e20vf
As filed with the Securities and Exchange Commission on October 25, 2010
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
     
o   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
     
þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2010
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
     
o   SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from      to     
Commission file number: 001 — 31545
HARMONY GOLD MINING COMPANY LIMITED
(Exact name of registrant as specified in its charter)
REPUBLIC OF SOUTH AFRICA
(Jurisdiction of incorporation or organization)
RANDFONTEIN OFFICE PARK, CNR WARD AVENUE AND MAIN REEF ROAD,
RANDFONTEIN, SOUTH AFRICA, 1760
(Address of principal executive offices)
Khanya Maluleke, Company Secretary
tel: +27 11 411 2019, khanya.maluleke@harmony.co.za, fax: +27 11 411 2070,
Randfontein Office Park, CNR Ward Avenue and Main Reef Road, Randfontein, South Africa, 1760
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Ordinary shares, with nominal value Rand 50 cents per share*
(Title of Class)
American Depositary Shares (as evidenced by American Depositary Receipts),
each representing one ordinary share
(Title of Class)
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Ordinary shares, with nominal value Rand 50 cents per share*
(Title of Class)
American Depositary Shares (as evidenced by American Depositary Receipts),
each representing one ordinary share
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
The number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the last full fiscal year covered by this Annual Report was:
428,654,779 ordinary shares, with nominal value of Rand 50 cents per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES  þ   NO  o
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
YES  o   NO  þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days:
YES  þ   NO  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES  o   NO  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ Accelerated filer o  Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
U.S. GAAP  o   International Financial Reporting Standards as issued   Other  o
    by the International Accounting Standards Board   þ    
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17  o   Item 18  þ
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES   o   NO  þ
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
YES  þ   NO  o
 
*   Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.
 
 

 


 

TABLE OF CONTENTS
         
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    F-1  
 EX-2.1
 EX-4.14
 EX-4.15
 EX-4.16
 EX-4.17
 EX-4.18
 EX-4.19
 EX-4.20
 EX-12.1
 EX-12.2
 EX-13.1
 EX-13.2

1


 

USE OF TERMS AND CONVENTIONS IN THIS ANNUAL REPORT
     Harmony Gold Mining Company Limited is a corporation organized under the laws of the Republic of South Africa. As used in this Annual Report on Form 20-F, or this annual report, unless the context otherwise requires, the term “Harmony” refers to Harmony Gold Mining Company Limited; the term “South Africa” refers to the Republic of South Africa; the terms “we”, “us” and “our” refer to Harmony and, as applicable, its direct and indirect subsidiaries as a “Group”.
     In this annual report, references to “R”, “Rand” and “c”, “cents” are to the South African Rand, the lawful currency of South Africa, “A$” refers to Australian dollars, “K” or “Kina” refers to Papua New Guinean Kina and references to “$”, “US$” and “U.S. dollars” are to United States dollars.
     This annual report contains information concerning our gold reserves. While this annual report has been prepared in accordance with the regulations contained in Securities and Exchange Commission Guide 7, it is based on assumptions which may prove to be incorrect. See Item 3. “Key Information — Risk Factors — Harmony’s gold reserve figures are estimated based on a number of assumptions, including assumptions as to mining and recovery factors, future cash costs or production and the price of gold and may yield less gold under actual production conditions than currently estimated.”
     This annual report contains descriptions of gold mining and the gold mining industry, including descriptions of geological formations and mining processes. We have explained some of these terms in the Glossary of Mining Terms included at the end of this annual report. This glossary may assist you in understanding these terms.
PRESENTATION OF FINANCIAL INFORMATION
     We are a South African company and the majority of our operations are located in our home country. Accordingly, our books of account are maintained in South African Rand and our annual and interim financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). Prior to fiscal year ended June 30, 2008, our annual financial statements (translated into U.S. dollars) were prepared and filed with the U.S. Securities and Exchange Commission (“SEC”) in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). On December 21, 2007, the SEC adopted rules allowing foreign private issuers that file Annual Reports on Form 20-F to file financial statements with the SEC in accordance with IFRS without reconciliation to U.S. GAAP. As per these rules, we include in this annual report our consolidated financial statements prepared in accordance with IFRS, translated into U.S. dollars. All financial information, except as otherwise noted, is stated in accordance with IFRS.
     In this annual report, we also present “total cash costs” and “total cash costs per ounce”, which have been determined using industry standards previously promulgated by the Gold Institute and are non-GAAP measures. The Gold Institute was a non-profit international industry association of miners, refiners, bullion suppliers and manufacturers of gold products that ceased operation in 2002, which developed a uniform format for reporting production costs on a per ounce basis. The Gold Institute has now been incorporated into the National Mining Association. An investor should not consider these items in isolation or as alternatives to production costs, cost of sales or any other measure of financial performance presented in accordance with IFRS. While the Gold Institute has provided definitions for the calculation of total cash costs, the calculation of total cash costs and total cash costs per ounce may vary significantly among gold mining companies and, by themselves, do not necessarily provide a basis for comparison with other gold mining companies. For further information, see Item 5. “Operating and Financial Review and Prospects — Costs — Reconciliation of Non-GAAP Measures”.
     We have included the U.S. dollar equivalent amounts of certain information and transactions in Rand, Kina and A$. Unless otherwise stated, we have translated (i) balance sheet items at the closing rate as reported by Reuters on the last business day of the period (R7.63 per US$1.00 as at June 30, 2010 and R7.72 per US$1.00 as at June 30, 2009), (ii) acquisitions, disposals and specific items included within equity at the rate prevailing at the date the transaction was entered into and (iii) income statement items at the average rate for the year (R7.58 per US$1.00 as at June 30, 2010, R9.00 per US$1.00 as at June 30, 2009 and R7.26 per US$1.00 for fiscal 2008). Capital expenditures for fiscal 2011 have been translated at the rates used for balance sheet items at June 30, 2010. By including these U.S. dollar equivalents in this annual report, we are not representing that the Rand, Kina and A$ amounts actually represent the U.S. dollar amounts, as the case may be, or that these amounts could be converted at the rates indicated.

2


 

FORWARD-LOOKING STATEMENTS
     This annual report contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations, business strategies, operating efficiencies, competitive positions, growth opportunities for existing services, plans and objectives of management, markets for stock and other matters. In particular, among other statements, certain statements in Item 4. “Information on the Company,” Item 5. “Operating and Financial Review and Prospects” and Item 11. “Quantitative and Qualitative Disclosures About Market Risk” are forward-looking in nature. Statements in this annual report that are not historical facts are “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended.
     These forward-looking statements, including, among others, those relating to our future business prospects, revenues and income, wherever they may occur in this annual report and the exhibits to this annual report, are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. As a consequence, these forward-looking statements should be considered in light of various important factors, including those set forth in this annual report. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation:
    overall economic and business conditions in South Africa and elsewhere;
 
    the ability to achieve anticipated efficiencies and other cost savings in connection with past and future acquisitions;
 
    fluctuations in the market price of gold;
 
    the occurrence of hazards associated with underground and surface gold mining;
 
    the occurrence of labor disruptions;
 
    availability, terms and deployment of capital;
 
    changes in government regulation, particularly mining rights and environmental regulation;
 
    fluctuations in exchange rates;
 
    currency devaluations/appreciations and other macroeconomic monetary policies; and
 
    socio-economic instability in South Africa and other countries in which we operate.
     We undertake no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events.

3


 

PART I
Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable.
Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
Item 3. KEY INFORMATION
SELECTED FINANCIAL DATA
     The selected consolidated financial data below should be read in conjunction with, and are qualified in their entirety by reference to, our consolidated financial statements and the notes thereto and with Item 5. “Operating and Financial Review and Prospects”, both included elsewhere in this annual report. Historical results are not necessarily indicative of results to be expected for any future period.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
     We are a South African company and the majority of our operations are located in our home country. Accordingly, our books of account are maintained in South African Rand and our annual and interim financial statements are prepared in accordance with IFRS. Prior to fiscal year ended June 30, 2008, our annual financial statements (translated into U.S. dollars) were prepared and filed with the SEC in accordance with U.S. GAAP. On December 21, 2007, the SEC adopted rules allowing foreign private issuers that file Annual Reports on Form 20-F to file financial statements with the SEC in accordance with IFRS without reconciliation to U.S. GAAP. As per these new rules, we changed our basis of presentation and have included in this annual report our consolidated financial statements prepared in accordance with IFRS, translated into U.S. dollars.
     The selected historical consolidated income statement and balance sheet data for the last five fiscal years are, unless otherwise noted, stated in accordance with IFRS, and has been extracted from the more detailed information and financial statements prepared in accordance with IFRS, including our audited consolidated financial statements as of June 30, 2010 and 2009 and for each of the years in the three years ended June 30, 2010 and the related notes, which appear elsewhere in this annual report. The historical consolidated financial data at June 30, 2008, 2007 and 2006, and for each of the years in the two years ended June 30, 2007, has been extracted from our audited consolidated financial statements not included in this annual report as adjusted for discontinued operations and the accounting changes described below.
     During fiscal 2008, we early adopted IAS 23 (Revised) — Borrowing Costs. In accordance with the Revised Standard’s transitional provisions, we designated July 1, 2000 as the effective date and applied the requirements of the Revised Standard to all qualifying projects for which the commencement date of capitalization was on or after that date. The effect of this change on the 2007 and 2006 years has been included in the selected consolidated information below.
     Discontinued operations for the periods below include our Cooke and Orkney operations in South Africa, as well as our South Kalgoorlie and Mount Magnet operations in Australia, up to the date of their disposal. The assets and liabilities of the Cooke operation were first classified as held for sale in fiscal 2008 and the results of this operation presented as discontinued operations until the time of its disposal to Rand Uranium (Proprietary) Limited (“Rand Uranium”) in November 2008. The assets and liabilities of the Orkney and Australia’s South Kalgoorlie operations were first classified as held for sale in fiscal 2007, and the results of these operations reflected as discontinued operations in anticipation of their disposal in fiscal 2008. In fiscal 2010, Australia’s Mount Magnet operations were classified as held for sale and the results of the Mount Magnet operation presented as discontinued operations when an agreement for its disposal to Ramelius Resources Limited (“Ramelius”) was concluded. The reclassifications in respect of discontinued operations were done in terms of IFRS 5 — Non-Current Assets Held for Sale and Discontinued Operations. See note 14 of the consolidated financial statements and Item 4. “Information of the Company — Business — International Operations”, “Information of the Company — Business — Orkney Operations,” Item 4. “Information of the Company — Business — Cooke Operations”.

4


 

                                         
    Fiscal year ended June 30,
    2010   2009   2008   2007   2006
            ($ in millions, except per share amounts)        
Income Statement Data
                                       
Revenue
    1,489       1,277       1,269       1,116       937  
Operating profit/(loss)
    22       236       73       154       (104 )
Profit/(loss) from associates
    7       1       (11 )     (3 )     (17 )
Profit/(loss) from continuing operations before taxation
    24       238       (39 )     156       (91 )
Taxation
    (44 )     (22 )     (65 )     (39 )     (22 )
(Loss)/profit from continuing operations
    (20 )     216       (104 )     117       (113 )
(Loss)/profit from discontinued operations
    (4 )     95       74       (66 )     22  
Net (loss)/profit
    (24 )     311       (30 )     51       (91 )
Basic (loss)/earnings per share from continuing operations ($)
    (0.05 )     0.52       (0.26 )     0.29       (0.29 )
Diluted (loss)/earnings per share from continuing operations ($)
    (0.05 )     0.51       (0.26 )     0.29       (0.29 )
Basic (loss)/earnings per share ($)
    (0.06 )     0.75       (0.08 )     0.12       (0.23 )
Diluted (loss)/earnings per share ($)
    (0.06 )     0.74       (0.08 )     0.12       (0.23 )
Weighted average number of shares used in the computation of basic (loss)/earnings per share
    426,381,581       414,120,732       400,750,167       397,910,797       393,727,012  
Weighted average number of shares used in the computation of diluted (loss)/earnings per share
    427,846,547       415,962,899       402,894,248       402,382,011       393,727,012  
Dividends per share
    0.06                          
Other Financial Data
                                       
Cash cost per ounce of gold from continuing operations ($/oz) (1)
    801       583       600       484       448  
Total cash cost per ounce of gold ($/oz) (1)
    801       586       602       489       443  
Balance Sheet Data
                                       
Assets
                                       
Property, plant and equipment
    3,874       3,614       3,531       3,484       3,263  
Assets of disposal groups classified as held for sale
    32             197       182        
Other assets
    1,235       1,311       982       1,494       1,432  
Total assets
    5,141       4,925       4,710       5,160       4,695  
Equity and liabilities
                                       
Total equity
    3,828       3,824       3,172       3,366       3,249  
Borrowings (current and non-current)
    156       47       525       653       500  
Liabilities of disposal groups held for sale
    18             64       77        
Other liabilities
    1,139       1,054       949       1,064       946  
Total equity and liabilities
    5,141       4,925       4,710       5,160       4,695  
 
(1)   Total cash costs and total cash costs per ounce are non-GAAP measures. Previously, we calculated cash costs per ounce by dividing total cash costs, as determined using the guidance previously provided by the Gold Institute, by gold ounces sold. During fiscal 2009, we changed the calculation, using gold produced as the denominator and therefore excluded the effect of the movement in the gold inventory from the cash cost amount. We believe that this change provides a better indication of the cash generating capabilities of our operations and also allows for a better comparison with other companies. The cash costs and cash cost per ounce have been re-presented for all periods prior to fiscal 2009. The Gold Institute was a non-profit industry association comprised of leading gold producers, refiners, bullion suppliers and manufacturers. This institute has now been incorporated into the National Mining Association. The guidance was first issued in 1996 and was revised in November 1999. Total cash costs, as defined in the guidance previously provided by the Gold Institute, include mine production costs, transport and refinery costs, applicable general and administrative costs, ongoing environmental rehabilitation costs as well as transfers to and from deferred stripping and costs associated with royalties. Ongoing employee termination costs are included, however, employee termination costs associated with major restructuring and shaft closures are excluded. Total cash costs have been calculated on a consistent basis for all periods presented. Changes in cash costs per ounce are affected by operational performance, as well as changes in the currency exchange rate between the Rand and the U.S. dollar. Because total cash costs and total cash costs per ounce are non-GAAP measures, they should therefore not be considered by investors in isolation or as an alternative to production costs, cost of sales, or any other measure of financial performance calculated in accordance with IFRS. While the Gold Institute has provided a definition for the calculation of total cash costs and total cash costs per ounce, the calculation of cash costs per ounce may vary from company to company and may not be comparable to other similarly titled measures of other companies. However, we believe that cash costs per ounce is a useful indicator to investors and management of a mining company’s performance as it provides (1) an indication of the cash generating capacities of the mining operations, (2) the trends in cash costs as the company’s operations mature, (3) a measure of a company’s performance, by comparison of cash costs per ounce to the spot price of gold and (4) an internal benchmark of performance to allow for comparison against other companies. For further information, see Item 5. “Operating and Financial Review and Prospects — Costs — Reconciliation of non-GAAP measures”.

