000m. Two further sub-parallel faults occur to the southeast of the Jersey Fault displacing the reefs down to more than 5,000m below surface.

Two primary conglomerate reefs are exploited within the Klerksdorp Goldfield, namely the Vaal Reef and the VCR. The Vaal Reef and VCR reef horizons occur at depths between 80m and 4,000m. The VCR dips moderately steeply west-northwest, the Vaal Reef generally dips gently to the southeast. Other, secondary reefs, including the Black Reef, Zandpan Marker and Denny's Reef exist; however they are not currently considered to be economically viable.

3.3

Deposit Geology

Most of the operations can be described as mature mining operations with good underlying geological models backed up with grade models based on vast amounts of historical mining and sampling data. The electronic capture of sampling data over the past ten-years has allowed a far greater understanding of the grade and payshoot characteristics of the orebodies than was possible previously. The Companies Indicated and Inferred Mineral Resources are more reliant on the projection of geological or facies models than the Measured Mineral Resources due to the much lower density of sampling data in these areas.

Annexure 7

3.3.1

Target Operations

The gold mineralisation currently exploited by Target Mine is contained within a succession of Elsburg and Dreyerskuil quartz pebble conglomerate reefs hosted by the Van den Heeversrust and Dreyerskuil Members of the Eldorado Formation, respectively. Additional Mineral Resources have been delineated in the Big Pebble Reefs of the Kimberley Formation but these are not planned to be exploited in the current LoM plan.

The individual Elburg Reefs are separated by quartzite beds and form a a wedge shaped stacked sequence which strikes north north-west and comprises some 35 separate reef horizons interpreted to have been deposited in an alluvial fan system similar in nature to present day river deltas. This sequence of Elsburg Reefs and quartzites is truncated by an unconformity with the overlying younger Dreyerskuil Member. Immediately below the sub-crop with the Dreyerskuil the Elsburg Reefs and quartzites dip steeply to the east becoming progressively shallower dipping resulting in a structure analogous with a recumbent syncline, verging to the west, with the upper limb removed. This synclinal structure plunges shallowly at 10° to the north. In the more proximal areas to the sub- crop the thickness of the intervening quartzites reduces and many of the individual Elsburg Reefs coalesce to form reef packages that are exploited by the massive mining methods employed at Target Mine. Gold grades in the Elsburg Reefs are also higher in the proximal areas decreasing down dip until reaching an economic limit some 200m to 450m from the sub-crop.

The majority of the Mineral Reserves at Target Mine are contained within the Eldorado fan, a structure with dimensions of some 135m vertically, 450m down-dip and 500m along strike. The Eldorado fan is similar in nature to the fans historically mined at Loraine gold mine to the south. The Eldorado fan is connected to the subsidiary Zuurbron fan, located between Target Mine and Loraine, by a thinner and lower grade sequence of Elsburg reefs termed the Interfan area. The economic mineralisation in the Interfan is less persistent distally than within the fans and does not contribute significantly to the reserves. To the north of the Eldorado fan a number of other fans have been intersected by surface drilling of which the Siberia and Mariasdal fans are the most significant. These fans are subject to ongoing technical studies and do not form part of the current Target Mine LoM Mineral Reserve.

The Dreyerskuil Member consists of a series of stacked reefs, dipping shallowly to the east, that are less numerous but laterally more continuous than the underlying Elsburg Reefs. At Loraine this unit correlates stratigraphically with the Uitkyk Member that consists of an immature conglomerate informally termed the `Boulder Beds'. These beds did not contain significant gold mineralisation and were therefore not mined at Loraine. Towards the north the Uitkyk Member grades into a series of reworked conglomerates and quartzites, similar in nature to the Elsburgs, which becomes the Dreyerskuil Member in the vicinity of Target Mine. The conglomerate reefs contain economic mineralisation, some of which may have been derived through the erosion and reworking of Elsburg Reefs at the sub-crop.

The Big Pebble Reefs are found in the Kimberley Formation, which is overlain by the Eldorado Formation. The BP6a Reef, which has been historically mined at Loraine No.2 Shaft, lies on the unconformity at the base of the upper member of the Kimberley Formation (the Earl's Court Member). This overlies the Big Pebble Reef Member, the base of which comprises a series of argillaceous quartzites and several well-developed conglomerates. These are collectively referred to as the Big Pebble Zone ("BPZ"), which varies in thickness between 1m and 15m. The BPZ conglomerates are well developed at Target Mine and Loraine and coalesce into thick multiple conglomerate reef units close to their western subcrop position. Although resources have been delineated in the BPZ in the Loraine and Target Mine areas, these are not exploited in the current LoM plan.

A number of faults that displace the reefs at Target Mine have been identified of which the most prominent are the north-south trending Eldorado fault and the east-west trending Dam and Blast faults. The Eldorado uplifts the more distal portions of the Elsburg and Dreyerskuil Reefs while the Blast fault forms the northern boundary of Target Mine. The structure is known to a reasonable degree of confidence through a combination of underground drilling and mapping augmented by surface seismic surveys.

The plunging synclinal feature at Target Mine continues northwards, where the geological setting is similar and additional non-LoM resources have been delineated on the Elsburgs, Dreyerskuil and Big Pebble Reefs. In the Target North area low-grade mineralisation has also been intersected on the Maraisdal Reef and the Sun Reef, which are thought to be the equivalent of the `B' Reef and Basal Reef, respectively, elsewhere in the Free State Goldfield.

An erratically developed reef has been intersected in some surface boreholes in an area to the far north of the Target Mine at the base of the Ventersdorp Conglomerate Formation, which overlies the Eldorado Formation. This is interpreted to be the VCR, which is present in the Klerksdorp, West Rand and Far West Rand Goldfields but not elsewhere in the Free State Goldfield. The VCR is a coarse to very coarse quartz pebble conglomerate, which appears to be highly channelised and varies in thickness from almost zero to 4m.

Annexure 7

Target North is sub-divided into the Paradise, Siberia and Maraisdal areas by the east-west trending Siberia and Maraisdal faults. To the north of the Siberia Fault, the Eldorado Fault continues trending more to the northwest and an additional north-south trending fault, the Twin fault has uplifted the distal portions of the reefs. North of the Maraisdal fault the reef horizons are at a depth greater than 2,500m below surface and a farm boundary sub-divides this area into Maraisdal and Kruidfontein. The large-scale structure in the Target North area is known to a reasonable degree of confidence through the surface boreholes and extensive three-dimensional seismic surveys. Resources have been delineated on strike up to 15km north of Target Mine.

Approximately 40 km north of Target Mine, surface boreholes have intersected gold bearing reefs in the Oribi area close to the town of Bothaville. Resources have been delineated at Oribi on the VCR and Elsburgs at depths of approximately 2.75km below surface.

3.3.2

Free Gold Operations

The primary reef mined at Tshepong BU is the Basal Reef with minor contribution from the `B' Reef, which lays some 140m stratigraphically above the Basal Reef. The `B' Reef is highly channelised in nature with a much more erratic grade distribution than the Basal Reef. The relatively incompetent Khaki Shale overlies the Basal Quartzite, which occurs in the upper portion of the Basal Reef. The Basal Quartzite provides natural support to the Khaki Shale and where the thickness of this is less than 60cm, mining dilution can and does increase dramatically.

The Basal Reef dips at shallow angles to the east and is intersected by two significant north-south striking faults, the Dagbreek and the Ophir Faults. These faults dip at moderate angles to the west and have significant strike-slip and up-dip throws of the order of 1,000m to 2,000m and 200m to 300m, respectively.

Economic grades at Tshepong BU are constrained within a broad payshoot, which trends east- southeast. Currently a geological model of the Basal Reef facies variations is used for grade estimation. The method of assigning facies type is a scoring system developed in conjunction with Leeds University, UK. Scoring is based on geological type (Lorraine Facies or Black Chert Facies), presence of Waxy Brown Quartzite ("WBQ"), which is thought to trap fluids in the underlying reef, presence of micro-thrusting, which is thought to encourage fluid flow into the reef and presence of reducing minerals such as sulphides and carbon, which are thought to encourage the precipitation of gold mineralisation.

Phakisa BU is situated immediately to the east of Tshepong BU where shaft-sinking operations ceased prior to completion. The resources at Phakisa comprise the Basal Reef and represent the down-dip extension from Tshepong BU.

The primary reefs mined at Bambanani include the Basal Reef and in particular the Steyn Facies which covers approximately 90% of the mine area. The Khaki Shale in the north and the Waxy Brown Quartzite in the south overlie the Basal Reef. Secondary reefs such as the Leader Reef have been mined on a small scale historically but have always been found to be low grade.

The whole package dips at angles of between 25° and 45° to the east and is generally between 1m and 3m thick.

The lease area is bound to the west by the Stuurmanspan Fault and to the east by the De Bron Fault. The Harrison Fault, parallel and to the west of the De Bron Fault demarcates the eastern mining limit. Both of these are significant north-south striking normal faults, which dip at moderate angles to the west and have throws of over 100m. Faults sympathetic to these occur with displacements of up to 50m, as do east-west faults with lateral shifts of up to 400m on the northern edge of the mining area.

Joel BU exploits two distinct forms of a single reef, developed on a single unconformity surface. These are known as the Beatrix Reef and the Beatrix-VS5 Composite Reef. The reefs dip to the northeast at 15° and the composite reef sub-crops against the overlying Karoo Supergroup just to the north of Joel South BU, defining the southern limit of the orebody.

The Beatrix Reef conglomerates are found throughout the mine area and generally have multiple basal degradation and internal scour surfaces, often thinning to a single pebble lag on paleotopographic highs. The Beatrix-VS5 Composite Reef represents a re-working of the Beatrix Reef accompanied by a mixing with lower grade VS5 material. This occupies a 500m to 1,000m wide channel running almost north south through the centre of the lease area, which is interpreted to widen to the northeast of Joel North BU.

Annexure 7

A deep erosional channel of Waterpan sedimentary rock, known as the Klippan Channel, truncates the reef some 1.8km to the northeast of Joel South BU. This washout is wedge-shaped with its apex to the west and widens to the southeast. The estimated dimension from the apex to the eastern property boundary is approximately 1.8km. The reefs have been shown to be continuous to the north of this transgressive feature.

Where untouched by the Klippan Channel, the reefs are bound to the east by the De Bron Fault, which strikes north-northeast. The CD Fault, which strikes northeast and is roughly halfway between the two shafts, has a 320m sinistral lateral displacement, which has moved ground south of the fault towards the northeast.

The complex nature of the reef, due to the multiple pulses of detrital influx and scouring, paleo- topographic highs and mixing between the Beatrix and Beatrix-VS5 Composite Reef, has resulted in a highly irregular distribution of gold throughout the mining area. There are broad low and high- grade zones on the scale of 100's of metres, which are likely to repeat beyond current development, however, the detailed grade distribution within these zones remains very unpredictable.

For the purposes of resource estimation, a detailed facies model is used and is based on detailed sedimentological observations and absence of well-mineralised reef at paleo-topographic highs.