5


 

EXCHANGE RATES
     Unless otherwise stated, balance sheet item amounts are translated from Rand to U.S. dollars at the exchange rate prevailing on the last business day of the period (R7.63 per US$1.00 as at June 30, 2010), except for acquisitions, disposals and specific items included within equity that are converted at the exchange rate prevailing on the date the transaction was entered into, and income statement item amounts that are translated from Rand to U.S. dollars at the average exchange rate for the period (R7.58 per US$1.00 for fiscal 2010).
     As of October 18, 2010, the exchange rate per US$1.00 was R6.90. (1)
     The following table sets forth, for the past five fiscal years, the average and period end rates for Rand expressed in Rand per US$1.00. For periods prior to December 31, 2008, the following tables express the exchange rates in terms of the noon buying rate in New York City for cable transfers in Rand as certified for customs purposes by the Federal Reserve Bank of New York. As of December 31, 2008, the Federal Reserve Bank ceased publication of the noon buying rate and, as such, the exchange rates for fiscal 2009 and 2010 are sourced from Reuters, being the closing rate at period end.
                 
Fiscal Year Ended        
June 30,   Average   Period End
2006
    6.36 (2)     7.17  
2007
    7.20 (2)     7.04  
2008
    7.26 (2)     7.80  
2009
    9.00 (3)     7.72  
2010
    7.58 (3)     7.63  
                 
Month of   High   Low
May 2010
    7.95       7.41  
June 2010
    7.82       7.50  
July 2010
    7.75       7.29  
August 2010
    7.38       7.19  
September 2010
    7.26       6.94  
October 2009 (through October 18, 2010)
    7.00       6.78  
 
(1)   Based on the interbank rate as reported by Reuters.
 
(2)   The average of the noon buying rates on the last day of each full month during the relevant period as certified for customs purposes by the Federal Reserve Bank of New York.
 
(3)   The daily average of the closing rate during the relevant period as reported by Reuters.
     Fluctuations in the exchange rate between Rand and the U.S. dollar will affect the dollar equivalent of the price of ordinary shares on the Johannesburg Stock Exchange, which may affect the market price of the American Depositary Shares (“ADSs”) on the New York Stock Exchange. These fluctuations will also affect the dollar amounts received by owners of ADSs on the conversion of any dividends on ordinary shares paid in Rand.

6


 

CAPITALIZATION AND INDEBTEDNESS
Not applicable.
REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
RISK FACTORS
     In addition to the other information included in this annual report and the exhibits, you should also carefully consider the following factors related to our ordinary shares and ADSs. There may be additional risks that we do not currently know of or that we currently deem immaterial based on information currently available to us. Although Harmony has a formal risk policy framework in place, the maintenance and development of which is undertaken on an ongoing basis so as to help management address systematic categories of risk associated with its business operations, any of these risks could have a material adverse effect on our business, financial condition or results of operations, leading to a decline in the trading price of our ordinary shares or our ADSs. The risks described below may, in retrospect, turn out to be incomplete and therefore may not be the only risks to which we are exposed. Additional risks and uncertainties not presently known to us or that we now believe are immaterial (and have therefore not been included), could also adversely affect our businesses, results of operations or financial condition. The order of presentation of the risk factors below does not indicate the likelihood of their occurrence or the magnitude or the significance of the individual risks. The risks described below could occur individually or cumulatively and intensify in case of a cumulative occurrence.
Risks Relating to Our Business and the Gold Mining Industry
     The profitability of our operations, and the cash flows generated by those operations, are affected by changes in the Rand price of gold, such that a fall in the price of gold below our cash cost of production for any sustained period may lead us to experience losses and to curtail or suspend certain operations.
     Substantially all of our revenues come from the sale of gold. Historically, the market price for gold has fluctuated widely and has been affected by numerous factors over which we have no control, including:
    the demand for gold for industrial uses and for use in jewelry;
 
    international or regional political and economic trends;
 
    the strength or weakness of the U.S. dollar (the currency in which gold prices generally are quoted) and of other currencies;
 
    financial market expectations regarding the rate of inflation;
 
    interest rates;
 
    speculative activities;
 
    actual or expected purchases and sales of gold bullion held by central banks or other large gold bullion holders or dealers;
 
    forward sales by other gold producers; and
 
    the production and cost levels for gold in major gold-producing nations, such as South Africa, China, the United States and Australia.
     In addition, the current demand for and supply of gold affects the price of gold, but not necessarily in the same manner as current demand and supply affect the prices of other commodities. Historically, gold has retained its value in relative terms against basic goods in times of inflation and monetary crisis. As a result, central banks, financial institutions and individuals hold large amounts of gold as a store of value and production in any given year constitutes a very small portion of the total potential supply of gold. Since the potential supply of gold is large relative to mine production in any given year, normal variations in current production will not necessarily have a significant effect on the supply of gold or its price.

7


 

     The volatility of gold prices is illustrated in the following table, which shows the annual high, low and average of the afternoon London Bullion Market fixing price of gold in U.S. dollars for the past ten calendar years:
                         
    Price per ounce
Calendar Year   High   Low   Average
    ($)   ($)   ($)
2000
    313       264       282  
2001
    293       256       271  
2002
    332       278       309  
2003
    412       322       361  
2004
    427       343       389  
2005
    476       411       434  
2006
    725       525       604  
2007
    841       608       695  
2008
    1,011       713       872  
2009
    1,212       810       972  
2010 (through October 18, 2010)
    1,373       1,058       1,188  
     On October 18, 2010, the afternoon fixing price of gold on the London Bullion Market was US$1,367.25 per ounce.
     While the aggregate effect of these factors is impossible for us to predict, if gold prices should fall below our cash cost of production and remain at such levels for any sustained period, we may experience losses and may be forced to curtail or suspend some or all of our operations. In addition, we would also have to assess the economic impact of low gold prices on our ability to recover any losses we may incur during that period and on our ability to maintain adequate reserves. Our cash cost per ounce of gold produced from continuing operations was US$801 in fiscal 2010, US$583 in fiscal 2009 and US$600 in fiscal 2008.
As the majority of our production costs are incurred in Rand and other non-U.S. currencies, and gold is sold in U.S. dollars, our financial condition could be materially harmed by an appreciation in the value of the Rand and other non-U.S. currencies against the U.S. dollar.
     Gold is sold throughout the world in U.S. dollars, but most of our operating costs are incurred in Rand and other non-U.S. currencies. As a result, any significant and sustained appreciation of the South African Rand or other non-U.S. currencies against the dollar will serve materially to reduce our revenues and overall net income.
As we currently do not enter into forward sales, commodity derivatives or hedging arrangements with respect to our future gold production, we are exposed to the impact of any significant decrease in the gold price.
     As a general rule, we sell our gold at the prevailing market price. Currently, we generally do not enter into forward sales, commodity derivative or hedging arrangements to establish a price in advance for the sale of future gold production, although we may do so in the future. As a result, we may realize the benefit of any short-term increase in the gold price, but are not protected against decreases in the gold price, and if the gold price decreases significantly, our revenues may be materially adversely affected.
Estimations of our gold reserves are based on a number of assumptions, including assumptions as to mining and recovery factors, future cash costs of production and the price of gold and may yield less gold under actual production conditions than currently estimated.
     The mineral reserve estimates contained in this annual report are estimates of the mill delivered quantity and grade of gold in our deposits and stockpiles. They represent the amount of gold which we believe can be mined, processed and sold at prices sufficient to recover our estimated future cash costs of production, remaining investment and anticipated additional capital expenditures. Our mineral reserves are estimated based upon a number of assumptions, and are stated in accordance with SEC Industry Guide 7. Our mineral reserve estimates are calculated based on estimates of:
    future cash costs (which in some cases are assumed to decrease significantly);
 
    future gold prices; and
 
    future currency exchange rates.

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     These factors, which are beyond our control, significantly impact these mineral reserve estimates. As a result, the reserve estimates contained in this annual report should not be interpreted as assurances of the economic life of our gold and other precious metal deposits or the future profitability of operations.
     Since these mineral reserves are estimates based on assumptions related to the factors detailed above, should there be changes to these, we may in the future need to revise these estimates. In particular, if our cash operating and production costs increase or do not decrease as assumed (whether in dollar, Rand, or other non-U.S. currencies terms, or in relative terms due to appreciation of the Rand and other non-U.S. currencies against the U.S. dollar) or the gold price decreases, the recovery of a portion of our mineral reserves may become uneconomical. This in turn will lead us to reduce our estimated reserves.
In order to maintain gold production beyond the expected lives of our existing mines or to increase production materially above projected levels, we will need to access additional reserves through exploration or discovery.
     Our operations have limited proven and probable reserves and exploration and discovery is necessary to maintain current gold production levels at these operations. Exploration for gold and other precious metals is speculative in nature and may be unsuccessful, and involves many risks, including those related to:
    locating orebodies;
 
    identifying the metallurgical properties of orebodies;
 
    estimating the economic feasibility of mining orebodies;
 
    developing appropriate metallurgical processes;
 
    obtaining necessary governmental permits; and
 
    constructing mining and processing facilities at any site chosen for mining.
     Our exploration efforts might not result in the discovery of mineralization, and any mineralization discovered might not result in an increase in our proven and probable reserves. To access additional reserves, we will need to successfully complete development projects, including extensions to existing mines and, possibly, that of new mines. Development projects would also be necessary to access any new mineralization discovered through our exploration activities around the world. We typically use feasibility studies to determine whether or not to undertake significant development projects. Feasibility studies include estimates of expected or anticipated economic returns, which are based on assumptions about:
    future gold and other metal prices;
 
    anticipated tonnage, grades and metallurgical characteristics of ore to be mined and processed;
 
    anticipated recovery rates of gold and other metals from the ore; and
 
    anticipated total costs of the project, including capital expenditure and cash costs.
Actual cash costs of exploration, production and economic returns may differ significantly from those anticipated by our feasibility studies for new development projects.
     It can take a number of years from the initial feasibility study until development is completed and, during that time, the economic feasibility of production may change. In addition, there are a number of uncertainties inherent in the development and construction of an extension to an existing mine or any new mine, including:
    the availability and timing of necessary environmental and governmental permits;
 
    the timing and cost of constructing mining and processing facilities, which can be considerable;
 
    the availability and cost of skilled labor, power, water and other materials;
 
    the accessibility of transportation and other infrastructure, particularly in remote locations;
 
    the availability and cost of smelting and refining arrangements; and
 
    the availability of funds to finance construction and development activities.
     We currently maintain a range of focused exploration programs, concentrating on areas not too distant from our operational mines, as well as a number of prospective known gold mineralized regions around the world. During fiscal 2010 and 2009, the bulk of exploration expenditure was allocated to activities in South Africa and Papua New Guinea (“PNG”). However, there is no assurance that any future development

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projects will extend the life of our existing mining operations or result in any new commercial mining operations.
The costs associated with the pumping of water inflows from closed mines adjacent to our operations could adversely affect our results of operations.
     Certain of our mining operations are located adjacent to the mining operations of other mining companies. A mine closure may have an adverse impact on the continued operations at an adjacent mine if appropriate preventative steps are not taken. In particular, this impact can include the ingress of underground water where pumping operations at the closed mine are suspended. Such ingress could result in damage to property, operational disruptions and additional pumping costs, which would adversely affect any one of our adjacent mining operations.
The supply of electricity and increases in the cost of power may adversely affect our results of operations and our financial condition.
     Each of our mining operations is dependent on electrical power generated by the state utility Eskom, which holds a monopoly on the South African market. As a result of an increase in demand exceeding available generating capacity, South Africa has been subject to disruptions in electrical power supply. During fiscal 2008, the electricity supply was interrupted by Eskom thereby halting production at certain of our mines. This led to management restructuring operating processes to control and reduce our consumption of electricity at all our operations. There have been no further disruptions and we have been able to continue production at 90% electricity allocation as required by the Energy Conservation Scheme (“ECS”) and interim rules imposed by Eskom. All operations were allocated an ECS allocation in line with the Eskom allocation and equipment and management structures were put in place to monitor and manage real-time consumption. Applications submitted to Eskom for additional energy allocation to the four future growth projects were approved, enabling us to proceed with the projects and to ramp-up to full capacity utilising Eskom power. We also submitted applications for additional power allocation for four metallurgical projects in the Free State, which were also approved by Eskom. Nevertheless, an insufficient supply of electricity may adversely affect our results of operations and financial condition.
     As a result of Eskom’s planned capital expansion program to deal with the current power constraints, an average 25% per annum tariff increase for the three year multi-year price determination period has been approved by the National Energy Regulator South Africa (“NERSA”). The first increase became effective on April 1, 2010. These increases will have a negative impact on our results of operations going forward.
     Also, see Item 5. “Electricity in South Africa.”
We may experience problems in identifying, financing and managing new acquisitions and integrating them with our existing operations.
     Acquiring new gold mining operations involves a number of risks including:
    our ability to identify appropriate assets for acquisition and/or to negotiate acquisitions on favorable terms;
 
    obtaining the financing necessary to complete future acquisitions;
 
    difficulties in assimilating the operations of the acquired business;
 
    difficulties in maintaining our financial and strategic focus while integrating the acquired business;
 
    problems in implementing uniform standards, controls, procedures and policies;
 
    increasing pressures on existing management to oversee a rapidly expanding company; and
 
    to the extent we acquire mining operations outside South Africa or Australasia, encountering difficulties relating to operating in countries in which we have not previously operated.
     Our ability to make successful acquisitions and any difficulties or time delays in achieving successful integration of any of such acquisitions could have a material adverse effect on our business, operating results, financial condition and share price.
Certain factors may affect our ability to support the carrying value of our property, plant and equipment, goodwill and other assets on our balance sheet.
     We review and test the carrying value of our assets on an annual basis when events or changes in circumstances suggest that the carrying amount may not be recoverable.

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     If there are indications that impairment may have occurred, we prepare estimates of expected future cash flows for each group of assets. These estimates of future cash flows are prepared at the lowest level for which identifiable cash flows are identified as being independent of the cash flows of other mining assets and liabilities. Expected future cash flows are inherently uncertain, and could materially change over time. Such cash flows are significantly affected by reserve and production estimates, together with economic factors such as spot and forward gold prices, discount rates, currency exchange rates, estimates of costs to produce reserves and future capital expenditures.
     As of June 30, 2010, we have substantial amounts of property, plant and equipment, goodwill and other assets on our consolidated balance sheets. We have recorded impairment charges relating to these assets and, if any one or a combination of the uncertainties described above occurs, management may be required to recognize further impairment charges, which could adversely affect our financial results and condition.
Given the nature of mining and the type of gold mines we operate, we face a material risk of liability, delays and increased cash costs of production from environmental and industrial accidents and pollution.
     The business of gold mining by its nature involves significant risks and hazards, including environmental hazards and industrial accidents. In particular, hazards associated with underground mining include:
    rock bursts;
 
    seismic events;
 
    underground fires;
 
    cave-ins or falls of ground;
 
    discharges of gases and toxic chemicals;
 
    release of radioactive hazards;
 
    flooding;
 
    pillar mining;
 
    accidents; and
 
    other conditions resulting from drilling, blasting and the removal and processing of material from a deep-level mine.
     Hazards associated with open cast mining (also known as open-pit mining) include:
    flooding of the open-pit;
 
    collapse of the open-pit walls;
 
    accidents associated with the operation of large open-pits and rock transportation equipment; and
 
    accidents associated with the preparation and ignition of large-scale open-pit blasting operations.
 
      Hazards associated with waste-rock mining include:
 
    accidents associated with operating a waste dump and rock transportation; and
 
    production disruptions caused by weather.
     We are at risk of experiencing any or all of these environmental or other industrial hazards. The occurrence of any of these hazards could delay production, increase cash costs and result in our financial liability.
The nature of our mining operations presents safety and security risks.
     The industrial risks identified above also present safety risks for our operations and our employees and can lead to the suspension and potential closure of operations for indeterminate periods. These and other safety risks, even in situations where no injuries occur, can have a material adverse effect on our operations and production. In addition, security issues need to be continually addressed, including the problem of criminal mining. See Item 4. Regulation — Health and Safety Matters”.
Our insurance coverage may prove inadequate to satisfy future claims against us.
     We have third-party liability coverage for most potential liabilities, including environmental liabilities. While we believe that our current insurance coverage for the hazards described above is adequate and consistent with industry practice, we may be subject to liability for pollution (excluding sudden and accidental pollution) or other hazards against which we have not insured or cannot insure, including

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those in respect of past mining activities. Further, we maintain and intend to continue to maintain, property and liability insurance consistent with industry practice, but such insurance contains exclusions and limitations on coverage. In addition, there can be no assurance that insurance will continue to be available at economically acceptable premiums. As a result, in the future, our insurance coverage may not cover the extent of claims against us for environmental or industrial accidents or pollution.
Our operations may be negatively impacted by inflation.
     Our operations have been materially affected by inflation. Inflation in South Africa has fluctuated widely in recent years, reaching 11.6% at the end of fiscal 2008 before it decreased significantly to 6.9% at the end of fiscal 2009 and to 4.2% by the end of 2010 fiscal year. However, working costs and wages especially, have increased considerably over the past three years resulting in significant cost pressures for the mining industry. In addition, electricity prices have increased by 25% in the current year and are expected to increase by 25% per year for the next two years as the national electricity provider, Eskom, incurs significant capital to expand capacity. Therefore the electricity trend in inflation has not yet filtered through to the mining industry. See Item 5. “Electricity in South Africa”.
     The inflation rate in PNG eased to 7.0% in the 2009 fiscal year (from 10.6% in 2008) and remained relatively stable at 7% for the 2010 fiscal year. Although the recent trend in the inflation figures point to a moderation in inflationary pressures, annual inflation remains significantly above those levels recorded in the years prior to 2008. While the strong international cost pressures experienced in 2008 were picked up in the official statistics, primarily through higher food and fuel prices, there is a concern that current domestic inflationary pressures are being understated in the official statistics produced by the National Statistical Office. For example, there are a number of domestic expenditure items such as the price of dwelling rentals which are reported to have been unchanged for the past two decades. This is despite the enormous increase in dwelling rents that have been observed over the past few years, which highlights inadequacies in the official statistics. Based on business liaison visits, anecdotal evidence suggests that inflation has been running at closer to 8.0% to 10.0% in the past year, with a number of businesses factoring these figures into their negotiations rather than using the official figures. Looking ahead to 2011, inflation is projected to be 8.0% compared to the budget estimate of 7.5%. The reason for the increase in forecast is mainly due to the Liquid Natural Gas project and the recovery in the global economy leading to high international food and energy prices. Labor costs have also increased due to availability of skilled labor as a direct consequence of major projects in PNG. The PNG currency has also remained relatively strong against the Australian and US dollar.
     Our profits and financial condition could be affected adversely if the cost inflation discussed above is not offset by a concurrent devaluation of the Rand and other non-U.S. currencies and/or an increase in the price of gold.
The socio-economic framework in the regions in which we operate may have an adverse effect on our operations and profits.
     We have operations in South Africa and PNG. As a result, changes or instability to the economic or political environment in any of these countries or in neighboring countries could affect our operations and profits. It is difficult to predict the future political, social and economic direction in these countries, or any other country in which we operate, and the impact government decisions may have on our business.
Actual and potential shortages of production inputs may have an adverse effect on our operations and profits.
     Our results of operations may be affected by the availability and pricing of raw materials and other essential production inputs. The price of raw materials may be substantially affected by changes in global supply and demand, along with weather conditions, governmental controls and other factors. A sustained interruption to the supply of any of these materials would require us to find acceptable substitute suppliers and could require us to pay higher prices for such materials. Any significant increase in the prices of these materials would increase our operating costs and affect production considerations.
Our financial flexibility could be materially constrained by exchange control regulations as imposed by SARB.
     In terms of South Africa’s exchange control regulations, the export of capital from South Africa is restricted. As a result, our ability to raise and deploy capital outside South Africa is limited. In particular, we are:
    generally not permitted to export capital from South Africa, to hold foreign currency or incur indebtedness denominated in foreign currencies without the approval of the South African exchange control authorities;
 
    generally not permitted to acquire an interest in a foreign venture without the approval of the South African exchange control authorities and first having complied with the investment criteria of the South African exchange control authorities;
 
    generally required to repatriate to South Africa profits of foreign operations; and

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    limited in our ability to utilize profits of one foreign business to finance operations of a different foreign business.
     These restrictions could hinder our normal corporate functioning, including our ability to make foreign investments and procure foreign currency denominated financings in the future.
     Since 1995, certain exchange controls in South Africa have been relaxed. The extent to which the South African government may further relax such exchange controls cannot be predicted with certainty, although the government has committed itself to a gradual approach to the relaxation of exchange control.
We compete with mining and other companies for key human resources.
     We compete with mining and other companies on a global basis to attract and retain key human resources at all levels with the appropriate technical skills and operating and managerial experience necessary to continue to operate our business. The need to recruit, develop and retain skilled employees is particularly critical with respect to Historically Disadvantaged South Africans (“HDSAs”), women mining in South Africa and the recruitment and training of local landowners in PNG. The global shortage of key mining industry human resource skills, including geologists, mining engineers, metallurgists and skilled artisans has been exacerbated in the current environment of increased mining activity across the globe. Despite various initiatives in place, there can be no assurance that we will attract and retain skilled and experienced employees and, should we lose any of our key personnel, our business may be harmed and our results of operations and financial condition could be adversely affected. See Item 6. Employees”.
Since our South African labor force has substantial trade union participation, we face the risk of disruption from labor disputes and new South African labor laws.
     Despite a history of positive and constructive engagement with labor unions, there are periods during which the various stakeholders are unable to agree on dispute resolution processes. Disruptive activities on the part of labor, which normally differ in intensity, then become unavoidable. Due to the high level of union membership among our employees, we are at risk of having production stoppages for indefinite periods due to strikes and other disputes. Significant labor disruptions have affected our operations and financial condition before and we are not able to predict whether or not we will experience significant labor disputes in the future.
     South African employment law sets out minimum terms and conditions of employment for employees. Though these minimum terms and conditions may be improved by agreements between us and the trade unions, the prescribed minimum terms and conditions form the benchmark for all employment contracts. See Item 6. Employees”.
     We are required to submit a report in terms of South African employment law detailing the progress made towards achieving employment equity in the workplace. In the event this report is not submitted, we could incur substantial penalties.
     Developments in South African employment law may increase our cash costs of production or alter our relationship with our employees and trade unions, which may have an adverse effect on our business, operating results and financial condition.
HIV & AIDS poses risks to us in terms of productivity and costs.
     The incidence of HIV & AIDS in South Africa and PNG, which is forecast to increase over the next decade, poses risks to us in terms of potentially reduced productivity, and increased medical and other costs. If a significant increase in the incidence of HIV & AIDS infection and HIV & AIDS-related diseases among the workforce over the next several years occurs, this may have an adverse impact on our operations, projects and financial condition. See Item 4. Regulation — Health & Safety Matters”.
The cost of occupational healthcare services may increase in the future.
     Operations in PNG are subject to the following PNG Acts and Regulations: PNG Mining Act 1992, PNG Mining Safety Act 1997, PNG Mining Safety Regulation 1935 (updated 2006), and the PNG Environment Act 2000. As in other countries, enforcement of these acts and regulations has the potential to cause interruption to mining activities. The PNG Minerals Resources Authority (“MRA”) administers the safety and environmental legislation on behalf of the PNG Government and has the power to stop work or in extreme cases close a mine until the mine owner complies with the requirements of the MRA. The MRA also mediates in disputes between mine owners and landowners or between landowner groups.
     PNG has minimal health services in country and rural communities. We are putting in place health programs that will assist communities within our area of operations to have better access to health services in a sustainable manner through assistance with health facility upgrades, mentoring and education assistance to community health staff, malaria prevention programs, potable water solutions, as well as assistance with the development of small agriculture business.

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     Our operations in South Africa are subject to health and safety regulations which could impose significant costs and burdens. The present Mine Health and Safety Act 29 of 1996 (“Mine Health and Safety Act”) imposes various duties on us at our mines, and grants the authorities broad powers to, among other things, close unsafe mines and order corrective action relating to health and safety matters.
     The Occupational Diseases in Mines and Works Act 78 of 1973, governs the payment of compensation and medical costs related to certain illnesses contracted by persons employed in mines or at sites where activities ancillary to mining are conducted. Occupational healthcare services are available to our employees from our existing healthcare facilities in South Africa.
     There is a risk that the cost of providing such services and implementing the various programs could increase in future depending on changes in the nature of underlying legislation and the profile of our employees. This increased cost, should it transpire, is currently indeterminate. We have embarked on a number of initiatives focused on improving the quality of life of our workforce, although there can be no guarantee that such initiatives will not be adversely affected by increased costs.
Laws governing mineral rights affect our business.
     Our operations in South Africa and PNG are subject to legislation regulating mineral rights and the mining of those rights. In South Africa, we are governed by the South African Mineral and Petroleum Resources Development Act 2002 (“MPRDA”). See Item 4. “Regulation —South Africa” for a description of the principal objectives set out in the MPRDA.
     Under the MPRDA, tenure over established mining operations is secured for up to 30 years (and renewable for periods not exceeding 30 years each thereafter), provided that mining companies applied for new order mining rights over existing operations within five years of May 1, 2004 or before the existing right expires, whichever was the earlier date and fulfill requirements specified in the MPRDA and the Broad-Based Socio-Economic Empowerment Charter for the South African mining industry (“Mining Charter”). The licenses for all of our South African operations have been granted. We will be eligible to apply for new licenses over existing operations, provided we comply with the Mining Charter. Failure to comply with the conditions of the mining licenses could have a material adverse effect on our operations and financial condition.
     The Mining Charter was signed by government and stakeholders in October 2002, and contains principles relating to the transfer, over a 10-year period, of 26% of South Africa’s mining assets (as equity or attributable units of production) to HDSAs as defined in the Mining Charter. An interim target of 15% HDSA participation over five years was also set and to this end, the South African mining industry committed to securing financing to fund participation by HDSAs in an amount of R100 billion within the first five years of the Mining Charter’s tenure. The Mining Charter provides for the review of the participation process after five years to determine what further steps, if any, are needed to achieve target participation of 26%. In order to measure progress in meeting the requirements of the Mining Charter, companies are required to complete a scorecard, in which the levels of compliance with the objectives of the Mining Charter can be “ticked off” after five and ten years, respectively. The Mining Charter and Scorecard require programs for black economic empowerment and the promotion of value-added production, such as jewelry-making and other gold fabrication, in South Africa. In particular, targets are set out for broad-based black economic empowerment in the areas of human resources and skills development; employment equity; procurement and beneficiation. In addition, the Mining Charter addresses socio-economic issues, such as migrant labor, mine community and rural development and housing and living conditions.
     Following a review of the progress made by the mining industry after five years of implementing the provisions of the Mining Charter , the Department of Mineral Resources (“DMR”) recently amended the Mining Charter and the Revised Mining Charter was released on September 13, 2010. The requirement under the Mining Charter for mining entities to achieve a 26% HDSA ownership of mining assets by the year 2014 has been retained. Amendments to the Mining Charter in the Revised Mining Charter include, inter alia, the requirement by mining companies to
(i)   facilitate local beneficiation of mineral commodities;
 
(ii)   procure a minimum of 40% of capital goods, 70% of services and 50% of consumer goods from HDSA suppliers (i.e. suppliers of which a minimum of 25% + 1 vote of their share capital must be owned by HDSAs) by 2014. These targets will however be exclusive of non-discretionary procurement expenditure;
 
(iii)   achieve a minimum of 40% HDSA demographic representation by 2014 at executive management (board) level, senior management (EXCO) level, core and critical skills, middle management level and junior management level;
 
(iv)   invest up to 5% per cent of annual payroll in essential skills development activities; and
 
(v)   implement measures to improve the standards of housing and living conditions for mineworkers by converting or upgrading mineworkers’ hostels into family units, attaining an occupancy rate of one person per room and facilitating home ownership options for all mineworkers in consultation with organised labour, all of which must be achieved by 2014.