Eland BU, Kudu & Sable BU and Nyala BU are contiguous to the south and west of Tshepong BU and Basal Reef is mined almost exclusively. The geological setting is similar to that described for Tshepong BU, however, faulting in the mining lease is the most intense to be found at the Free Gold Operations (excluding Joel BU). The Dagbreek fault intersects Eland BU lease area and the Rheedersdam thrust fault forms the western boundary of the remaining three BUs. These and other generally north striking normal faults including the Eureka, Rietpan and Wesselia faults represent the dominant the structures in the area. The reef in the Rheedersdam fault zone has been multiply repeated by thrusting which has resulted in stacks of up to eight reef repeats.

Further variability in reef occurrence has been caused by changes in palaeotopographic slope, which controlled the nature of sedimentation and subsequent mineralisation potential.

The Basal Reef is particularly carbonaceous at Eland BU, Kudu & Sable BU and Nyala BU and the gold tends to concentrate strongly on the kerogen-rich footwall contact and visible gold has been observed in several areas. The best grades were historically mined at Kudu & Sable BUs. The Nyala BU area is characterised by marginal grades.

Eland BU and Kudu & Sable BU are predominantly remnant operations with short lives and the extensive historical mining and the nature of the remaining Basal Reef Mineral Resources minimise uncertainties regarding grade, structural complexity and loss of ground. Nyala BU has only recently re-opened and the LoM plan is focused on exploiting the Basal Reef shaft pillar.

The St. Helena BU has a complex geological structure with faults generally trending north south with downthrows of up to 2,000m and dips of between 30° and 50°. Reverse and thrust faulting is present, sometimes resulting in local duplication of reef. Two economic reefs are present within the mine property with the Basal Reef being the most economically important unit and the Leader Reef, which lies some 15m above the Basal Reef.

St. Helena is predominantly a remnant operation with extensive historical mining and the nature of the remaining Basal Reef Mineral Resources minimise uncertainties regarding grade, structural complexity and loss of ground.

Surface sources at the Free Gold Operations comprise numerous Waste Rock Dumps ("WRDs") and Slimes Dams, which in addition to various plant clean-up tonnages, are processed at FS1 Plant, FS2 Plant and to some degree at Joel Plant. WRDs comprise both waste material and reef material, the latter of which is sourced from cross-tramming of mined ore. Typical grades range between 0.5g/t and 1.0g/t, which are either processed directly or pre-screened to ensure Run of Mine ("RoM") grades in excess of 1g/t.

Slimes Dams may also contain significant gold grades owing to occasional sub-optimal metallurgical performance, which resulted in gold being sent to tails. Grade distribution within WRDs and Slimes Dams can vary significantly owing to fundamental changes in mining, hoisting and processing methods, which have been implemented over prolonged years of mining.

100

Annexure 7

3.3.3

Harmony Free State Operations

At these operations mining was originally established to exploit the rich Basal Reef, but, as reserves in this orebody became depleted, production is being increasingly sourced from the more erratically mineralised and lower grade Leader Reef, Middle Reef, `A' Reef and the `B' Reef. The Basal Reef is a high grade, generally thin (<100cm) reef, which has been payable across most of its exposed extent. In the south, at both Harmony No.2 BU and Unisel BU, the reef pinches out against elevated footwall and grades deteriorate. The Leader Reef, `A' Reef, `B' Reef and Middle Reef are only payable in distinctive and often extensive payshoots and discrete pods where these reefs overlie the Basal Reef. Where the Leader Reef truncates the Basal Reef east of the so-called "line of coalescence" at Harmony, it is more uniformly payable.

The mineralised meta-conglomerates mined at Masimong are the Basal Reef, `B' Reef and `A' Reef. The Basal is mined at all three of the Masimong BUs while the `A' Reef is mined at Masimong No.4 BU and the `B' Reef at Masimong No.5 BU . At Masimong No.4 BU and Saaiplaas No.3 BU the Basal Reef is present as the Steyn facies, comprising three to four upward fining sedimentary cycles. The lower cycle, being the primary gold carrier comprises a basal conglomerate with an overlying protoquartzite. Carbon seams, which carry most of the gold, occur locally on the bottom contacts. Channel widths are generally below 70cm but in places only the carbon contact between the hanging BU wall and footwall exists. A north-south trending payshoot extending through the Saaiplaas No.3 BU towards the north along the western side of Masimong No.4 BU forms the main target area for the Basal Reef.

The black chert facies Basal Reef at Masimong No.5 BU comprises two upward fining cycles, of which the lower carbonaceous unit is the primary gold carrier. Channel widths average 60cm. The target area for this facies is a northwest-southeast trending payshoot that cuts through the shaft and is truncated to the east by younger leader quartzites.

The `A' Reef at Masimong No.4 BU lies 140m to 160m above the Basal Reef and is characterised by a highly channelised series of conglomerate bands that are generally only payable in locations where one or more bands exist within the channel itself. These oligomictic conglomerates are dark in colour with abundant, mostly fine pyrite and occasional carbon. Channel thickness is highly variable but can be up to 1.8m, with gold values highly dependent on the reef thickness and the presence of carbon.

The `B' Reef, lying 110m above the Basal Reef, comprises complex sedimentologically controlled gold mineralisation within a wide east-west trending channel that cuts through the Masimong No.5 BU area. Within this channel very high grade lenticular gravel bars contain abundant visible gold and form the targets for mining. Gold grades are erratic and extremely nuggety, while the channel widths also vary from zero to approximately 1.8m.

The two conglomerate horizons at Harmony No.2 BU, the Basal Reef and `A' Reef, are separated by 140m of mostly quartzites and conglomerate. The reefs dip 5° to 15° towards the west, becoming steeper to the west approaching the De Bron Fault. Numerous east-west trending dykes cut the reef, resulting in up throw and lateral shift. The Basal Reef occurs as thin bands of upward fining conglomerates, with full channel widths of up to 120cm. The payable reefs are often associated with carbon. Weak shales overlie the Basal Reef and must either be undercut or removed with the reef. The footwall to the `A' Reef at Harmony No.2 BU is the 1m to 15m thick Big Pebble Marker, which, where thinnest, is associated with better developed `A' Reef. Better gold grades are associated with thicker channels greater than 1m thick.

Brand No.1 BU and Brand No.3 BU are characterised by large north-south trending faults with lateral movement. The `A' Reef is the predominantly targeted reef and is found in wide fault displaced east west pay trends. The Basal Reef belongs to the former `Basal Placer' facies and is predominantly found in the form of a thin reef, rich in carbon. Pebbles are not always present. The reef thickness seldom exceeds 20cm and is generally less than 10cm.

Brand No.5 BU is sub-divided into fault blocks, with complex north-south structural trends intersected by normal north-northeast-south-southwest trending faults. Vertical fault displacements are minor, whereas right-lateral displacements are significant. The reefs on average, dip 40° to the east. The main reefs mined at Brand No.5 BU are the Basal Reef and Leader Reef. The Steyn Facies Basal Reef comprises four sedimentological conglomerate sub-facies, with gold best developed at the base of the conglomerates and associated with pyrite. The Leader Reef, lying between 7m and 16m above the Basal Reef is highly channelised with thickness increasing from east to west. This upwardly fining sequence comprises three sub-facies that can be up to 400cm thick. Gold is generally distributed evenly throughout the reef package.

The reefs at Unisel BU dip 30° to the East and are structurally complex due to fault intersections and the presence of sills in the vicinity of the Basal Reef. The principal reefs mined are the Basal Reef and the Leader Reef. The Basal Reef has been divided into three distinct sedimentological facies, with gold mainly associated with moderate-to-well developed buckshot pyrite. The Leader Reef is highly channelised with limited sedimentological information and shows an erratic grade distribution.

101

Annexure 7

The Merriespruit area is structurally complex with extensive north-south and east-west trending faults, with vertical displacements of up to 650m. Igneous intrusive are associated with the structurally complex areas. In general the reefs structures strike northeast southwest and dip 20° to the north. The Basal Reef is typically thin (<1m) and channelised, with payable grades located in northeast- southwest trending payshoots. This upwardly fining conglomerate is poorly to well mineralised with the local occurrence of buckshot pyrite. Locally mineralised Middle Reef, found above the Basal Reef in the hanging wall quartzites, is only payable when adjacent to Basal Reef or overlying Leader Reef. The Leader Reef comprises a series of conglomerate bands separated by pebbly quartzite bands that are variably mineralised, with typically poor to moderate grades. Payable grades are often located in NE-SW trends. In general the gold is dispersed throughout the package, with gold associated with the pyrite.

Surface sources at the Harmony Operations comprise numerous WRDs, Slimes Dams and Other Sources, which in addition to various plant clean-up tonnages, are processed at the Central, Virginia and Saaiplaas Plants. WRDs comprise both waste material and reef material, the latter of which is sourced from cross-tramming of mined ore. Typical grades range between 0.4g/t and 1.0g/t.

Slimes Dams may also contain significant gold grades owing to occasional and historical sub-optimal metallurgical performance, which resulted in gold being sent to tails. Grade distribution within WRDs and Slimes Dams can vary significantly owing to fundamental changes in mining, hoisting and processing methods, which have been implemented over prolonged years of mining.

3.3.4

Welkom Operations

The Welkom Operation lease area is centrally located within the Free State Goldfield in an area containing several other mature operations. The property is bounded to the south by the Free Gold Operation's St. Helena, Harmony Free State Operation's President Brand and President Steyn Gold Mines Limited's President Steyn Mine and the property is bounded to the north by Free Gold Operation's Eland BU, Kudu & Sable BU, Nyala BU and Tshepong BU.

The Basal Reef is the main reef exploited at Welkom Operation. In addition to the Basal Reef, No.6 BU also exploits the Leader Reef, lying some 15m above the Basal Reef. No.7 BU plans to exploit the Saaiplaas Reef or `pyrite stringers' as it is commonly referred to at this mine. This consists of thick (up to 6m), low-grade channels superimposed on the Basal Reef.

The Basal Reef strikes north to north-northwest and generally dips to the east between 20° and 40°. The reef is bounded on the west by the north trending Rheedersdam Fault system and sub-crops against the Karoo Supergroup along a northward trending line representing the basin margin. To the east the north trending De Bron Fault bound the reef. Two major faults, the Dagbreek and Ararat further dissect the reef into three contiguous blocks.

No.1 BU and No.2 BU are situated within the easternmost of these three blocks, between the De Bron and the Ararat Faults. No.3 BU and No.4 BU are situated within the central block between the Dagbreek and Ararat Faults and No.6 BU and No.7 BU are situated within the western most block.

The Leader Reef also varies in thickness between 0.3m and 1.7m and comprises a well-packed, small- to-medium pebble conglomerate with white quartz and black chert clasts and a moderate percentage of buckshot and crystalline pyrite.

One other reef, the Middle Reef, has been exploited in a very small, opportunistic way. The Middle Reef is an impersistent, lensoid, cherty and/or quartz-pebble conglomerate unit within the Middling Quartzite of the Harmony formation. While sometimes of very high grade, individual lenses are typically less than 30m in planar dimensions and as such too small to systematically drill for, generally resulting in accidental discovery.

3.3.5

West Wits Operations

The economic horizons change from north to south along the length of the Doornkop-Cooke-Western Areas part of the Witwatersrand Basin, from a few lower Central Rand unconformities in the north to the development of multiple upper Central Rand unconformities in the south. The structural and depositional history of the goldfield is still not fully understood due to the complicated pattern of stacked sub-cropping reefs, the syndepositional tectonics; however the individual orebodies have detailed grade models that assist evaluation.