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     In addition, mining companies are required to monitor and evaluate their compliance to the Revised Mining Charter, and must submit annual compliance reports to the DMR. The Scorecard for the Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry attached to the Revised Mining Charter (“the Scorecard”) makes provision for a phased-in approach for compliance with the above targets over the five year period ending in 2014. For measurement purposes, the Scorecard allocates various weightings to the different elements of the Revised Mining Charter. Failure to comply with the provisions of the Revised Mining Charter will amount to a breach of the MPRDA and may result in the cancellation or suspension of a mining company’s existing mining rights. Harmony obtained all of its licenses two years ago and has no reason to believe that our mining licenses will be cancelled or suspended.
     The MPRDA also makes reference to royalties payable to the South African state in terms of the Mineral and Petroleum Resources Royalty Act (Act 28 of 2008). The Act provides for the payment of a royalty according to a formula based on earnings before interest, tax and depreciation, after the deduction of capital expenditure. This rate is then applied to revenue to calculate the royalty amount due, with a minimum of 0.5% and a maximum of 5% for gold mining companies. For the period since the royalty became effective on March 1, 2010 until June 30, 2010, the average royalty rate for our South African operations was 1.5% of gross sales.
     The Mining Act of 1992 (PNG) stipulates that mineral rights in PNG belong to the government of PNG and they have a statutory right to obtain up to a 30% participating interest in mining development projects. The government then issues and administers mining tenements under the relevant mining legislation, and mining companies must pay royalties to the government based on production.
     Production has commenced at our PNG mining operations and they are now subject to a 2% royalty payment to the government of PNG and local community groups. Should we desire to expand any of our initiatives in PNG operations into additional areas under exploration, these operations would need to convert the existing exploration licenses prior to the start of mining, and that process could require landowner title approval. There can be no assurance that any approval would be received.
     Please also see Item 4. Regulation” for further information.
We are subject to extensive environmental regulations.
     As a gold mining company, we are subject to extensive environmental regulation. We have experienced and expect to continue to experience increased cash costs of production arising from compliance with South African and PNG environmental laws and regulations.
     The MPRDA, certain other environmental legislation and the administrative policies of the South African government regulate the impact of our prospecting and mining operations on the environment. Pursuant to these regulations, upon the suspension, cancellation, termination or lapsing of a prospecting permit or mining authorization, we will remain liable for compliance with the provisions of the various relevant regulations, including any rehabilitation obligations. This liability will continue until such time as the appropriate authorities certify that we have complied with such provisions.
     In the future, we may incur significant costs associated with complying with the increasingly stringent requirements being imposed under new legislation and regulations. This may include the need to increase and accelerate expenditure on environmental rehabilitation and to alter provisions for this expenditure, which could have a material adverse effect on our results and financial condition. We may also face increased environmental costs should other mines in the vicinity of our mines fail to meet their obligations with regard to the pumping or treatment of water.
     The South African government has reviewed requirements imposed upon mining companies to ensure environmental restitution. For example, following the introduction of an environmental rights clause in South Africa’s constitution, a number of environmental legislative reform processes have been initiated. Legislation passed as a result of these initiatives has tended to be materially more onerous than laws previously applied in South Africa. Examples of such legislation include the MPRDA, the South African National Nuclear Regulator Act 1999, the South African National Water Act of 1998 and the South African National Environmental Management Act 1998, which include stringent “polluter-pays” provisions. The adoption of these or additional or more comprehensive and stringent requirements, in particular with regard to the management of hazardous waste, the pollution of ground and ground-water systems and the duty to rehabilitate closed mines, may result in additional costs and liabilities.
     Our PNG operations are also subject to various laws and regulations relating to the protection of the environment, which are similar in scope to those of South Africa. See Item 4. Regulation — Environmental Matters” for further discussion on the applicable legislation and our policies on environmental matters.

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Our operations in South Africa are subject to water use licenses, which could impose significant costs and burdens.
     Under South African law, our South African operations are subject to water use licenses that govern each operation’s water usage and that require, among other things, that mining operations achieve and maintain certain water quality limits regarding all water discharges, where these are applicable. The majority of the South African operations are lawful users having existing water permits in terms of the Water Act of 1954. Nevertheless, the South African operations have made applications to the relevant regional directors for water use licences in terms of the National Water Act, 1998. Submissions were made as early as 2003 and the organisation has been working closely with the Regional Directors in the review process and in fact a number of our operations have been issued with licences and / or draft licences.
     It is anticipated that the conditions of the licences may require Harmony to consider and implement alternate water management measures that may have a significant cost implication on our business. Any failure on our part to achieve or maintain compliance with the requirements of these licenses with respect to any of its operations may result in Harmony being subject to penalties, fees and expenses or business interruption due to revoked water licences. Any of the above could have a material adverse effect on our business, operating results and financial condition.
Compliance with emerging climate change regulations could result in significant costs to the Group, and climate change may present physical risks to our operations.
     Greenhouse gases (“GHGs”) are emitted directly by our operations and indirectly as a result of the consumption of electricity from external utilities. Emissions from electricity consumption are indirectly attributable to our operations. There are currently a number of international and national measures to address or limit GHG emissions, including the Kyoto Protocol and the Copenhagen Accord, in various phases of discussion or implementation. Both South Africa and PNG are non-Annex I countries and therefore do not have emission reduction targets under the Kyoto Protocol in the First Commitment Period, ending 2012. After the Climate Summit in Copenhagen in December 2009, South Africa committed to 30% clean energy by 2025 with the vision that South Africa’s GHG emissions should peak by 2020-2025 at the latest, plateau for a decade and then decline by 40% by 2050. South Africa is currently also developing a National Climate Change Response Policy which is expected to be completed by 2012. This policy will be translated into a legislative, regulatory and fiscal package from now until 2012.
     Our largest portion of GHG emissions are predominantly electricity related, with our electricity expenditure amounting to 10% of its operational costs in South Africa. While cost management is clearly a strategic issue for Harmony, of even greater importance is that energy supply be constant and reliable, given the implications that the loss of energy has on both production and for health and safety reasons. GHG emissions regulation which would increase the price of energy, within reason, will not affect Harmony as significantly as regulation which stipulates emission thresholds, or sets technology standards which may result in an insecurity of energy supply. Already certain compliance costs from our power suppliers are being passed through to the group in the form of price increases. For instance, in South Africa since 2009, we pay a levy of R0.02 per kilowatt hour for electricity generated by fossil fuels. These levies may increase over time and additional levies may be introduced in the future in South Africa or PNG, which could result in a significant increase in our costs.
     As our current mines have a life expectancy of up to 24 years, we are undertaking capital projects to sustain and increase production at the Phakisa, Doornkop, Kusasalethu, Tshepong and Hidden Valley operations. These expansions would extend the company’s mining operations by another 10 years or more, by which time GHG regulations are expected to be a permanent feature of the global economy. Future climate change regulation will therefore need to be considered for all Harmony’s extensions and acquisitions. All new greenfields and brownfield projects are required by company policy to consider the impact of climate change in their design and planning.
     Harmony is also likely to be exposed to GHG emission regulation thresholds specifically regarding leakage from refrigerant gas usage. Harmony will therefore be required to manage CFC-free refrigerant gas, and will consider using absorption chillers. This could have cost implications for the company.
     In addition, our operations could be exposed to a number of physical risks from climate change, such as increased rainfall, reduced water availability, higher temperatures and extreme weather events. Events or conditions such as flooding or inadequate water supplies could disrupt our operations and rehabilitation efforts, and could increase the health and safety risks at the operations. In addition, such events or conditions could have adverse effects on our workforce and in communities in close proximity to our operations.
     See Item 4. “Environmental Matters” for disclosure regarding our GHG emissions.

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We may have potential exposure to rehabilitate ground water and radiation that may exist where we have operated and/or continue to operate.
Due to the interconnected nature of mining operations, any proposed solution for potential flooding and potential decant risk posed by deep ground water, needs to be a combined one supported by all the mines located in the goldfields. As a result, the DMR and affected mining companies are involved in the development of a Regional Mine Closure Strategy. In view of the limitation of current information for the accurate estimation of a liability, no reliable estimate can be made for the obligation.
     We have initiated analytical assessments to identify, quantify and mitigate impacts if and when (or as and where) these impacts may arise. Numerous scientific, technical and legal studies are under way to assist in determining the magnitude of possible contamination of ground water and to find sustainable remediation solutions. We have instituted processes to reduce possible future potential seepage and it has been demonstrated that Monitored Natural Attenuation (“MNA”) by the existing environment will contribute to improvement in some instance. The ultimate outcome of the matter cannot presently be determined and no provision for any liability that may result has been made in the financial statements.
Investors in the United States may have difficulty bringing actions, and enforcing judgments, against us, our directors and our executive officers based on the civil liabilities provisions of the federal securities laws or other laws of the United States or any state thereof.
     We are incorporated in South Africa. Each of our directors and executive officers (and our independent registered public accounting firm) resides outside of the United States. Substantially all of the assets of these persons and substantially all of our assets are located outside the United States. As a result, it may not be possible for investors to enforce a judgment against these persons or ourselves obtained in a court of the United States predicated upon the civil liability provisions of the federal securities or other laws of the United States or any state thereof. A foreign judgment is not directly enforceable in South Africa, but constitutes a cause of action which will be enforced by South African courts provided that:
    the court that pronounced the judgment had jurisdiction to entertain the case according to the principles recognized by South African law with reference to the jurisdiction of foreign courts;
 
    the judgment is final and conclusive;
 
    the judgment has not lapsed;
 
    the recognition and enforcement of the judgment by South African courts would not be contrary to public policy, including observance of the rules of natural justice which require that the documents initiating the United States proceeding were properly served on the defendant and that the defendant was given the right to be heard and represented by counsel in a free and fair trial before an impartial tribunal;
 
    the judgment does not involve the enforcement of a penal or revenue law; and
 
    the enforcement of the judgment is not otherwise precluded by the provisions of the Protection of Business Act 99 of 1978, as amended, of the Republic of South Africa.
Compliance with new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and increases our costs of compliance.
     Laws, regulations and standards relating to accounting, corporate governance and public disclosure, new SEC regulations and other listing regulations applicable to us are subject to change and can create uncertainty for companies like us. New or changed laws, regulations and standards could lack specificity or be subject to varying interpretations. Their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards.
     Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish a report by our management on our internal control over financial reporting. The report in this annual report contains, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year, including a statement as to whether or not our internal controls over financial reporting are effective. If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with the Sarbanes-Oxley Act. The requirement to evaluate and report on our internal controls also applies to companies that we may acquire and therefore, this assessment may be complicated by any future acquisitions we may complete. While we continue to dedicate resources and management time to ensuring that we have effective controls over financial reporting, failure to achieve and maintain an effective internal control environment could have a material adverse effect on the market’s perception of our business and our stock price. See Item 15. “Disclosure Controls and Procedures” for management

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assessment as of June 30, 2010. In addition to management’s assessment of internal controls over financial reporting, we are required to have our independent registered public accounting firm publicly disclose their conclusions regarding the effectiveness of Harmony’s internal controls over financial reporting.
     We are committed to maintaining high standards of corporate governance and public disclosure, and our efforts to comply with evolving laws, regulations and standards in this regard have resulted in, and are likely to continue to result in, increased general and administrative expenses.
Sales of large quantities of our ordinary shares and ADSs, or the perception that these sales may occur, could adversely affect the prevailing market price of such securities
     The market price of our ordinary shares or ADSs could fall if large quantities of ordinary shares of ADSs are sold in the public market, or there is a perception in the marketplace that such sales could occur. Subject to applicable securities laws, holders of our ordinary shares or ADSs may decide to sell them at any time. The market price of our ordinary shares or ADSs could also fall as a result of any future offerings it makes of ordinary shares, ADRs or securities exchangeable or exercisable for its ordinary shares or ADSs, or the perception in the marketplace that these sales might occur. We may make such offerings of additional ADS rights, letters of allocation or similar securities at any time or from time to time in the future.
Because we have a significant number of outstanding share options, our ordinary shares are subject to dilution.
     We have employee share option schemes as well as other share schemes. The employee share option schemes came into effect in 2001, 2003 and 2006. Our board has authorized up to 60,011,669 shares of the issued share capital to be used for these plans. As a result, shareholders’ equity interests in us are subject to dilution to the extent of the future exercises of the options, through share schemes.
We may not pay dividends or make similar payments to our shareholders in the future.
     We pay cash dividends only if funds are available for that purpose. Whether funds are available depends on a variety of factors, including the amount of cash available and our capital expenditures and other cash requirements existing at the time. Under South African law, we are only entitled to pay a dividend or similar payment to shareholders if we meet the solvency and liquidity tests set out in the Companies Act of South Africa and our Articles of Association. Cash dividends or other similar payments may not be paid in the future.
     In February 2007, the South African Government announced a proposal to replace Secondary Tax on Companies with a 10% withholding tax on dividends and other distributions payable to shareholders. The amendments will be implemented in phases and are expected to become effective in the near future. Although this may reduce the tax payable on our South African operations, thereby increasing distributable earnings, the withholding tax will generally reduce the amount of dividends or other distributions received by shareholders.

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Item 4. INFORMATION ON THE COMPANY
BUSINESS
History and Development
     We conduct underground and surface gold mining and related activities, including exploration, processing and smelting. We are currently the third largest producer of gold in South Africa, producing approximately 22% of the country’s annual gold output, and we ranked among the top 10 gold producers in the world, with operations and projects in South Africa and PNG. Our gold sales were approximately 1.4 million ounces of gold in fiscal 2010. As at June 30, 2010, our mining operations reported total proven and probable reserves of 48.1 million ounces, primarily from South African sources. In fiscal 2010, we processed approximately 19.8 million tons of ore.
     In fiscal 2010, 96% of our total gold production took place in South Africa. In fiscal 2010, approximately 91% of our South African gold came from underground mines, and approximately 9% came from our surface operations (which include the Kalgold opencast operation and the Phoenix operation). For more detailed information about our activities, see Item 4. “Information on the Company — Business — Harmony’s Mining Operations — Overview” and the notes to the consolidated financial statements included in this annual report. Mining is a highly regulated industry, and we operate under a variety of statutes and regulations. For more detailed information about these statutes and regulations, see Item 4. “Information on the Company — Regulation” and Item 10. “Additional Information Memorandum and Articles of Association”.
     The majority of our exploration and evaluation done during fiscal 2010 has been focused on PNG. Our PNG exploration and evaluation opportunities are handled through the international office in Brisbane, Australia. Exploration in South Africa focused on the Evander South project, Joel North, Poplar and Tshepong.
     We were incorporated and registered as a public company in South Africa on August 25, 1950 (under registration number 1950/038232/06). We poured our first gold on September 11, 1954. In the early 1970’s, we merged with the Anglovaal mines, Merriespruit and Virginia, forming Harmony Gold Mining Company Limited. We then expanded from a single lease-bound mining operation into an independent, world-class gold producer. We acquired additional mineral rights in the Free State, Mpumalanga, Gauteng and North West provinces in South Africa when we acquired Lydex in 1997, Evander in 1998, Kalgold in 1999, Randfontein in 2000, ARMgold in 2003 and Avgold in 2004. We acquired the President Steyn 1 and 2 shafts, Loraine 3 shaft, Freddies 7 and 9 shafts as well as the President Steyn gold plant, collectively known as the Pamodzi Free State assets, from Pamodzi Gold Free State (Proprietary) Limited (In Liquidation) (“Pamodzi FS”) during fiscal 2010. These shafts have been included in the Bambanani and Target operations. In building our Australian portfolio, we acquired Hill 50 and New Hampton in Western Australia in 2001 and 2002, respectively, and started our exploration portfolio in PNG with projects in the Morobe province originally through our acquisition of Abelle in 2003. During fiscal 2009 and 2008, we disposed of several operations in South Africa and Australia, as well as 50% of our interests in gold and copper assets in PNG. See Item 4. Disposals”.
     Our principal executive offices are located at Randfontein Office Park, Corner of Main Reef Road and Ward Avenue, Randfontein, 1760, South Africa and the telephone number at this location is +27-11-411-2000.
South African Operations
     In South Africa, we operate a total of 10 underground operations, several surface operations including an open cast mine, and nine processing plants which are located in all of the currently known goldfields in the Witwatersrand basin of South Africa as well as the Kraaipan Greenstone Belt. These operations produced approximately 1.4 million ounces in fiscal 2010, and South Africa represented approximately 95% (or 45.6 million ounces) of our total proven and probable reserves. The deep level gold mines are located in four provinces in this basin, being the Free State province, Mpumalanga, the West Rand Goldfields in Gauteng province and the North West province. Surface operations are located in all these provinces.
     Ore from the shafts and surface material are treated at nine metallurgical plants in South Africa, located near the operations (five in the Free State province, two in the North West province, one in Mpumalanga and one in Gauteng). There is one plant on care and maintenance which can be restarted if additional processing capacity is required (St. Helena plant in the Free State province). We are currently demolishing two plants in the Free State — the Virginia plant’s demolishment is almost completed, while the process for Steyn plant will continue until fiscal 2012. Winkelhaak plant at the Evander operations was placed on care and maintenance during fiscal 2010, and the demolishment of the plant is expected to commence during the first half of fiscal 2011 and be completed by the end of the first half of 2012.

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     As part of our “Back-to-Basics” strategy, which we embarked on in August 2007, management reassessed and restructured the manner in which operations are managed and evaluated. Each operation, consisting anywhere from a single shaft to a group of shafts, is managed by a team headed up by a general manager. See Item 4. “Harmony’s Management Structure”.
     Operations are classified as “Underground” or “Surface” with the reportable segments in South Africa being as follows:
    Bambanani (includes Steyn 1 and 2 shafts), Doornkop, Evander, Joel, Kusasalethu (previously known as Elandsrand), Masimong, Phakisa, Target (includes Loraine 3, now known as Target 3), Tshepong and the Virginia operations (the Cooke operations were considered to be a reportable segment in fiscal 2008 and have been disclosed under discontinued operations until the time of its disposal in November 2008); and
 
    All other shafts and surface operations, including those that treat historic sand dumps, rock dumps and tailings dams, are grouped together under “Other — Underground” and “Other — Surface”.
International Operations
     Our interests internationally are currently mainly located in PNG and represent 5% (or 2.5 million ounces) of our total proven and probable reserves.
     PNG operations
     In PNG, through our wholly-owned PNG-based subsidiaries, Morobe Consolidated Goldfields Limited (“Morobe Consolidated Goldfields”), Wafi Mining Limited (“Wafi”), Morobe Exploration Limited (“MEL”) and Harmony Gold (PNG) Exploration Limited (“HGEL”) we own development and exploration prospects.
In August 2008, Newcrest Mining Limited (“Newcrest”) acquired a 30.01% interest in our assets and tenements in the Morobe Province through the Morobe Mining Joint Venture. By the end of fiscal 2009, Newcrest had earned an additional 19.99% in terms of the farm-in agreement, resulting in Newcrest and us each owning a 50% interest in the joint venture. Through the joint venture, we continued with the process of building the Hidden Valley mine, with partial commissioning of the plant completed by the end of fiscal 2009. The plant was fully commissioned during the June 2010 quarter. The project at Wafi Golpu is at a Concept Study level, examining underground and open pit mining options. The project is expected to enter into pre-feasibility study in the new fiscal year.
     Australian operations
     At June 30, 2010, our interests in Australia consist solely of one site located at Mount Magnet in Western Australia. This site has been closed down and the plant has been put on care and maintenance since December 2007. Subsequent to the end of fiscal 2010, the Mount Magnet operations were sold to Ramelius, a mining company in Australia listed on the Australian Securities Exchange (“ASX”). The South Kalgoorlie operational assets and tenements, which we previously owned and which was also located in Western Australia, were sold to Dioro Exploration NL (“Dioro”) on November 30, 2007. Ore from the underground and surface material were treated at the two metallurgical plants in Australia (at Mount Magnet and at South Kalgoorlie prior to their sale).
     In July 2007, we entered into an agreement with Dioro pursuant to which Dioro acquired our South Kalgoorlie assets. The total purchase price was A$45 million (US$39.8 million), consisting of both a cash and share component. The share component entailed the issuance of 11.4 million Dioro shares valued at A$20 million (US$17.7 million), and a cash component of A$25 million (US$22.1 million). The transaction was subject to various conditions precedent, including a minimum capital raising by Dioro of A$35 million (US$30.9 million) by the completion date. On November 30, 2007, all conditions precedent were satisfied, and the transaction was completed and accounted for on that date.
     During fiscal 2009, we started an intensive drilling program at Mount Magnet and carried out feasibility studies in order to support our decision to either resume mining operations or sell it. A decision was taken by management during May 2010 to sell Mount Magnet, and at June 30, 2010, Mount Magnet is disclosed as held for sale and discontinued operation. We entered into a Share Sales Agreement with Ramelius for a total consideration of A$35.3 million (US$31.6 million) in cash plus replacement environmental bonds of A$4.7 million (US$4.2 million) totaling A$40.0 million (US$35.8 million) consideration. Final settlement of the transaction took place in July 2010.

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Strategy
     Our focused strategy is based on two main pillars: safety and the competitive production of profitable ounces of gold. This strategy has its overall goal the production of 2 million safe and profitable ounces of gold by 2013. In striving for this, the intention is to transform Harmony into a sustainable company that has free cash flow that is able to generate earnings to fund both growth and dividends.
     Growing the company and generating free cash flow will entail:
    growth in production ounces, by delivering into production the South African growth projects and by fully exploiting growth opportunities in PNG. An important element of this growth objective is the pursuit of geographic diversity;
 
    exploring and expanding into new geographic regions, developing mines, acquiring low-cost assets and entering into joint ventures;
 
    increasing levels of operational efficiency and productivity, to which end capital projects are being commissioned and achievable operational plans have been compiled; and
 
    optimizing our asset portfolio, so as to yield lower-cost, more profitable, high-margin ounces. To this end our portfolio was reviewed and restructured.
Together, these actions will help us to achieve the targeted growth in ounces and generate free cash flow.
(FLOW CHART)
Achievement of these objectives will be driven by the following:
Safety
     Safety is our first priority. We are committed to zero fatalities, with various initiatives throughout the Group, from top management, filtering to every level through conscious and pragmatic effort. We also perform comprehensive safety auditing, and currently have 180 health and safety personnel trained as lead auditors on the OHSAS 18001 Standard in South Africa. We also conduct extensive back analysis to determine the root causes of accidents, to identify what could have been done to prevent them and what can be done in the future to prevent similar incidents.
     To ensure that the only acceptable production is safe production, we have linked remuneration to safety performance at all levels of the organization. We have focused a great deal of effort on addressing behavior, creating an awareness of safety-related issues and acknowledging and rewarding safety achievements.

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Increasing production
     In the past few years, we have invested a great deal in the expansion of the production base in South Africa and PNG, with a focus on developing new mines at competitive cash costs and upgrading the overall quality of our portfolio. Production has started at our five projects, being Kusasalethu new mine, Doornkop South Reef, Tshepong sub 66 and sub 71 declines and Phakisa in South Africa, and Hidden Valley in PNG. These projects could deliver up to 1.1 million low-cost production ounces by 2013 and a reduction on overall cash costs per ounce. As these assets reach full production in the next few years, they will provide the cash flow necessary to allow us to fund growth in our exploration projects and other opportunities that may arise.
     We also have a number of additional development projects in South Africa, including surface sand dumps, rock dumps and tailings dams, where various feasibility and pre-feasibility studies are being conducted. We are investigating the treatment of the current arisings from the Tshepong, Phakisa and Masimong mines primarily for uranium, after which the gold will be extracted. In PNG, we have several greenfields and brownfields exploration projects, several within the Morobe Mining Joint Venture as well as prospects of which are wholly owned by us. Drilling results at the various sites are very encouraging, with Wafi-Golpu being rated as a world class discovery.
Adding to our asset portfolio
     We are always looking out for quality assets offering lower costs to add to our asset portfolio. We have identified and evaluated a number of assets in South Africa, elsewhere in Africa and in South East Asia, which may potentially fit our portfolio. Although we have not been able to identify any projects of sufficient value at a reasonable price, we continue to assess acquisition opportunities, provided they meet our acquisition criteria.
     We have, however, been very successful in acquiring valuable exploration tenements. Our aim is to enhance our competitive edge at an earlier stage in the pipeline, to expand our geographic diversity and to leverage off our existing base in one of the world’s premier new gold regions, PNG. As a result we have increased our exploration budget in the region by 72% for fiscal 2011. While returns may only be generated in the long term, we are confident that those returns will indeed be generated.
Restructuring for efficiency
     In the past year, we reviewed our asset base and in line with our strategy to deliver safe, profitable and sustainable ounces, and we restructured our asset portfolio. We closed several shafts that were no longer economically viable to operate, and entered into agreements to dispose of assets that no longer fit into our asset profile. These changes will allow us to focus on growing, developing and operating our portfolio of quality assets in South Africa and PNG.
Competitive Strengths
     We believe that the following strengths provide us with a competitive advantage:
Leading market position in the attractive gold industry
    We believe that our size and leading market position enables us to undertake exploration and simultaneously develop multiple projects around the world, as well as secure capital on competitive terms.
 
    The global gold industry offers a number of attractive industry fundamentals from which we benefit. This includes the absence of available substitutes, relatively high barriers to entry, and increasing gold producer concentration.
 
    We are developing new mines at a planned lower cost per ounce than our current operations, which we believe will help make them robust enough to survive any margin squeeze and to withstand any reversal in the gold price. We expect the gold price to continue its upward trend in the medium term.
Significant reserves with long mine lives
    Our mineral reserves as of June 30, 2010 amounted to 48.1 million ounces of gold spread across our assets in South Africa and PNG. This mineral reserve base is sufficient to support our existing production profile in excess of 10 years at current production levels. There has been a 0.1 million ounces year-on-year negative variance in mineral reserves due to normal depletion of 1.7 million ounces. Mine closures, the exclusion of projects previously included in reserves (Evander South), geology and scope changes resulted in a decrease of 2.6 million ounces. On the positive side, there is a net addition of 4.3 million ounces of mineral reserves from new acquisitions, Rand Uranium (attributable interest of 40%), surface projects and other positive adjustments from the operations.

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    Of our 48.1 million ounces of reserves, 38.2 million ounces are classified as above infrastructure and 9.9 million ounces re classified as below infrastructure (reserves for which capital expenditure has still to be approved).
Highly attractive project pipeline
    We have a diverse portfolio of gold development projects spread across South Africa and PNG. These projects include Kusasalethu, Doornkop, Tshepong and Phakisa in South Africa, and Hidden Valley in PNG, which, when developed, could deliver up to 1.1 million ounces of production by 2013.
 