102

Annexure 7

A key feature of reef development at Cooke Section is the thickening of the Westonaria Formation to the east of the anticline and importantly to the south. This wedging of formations indicates that syndepositional uplift along the Panvlakte trend (before the anticline developed) had an effect on reef formation. The area to the west of the crest of the current anticline is characterised by narrow single band UE1A reef overlying a pronounced unconformity, whereas to the east the Elsburg A1 to A5 stacked package of conglomerate horizons forms a wedge interleaved with barren quartzites. This wedge opens out to the east and to the south with greater thicknesses of barren quartzites separating the individual reef horizons. To the east the conglomerates become increasingly distal in nature, to the south more individual horizons are developed.

The Main orebodies on the Cooke 1, 2 and 3 Section shafts of the West Wits Operations are the UE1A and the Elsburg A5 Reefs. Cooke 4 in the south mined 10 individual horizons including Elsburg Reefs and the VCR. On Doornkop the Kimberley Reefs and the South Reef are being mined. Moving further, the primary orebodies on the adjoining Central Rand goldfield were the Lower Central Rand Group orebodies the Main Reef Leader and the Main Reef.

A pronounced feature of the grade distribution at the Cooke shafts is the location of what were previously described as fan entry points into the basin. These pronounced fan shaped grade distributions on the grade plans are due in part to the presentation of the two different aged orebodies, the UE1A and A1, on the same plans; and the lack of palinspastic reconstruction of payshoots that terminate along these younger lateral movements.

The area covered by the original exploration pattern on the Cooke Shafts has now largely been mined out. Mining is now concentrating on pillars and areas on the periphery of the initial exploration area that are poorly explored from surface drilling.

Doornkop has been mining the Kimberley Reefs but attention is now focusing on the South Reef, which has been previously exploited on nearby operations. The South Reef comprises broad south-easterly trending shoots (palaeodepressions) separated by lower grade zones (palaeo-highs). One of these ore shoots, indicated by surface drilling and confirmed by recent stoping, runs through the Doornkop area.

Elandsrand BU and Deelkraal BU exploit the VCR, which unconformably overlies the Mondeor and Elsburg Formations of the Central Rand Group. These footwall sediments primarily comprise siliceous quartzites there are four major polymictic conglomerate zones within the Mondeor, which have supported minor stoping on Deelkraal. The VCR is overlain by the lava of the Alberton Formation, which forms the basal unit of the Klipriviersberg Group of the Ventersdorp Supergroup. The dip of the VCR at Deelkraal BU is relatively consistent at 24° although there is some postulation of a slight flattening of dip at depth at Elandsrand.

The VCR sits on a highly-incised unconformity surface exhibiting a marked palaeotopography. The unconformity (erosion) surface was covered with a residue of mature quartz pebble conglomerates (reef) preserved on fluvial terraces and slopes. These now reflect as local variations in the dip and strike of the reef. Terrace reef (being originally close to horizontal) has the attitude of the regional dip and it tends to be thicker and accompanied by higher gold accumulations. Terraces are preferentially mined. Slope reef is indicated where the attitude of the reef now departs significantly from the regional dip. Slope reef represents the inter-terrace slope areas, the reef is thin, has less conglomerate and less total gold. Slope reef gold values are generally below the paylimit.

The VCR is present throughout the Elandsrand BU lease area, but at Deelkraal BU there is a limit of deposition running roughly north-south through the centre of the lease area. The VCR is poorly developed to the west of this line.

The facies and morphological models encompassing the Mining Assets have been developed through reef mapping in stopes and on-reef development mapping. They are used in the estimation of Mineral Resources to constrain the interpolation of grade into geologically homogenous areas.

Mondeor Conglomerate bands sub-crop beneath the VCR on the western side of Elandsrand BU and on Deelkraal BU. They have been mined in places underneath or close to their sub-crop on Deelkraal BU.

Structures present at Deelkraal BU and Elandsrand BU include faults, dykes and sills. The sills occur in the footwall in many areas adjacent to dykes; however, these only affect the reef horizon in old, mined out areas near Elandsrand BU. The faults and dykes are classified according to the relative geological ages and comprise Pre-VCR, Early Ventersdorp, Late Ventersdorp, Bushveld and Pilanesberg Structures.

The structural model at Elandsrand BU has been developed from information compiled over many years, from continual mapping of footwall haulages, cross-cuts, on-reef raises, winzes, development drives and stopes. In contrast at Deelkraal, where the low angle faulting is more common, a relatively poor structural database exists, as it was previously not consistently recorded. Ongoing mapping and re-interpretation is rectifying this situation and enabling the development of a more detailed model.

103

Annexure 7

3.3.6

Evander Operations

Within the Evander Operations lease area the Kimberley Reef dips predominantly northwards. There are several distinct fault styles developed within the mine lease. Earliest faults tend to have thrust movements, resulting in duplication of the reef. These faults strike northwards to westwards and are generally consistent with thrust movement into the basin. Throws of up to 150m have been encountered within the mine workings. The predominant faulting within the mine is a series of extensional faults. The resulting shallow-dipping faults trend west-northwest and have up throws to the north. This is an extremely fortuitous situation as the successive up throws maintain the Kimberley Reef at a consistently shallow depth below surface throughout the main part of the Evander lease. Significant fault losses are, however, associated with these faults. There has been only minor lateral movement along these faults. Channels can normally be traced across them with only minor displacements.

Vertical and overturned Kimberley Reef is present in the BU No.6 area in the southeast corner of the mine. This structurally complex area represents a basin margin structure, in many ways analogous to the structural regimes observed on the Western Margin of Free State Goldfield. The vertically dipping reef sub-crops against the overlying Karoo Sequence rocks. Complex wrench faulting is also developed within the No.6 BU area.

Ventersdorp, Bushveld and Karoo age dykes and sills are present within the mining lease. Bushveld age intrusives occur as dykes and sills, Ventersdorp and Karoo intrusives occur as predominantly north trending dykes. By far the most problematic is a doleritic footwall sill that varies from 30m to 70m in thickness. In several areas this sill steps upwards and occupies the same stratigraphic position as the Kimberley Reef, in places splitting the reef into two separate components. Fortunately interference from the sill is generally localised in areas such as the southern portion of the previous Winkelhaak mine and specific areas in the western part of Kinross.

Gold in the Kimberley Reef is associated with heavy minerals on re-activation surfaces specifically associated with the more robust, clast supported oligomictic quartz pebble conglomerates, or in association with flyspeck carbon. The gold generally occurs in native form often associated with pyrite and carbon. Pyrite, chromite, rutile, zircon and leucoxene have been identified within the Kimberley Reef. Pyrite dominates the heavy mineral suite and displays several distinct forms. Pyrite grains displaying detrital characteristics are common. Rounded balls of porous pyrite are also recognised, as are secondary remobilised pyrites. These latter minerals may occupy fractures across pre-existing pebbles, as well as overgrowing existing detrital pyrites within the sand matrix. Uraninite is present within the Kimberley Reef, but in concentrations so low that routine sampling for uranium is not practiced.

Carbon is generally rare within the more robust Kimberley Reef, becoming common in the distal areas as flyspeck carbon on the footwall contact. This has an effect on gold grades. As the channel width of the reef decreases the gold accumulation (cmg/t) does not change significantly. This is attributed to high gold grades associated with the carbon.

3.3.7

Orkney Operations

The Orkney Operation mining area is bounded to the east and north by the North West Operations owned by Durban Roodepoort Deep, Limited ("DRD"), to the west by AngloGold's Tau Lekoa and to the south by AngloGold's Vaal River Operations ("VRO") and the course of the Vaal River.

The major faults within the lease area are: the Nooitgedacht and Buffelsdoorn faults occurring in No.6 BU and No.7 BU areas; the Witkop Fault between No.6 BU and No.7 BU; the WK22 and No.3 BU Faults between No.7 BU and No.3 BU; the No.5 BU Fault; and the No.2 BU South Fault. The horsts and grabens are further disturbed by faults sympathetic to the major faults which typically have throws of tens of metres and further divide the reef into blocks of up to 100m in width. Drilling from access development can identify these brittle faults, as the dip of the stratigraphy is reasonably constant (15° to 20°).

The Vaal Reef is by far the most significant reef mined at the Orkney operations and is the major contributor to gold production. The reef strikes northeast, dipping to the southeast and is heavily faulted to form a series of graben structures. The dip is generally less than 30° but can vary locally in direction and magnitude to exceed 45°. Gold is present throughout the reef horizon; however it tends to be concentrated close to the basal contact where carbon commonly occurs as thin seams. Well-mineralised carbon seams occur most commonly in three stacked sequences.

The VCR is exploited solely at BU No.3, BU No.6 and BU No.7 and, like the Vaal Reef, can occur as a composite reef consisting of several distinct sedimentary packages. In an attempt to improve grade estimation in such packages, a terrace and slope-based geological model was developed by AngloGold and has been retained by the geologists now employed by Harmony. The model divides

104

Annexure 7

the orebody into a main channel; lower; middle and upper terraces and also involves delineation of certain higher-grade reworked channels. The reef is clearly identifiable and its location at the contact between the overlying Klipriviersberg Lavas and the underlying Witwatersrand Supergroup Rocks renders the footwall and hangingwall rocks distinct from the reef, except in areas where Elsburg conglomerates sub-outcrop against the VCR. The contrasting lithologies aids fault negotiation and have facilitated the use of three-dimensional seismic survey techniques to image the gross reef topography in the past.

The Elsburg Reefs are exploited at BU No.6 and No.7, usually in conjunction with the overlying VCR, against which it sub-outcrops along a northeast trending band, south of and sub-parallel to the Buffelsdoorn Fault. The sedimentological characteristics of the Elsburg Reefs in the region of the sub-outcrop are similar to those exhibited by the VCR.

3.3.8

Kalgold Operations

The Kalgold Operation is situated on the Kraaipan granite-greenstone belt, which is a typical gold-bearing greenstone formation. It has undergone intense structural deformation that has led to its dislocation into separate units. Within the mining lease area six steeply dipping zones of mineralisation have been identified. The discrete mineralised ore zones are the result of the percolation of mineralised fluids into the Banded Ironstone Formation ("BIF") host rocks.

The zones comprise the A, A-West, D, Mealie Field, Watertank and Windmill zones and the mineral resources of the A, D, Windmill and Watertank Zone have been comprehensively evaluated. The D-Zone is the first area to be exploited by open pit mining over a strike length of 1,400m and an ore zone width of between 15m and 40m.

Gold mineralisation is associated with pyrite and pyrrohotite, which was developed as a replacement mineral within a BIF and also within extensional, cross-cutting quartz veins within the ironstone.

3.3.9

Harmony Australian Operations

Gold mineralisation at the Mt. Magnet operation occurs in the southern tip of the Mt. Magnet Greenstone Belt in the Murchison Province of the Achaean Yilgarn cratonic block. The belt consists of a series of tholeiitic and komatiitic volcanics and associated ultramafic volcanics and mafic tuffs. Several folding events led to the formation of the Boogardie Synform and, after a major period of ductile deformation, selective fracturing of brittle rocks introduced gold mineralisation synchronous with certain deformation events. Shearing of the country rock usually provided a conduit for mineralising fluids.