    We believe the relatively higher grade of these South African deposits and/or lower cost base will result in these ounces being produced at highly competitive cash costs. This in turn may result in a reduction in our overall cash cost position as these new projects are commissioned.
 
    In addition to these projects, we have a number of additional development prospects that are being considered and progressed, including the processing of sand dumps and tailings dams in our tailings projects, the processing of rock dumps, and developing the Wafi-Golpu copper/gold deposit in PNG, which, when all developed, could increase production.
 
    We have also expanded our exploration skill base, evidenced by our progress in PNG.
 
    We formed Rand Uranium, to which we have transferred our Cooke assets to optimize the value of our uranium deposits.
Positive gold market outlook
    In the midst of volatile tumultuous global investment markets, the gold market has demonstrated great resilience and a positive upside. The price performance throughout fiscal 2010 supports our positive outlook for gold and, given our operational imperatives, we will seek to contain costs, increase output and optimize our margins.
 
    The gold price hit a high of US$1,261 per ounce on June 28, 2010 and, subsequent to year-end, an all-time high of US$1,373.25 on October 14, 2010. On October 18, 2010, it was US$1,367.25 per ounce, which is 30% higher than it was for the same time the previous year.
 
    We believe the fundamental drivers behind increased demand and decreased new supply of gold will remain in the future, which will in turn support a higher gold price over this period. As an unhedged gold producer, we will benefit from a rising gold price environment.
Increased focus on earnings margins and cost
    Our aim remains to improve profitability. At an operational level we have put in place an intensive process of business planning, with benchmarks and targets we believe to be realistic.
 
    We are committed to lower our cost base and extensively benchmark our costing parameters both internally among our operations, and externally against other gold producers. Stringent cost cutting and cost control programs have been implemented.
 
    We are confident that the benefits of our restructuring process and ongoing cost focus will be sustained in the long term, and as a result, our ability to withstand any future adverse market conditions has been significantly enhanced.
Conservative balance sheet and low gearing
    We maintain a conservative gearing policy and seek to fund ongoing capital expenditure (excluding growth projects) through cash generated from existing operations.
 
    Our low level of gearing should provide us with the ability to utilize debt to fund capital and development expenditure requirements for our new projects.

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Experienced management team with significant industry expertise
    Our senior management team consists of experienced mining executives with extensive industry backgrounds combined with geological and metallurgical expertise.
 
    Our senior management team has a proven track record in developing and managing the operations under its control, and has demonstrated an ability to optimize underperforming assets as well as developing new projects around the world.
Leading Black Economic Empowerment strategy
    We are proud to be a South African company that fully embraces the country’s transformation initiatives. We are approximately 14.6% owned by African Rainbow Minerals Limited (“ARM Limited”), a black empowerment company in which our chairman, Patrice Motsepe, owns an interest. Of our total production profile, 36% of our South African ounces are attributed empowerment ounces.
 
    We believe that we have gone beyond the requirements of the Mining Charter by ensuring that our HDSA partners are truly empowered, that we are largely managed by a HDSA Board, and that we continue to engage with black shareholders and/or partners to find more opportunities to invest in BEE transactions and involve HDSA partners.
 
    We will continue to embrace empowerment as part of our growth strategy and we acknowledge that empowerment forms a fundamental part of our business into the future.
Principal Investments
     We have concluded several other strategic transactions within and outside South Africa in the last three fiscal years, which are summarized below.
     During fiscal 2010, we acquired the President Steyn 1 and 2 shafts, Loraine 3 and the Freddies 7 and 9 shafts, along with the President Steyn gold plant, collectively known as the Pamodzi Free State assets, for R405 million (US$53 million). The assets were acquired from Pamodzi FS, a subsidiary of Pamodzi Gold Limited (“Pamodzi”), which is an associate of Harmony.
     During fiscal 2009, we reached an agreement with African Vanguard Resources (Doornkop) (Proprietary) Limited (“AVRD”) to re-acquire AVRD’s 26% interest in the Doornkop mining right. In March 2010, the condition precedent to the agreement became effective. As a result the 26% interest in the Doornkop mining right was transferred from AVRD to Harmony in exchange for our repayment of the Nedbank loan of R244 million (US$33.4 million) and the issue of 2,162,359 Harmony ordinary shares. In terms of the agreement, 975,419 of these shares are to remain in escrow until May 2014.
     In August 2009, we acquired 100% interest in two new exploration tenements, the Mount Hagen and Amanab Projects, in PNG.
     On April 17, 2009, we exchanged our interest in Dioro for shares in Avoca Resources Limited (“Avoca”). See Item 4.“Disposals”. In terms of the offer by Avoca, we received one Avoca share for every three Dioro shares held. The market value of the Avoca shares on the date was US$4.2 million (A$1.50 per share).
     On December 1, 2008, we issued 3,364,675 shares to Rio Tinto plc (“Rio Tinto”) for the purchase of Rio Tinto’s rights to the royalty agreement entered into prior to our acquisition of the Wafi deposits in PNG. The shares were valued at US$23 million on the transaction date. An additional US$10 million in cash will be payable when the decision to mine is made. Of this amount, Harmony is responsible for paying the first US$6 million, with the balance of US$4 million being borne equally by the joint venture partners. The effect of the transaction will be to reduce the cost of any gold produced at Wafi.
     On November 21, 2008, we transferred our Cooke operations to Rand Uranium in exchange for cash of US$209 million and a 40% interest in Rand Uranium. See Item 4. “Disposals”.
     On February 27, 2008, the Group acquired a 32.4% interest in Pamodzi after disposing of its Orkney assets. See Item 4. “Disposals”.

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Disposals
     See Item 8. “Recent Developments” for disposal made after the reporting date.
     In June 2010, the group sold the Jeanette prospecting rights to Taung Gold Limited for a total consideration and profit of R75 million (US$10 million).
     On January 18, 2010, we disposed of our investment in our Australian subsidiary, Big Bell Operations (Proprietary) Limited (“BBGO”), to Fulcrum Resources (Proprietary) Limited (“Fulcrum”) for A$3.5 million (US$3.2 million) in cash and replacement environmental bonds of A$3.2 million (US$3.0 million), resulting in total consideration of A$6.7 million (US$6.2 million).
     During September and October 2009, we sold our interest in Avoca into the market for a total consideration of R42 million (US$5.8 million).
     On April 17, 2009, we disposed of our Dioro shares in exchange for shares in Avoca. On that date, the market value of the Dioro shares was A$0.50 per share, or US$4.2 million.
     On November 21, 2008, we transferred our Cooke assets to our wholly-owned, newly formed subsidiary, Rand Uranium, for the consideration of US$328 million, settled with Rand Uranium shares. In a related transaction on the same date, 60% of these shares were sold to Pamodzi Resources Fund 1 LLP (“PRF”) for US$197 million. US$40 million was paid on the effective date and the balance of US$157 million, together with interest at 5% per annum, was paid on April 20, 2009. The conditions precedent for the second part of the Rand Uranium transaction, relating to the sale of the Old Randfontein assets, were fulfilled on April 22, 2009. Additional shares were issued in settlement and 60% of these shares were sold to PRF. PRF paid its portion of the purchase price, amounting to US$12 million, in cash on April 20, 2009. We recognized a gain of US$171 million on these transactions.
     During fiscal 2009, we disposed of 50% of our interest in our PNG assets in three tranches to Newcrest. The first tranche of 30.01% was disposed of on July 31, 2008 in exchange for US$229 million in cash, which was received on August 7, 2008. On February 28, 2009, the second tranche of 10% was disposed of in terms of the farm-in agreement. Newcrest earned in a further 9.99% interest by contributing to the capital expenditure at Hidden Valley as well as with a cash payment of US$6 million on June 30, 2009. A net profit of US$112 million was realized for the total disposal.
     On February 27, 2008, we disposed of our Orkney operations to Pamodzi in exchange for 30 million listed ordinary shares, the market value of which was R345 million (US$46.5 million).
     On November 30, 2007 the South Kalgoorlie operations were sold to Dioro in exchange for 11.4 million listed ordinary shares, the market value of which was, when issued on December 5, 2007, US$17.7 million (A$20 million), as well as cash of US$22.1 million (A$25 million). A loss of US$8.8 million (A$9.8 million), net of tax, was realized.
     On August 24, 2007, the Group disposed of 13,095,079 ordinary Gold Fields shares. The proceeds amounted to R1,310 million (US$182.9 million), resulting in a loss of R459 million (US$63.2 million).
Hedging Policy
     We have consistently maintained a policy of not entering into forward sales, commodity derivatives or hedging arrangements to establish a price in advance for the sale of our future gold production, although we may do so in the future. As a result of this policy, board approval is required when hedging arrangements are proposed.
     Where any such gold hedging position is acquired, our policy is to eliminate any such positions existing within acquired companies as soon as this can be achieved through sound, commercially advantageous transactions. There may, however, be instances where certain hedge positions in acquired companies need to be kept in place for contractual or other reasons. In line with this policy, we have historically closed out hedging arrangements inherited through our acquisitions. Our revenues are sensitive to the exchange rate of the Rand and other non-U.S. currencies to the U.S. dollar, as all the revenues are generated by gold sales denominated in U.S. dollars. We do not enter into forward sales, commodity derivatives or other hedging arrangements to establish a Rand and/or other non-U.S. currency to U.S. dollar exchange rate in advance for the sales of our future gold production, although we may do so in the future.

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Description of Mining Business
Exploration
     Exploration activities are focused on the extension of existing orebodies and identification of new orebodies, both at existing sites and at undeveloped sites.
     Our gold-focused exploration program has two components:
    on-mine exploration, which looks for resources within the economic radius of existing mines, and
 
    new mine exploration, which is the global search for early to advanced stage projects.
     Once a potential orebody has been discovered, exploration is extended and intensified in order to enable clearer definition of the orebody and the potential portions to be mined. Geological techniques are constantly refined to improve the economic viability of prospecting and mining activities.
     We conduct exploration activities on our own or with joint venture partners. As at June 30, 2010, our prospecting interest in South Africa measured 67,922 hectares (167,833 acres), 344,522 hectares (851,329 acres) in PNG and 39,885 hectares (98,560 acres) in Australia (including Mount Magnet). We spent US$29 million on exploration in fiscal 2010 and the bulk of exploration expenditure was allocated to activities in PNG and South Africa. In fiscal 2011, we intend to carry out exploration in PNG and at Poplar, Masimong and Joel North in South Africa.
Mining
     The mining process can be divided into two main phases: (i) accessing the orebody and (ii) mining the orebody. This basic process applies to both underground and surface operations.
    Accessing the orebody.
 
      In our South African underground mines, access to the orebody is by means of shafts sunk from the surface to the lowest economically and practically mineable level. Horizontal development at various intervals of a shaft (known as levels) extends access to the horizon of the reef to be mined. On-reef development then provides specific mining access. Horizontal development at various intervals of the decline extends access to the horizon of the mineral to be mined. The declines are advanced on a continuous basis to keep ahead of the mining taking place on the levels above. In our open-pit mines, access to the orebody is provided by overburden stripping, which removes the covering layers of topsoil or rock, through a combination of drilling, blasting, loading and hauling, as required.
 
    Mining the orebody.
 
      The process of ore removal starts with drilling and blasting the accessible ore. The blasted faces are then cleaned, and the ore is transferred to the transport system. In open-pit mines, gold-bearing material may require drilling and blasting, and is usually collected by bulldozers or shovels to transfer it onto trucks, which transport it to the mill.
     In our South African underground mines, once ore has been broken, train systems collect ore from the faces and transfer it to a series of ore passes that gravity feed the ore to hoisting levels at the bottom of the shaft. The ore is then hoisted to the surface in dedicated conveyances and transported either by conveyor belts directly or via surface railway systems or roads to the treatment plants. In addition to ore, waste rock broken to access reef horizons must similarly be hoisted and then placed on waste rock dumps.
Processing
     We currently have nine operational metallurgical plants in South Africa. We also have a metallurgical plant at the Hidden Valley project in PNG. The principal gold extraction processes we use are carbon in leach, or CIL, and carbon in pulp, or CIP.
     The gold plant circuit consists of the following:
    Comminution.
 
      Comminution is the process of breaking up the ore to expose and liberate the gold and make it available for treatment. Conventionally, this process occurs in multi-stage crushing and milling circuits, which include the use of jaw and gyratory crushers and rod and tube and ball mills. Our more modern milling circuits include semi- or fully-autogenous milling where the ore itself is used as the

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      grinding medium. Typically, ore must be ground to a minimum size before proceeding to the next stage of treatment.
 
    Treatment.
 
      In most of our metallurgical plants, gold is extracted into a leach solution from the host ore by leaching in agitated tanks. Gold is then extracted onto activated carbon from the solution using the CIL or CIP processes. Gold in solution at one of our plants is recovered using zinc precipitation. Recovery of the gold from the loaded carbon takes place by elution and electro-winning. Cathode sludge or dore bars produced from electro- winning is now currently sent directly to the Rand Refinery. Most of the South African plants no longer use smelting to produce rough gold bars (dore). Our South African zinc precipitation plants continue to smelt precipitate to produce rough gold bars. These bars are then transported to the Rand Refinery, which is responsible for refining the bars to a minimum of good delivery status.
     All the production from our South African operations is sent to the Rand Refinery, which is owned by a consortium of the major gold producers in South Africa. The Australian and PNG gold production for fiscal years 2008 to 2010 was refined in Australia at an independent refiner, The Perth Mint Australia (previously known as AGR Matthey).
     The South African government has emphasized that the production of value-added fabricated gold products, such as jewelry, is an important means for creating employment opportunities in South Africa and has made the promotion of these beneficiation activities a requirement of the Mining Charter described in Item 4. “Information on the Company — Regulation — Mineral Rights”. We support jewelry ventures in South Africa.
Harmony’s Management Structure
     We have a de-centralized management structure that is based on small, empowered management teams led by General Managers at each of our operations. In South Africa, the General Managers report to Alwyn Pretorius and Tom Smith, the Chief Operations Officers, and are responsible for business optimization, mineral reserve optimization, and for developing a business culture at the operations. They also focus on long-term viability and growth of the operations. The General Managers are supported by a Mineral Reserve Manager, a Financial Manager, a Human Resources Manager and a Technical Manager in ensuring the growth and long-term sustainability of the operations
     Morobe Mining Joint Venture consists of three unincorporated joint ventures (Hidden Valley Mine Joint Venture (“HVJVM”), Wafi-Golpu Mine Joint Venture (“WGMJV”) and Morobe Exploration Joint Venture (“MEJV”) which are owned 50/50 by respective Harmony and Newcrest 100% owned subsidiaries (“owners”).
     The Joint Ventures are managed by a Joint Venture Committee (“JVC”) appointed by the respective owners. The JVC is responsible for the supervision of each of the three Joint Ventures, and implementation of the owners’ policy and strategy. The members act as owner representatives within the unincorporated joint ventures.
     Three legal operator entities (“operator co.”), Hidden Valley Services Proprietary Limited, Wafi Golpu Services Limited and Morobe Exploration Services Limited have been established and appointed as operator of / agent for the respective unincorporated joint ventures (HVMJV, WGMJV and MEJV). Shareholding is held equally by the owners who appoint a board of directors (“board”) for each operator co.
     The respective operator co. boards appoint Operational Steering Committees and General Managers who are responsible for implementation of the operating plan as approved by the JVC as well as making recommendation to the JVC for growth and sustainability. The General Managers report to the Operational Steering Committees. The General Managers are supported by functional managers.
Capital Expenditures
     Capital expenditures for continuing operations incurred for fiscal 2010 totaled US$442 million compared with US$487 million for fiscal 2009 and US$500 million for fiscal 2008. In Rand terms, the capital expenditure decreased by 23% from fiscal 2009. For fiscal 2010, the capital development at PNG accounted for 16% of the total, with development at Phakisa and Kusasalethu accounting for 14% and 13%, respectively. Capital development also took place at the Doornkop South Reef Project and Tshepong Sub 71 Declines, as well as at the newly acquired President Steyn and Loraine shafts. The capital expenditure, including the non-cash portion, in fiscal 2009 was primarily related to the development of the PNG assets, which accounted for 41% of the project capital expended. The majority of this development was funded by Newcrest in terms of the farm-in agreement. Capital was also expended on the Doornkop South Reef Project, Tshepong Sub 71 Decline, as well as Phakisa and the Kusasalethu New Mine. During fiscal 2008, the increased development in PNG accounted for 39% of the project capital expended in the year, with the balance being expended at the Doornkop South Reef Project, Phakisa, Tshepong Sub 66 and 71 Declines and the Kusasalethu New Mine.

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     The focus of our capital expenditures in recent years has been underground development and plant improvement and upgrades. Construction at these projects has been completed in certain areas, and production, if not yet at full capacity, has started from these areas at all our current growth projects. Capital will still be expended at these projects in the next two to three years to complete construction. During fiscal 2010, the projects were funded from the Company’s cash reserves, as well as by the loan facility from Nedbank.
     Capital expenditure for discontinued operations, incurred for fiscal 2010 totaled US$nil, compared with US$10 million for fiscal 2009 and US$42 million for fiscal 2008.
     We have budgeted approximately US$452 million for capital expenditures in fiscal 2011. Details regarding the capital expenditures for each operation are found in the individual mine sections under “Business — Harmony’s Mining Operations”. We currently expect that our planned operating capital expenditures will be financed from operations and new borrowings as needed.
Reserves
     As at June 30, 2010, we have declared proven and probable reserves of 48.1 million ounces, broken down as follows: 45.6 million ounces in South Africa and 2.5 million ounces in PNG. Of our 48.1 million ounces of mineral reserves, 9.9 million ounces are classified as below infrastructure (that is, reserves for which capital expenditure has yet to be approved). There has been a 0.1 million ounces year-on-year negative variance in mineral reserves due to the following reasons:
    normal depletion of 1.7 million ounces;
 
    mine closures, the exclusion of projects previously included in reserves (Evander South), geology and scope changes resulted in a decrease of 2.6 million ounces; and
 
    a net addition of 4.3 million ounces of mineral reserves from new acquisitions, Rand Uranium (attributable interest of 40%), surface projects and other positive adjustments from the operations.
     We use the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (“SAMREC Code”), which sets out the internationally recognized procedures and standards for reporting of mineral resources and mineral reserves. We use the term “mineral reserves” herein, which has the same meaning as “ore reserves”, as defined in the SAMREC code. Our reporting of the PNG Mineral Reserves complies with the Australian Code for the Reporting of Mineral Resources and Mineral Reserves (“JORC”) of the Australian Institute of Mining and Metallurgy. This code is materially the same as the SAMREC Code. In reporting of reserves, we have complied with Industry Guide 7 of the U.S. Securities and Exchange Commission.
     For the reporting of Mineral Reserves at our South African and PNG operations, we use a gold price of US$950 per ounce. An exchange rate of R8.19 per U.S. dollar is used for South Africa and for PNG an exchange rate of US$0.83 per Australian dollar is used giving a gold price of R250,000 per kilogram and A$1,145 per ounce, respectively. These gold prices have also been used in mine planning.
     In order to define that portion of a measured and indicated mineral resource that can be converted to a proven and probable mineral reserve at our underground operations, we apply the concept of a cut-off grade. This is done by defining the optimal cut-off grade as the lowest grade at which an orebody can be mined such that the total profits, under a specified set of mining parameters, are maximized. The cut-off grade is determined using our Optimizer computer program which requires the following as input:
    the database of measured and indicated resource blocks (per operation);
 
    an assumed gold price which, for this mineral reserve statement, was taken as R250,000 per kilogram;
 
    planned production rates;
 
    the mine recovery factor which is equivalent to the mine call factor (“MCF”) multiplied by the plant recovery factor; and
 
    planned cash costs (cost per tonne).
     Rand per tonne cash costs of the mines are historically based, but take into account distinct changes in the cost environment, such as the future production profile, restructuring, right-sizing, and other cost reduction initiatives which we expect in the aggregate to lead to lower unit costs, and for below-infrastructure ounces, an estimate of capital expenditure.
     The block cave reserve at Golpu (PNG) used the PCBC computer program to define the optimal mine plan and sequencing.

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     The open pit reserve at Hidden Valley (PNG) is defined by a pit design based on the Whittle open pit optimization program guiding the most efficient mine design given this constraint.
     The mineral reserves represent that portion of the measured and indicated resources above cut-off in the life-of-mine plan and have been estimated after consideration of the factors affecting extraction, including mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. A range of disciplines which includes geology, survey, planning, mining engineering, rock engineering, metallurgy, financial management, human resources management and environmental management have been involved at each mine in the life-of-mine planning process and the conversion of resources into reserves. The mineral flow-related modifying factors used to convert the mineral resources to mineral reserves through the life-of-mine planning process are stated for each individual operation. For these factors, historical information is used, except if there is a valid reason to do otherwise. Because of depth and rock engineering requirements, some shafts design stope support pillars into their mining layouts which accounts for approximately 7% to 10% discounting. Further discounting relates to the life-of-mine extraction to provide for unpay and geological losses.
     Our standard for narrow reef sampling with respect to both proven and probable reserve calculations for underground mining operations in South Africa is applied on a 6 meter by 6 meter grid. Average sample spacing on development ends is at 2 meter intervals in development areas. For the massive mining at the Target operations, our standard for sampling with respect to both proven and probable reserves are fan drilling with “B” sized diamond drill holes (43mm core) sited at 50 meter spaced sections along twin access drives. The Kalgold open cast operations are sampled on diamond drill and reverse circulation drill spacing of no more than 25 meters on average. Surface mining at South African operations other than Kalgold involves recovering gold from areas previously involved in mining and processing, such as metallurgical plants, waste rock dumps and tailing dams (slimes and sand) for which random sampling is used.
     The PNG resources are hosted in large porphyry or related mesothermal geological systems. Data is gained through diamond drilling using PQ down to NQ sized core. The core is cut in half, one half sampled at a maximum of 2 meter intervals and the other half stored in designated core storage facilities. Drill spacing is typically on less than 20 meter centers for Measured category, 20 to 40 meter centers for the Indicated category and greater than 40 meters for Inferred category material. Assaying for gold is by fire assay and various methods are used for copper and other elements. All assays informing the resource calculation are analyzed at a National Association of Testing Authorities accredited commercial laboratory. Some sample preparation is done at the mine site laboratory. Extensive Quality Assurance/Quality Control work is undertaken and data is stored in an electronic database.

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Our mining operations’ reported total proven and probable reserves as of June 30, 2010 are set out below:
Mineral Reserves statement (Imperial) as at June 30, 2010
                                                                         
OPERATIONS   PROVEN RESERVES     PROBABLE RESERVES     TOTAL RESERVES  
GOLD   Tons     Grade     Gold oz(1)     Tons     Grade     Gold oz(1)     Tons     Grade     Gold oz(1)  
    (million)     (oz/ton)     (000)     (million)     (oz/ton)     (000)     (million)     (oz/ton)     (000)  
South Africa Underground
                                                                       
Bambanani
    4.8       0.294       1,406       0.1       0.202       25       4.9       0.292       1,431  
Joel
    1.3       0.182       240       1.6       0.163       264       2.9       0.172       504  
Masimong
    6.0       0.149       894       2.1       0.148       306       8.1       0.149       1,200  
Phakisa
    0.7       0.136       94       21.3       0.237       5,065       22.0       0.234       5,159  
Target
    5.5       0.173       954       12.5       0.148       1,847       18.0       0.156       2,801  
Tshepong
    14.5       0.155       2,247       10.4       0.156       1,626       24.9       0.156       3,873  
Virginia
    3.0       0.134       407       1.7       0.135       223       4.7       0.134       630  
Doornkop
    1.7       0.092       160       2.7       0.103       277       4.4       0.098       437  
Kusasalethu
    13.8       0.195       2,680       25.8       0.187       4,834       39.6       0.190       7,514  
Evander
    2.5       0.210       520       1.8       0.266       470       4.3       0.234       990  
Evander(below infrastructure)
                      46.6       0.212       9,895       46.6       0.212       9,895  
Rand Uranium (2)
    2.4       0.122       299       4.8       0.100       484       7.2       0.108       783  
Total South Africa Underground
    56.2       0.176       9,901       131.4       0.193       25,316       187.6       0.188       35,217  
 
                                                                       
South Africa Surface
                                                                       
Kalgold
    24.1       0.024       575       8.3       0.031       258       32.4       0.026       833  
Free State Surface
                      1,021.3       0.007       7,212       1,021.3       0.007       7,212  
Evander Surface
                      223.7       0.008       1,897       223.7       0.008       1,897  
Rand Uranium Surface (2)
    33.8       0.008       286       9.7       0.013       127       43.5       0.010       413  
Total South Africa Surface
    57.9       0.015       861       1,263.0       0.008       9,494       1,320.9       0.008       10,355  
Total South Africa
    114.1               10,762       1,394.4               34,810       1,508.5               45,572  
 
                                                                       
Papua New Guinea (3)
                                                                       
Hidden Valley
    4.2       0.062       260       26.8       0.052       1,382       31.0       0.053       1,642  
Hamata
                      3.2       0.061       196       3.2       0.061       196  
Golpu
                      39.0       0.018       694       39.0       0.018       694  
Total Papua New Guinea
    4.2       0.062       260       69.0       0.033       2,272       73.2       0.035       2,532  
 
                                                                       
GRAND TOTAL
    118.3               11,022       1,463.4               37,082       1,581.7               48,104  

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In addition to the gold reserves, we also report our attributable reserves for silver, copper and molybdenum from our PNG operations. Metal prices are assumed at US$14/oz for silver, US$2/lb for copper and US$13/lb for molybdenum.
                                                                         
SILVER   Tons     Grade     Silver oz (1)     Tons     Grade     Silver oz (1)     Tons     Grade     Silver oz (1)  
    (million)     (oz/ton)     (000)     (million)     (oz/ton)     (000)     (million)     (oz/ton)     (000)  
Papua New Guinea (3)
                                                                       
Hidden Valley
    4.2       1.038       4,320       26.8       1.036       27,726       31.0       1.036       32,046  
                                                                         
COPPER   Tons     Grade     Cu lb (1)     Tons     Grade     Cu lb (1)     Tons     Grade     Cu lb (1)  
    (million)     (%)     (million)     (million)     (%)     (million)     (million)     (%)     (million)  
Papua New Guinea (3)
                                                                       
Golpu
                      39.0       1.025       882       39.0       1.025       882  
                                                                         
MOLYBDENUM   Tons     Grade     Mo lb (1)     Tons     Grade     Mo lb (1)     Tons     Grade     Mo lb (1)  
    (million)     (lb/ton)     (million)     (million)     (lb/ton)     (million)     (million)     (lb/ton)     (million)  
Papua New Guinea (3)
                                                                       
Golpu
                      39.0       0.231       9       39.0       0.231       9  
 
(1)   Metal figures are fully inclusive of all mining dilutions and gold losses, and are reported as mill delivered tons and head grades. Metallurgical recovery factors have not been applied to the reserve figures.
 
(2)   Represents Harmony’s attributable interest of 40%
 
(3)   Represents Harmony’s attributable interest of 50%
Note: 1 ton = 907 kg = 2,000 lbs
     Our methodology for determining our reserves is subject to change and is based upon estimates and assumptions made by management regarding a number of factors as noted above in this section.