The majority of the gold mineralisation is hosted by BIF that are cross-cut by faults, at or near the contact of ultramafic and mafic rocks with felsic intrusions. Fault zones and shears are generally north-south to north-northeast trending and selective fracturing appears to form a major trap-site for gold mineralisation. Crossing of several shear directions appear to enhance mineralisation, which is often characterised by an epigenetic pyrrhotite-pyrite alteration.

At Hill 50, the bulk of the mineralisation is hosted in a thick sequence of intercalated sedimentary BIF with both komatiitic and tholeiitic volcanics and associated ultra-mafic volcanics and mafic tuffs. The mineralisation is characterised by pyrrhotite-pyrite wall rock alteration. The BIF's are locally offset by faults with offsets ranging from one to two metres to up to tens of metres.

At Morning Star, mineralisation is hosted within quartz-carbonate veins containing molybdenite, scheelite and stibnite in a series of pyritic, sericite-altered mafic and felsic schists. The gold mineralisation is strongly associated with large vein packages and detailed geological mapping has indicated that the mineralisation can be correlated from level to level with a high degree of confidence.

Mineralised zones are primarily defined on the basis of geological mapping while stope designs are also based on detailed sampling and mapping. Wire framing based on geological mapping and interpretation is routinely carried out and grade shells are then defined within the geological domains.

In the Cue area, approximately 85km north of Hill 50 and Morning Star, the Big Bell deposit is hosted in a steeply dipping and locally overturned northeast trending extension of the Achaean Meekatharra- Wydgee Greenstone belt. This belt forms the west limb of a north-plunging regional anticlinal structure. At Cue, towards the east of Big Bell, the anticlinal structure changes to a north-plunging regional synclinal structure. In the Big Bell area, three main zones are recognised in the regional volcano-sedimentary sequence, a lower sequence of ultramafics, graphitic sediments and BIF, gradationally overlain by a felsic volcanic sequence of andesitic, dacitic and rhyolitic rocks and then by a sequence of mainly submarine basaltic flows.

105

Annexure 7

The free-milling gold mineralisation at Big Bell is mainly hosted by a sub-vertical series of potassium- altered metamorphic schists with some mineralisation occurring in hanging wall biotite schists. In the Cuddingwarra area, gold mineralisation is related to a major phase of porphyritic intrusive activity.

At South Kalgoorlie Operations gold mineralisation was discovered in the Archaean Norseman-Wiluna granite-greenstone terrain in the late 1890s consisting of extensive volcanic sedimentary rocks deposited in an extensional environment. The stratigraphy is characterised by mafic/ultramafic rocks and komatitic basalt flows with intercalated sediments of the Kalgoorlie Group, conformably overlain by a thick series of felsic volcanics and intercalated sedimentary rocks of the Black Flag Group. The discovery of gold led to the exploitation of major historic gold mines in the Kalgoorlie "Golden Mile" and to the south at Jubilee.

Jubilee forms part of a major 4km strike length mineralised system that includes the Celebration, Mutooroo, Hampton Boulder, Mt. Martin, Dawns Hope, White Hope and Golden Hope open pit and underground mines. There are many sub-parallel northsouth trending tectonic zones in the granite- greenstone terrain with a multitude of deposits occurring further towards the west near Coolgardie.

Mineralisation is hosted along brittle-ductile shear contacts between biotite schist and ultramafics (Mt. Marion), in brittle shear in granite (Trojan open pit), along the Boorara shear in felsic porphyry (Goldenridge open pit), in biotite-tremolite schist (Freddo open pit), in shears in quartz dolerite and gabbro (Scrubby Tank) or quartz diorite (Rose Hill) or in Archaean basalts or paleo-channels (Lake Cowan open pits).

At Mt. Marion, mineralisation is hosted in "lode gneiss" along the Kunanulling Shear, within a sub- vertical package of gneiss and ultramafics that is footwall as well as hangingwall lode and has a lower grade core. Mineralised zones are defined on the basis of geological mapping and drilling. Mineralisation occasionally extends from the hangingwall gneiss into the ultramafic hanging wall and appears to be moving further into the hangingwall with increasing depth. The footwall contact of mineralisation generally coincides with the footwall contact of the gneiss and is most consistent.

3.3.10 Harmony Canadian Operations

The orebodies at Bisset are located within the Red lake Archaen greenstone belt and comprise two major sets of shear related quartz veins occurring within a steeply dipping intrusive host. One set of veins consists of stockwork breccias and the other narrower, fault-controlled veins cross-cutting the stockwork. Gold mineralisation occurs in both sets of veins but is enriched at the intersection of the two vein types.

3.4

Exploration Potential

The majority of the operations are mature and well explored and as such SRK consider there to be limited opportunity for discovering any new mineralised horizons or areas within the existing property boundaries within South Africa. Some potential does however exist for the Target, Free Gold, Evander and Harmony Australia Operations:

the eastern extension in the Dreyerskuil Reefs at Target Mine;

the southern extension in Basal Reef at Bambanani BU, the northern extension of certain facies at Tshepong BU and ongoing surface drilling at Joel BU, which is designed to delineate extensions to the Joel North BU area;

the development of the Poplar and Rolspruit projects at the Evander Operations, where exploration has defined significant additional resources and are currently being investigated in the form of pre-feasibility and feasibility studies;

at Harmony Australian Operations there is significant potential for new discoveries in the vicinity of the existing areas and an extensive conceptual exploration programme based on detailed regional geological mapping is underway. This potential is enhanced by the consolidation of all available information in the hands of one organisation. The ore in the South Kalgoorlie area can, however be less free-milling than the Mt. Magnet & Cue ores, signalling a potentially higher risk with regard to the maintenance of the current metallurgical recoveries; and

the tenements in the South Kalgoorlie area are located just north of the well-known Kambalda nickel sulphide deposits where over a million tonnes of contained Ni metal has been produced to date. Portions of the tenements cover strike extensions of the Kambalda Dome stratigraphy and komatites along the Wildcatter's Shear Zone and are considered highly prospective for nickel sulphide deposits. A number of nickel sulphide deposits have been recognised on the Harmony South Kalgoorlie tenements.

106

Annexure 7

MINERAL RESOURCES AND MINERAL RESERVES

4.1

Introduction

This section summarises the methods used by Avgold and Harmony to derive and classify the latest Mineral Resource and Mineral Reserve estimates for the Mining Assets. It also presents SRK's comments and opinions on the reasonableness of these estimates. In addition this section sets out SRK's view regarding any potential for proving up of further Mineral Resources and Mineral Reserves at the Mining Assets.

4.2

Review Procedures

SRK has not re-estimated the Mineral Resources and Mineral Reserves as estimated by the Companies for each of the Mining Assets. SRK has, however, undertaken sufficient check calculations and where appropriate, made necessary adjustments to the estimates to derive the statements presented herein and supporting the respective LoM plans.

The tables in this section summarise the audit process in support of the presented Statements of Mineral Resources and Mineral Reserves. The terms and definitions are those given in the March 2000 South African Code for Reporting of Mineral Resources and Mineral Reserves. This is known as the SAMREC Code ("SAMREC") and is published by the South African Mineral Resource Committee under the auspices of The South African Institute of Mining and Metallurgy.

Avgold and Harmony both report Mineral Resources and Mineral Reserves in accordance with the SAMREC Code. Harmony uses stricter criteria to limit its Measured and Indicated Mineral Resources than other South African gold mining companies. The limit of the Indicated Mineral Resource is 60m from current stoping, whereas certain other South African gold mining companies classify Indicated Mineral Resource utilising confirmed drill intersections which may be at a distance considerably further than 60m.

Within the scale of current mining operations this approach does not affect short-term term planning, nor does it impact on the long-term potential for the operations with large Inferred Resources based on sound geological models. It does, however introduce a problem with respect to reporting SAMREC compliant financial valuations where only projections derived from Proved and Probable Mineral Reserve areas can be presented.

For this reason it is necessary to stress the confidence in the underlying resource models and to include Inferred Mineral Resources into certain of the base case LoM projection and associated cash flow models.

Further, in presenting the Mineral Resource and Mineral Reserve statements the following points apply:

the Measured and Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce Mineral Reserves. Accordingly Mineral Resource statements are sub-divided into those Mineral Resources which have been modified to produce Mineral Reserves (designated by the suffix 1) and those which have not (designated by suffix 2);

Mineral Resources are quoted at an appropriate in-situ economic cut-off-grade with tonnages and grades based on the planned minimum mining width;

Mineral Reserves for Target Mine are based on a gold price of US$375/oz and ZAR:US$ exchange rate of 8.87 (ZAR107,000/kg);

all Mineral Reserves for the Harmony's South African Mining Assets are based on a gold price of US$350/oz and ZAR:US$ exchange rate of 8.26 (ZAR93,000/kg). Harmony's Australian Assets use a US$350/oz and AUD:US$ exchange rate of 1.49 (AUD523/ozt);

all Mineral Resources and Mineral Reserves were estimated as part of the Companies annual planning cycle dated 1 July 2003, the statements as reported herein have been adjusted for depletion that has occurred during the six months that have elapsed and are now dated 1 January 2004;

unless otherwise stated all Mineral Reserves and Mineral Resources are quoted as 100% and not attributable with respect to ownership;

all Mineral Reserves quoted in terms of RoM grades and tonnage as delivered to the metallurgical processing facility and are therefore fully diluted;

Mineral Reserve statements include only Measured and Indicated Mineral Resources modified to produce Mineral Reserves and planned for extraction in the LoM plans;

Mineral Reserve sensitivities have been derived from application of the relevant cut-off-grades to the underlying block listings. Accordingly, these have not been based on detailed depletion schedules and should be considered as incremental changes to the Base Case; and

all references to Mineral Resources and Mineral Reserves relate to the SRK estimates stated in accordance with the SAMREC Code.

107

Annexure 7

Surface sources at the Mining Assets comprise WRDs, Slimes Dams and other surface sources such as spillage and small stockpiles. WRDs are notoriously difficult to sample, given the range of particle sizes commonly present and the heterogeneity of grade. In the majority of instances, SRK has classified those WRDs with sufficient information as Indicated Mineral Resources. In instances where the grade and/or the density are known with insufficient confidence, SRK has classified these as Inferred Mineral Resources. In contrast to WRDs, slimes dams, in general tend to have more homogeneously distributed grades and the smaller particle size facilitates sampling. With adequate sampling and in-situ determinations, SRK consider that slimes dams as such may be classified as Measured Mineral Resources. In instances where the grade and/or the density are known with insufficient confidence, SRK has classified these as Indicated Mineral Resources.

4.3

South African Deposits: Mineral Resource and Mineral Reserve Estimation Methodologies

Mineral Resource and Mineral Reserve estimation and classification is dependent upon the quality and quantity of data, block definition, grade and tonnage estimation, grade control and reconciliation. Such parameters are considered by SRK to be typical of Witwatersrand Basin gold mines at most operations.

Unlike most other Witwatersrand deposits, the stacked nature of the reefs at Target Mine in combination with the bulk mining methods utilised, are condusive to three dimensional computerised geological modelling. As a result of this and the fact that a significant amount of drilling has been completed at Target Mine relative to other mines, the approach used to estimate the Mineral Resources and Reserves at Target Mine differs in some regards from that used at most other Witwatersrand mines.

The majority of resources in the Target North and Oribi areas have been estimated using standard two-dimensional classical statistical methods employed at other Witwatersrand mines where the reefs have been intersected by surface drilling only. At Loraine and to the immediate north of Target additional underground information has enabled a three-dimension computerised approach to be used similar to that employed at Target Mine.

Given the similar nature of the majority of the South African Mining Assets, the following sub-section summarises the general techniques commonly used by Avgold and Harmony for estimation.

4.3.1

Quality and Quantity of Data

Avgold: The Mineral Resource at Target Mine is primarily based on underground exploration drilling. Limited surface drilled intersections also exist as well as chip sampling in areas of the mine with underground development. The underground exploration holes were drilled from a footwall decline on sections lines 50m apart. The holes were drilled on a fan pattern at 15° intervals resulting in drill coverage of between 15m and 80m. Due to the fan nature of the drilling the broader coverage occurs in stratigraphically higher reefs as well as more proximal and distal areas to the sub-crop. Over 35 individual reef horizons have been intersected within the Eldorado Fan between 20 and 200 drillhole intersections per reef. The use of underground drilling has resulted in a significantly larger amount of sampling data being available in areas not yet accessed by underground development compared to most other Witwatersrand deep-level operations.

The Mineral Resource at Target North and Oribi is primarily based on surface exploration drilling. At Loraine 33 underground exploration drillholes and small quantities of chip samples form the basis of the Mineral Resource. The surface drillholes in the Target North area have been drilled on an irregular pattern, forming a drillhole grid spacing of between approximately 500m in the south up to 2,000m in the north. In the Oribi area 7 surface boreholes have been drilled over a strike length of 10km. Due to the geometry and geological characteristics of the individual reefs and reef packages these surface drillhole grids do not necessarily apply to all reefs or reef packages.

Arithmetic means of the short deflections in each surface borehole have been used for the true thickness and gold accumulation value of that borehole. Long deflections were treated as separate intersections, however, data were declustered by taking the arithmetic mean of borehole values for the same reef falling within 100m of each other on plan.

In the case of surface drillholes, the core is halved using a diamond saw, one-half is retained as a geological record and one-half is assayed. For underground drillholes, the core diameter is considered to be too small to allow the core to be split and to yield a sufficiently large sample to allow assaying and, in this instance, the entire core is assayed.

Assaying on the exploration samples was undertaken using fire assay techniques by ISO accredited laboratories with the use of blanks, standards and check assays for quality control. Inter-laboratory checks were also performed with the full process having been independently audited by external consultants.

108

Annexure 7

Given the density of drillhole data, the assaying and quality control procedures applied, together with the operating history to date at Target Mine, in SRK's opinion the quality and quantity of the data available is sufficient to support the Mineral Resource and Reserve estimates as derived.

Harmony: The resource estimation process at all of the underground operations is based on surface drilling, underground drilling and underground channel sampling. Unless cropping out the reefs are initially explored by drilling from surface on regular 500m to 2,000m grids. Once underground access is available, infill development drilling may be undertaken from access haulages and cross-cuts to provide a 30m by 60m grid of intersections. Evaluation is then by extrapolation from or interpolation between stoping and development sampling.

Within the underground workings, exposures of the reef are channel sampled. Individual channels are cut from the wall rocks using a hammer and chisel or diamond saw and the cuttings are caught using steel pans. A detailed sampling record is kept showing the reef geometry at each section.

Current channel sampling standards comprise development sampling at 2m intervals and stope face sampling at 5m intervals. Channels are defined perpendicular to the reef plane and individual sample lengths of 10cm to 30cm are taken to reflect the internal geometry of the reef. The sample size collected is in the order of 0.3kg. Two adjacent samples spanning the footwall contact may be taken in order to double the sample volume of this part of the reef that frequently contains the highest grades. This is important where the reef is `bottom-loaded', providing more confidence in the high-grade values at the footwall contact.

The Evander and West Wits operations use private assay laboratories. All other operations rely on mine owned and managed laboratories.

Two different assaying techniques are utilised at the Mining Assets. The Aztec Analysis is an automated technique for analysing underground chip samples using non-destructive energy dispersive X-Ray analysis ("EDAX") that gives rapid quantitative analyses for gold and uranium. Check assaying is carried out on a proportion of the samples, which are analysed by fire assay with gravimetric finish. The fire assay method is used for the analysis of reef and waste dump samples as well as for checking Aztec analysis results. The samples are dried, sorted, crushed and pulverised then approximately 180g flux is used for a 50g-sample aliquot. A gravimetric finish is used for reef samples and atomic absorption finish is used for waste samples.

As part of Quality Control and Quality Assurance procedures checks are conducted on the assay laboratories and sample preparation plants. Blank samples and repeat assays are part of the external check process undertaken regularly which ensures that the laboratory adheres to assaying standards and procedures.

In SRK's opinion, the long mining history and the quantity and quality of data upon which the Mineral Resource estimates at the Mining Assets are based, is sufficient to support the Mineral Resource and Mineral Reserve estimates as derived. All of the current operations comprise mature operating BUs and consequently Mineral Resource and Mineral Reserve estimates are based largely on underground stope development and pillar sampling.

The Companies are in the process of rationalising and updating their mining software systems. Currently a mixture of computer systems are being used for survey pegs, sampling data, measuring, geological structure, facies, geozones, ore reserve management and mine planning. These systems comprise different versions of commercial packages and proprietary systems. The proprietary systems are being phased out (for support reasons) in favour of the commercial products.

The majority of the Mining Assets have their sampling data in digital format. MS Excel spreadsheets are used for Mineral Reserve and Mineral Resource data management. Specifically "Optimiser" which is used to calculate optimum grade cut-off and "CLS" which is used to generate Mineral Resource and Reserve statements.

At Free Gold Operations, Joel uses a newly established computerised system, utilising a mining software package allowing the completion of all blocking, statistics, geostatistics and grade and tonnage estimation in a fully integrated evaluation system. This system is currently being developed and managed centrally with specialised support staff. Bambanani BU, West BU, Tshepong BU and Phakisa BU use more established 2D CAD computer systems, which have been developed to suit the tabular nature of the Witwatersrand gold deposits. At all these operations all survey data and sampling information is captured digitally and stored in electronic database.

109

Annexure 7

4.3.2

Orebody and Block Definition

Avgold: At Target Mine a computerised three-dimensional geological model of the reefs and interbedded quartzites has been developed using stratigraphic correlation between the boreholes. Underground geological mapping and high-resolution seismic surveys are also used to supplement the stratigraphic and structural data from the drilling. This enables the reef and quartzite models to be truncated against faults and dyke contacts maintaining the three-dimension volume integrity of the model.

The geological model is subsequently used to constrain a block model into which grades are interpolated. This model utilises a block size of 20m along strike, 10m normal to strike and 5m vertically. Volume integrity is maintained through the use of 2m by 1m by 1m sub-cells, which are assigned the grade of the parent block.

At Target North and Oribi the geometry of the orebodies is difficult to interpret with a high-level of confidence given the relative sparsity of the reef intersections from the surface boreholes. The Mineral Resources are as such appropriately classified as either Indicated or Inferred. Fans similar in geometry to the Eldorado Fan at Target Mine have therefore been postulated to exist at reasonable north- south intervals. The characteristics and geometry of this fan together with the borehole intersections have been used to define the limits of the Elsburgs and Dreyerskuil Reef orebodies.

For the Big Pebble Reefs the syncline has been sub-divided into four zones from west to east to account for the separation of the distal reefs. This enables the resource estimation process to account for the probability that in the west the reefs would be mined in a single cut, while in the east the reefs would be mined individually in separate cuts.

In the case of the VCR the geological models have been based solely on the coverage of the surface borehole intersections on that reef.

The geological models developed as described above have been used as the basis of two-dimensional resource polygons constrained by surface borehole coverage and the regional structural model for each reef or reef package.

Where more information is available at Loraine and immediately to the north of Target Mine, computerised three-dimensional geological models of the reefs and interbedded quartzites or total reef packages have been developed using stratigraphic correlation between the boreholes and underground mapping if available. In these cases the three-dimensional models have been used to constrain a block model into which grades are interpolated as at Target Mine.

Harmony: Once the geological structure of an area and reef have been defined, the resource is blocked out on 2-D plan projections using major geological features such as faults, facies boundaries, channel structures and payshoots to define zones of homogeneity. These initial macro- scale blocks are referred to as `geozones'.

Mining blocks are determined once the geozones have been defined. Stoping is blocked out per panel in 30m mining blocks; development will be blocked out for 10m. Major geological features such as faults, facies boundaries and payshoots are used to define zones of homogeneity and to terminate blocks. In some circumstances, the intersection line between the reef and a certain access elevation (e.g. a mine level) may also be used.

The geozones are used to define and separate data populations within the sampling database for further statistical and geostatistical studies. Once geozones and mining blocks have been defined they are digitised for use in computer-aided grade and tonnage evaluation.

4.3.3

Grade and Tonnage Estimation

Avgold: At Target Mine the assay data for each reef have been analysed statistically following the production of reef composites using the geological model. The reef grade populations exhibit positively skewed distributions therefore the cutting of high-grades has been applied to the dataset prior to grade estimation in order to limit the influence of these high grades. The individual reefs within the reef packages demonstrate variable statistical characteristics supporting their evaluation as separate entities.

The cut composites have been subject to geostatistical spatial analyses using semi-variograms calculated in a best-fit plane for the reefs. These analyses indicate the presence of two structures with minor ranges in the order of 40m to 100m and major ranges from 100m to 200m. A nugget effect of 20% has been modelled. As with the statistical characteristics the individual reefs display marked geostatistical differences in range and anisotropy.

110

Annexure 7

Grade has been directly interpolated into the blocks by means of ordinary kriging using parameters derived from the semi-variogram analyses. Each individual reef horizon has been separately estimated. The search parameters in the plane of the reef correspond closely to the semi-variogram ranges. The search normal to the reef plane varies between 50m and 80m in order to accommodate the throw of the faults and the synclinal structure of the fan. A second longer range kriging run has been used to interpolate grades into peripheral blocks not assigned a grade by the initial run. Grade has also been interpolated into the intervening quartzite horizons in order to assess the diluting grade of this material when it is incorporated as internal dilution into the massive stopes.

In the case of the two-dimensional resource estimates the declustered gold accumulation data which falls within each resource polygon are plotted on a log-normal probability plot. If deemed necessary a third constant beta parameter is estimated and a three parameter log-normal distribution assumed. If necessary using the log-probability plots any high outliers are then cut to fit the distribution. The gold accumulation estimate (cmg/t) is then derived for each resource polygon using the lower value of the arithmetic mean and sichel `t' estimate.

In the case of the three-dimensional models at Loraine and Target North a similar methodology is used as at Target Mine. However, due to the sparser nature of the data, grade is interpolated into the blocks by means of a sichel `t' estimate using search radii derived from the variography of each reef horizon. In the case of Target North the semi-variograms used at Target Mine form the basis of the search radii, while at Loraine semi-variograms have been modelled using the limited underground chip sampling available (although this is not used in the estimation itself). A minimum of three samples is required for the block to be estimated. As at Target Mine, a second longer range run is used to interpolate grades into peripheral blocks not assigned a grade by the initial run.

For the two-dimensional polygons an average dip for the steeper west limb and shallower east limb of the syncline has been estimated, together with a proportional split between the two, from cross- sections to derive a true reef area for each polygon. The arithmetic mean of the declustered data is used to derive an average thickness and therefore a volume. If the thickness is below 100cm a minimum mining width of 100cm is used in this process.

Tonnage estimates are derived through the application of tonnage factors for each reef package as follows:

- Elsburg: 2.70t/m

;

- Dreyerskuil: 2.76t/m

;

- Big Pebble/Kimberley: 2.73t/m

; and

- VCR: 2.70t/m

As the small-scale structure in the Target North, Loraine and Oribi is not as well-known as at Target Mine and the estimates are based on two-dimensional models, a 10% tonnage discount factor has been applied to all resources in these areas to account for reef losses.

Harmony: Resource estimation techniques at the Mining Assets follow the same basic principles; however different computer software packages are employed.

At Kudu & Sable BU, Nyala BU, Eland BU and St. Helena BU data capture and estimation is paper based.

Where data is captured digitally each mine uses its defined geozones to sub-divide the reef data into discrete populations that have distinct grade distribution characteristics. Statistical analyses of the metal accumulation values are undertaken so as to substantiate the different grade populations in each domain. The data will often be log transformed to allow a lognormal or compound lognormal model to be applied. In some cases other parameters such as channel width and stope width will be analysed, to look for trends that could be investigated further with geostatistics.

Data are checked and validated and any extreme values investigated to ensure there are no transcription errors. Despiking and grade cutting techniques are used on some of the secondary reef data to assist with further statistical and geostatistical studies.

Point variograms are calculated and modelled from underground channel sample metal accumulation values (and borehole data) for each domain. The data generally provide well-structured, two component spherical variograms with high nugget effects (50% to 80%) and ranges of 10m to 20m and 60m to 90m, these variograms are usually isotropic. This indicates a high random variability in sample grades and an underlying spatial control on sample grades whose zone of influence extends for up to 90m in all directions.

Further variography is carried out on data to be used in the macro-kriging process. These data are used to construct variograms comprising regularised channel sample data, diamond drillhole intersections and underground drillhole intersections.

111

Annexure 7

The variograms from these datasets provide a larger scale control on block grade estimation. The large-block regularised data tends to give excellent structure with little or no nugget effect and produces larger ranges, which can exceed 1,500m.

At Tshepong BU, Phakisa BU, Bambanani BU and West BU kriging is undertaken separately for each geostatistical domain. Channel sample data is used to estimate grade into 10m by 10m blocks using ordinary kriging based on the point variograms and a search radius equivalent to the short range in the variograms. Only those blocks with a high statistical confidence (regression slope greater than 0.6) are evaluated by this method.

Next, 30m by 30m blocks are used to house values generated by a simple kriging process which incorporates the local area mean (based on the ordinary kriged values) into the estimate and therefore smoothes data more than the ordinary kriging, but gives more confidence to the kriged values in those blocks which were not estimated by the ordinary kriging process. The search radius used is approximately 30m and therefore restricts the 30m by 30m block estimates to the vicinity of well- sampled areas. Again, only those blocks with a high statistical confidence within a 3-by-3 neighbourhood search range are evaluated by this method.

A third method is used to extrapolate grades much further using the large-block regularised channel sample data and incorporating the diamond drillhole intersection data which is more dispersed. This kriging is based on 250m by 250m blocks and a large search radius. The data is then co-kriged. The blocks from each of the three block models are combined so as to result in high confidence estimates in the vicinity of the channel sampling using 10m by 10m and 30m by 30m blocks which contribute to the Measured Resource and well founded long range estimates which contribute to the Indicated and Inferred Resource.

The kriging technique utilised by Harmony and Joel BU differs to that stated above. Three prototype block models are created prior to grade estimation, a 15m by 15m Measured model, a 30m by 30m Indicated model and a 60m by 60m Inferred model. The kriged estimates of the Measured model are restricted by the range of the semi-variogram and including a minimum of 15 sample points within the search radius. The kriged estimates of the Indicated model are restricted by two times the range with a minimum of two sample points. In general the sichel `t' estimate technique and application of calculated additive constants is used for estimation of the Inferred model. The three grade models are then combined to form one overall grade model. Channel widths are also estimated using the same technique.

Resource blocks are assigned grades from the block models using the respective software packages. Resource blocks are kept as an inventory listing with several attributes recorded for each. Availability and status record whether or not the ground has been abandoned, whether the area is currently accessible and the time required accessing a currently inaccessible area.

Each block is assigned a stoping width, which is based on the expected mining width in virgin ground, or otherwise the stoping widths encountered historically in the vicinity of that block which accounts for the hangingwall dilution often incurred at these mines. In addition, the square metres of the block are corrected for dip and discounted for fault losses on the basis of previously encountered factors and incorporating the results of a fractal analysis of fault frequency and displacement. The volume described by the resultant square metres and the stoping width is multiplied by the respective tonnes per cubic metre in order to estimate the block tonnage.

Harmony's Welkom and Orkney Operations, Eland BU, Kudu & Sable BU, Nyala BU and St. Helena BU do not use a computerised system for resource and reserve estimation. The Eland BU shaft pillar has been kriged using 30m by 30m blocks, using separate runs for each of the two facies identified in that area, namely the Geduld and the BCF. All other areas are estimated using either a weighting method or simple stretch averages. These methods are considered to be adequate given the high pillar content of the resource and therefore the high density of samples available. The virgin areas at Nyala BU have been estimated using a value contour technique.

Block listing data is generally managed using MS Excel, using company template spreadsheets that perform simple calculations and present data in common formats.

4.3.4

Classification

Avgold: The individual resource blocks have been classified on a block by block basis as Measured, Indicated or Inferred as defined by the SAMREC Code. At Target Mine blocks are classified as Measured Resources where the drillhole spacing is less than that which equates to the point on the semi-variograms where the variance is two-thirds of the total sample variance. Indicated Resources extend beyond the Measured Resource to include all those remaining blocks estimated by the first interpolation run. Inferred Resources comprise blocks estimated by the second longer range interpolation run and also resource areas with very limited sample data.

112

Annexure 7

At Target North and Loraine where the resources have been modelled in three-dimensions Indicated Resources are defined as those blocks into which grade is interpolated in the first estimation run and Inferred Resources are defined as those blocks estimated by the second longer range interpolation run.

In the case of the resources modelled in two-dimensions the resource polygons, and therefore the basis of the classification, have generally been delineated based on borehole coverage. Indicated Resources are broadly defined as those blocks containing a reasonable coverage of surface borehole intersections (usually a minimum of 10 intersections on a minimum approximate borehole grid spacing of 1km). Inferred Resources are those containing fewer intersections and where the continuity of blocks has been inferred using geological interpretation to major structural features. The Inferred Resources are therefore generally situated in the far north of Target North and at Oribi or closer to Target Mine on reefs that have not been intersected by many surface boreholes.

SRK considers that given the quantity and quality of the sample data available, together with the grade and tonnage estimation methodology applied, the classification applied by Avgold is appropriate and in accordance with the SAMREC Code.

Harmony: The individual resource blocks have been classified as Measured, Indicated or Inferred as defined by the SAMREC Code.

Where paper estimation methods are employed resource blocks that are adjacent to sampled developments, including current production and ongoing sampling, are classified as Measured. Blocks that are generally close to sampled developments, but are themselves usually sampled by only a few underground drillholes, are classified as Indicated. The remaining blocks, remote from underground developments where the estimation of tonnage and grade is based upon extrapolation of known geological features such as payshoots/channels as well as faults, are thus classified as Inferred.

Classification of Indicated and Inferred Mineral Resources at Tshepong BU and Phakisa BU is based on the kriging variance applied to the resource block. This is used to derive percentage values, which represent the maximum theoretical difference between the estimated grade and the actual grade of a block at 95% confidence. The limit of the Measured blocks is determined by the extent of the simple kriged 30m by 30m blocks.

Harmony Freestate Operations, Joel BU, Bambanani BU, West BU, West Wits Operations and Evander Operations classify resource blocks based on the following criteria. Measured Mineral Resources are blocked out to 30m or against structures and payshoots and are adjacent to sampled stoping. Indicated Mineral Resources are blocked out to 60m from sampled stoping and within geozones. Inferred Mineral Resources are within large blocks defined by facies, structure and the mining lease boundaries.

SRK considers the Harmony interpretation of the Indicated and Inferred classification boundary to be conservative relative to the approach used at other Witwatersrand deep level gold operations. This has particular impact where an operation has large areas of Inferred Mineral Resources, which are structurally simple and have high payability, such as Joel BU, Bambanani BU, Elandsrand BU and Evander Operations. As the SAMREC Code states that Inferred Mineral Resources cannot be converted into Mineral Reserves this approach may in turn lead to conservative estimates of the Mineral Reserve at these operations.

4.3.5

Selective Mining Units

Avgold: Theoretically the minimum selective mining unit ("SMU") applied at Target Mine is the individual 20m by 10m by 5m blocks used for the grade estimation. However, in practice the reserve is defined through the superimposition of practical stope designs on the block model. While the individual blocks are used to determine the margins of these stopes they are not planned to be mined in isolation but rather as aggregations of blocks within the stope design.

Harmony: The choice of SMU is dependent upon the mining method to be applied. In the case of narrow reef mining used at the Mining Assets, the SMU is an agglomeration of contiguous panels, each of dimension 30m by 30m. For practical reasons at this block size, mining of both pay and unpay material is unavoidable and the halting of stope faces is only triggered by unacceptably high levels of unpay ore being mined.

For remnant extraction, the pillar dimensions define the SMU. Due to the relatively small volumetric size of such remnant and/or pillar area, the sampling density available from previous mining activities facilitates a high degree of confidence for grade estimation.

113

Annexure 7

4.3.6

Grade Control and Reconciliation

Avgold: Grade control practices at Target Mine are based on the results of development chip sampling and underground infill drilling and are used primarily to aid stope definition especially in areas where the fan drilling has resulted in larger spaced sample coverage. In the areas where conventional narrow reef mining methods are applied such as in the Dreyerskuil reefs, stope face sampling and surveying is undertaken as is standard practice on other Witwatersrand mines. In the massive Elsburg stopes a cavity monitoring system is employed which assess the degree of stope overbreak and resulting dilution. Hoisted grade is reconciled back to the mined grade to derive a Shaft Call Factor ("SCF"). The grade reported by the mill is compared to the hoisted grade to derive a Plant Call Factor ("PCF"). These two factors are then combined to derive a Mine Call Factor ("MCF"). Over the last 11 months the MCF has been in excess of 100%.

SRK considers the grade control and reconciliation practices employed at Target Mine to be appropriate for the nature of the orebody and mining methods employed. The high mine call factor may well be a function of underestimation of the grade in the higher-grade proximal areas of the Eldorado fan as a result of the smoothing inherent in the grade interpolation procedure. In SRK's opinion this is likely to reduce over time as mining progresses to lower grade, more distal areas.

Harmony: Grade control and reconciliation practices follow similar procedures to those applied elsewhere in Witwatersrand Basin gold mining operations. The reefs and the hangingwall and footwall lithologies are visually identifiable and channel sampling ensures that the face grade is monitored accordingly. As part of the reconciliation exercises, physical factors, including stope widths, dilution, MCFs and Block Factors ("BF"s) are monitored and recorded on a monthly basis. The results are used to reconcile Mineral Reserve estimates with actual mined tonnages and grades.

As stopes are mined, surveyors monitor the stope width and face advance to provide an accurate stope tonnage estimate. The channel samples taken within the stope are reconciled against the pre- mining grade estimate based on the kriging described above. The difference in gold metal is recorded as a BF, which is a combination of bias in the resource estimate and mining losses. BFs tend to approximate 100% and accordingly no further adjustment has been made.

Belt samplers at the shaft head also record grade and tonnage. These figures are compared back to the surveyed estimates on a monthly basis to give a SCF, which multiplied with the PCF gives the MCF. Generally SRK consider that the underlying grade control and reconciliation processes are appropriate and do not materially affect the underlying Mineral Resource estimates as presented herein.

4.3.7

Reserve Estimation

Avgold: The Mineral Resources at Target Mine together with the survey outlines of the existing stopes, excavations and development tunnels form the basis of the engineering design of the Mineral Reserves. The Mineral Reserves are based on the Measured and Indicated Resources that exceed a cut-off grade ("CoG"), that is determined for each mining method, have been the subject of engineering design and have consequently been classified into Proved and Probable Reserves.

Datamine is used for all GIS and 3-D modelling of the orebody outlines and stope design at Target Mine and the survey outlines are imported from StopeCAD. In terms of the mechanised section a mining method is assigned to a particular area of ground within a block and the design parameters applicable to the method are used as a basis for developing the stope outline. The stope design considers aspects such as maximum drill hole length, the angle of repose, location of drill drive and loading drive as well as backfill, ventilation and equipment resource constraints. The stope outline may in places not be coincident with the orebody outline and result in planned dilution and/or ore losses. Internal waste between reef packages is also incorporated into the stope design where necessary. Once the design is complete the material contained within the stope outline becomes an Engineered Resource and subsequent to the application of further factors associated with un-planned dilution and ore loss with for the Mineral Reserve. The Narrow Reef Mining ("NRM") reserves are determined in a similar but simpler manner in that an appropriate stoping width is selected and the planned dilution represents the difference between this width and the channel width of the Mineral Resource.

A portion of the Inferred Resources has been modified to form the not in reserve ("NIR") category of material contained in the latter years of the LoM plan.

Harmony: The procedure for estimating Mineral Reserves involves the definition of appropriate SMU's, the application of appropriate survey factors based on tonnage, volume and grade reconciliation exercises, the use of cut-off-grade policies and technical-economic investigations leading through to the development of an appropriately detailed and engineered LoM plan.

Tables 4.1 through to 4.6 give the various mine planning parameters utilised in the derivation of cut-off-grades and the modification of Mineral Resources to Mineral Reserves for each mine separately.

114

Annexure 7

All factors relate solely to underground resources and primarily utilise BF, MCF, Stoping Width ("SW") and Milling Width ("MW"). The BF is a correction factor used to account for historical variance between the in-situ estimate of the mining block and the average block grade post-sampling during block depletion. The MCF is the estimated historical discrepancy between the gold estimated to have been broken from the stoping faces to that back allocated post-metallurgical metal accounting as received at the plant as a head grade. The SW is the average in-stope mining width achieved during extraction. Finally the MW is estimated as the total tonnage delivered to the plant from underground divided into the total stope area depleted over the same period. The difference between MW and SW expressed as a ratio to MW is the measure of dilution. Surface sources are processed directly and are generally not screened. As such no modifying factors are applicable for conversion to RoM grades. BUs that supply RoM material to the same metallurgical plant are assigned the same Metallurgical Recovery Factor ("MRF").

The modifying factors as given below are based on historical reconciliation exercises and as such are considered valid for the purpose of reporting Mineral Reserves for the Mining Assets. The seemingly large range in certain modifying factors is as a result of mining several different reef types and under different operating conditions combining virgin ground, remnant pillars and delivering ore to one or a selection of processing plants. The factors are determined by historical records over significant period of time. For new projects, factors have been selected on the basis of comparable operations working the same reefs.

Table 4.1 Target Operations - Target Mine: Assumed Modifying Factors

Business Units

MCF

(1)

Un-planned

Dilutant

Stope

Development

Grade

Dilution

(%)

(g/t)

Target

100

93.6

(1)

A certain quantity of dilution and ore loss is contained within the stope outlines and is not quantified. The dilution and MCF reflected above represent an allowance for additional dilution and ore loss respectively.

Table 4.2 Free Gold Operations: Assumed Modifying Factors

Business Units

MCF

(%)

(cm)

Tshepong BU

100

102

143

Phakisa BU

100

102

143

Bambanani BU

100

151

233

West BU

100

160

188

Eland BU

100

141

209

Kudu & Sable BU

100

167

214

Nyala BU

100

134

155

St. Helena BU

100

137

177

Joel BU

100

139

167

Table 4.3 Harmony Free State Operations: Assumed Modifying Factors

Business Units

MCF

(%)

(cm)

Harmony No.2 BU

100

178

188

Harmony No.3 BU

100

Harmony No.4 BU

100

Merriespruit No.1 BU

100

164

188

Merriespruit No.3 BU

100

202

217

Virginia No.2 BU

100

Unisel BU

100

179

236

Saaiplaas No.3 BU

100

158

175

Brand No.2 BU

100

Brand No.3 BU

100

193

223

Brand No.5 BU

100

201

265

Masimong No.4 BU

100

139

179

Masimong No.5 BU

100

131

168

115

Annexure 7

Table 4.4 Welkom Operations: Assumed Modifying Factors

Business Units

MCF

(%)

(cm)

No.1 BU

100

119

140

No.2 BU

100

140

154

No.3 BU

100

151

253

No.4 BU

100

150

158

No.6 BU

100

130

217

No.7 BU

100

150

189

Table 4.5 West Wits Operations: Assumed Modifying Factors

Business Units

MCF

(%)

(cm)

Elandsrand BU

100

126

152

Deelkraal BU

100

170

227

Cooke 1 BU

100

172

205

Cooke 2 BU

100

144

177

Cooke 3 BU

100

159

195

Randfontein No.4 BU

100

Doornkop BU

100

244

366

Table 4.6 Evander Operations: Assumed Modifying Factors

Business Units

MCF

(%)

(cm)

No.2 BU

100

162

209

No.5 BU

100

111

177

No.7 BU

100

135

217

No.8 BU

100

120

160

No.9 BU

100

116

163

Table 4.7 Orkney Operations: Assumed Modifying Factors

Business Units

MCF

(%)

(cm)

No.2 BU

100

164

210

No.3 BU

100

200

210

No.4 BU

100

120

181

No.6 BU

100

154

193

No.7 BU

100

112

152

4.4

International Deposits: Mineral Resource and Mineral Reserve Estimation Methodologies

The International Operations in Australia and Canada principally focus on small and shallow orebodies and orezones where the gold is hosted by banded iron formations and quartz veins are steeply dipping. The Mineral Resource and Mineral Reserve estimation methodology is similar at these operations and it is therefore not described separately. It should be noted that the procedures and methodologies discussed below are current only for the Harmony Australian Operations as Bisset, the only asset of Harmony's Canadian Operations, is currently on care and maintenance.

4.4.1

Quality and Quantity of Data

A large quantity of data exists at the various operations that comprise a combination of historic and current drilling and sampling data. Drilling and sampling methods include open-hole, reverse circulation, diamond drilling, face and stockpile sampling. Limited information is available on historic quality assurance and quality control procedures and Harmony employs ongoing data validation procedures when completing the geological modelling and resource estimation. A check analysis is performed for every 20 sludge holes drilled. All current sampling takes place under geological control and, where applicable, older geological codes are converted to newer codes.

116

Annexure 7

4.4.2

Orebody Definition

At the underground operations detailed underground geological and structural mapping is undertaken that forms the basis for geological modelling, the understanding of the ore genesis and the mapping of gaps within the sub-vertical oreshoots. In the open pits, results from reverse circulation, diamond and earlier open-hole (if available) drilling are used to define geological wire-frames and grade shells that conform to the geological boundaries. As a standard, the reverse circulation and diamond drilling is composited to standard 1m or 2m lengths. Top-cutting of grades is used as a standard.

4.4.3

Grade and Tonnage Estimation

Mineral Resource estimation procedures are based on ordinary kriging or inverse distance methods. When using inverse distance methods for open pits inverse distance squared or inverse distance cubed weightings are used. The block models are based on information from different sampling and drilling support without extensive QA/QC control and monitoring. Where applicable, the search neighbourhoods for the inverse distance methods are based on the results of geological modelling.

In the open pit mines, optimised pit outlines are designed around the resource block models. In many of the orebodies there is a significant nugget effect and dense sampling grids are required to estimate resources with a high degree of confidence and the search neighbourhoods employed during estimation are therefore of critical importance.

Tonnage modelling is based on average dry bulk density values that are, in places, based on a limited number of samples but have shown to be realistic when compared to density values obtained from mining reconciliation between underground and open pits.

Mineral Resource models for many of the underground orebodies are not based on block models but on the projection of historical averages. At a number of the underground mines there is history of a large variation in the thickness of the undulating sub-vertical oreshoots in the vertical plane that is difficult to predict from the available drillhole spacing. It has been found that, in these cases, the downward projection of the average mine tonnages and grades obtained from extensive current mine development is more appropriate than generating a block model. In terms of the projection of tonnages, gaps in the mineralisation identified by geological mapping of current mine development, are taken into account in the model. SRK concurs that, at this stage, the method of downward plunge projection of tonnage and grade from well developed mine production levels provides the best method for resource modelling for the deeper portions of the mines.

4.4.4

Grade Control and Reconciliation

Grade control drilling in the open pits consists of angled reverse circulation drilling and takes place at different drillhole spacing, locally down to a spacing of 5m by 5m. Reconciliation in the open pits is carried out on each pit level and compared with grade control drilling or sampling. Channel samples are taken and used as the basis of grade control and reconciliation at the underground operations whilst grab samples are taken at the surface stockpiles. Reconciliation between production data and block models shows that tonnages and grade reconcile reasonably well over longer periods. However, on a local scale over short time periods there are significant deviations in the reconciliations, which is usual for inverse distance weighting estimation. The production results from open pits is also compared with the grade from the upper underground levels (where possible) and confirms the average gold grades indicated by the available sampling data.

4.4.5

Reserve Estimation

In the underground mines, resources are converted to reserves by designing stopes on a panel-by- panel basis using different cut-off-grades, determining a practical extraction and adding a percentage for mining dilution. Stopes and development outlines are designed using computerised mine design software. Cross-sections, long-sections and plans are generated as required that reflect a combination of drilling results, assays and geology and interpretations and are used to reflect the stopes, development ends and Mineral Reserves.

In the open pit mines, an optimised pit outline is developed to represent the economically extractable reserves. The Mineral Resources are derived from engineered pit designs, based on the optimal pit outlines.

4.5

Mineral Resource and Mineral Reserve Statements

The Mineral Reserves quoted are sensitive to changing operating costs and gold price. Tables within each sub- section show the Mineral Reserves at eight different gold prices including the Base Case. These sensitivities are presented to give an indication of the changes relative to gold price. SRK has shown a range that relates the extremes in gold price (hence in-situ cut-off grades appropriate to satisfy the context of "potentially

117

Annexure 7

economically viable") over the past few years and into the future and to give an indication of the gold price required to report resources equivalent to 250cmg.t as per Harmony's Annual Report. In this way SRK does not consider the range to reflect the dynamics of international currency exchange and fluctuations in dollar based gold price.

Note that these sensitivities are approximations only and accordingly at different gold prices alternative mining strategies may be pursued to exploit payable material in a more optimal manner. In turn, these may also affect the operating cost structure and cut-off-grades owing to changes in scale of operation, reflecting the dynamic nature of the mining process.

At Target Mine the impact on the Mineral Reserve of different gold prices is not presented due to the complex, interactive mine planning methodology.

The Mineral Resource and Mineral Reserve statements as presented herein differ from those generated by the Companies due to the following:

the Companies present Mineral Resources for the South African assets at an in-situ cut-off-grade of 250cmg/t or between 0g/t and 3g/t. SRK has reported Mineral Resources at in-situ cut-off-grades which are reflective of current macro-economic and specific technical-economic parameters at each of the individual BUs;

SRK has adjusted the Companies Mineral Resource and Mineral Reserve Statements for depletion that has occurred during the six-months that have elapsed since their respective generation. The statements presented herein are dated 1 January 2004; and

Mineral Reserve statements include only Measured and Indicated Mineral Resources modified to produce Mineral Reserves and planned for extraction as projected in the respective LoM plans.

In considering the Mineral Resource and Mineral Reserve statements SRK note the following:

with respect to the classification of Mineral Reserves by Harmony SRK considers that at the majority of the South African operations the boundary between Indicated Mineral Resources and Inferred Mineral Resources is conservatively defined and that for primary reef units reclassification could increase Indicated Mineral Resources and potentially the Probable Mineral Reserves;

- the LoM plans in certain instances rely on significant contribution from the Inferred Mineral Resource

category and reported at RoM tonnage and grades. Given the generally conservative classification potential exists to significantly increase the Indicated Mineral Resource and consequently the Probable Mineral Reserve. SRK has on a high-level basis determined the relative impact on value should mining operations extract only that material currently defined as Mineral Reserves. This assessment crudely assumes that all Inferred Mineral Resources are depleted in the later part of the respective LoM plans. The resulting NPVs should be viewed on a comparative basis only and by definition reflect a lower level of technical planning than the LoM plans as the base case projections presented by the Companies;

- Mineral Resources classified by the suffix (1) represent those groupings of Mineral Resources which have

been used as a base for modification to produce Mineral Reserves or those Inferred Resources which have been modified to produce material included for depletion in the respective LoM plans. Conversion in this instance is dependent upon all modifying factors inclusive of MCF, dilution, extraction and other planning considerations. In certain instances, specifically where groupings of Mineral Resources contain a high portion of remnant pillars, only a relatively small portion of the reported Mineral Resource is currently planned for extraction. Where this is the case such as Free Gold Operations there is an apparent overall low conversion to Mineral Reserves;

- the Mineral Resources not modified to produce Mineral Reserves as defined by the suffix (2), generally include:

reef horizons not currently planned to be extracted in the current LoM plans;

groupings of pillars and other resource blocks for which insufficient technical work has been completed to allow conversion to Mineral Reserves.

In such instances, opportunity also exists for future modification to Mineral Reserve status. In contrast, risks also exist that further technical assessments may render portions of these Mineral Resources to be excluded from the Mineral Resource base on technical grounds; and

- vamping tonnages and grades are not currently included in the following statements, SRK consider there

to be insufficient investigations to base continued contribution at current levels of production and hence warrant inclusion in the Mineral Resource and Mineral Reserve statements as presented herein. This represents further potential for increasing both the Mineral Resource and Mineral Reserve statements; and

the Mineral Resource statements as presented for Harmony Canada Operations have only been reviewed by SRK on a desk top basis alone. SRK note however, that the operation is currently under care and maintenance with no near term intent to recommence operations.

118

Annexure 7

4.5.1

Target Operations

Table 4.8 Target Operations: Target Mine - Mineral Resource and Mineral Reserve Statement

Mineral Reserve Category

Mineral Resource Category

Tonnage

Grade

Gold

Tonnage

Grade

Gold

(kt)

(g/t)

(koz)

(kt)

(g/t)

(koz)

Proved

Measured

- u/g (1)

5,190

7.4

1,227

- u/g (1)

5,545

9.4

1,674

Subtotal

5,190

7.4

1,227

Subtotal

5,545

9.4

1,674

Probable

Indicated

- u/g (1)

11,656

6.3

2,374

- u/g (1)

12,910

9.3

3,840

Subtotal

11,656

6.3

2,374

Subtotal

12,910

9.3

3,840

Total Reserves

16,846

6.6

3,601

Total

18,455

9.3

5,514

M+I+Inf in LoM

Inferred

- u/g (1)

3,098

6.4

641

- u/g (1)

6,720

7.5

1,630

- s/f (1)

11,980

0.6

227

Subtotal

3,098

6.4

641

Subtotal

18,700

3.1

1,857

Total in LoM Plan

19,944

6.6

4,242

TOTAL

37,155

6.2

7,371

The impact of different gold prices on the Mineral Reserve is not presented for the Target Mine. Given the number of mining methods employed and the sensitivity of these to changes in mining costs and potential revenues, a significant amount of re-design work would be required to produce the optimum mining layout and hence a Mineral Reserve estimate for each price. Further, given that a very high percentage of the Target Mine Mineral Resource is converted to Mineral Reserve in the current statement, there is limited potential for the Mineral Reserve to increase with a higher gold price, such as that used as the basis of the Mineral Reserve at Harmony. In addition, while any decrease in price would more likely change the ratio between the mining methods employed, and reduce the operating margins, there would again be less of an impact on the Mineral Reserve itself.

Table 4.9 Target Operations: NFSEC - Mineral Resource and Mineral Reserve Statement

Mineral Reserve Category

Mineral Resource Category

Tonnage

Grade

Gold

Tonnage

Grade

Gold

(kt)

(g/t)

(koz)

(kt)

(g/t)

(koz)

Probable

Indicated

u/g - Loraine

11,190

6.5

2,338

u/g - Target North

u/g - Target North 69,950

7.0

15,676

Subtotal

0.0

Subtotal

81,140

6.9

18,015

Total Reserves

0.0

Total

81,140

6.9

18,015

M + I + INF in LoM

Inferred

u/g - Target North

u/g - Target North 52,200

8.4

14,073

u/g - Oribi

46,890

6.5

9,792

Subtotal

0.0

Subtotal

99,090

7.5

23,865

Total in LoM Plan

0.0

TOTAL

180,230

7.2

41,880

119

Annexure 7

4.5.2

Free Gold Operations

Table 4.10 Free Gold Operations: Mineral Resource and Mineral Reserve Statement

Mineral Reserve Category

Mineral Resource Category

Tonnage

Grade

Gold

Tonnage

Grade

Gold

(kt)

(g/t)

(koz)

(kt)

(g/t)

(koz)

Proved

Measured

- u/g (1)

15,688

8.1

4,082

- u/g (1)

26,252

12.9

10,930

- u/g (2)

507

11.0

179

- s/f (1)

2,687

0.5

- s/f (1)

2,694

0.5

Subtotal

18,375

7.0

4,125

Subtotal

29,453

11.8

11,153

Probable

Indicated

- u/g (1)

45,101

6.9

10,000

- u/g (1)

63,355

10.5

21,391

- u/g (2)

1,237

7.2

287

- s/f (1)

7,674

0.8

196

- s/f (1)

10,095

0.7

233

Subtotal

52,775

6.0

10,196

Subtotal

74,688

9.1

21,911

Total Reserves

71,150

6.3

14,321

Total

104,141

9.9

33,064

M+I+Inf in LoM

- u/g (1)

7,456

6.5

1,566

- u/g (1)

122,126

9.1

35,551

- u/g (2)

83,508

4.8

12,987

Subtotal

7,456

6.5

1,566

Subtotal

205,634

7.3

48,538

Total in LoM Plan

78,605

6.3

15,887

TOTAL

309,774

8.2

81,602

In addition to the stated Mineral Resources and Mineral Reserves, over the LoM period Free Gold Operations plan to deliver to the plant some 892kt of material recovered from vamping operations at an average grade of 4.5g/t. This material is included in the LoM plan projections, however has not been classified as either Mineral Resources or Mineral Reserves.

Table 4.11 summarises the sensitivity of the Mineral Resources and Mineral Reserves at a range of gold prices. The results exclude the material projected from vamping operations.

Table 4.11 Free Gold Operations: Mineral Resource, Mineral Reserve and LoM plan Sensitivity

Gold Price

(ZAR/kg)

46,500

69,750

93,000 116,250 139,500 186,000

232,500

279,000

Mineral Resources - Total

Tonnage

(kt)

94,528

211,691

309,774 363,861

547,743 969,333 1,180,394 1,221,461

Grade

(g/t)

9.1

9.0

8.2

7.6

5.4

3.5

3.1

Metal

(koz)

27,768

61,478

81,602

88,718

95,662

109,093

118,732

120,957

Mineral Reserves - Total

Tonnage

(kt)

31,880

52,532

71,150

77,356

177,606 343,457

347,242

348,756

Grade

(g/t)

8.7

7.6

6.3

6.0

2.8

1.6

Metal

(koz)

8,912

12,752

14,321

14,857

16,178

17,980

18,174

18,237

LoM Plan - Total

Tonnage

(kt)

32,857

57,380

78,605

85,943

187,279 354,446

367,312

369,227

Grade

(g/t)

8.7

7.6

6.3

6.0

3.0

1.7

Metal

(koz)

9,196

13,928

15,887

16,551

17,927

19,767

20,193

20,275

120

Annexure 7

4.5.3

Harmony Free State Operations

Table 4.12 Harmony Free State Operations: Mineral Resource and Mineral Reserve Statement

Mineral Reserve Category

Mineral Resource Category

Tonnage

Grade

Gold

Tonnage

Grade

Gold

(kt)

(g/t)

(koz)

(kt)

(g/t)

(koz)

Proved

Measured

- u/g (1)

11,449

4.6

1,700

- u/g (1)

21,415

7.5

5,180

- u/g (2)

981

7.6

239

- s/f (1)

13,241

0.4

151

- s/f (1)

13,412

0.4

151

Subtotal

24,690

2.3

1,851

Subtotal

35,808

4.8

5,570

Probable

Indicated

- u/g (1)

11,946

4.7

1,792

- u/g (1)

15,413

7.3

3,636

- u/g (2)

174

7.3

- s/f (1)

6,003

0.6

114

- s/f (1)

6,080

0.6

114