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Worldwide Operations
Description of Property
     The following is a map of our worldwide operations:
(GRAPHIC)

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     Our operational mining areas in South Africa are set forth below:
                 
    Hectares     Acres  
Doornkop
    2,941       7,267  
Kusasalethu
    5,113       12,634  
Free State (includes Masimong and Virginia operations)
    22,583       55,802  
Tshepong and Phakisa
    10,799       26,683  
Bambanani
    2,356       5,821  
Joel
    2,162       5,342  
St Helena
    5,856       14,471  
Kalgold
    615       1,520  
Evander
    36,898       91,174  
Target (includes Loraine)
    7,952       19,649  
Total
    97,275       240,363  
In Australia and PNG, we hold granted tenements as set forth below:
                 
    Hectares     Acres  
Mount Magnet (sold in July 2010)
    39,885       98,560  
PNG
    344,522       851,329  
Total International Operations
    384,407       949,889  
TOTAL
    481,682       1,190,252  
     We acquired new tenements in PNG for exploration in fiscal 2010.
     In line with the rest of the South African mining industry, and in an effort to reduce costs, we have been rationalizing our mineral rights holdings in recent years. Accordingly, over the past three years, we have disposed of our shares and participation rights in areas within and outside of South Africa in which we have not actively pursued mining. However, in some cases we have retained certain participation rights and option clauses in properties and mining rights we have disposed of. We may continue to investigate further disposals.
Geology
     The major portion of our South African gold production is derived from mines located in the Witwatersrand Basin in South Africa. The Witwatersrand Basin is an elongated structure that extends approximately 300 kilometers in a northeast-southwest direction and approximately 100 kilometers in a northwest-southeast direction. It is an Archean sedimentary basin containing a six kilometer thick stratigraphic sequence consisting mainly of quartzites and shales with minor volcanic units. The majority of production is derived from auriferous placer reefs situated at different stratigraphic positions and at varying depths below the surface in three of the seven defined goldfields of the Witwatersrand Basin.
     Our Hidden Valley project comprises low sulphidation carbonate-base metal-gold epithermal deposits within the Morobe Goldfield, in the Morobe Province of PNG. In the Hidden Valley project area, a batholith of Morobe Granodiorite (locally a coarse grained monzogranite) is flanked by fine metasediments of the Owen Stanley Metamorphics. Both are cut by dykes of Pliocene porphyry ranging from hornblende-biotite to feldspar-quartz porphyries. A number of commonly argillic altered and gold anomalous breccias are known, including both hydrothermal and over printing structural breccias. The Hidden Valley deposit area is dominated by a series of post Miocene faults controlling the gold mineralization, including an early north trending set and the main northwest faulting.
     Our Wafi project comprises the sedimentary/volcaniclastic rocks of the Owen Stanley Formation that surround the Wafi Diatreme and host the gold mineralization. Gold mineralization occurs as extensive high-sulphidation epithermal alteration overprinting porphyry mineralization and epithermal style vein-hosted and replacement gold mineralization with associated wall-rock alteration. The Golpu Copper-Gold project is located about one kilometer northeast of the Wafi gold orebody. It is a porphyry (diorite) copper-gold deposit. The host lithology is a diorite that exhibits a typical zoned porphyry copper alteration halo together with mineralization in the surrounding metasediment. The mineralized body can be described as a porphyry copper-gold “pipe”.

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Harmony’s Mining Operations — Overview
     In South Africa, we conduct underground mining at 10 operations:
    Bambanani (includes Steyn 1 & 2 Shafts from February 2010);
 
    Doornkop;
 
    Evander (consists of Evander 2 & 5, 7 and 8);
 
    Joel;
 
    Kusasalethu (formerly Elandsrand);
 
    Masimong;
 
    Phakisa;
 
    Target (consists of Target 1, and as of February 2010 Loraine 3 (now Target 3) and Freddies 7 & 9 shafts);
    Tshepong; and
 
    Virginia operations (consists of Harmony 2, Merriespruit 1 & 3, Unisel and Brand 3 & 5).
     During fiscal 2008, the Cooke operations (consists of Cooke 1, 2 and 3 Shafts) were considered to be a reportable segment. An effective 60% interest in these operations was sold on November 21, 2008 and the results for the five months up to that date have been included in discontinued operations for fiscal 2009.
     We conduct surface mining at five sites (all included in “Other — Surface”):
    Evander;
 
    Free State (also known as Phoenix);
 
    Freegold;
 
    Kalgold;
 
    Target.
     Surface mining was conducted at Randfontein’s Cooke operations up to the date of sale in fiscal 2009 and the Cooke plant has been classified as discontinued operations along with the Cooke operations.
     Surface mining conducted at the South African operations other than Kalgold involves recovering gold from areas previously involved in mining and processing, such as metallurgical plants, waste rock dumps and tailings dams (slimes and sand). We are conducting studies to determine the feasibility of further retreatment projects in the Free State, including uranium extraction from material.
     Internationally, we conduct mining activities in PNG at the Hidden Valley mine, which is a joint venture, known as Morobe Mining Joint Venture, between Harmony and Newcrest in which we each have a 50% interest.
     We previously conducted mining at the following two sites in Australia:
    Mount Magnet — The site was put on care and maintenance at the end of December 2007. A decision was taken by management during May 2010 to sell the operation and in July 2010 the disposal was finalized — See Item 8 Recent Developments”.
 
    South Kalgoorlie — we finalized the sale of this operation with Dioro on November 30, 2007 — See “Disposals” above.
     Underground and surface mining was conducted at each of these operations, with underground access through two declines at Mount Magnet and one decline at South Kalgoorlie and surface access principally through open-pits. Surface mining at South Kalgoorlie ceased in fiscal 2006 with treatment consisting of Mount Marion ore and low grade stockpiles. Open-pit mining recommenced at South Kalgoorlie mines during fiscal 2007. The Mount Marion underground operation at South Kalgoorlie ceased in June 2007, with only open-pit operations continuing on that site until the date of sale to Dioro.

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     The following discussion is a two-part presentation of our operations:
    an overview of our South African mining operations with a discussion and production analysis of each of our operating segments; and
 
    an overview of our International (Australian and PNG) operations.
     Previously, we disclosed cash costs and cash cost per ounce which including the movement in inventory and calculated using gold ounces sold as a denominator. These amounts have been re-presented for all comparative periods in the discussions and production analyses below following the changes to the calculation of these measures. See Item 3. “Selected Financial Data — Selected Historical Consolidated Financial Data.”
     Where we have translated the Rand amount budgeted for capital expenditures in 2011 into U.S. dollars, we have used the closing rate at the balance sheet date.
South African Mining Operations
Unless indicated otherwise, the discussions below are for continuing operations.
(GRAPHIC)

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Underground
Bambanani
Introduction: We acquired Bambanani when we, in January 2002, acquired the Freegold operations from AngloGold Ashanti Limited (“Anglogold”) through a 50% joint venture with African Rainbow Minerals Gold Limited (“ARMgold”). In September 2003, we acquired 100% of these operations when ARMgold became a wholly owned subsidiary. During February 2010, we acquired President Steyn 1 & 2 Shafts in the transaction with Pamodzi FS. These shafts have been incorporated into Bambanani. These operations are located in the Free State province. Production from the operations is processed through Harmony 1 Plant.
History: Exploration, development and production history in the area of the Freegold assets dates from the early 1900’s, leading to commercial production by 1932. Subsequent consolidation and restructuring led to the formation of Free State Consolidated Gold Mine (Operations) Limited, which became a wholly-owned subsidiary of Anglogold in June 1998.
     In 1998, President Steyn Gold Mine (Free State) (Proprietary) Limited (“PSGM”) was formed after purchasing shafts from various individuals. During 2002, the mine was sold to Thistle Mining Inc, an international company with interests in the Philippines and South Africa. The mine struggled to make operational profits, and Thistle undertook a restructuring program in 2006, which together with an increase in the Rand gold price resulted in positive operational cash flows. In February 2008, PSGM was purchased by Pamodzi FS. The mine was operated from that time until March 2009, when Pamodzi FS was placed into liquidation.
Geology: The operations are located in the Free State Goldfield, which is on the southwestern edge of the Witwatersrand basin. The Free State Goldfield is divided into two sections, cut by the north-south striking De Bron Fault. This major structure has a vertical displacement of about 1 500 metres in the region of Bambanani, as well as a lateral shift of 4 kilometres. Bambanani is to the west of the De Bron Fault. The reefs generally dip towards the east. Mining is conducted in the Basal reef.
Mining Operations: These operations are subject to the underground mining risks detailed in the Risk Factors section. The management teams regularly revisit their mining strategy and management procedures in order to minimize risks.
     The Bambanani mine consists of a surface shaft and a sub-shaft. Mining is conducted at depths ranging from 1,911 and 3,680 meters. Activities at the mine include mining the Basal Reef and remnant pillar extraction. The primary mining challenges at these operations are seismic risks, ventilation and fire avoidance. Bambanani is classified as a seismically active operation with seismic activity monitoring systems installed to do active seismic risk evaluation. The seismic activity monitoring systems were upgraded during fiscal 2010.
     The conversion of Bambanani into a high-grade, low-volume operation continued during fiscal 2010. There was greater emphasis on disciplined mining through the year and in particular on the achievement of daily tramming and hoisting targets, as well as efficient vamping and clean mining. Following a fatal fall of ground in the second quarter of fiscal 2010, extensive changes were made to the mining method in the steeply dipping, high-stope-width panels in the lower levels of the sub-shaft. Although these changes, from breast to down-dip mining, temporarily led to reduced volumes mined while alterations to mining plans and methods were implemented, these revisions proved successful regarding both safety and production performance.
     Greater attention is also being given to the improvement of the blast cycle by increasing the number of blasts per panel in the sub-shaft (historically difficult, high channel steep stopes) and the delivery of higher volumes to maintain plant throughput at targeted levels.
     Two raise lines were completed in the sub-shaft area and on-reef development has come to an end here. Development is under way in preparation for the extraction of the shaft pillar. Mining in the sub-shaft area will come to an end in the next three years, following which the remaining mining will take place around the high-grade shaft pillar. Mining of the shaft pillar will take eight years. Backfill will be used to minimize ground control-related risks when mining begins in the shaft pillar in June 2012.
     Steyn 1 consists of a main shaft and two sub-decline shafts. No mining activities have taken place at the shaft since acquisition due to an underground fire. The shaft has been placed on care and maintenance.
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     Steyn 2 consists of a main shaft and two sub-decline shafts. Equipping of the Steyn 2 shaft is underway. Face length flexibility, infrastructural shortcomings and heat are the main obstacles to production here. Progress was made with the decline shaft infrastructure and the haulage from 73 level to Bambanani is being rehabilitated to assist Steyn 2 in maintaining its shaft bottom and keeping it clean of spillage. Areas affected by heat problems at Steyn 2 are now being supplied with chilled water from Bambanani and temperatures have substantially improved. A feasibility study is being conducted on the extraction of the shaft pillar, which is expected to cost US$2.4 million.
     During fiscal 2010, Bambanani accounted for 9% (8% in 2009 and 8% in 2008) of our total gold production.
Safety: Regrettably a fatality occurred at Bambanani during fiscal 2010 (2009: one) and the lost time injury frequency rate (“LTIFR”) was reported as 9.29 per million hours worked (2009: 7.48). After year-end, during September 2010, a fall of ground resulted in eight employees being trapped. Tragically, two employees died, with the other six being rescued, several having sustained injuries.
     Safety at these operations receives constant and high-level attention.
Plants: The ore from Bambanani, along with ore from Tshepong and Phakisa, is sent to Harmony 1 Plant for processing. This plant, which processes underground ore, waste rock and various surface accumulations, was commissioned in 1986 and is a conventional CIP plant processing ore that has been milled by fully-autogenous grinding. Gold is recovered from the eluate solution using zinc precipitation and a precoat vacuum filter. The precipitate recovered from the filter is calcined and smelted to bullion.
     The following table sets forth processing capacity and average tons milled during the fiscal 2010 for the Harmony 1 Plant:
                 
            Average Milled for
    Processing   the Fiscal Year
Plant   Capacity   Ended June 30, 2010
 
  (tons/month)   (tons/month)
FS 1
    463,000       429,000  
     In fiscal 2010, Harmony 1 Plant recovered approximately 95.9% of the gold contained in the ore delivered for processing. The plant achieved one year lost time injury free during fiscal 2010.
Production analysis:
                         
    Fiscal Year Ended June 30,  
Bambanani   2010     2009     2008  
Production
                       
Tons (‘000)
    582       570       912  
Recovered grade (ounces/ton)(1)
    0.227       0.213       0.170  
Gold produced (ounces)(1)
    133,007       121,530       154,879  
Gold sold (ounces)(1)
    134,165       119,665       158,985  
Results of operations ($)
                       
Product sales (‘000)
    146,971       102,645       128,346  
Cash cost (‘000)
    98,289       72,343       101,962  
Cash profit (‘000)
    48,682       30,302       26,384  
Cash costs
                       
Per ounce of gold ($)(1)
    723       611       639  
Capex (‘000) ($)
    27,300       5,779       14,737  
 
(1)   1,061 ounces were produced by Steyn 2 and sold. The revenue has been credited against capital expenditure as the shaft is not in production yet. The cost of these ounces has not been included in the cash cost per ounce amount. The calculation of grade also excludes these ounces.
     Tons milled from Bambanani decreased to 570,000 in fiscal 2009 compared with 912,000 in fiscal 2008. Ounces produced were 121,530 in fiscal 2009, compared with 154,879 in fiscal 2008. This decrease was due to the restructuring of the shaft due to power constraints but was offset by a better recovered grade, which increased from 0.170 in fiscal 2008 to 0.213 in fiscal 2009.
     Cash costs per ounce for Bambanani were US$611 in fiscal 2009, compared with US$639 in fiscal 2008. The costs per ounce decreased by 4% in fiscal 2009, due to an increase in grade mined offset by an increase in the cost of labor and supplies and the effect of inflation on supply contracts.

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     Tons milled from Bambanani increased to 582,000 in fiscal 2010 compared with 570,000 in fiscal 2009. Ounces produced were 133,007 in fiscal 2010 compared with 121,530 in fiscal 2009. This increase was due to better recovered grade, which increased by 0.014 ounces per ton compared to fiscal 2009.
     Cash costs per ounce for Bambanani were US$723 in fiscal 2010, compared with US$611 in fiscal 2009. The costs per ounce increased by 18% in fiscal 2010 compared with fiscal 2009, due to increases in the costs of labor and supplies, combined with the increase in power and water costs year on year of 37% (utility costs comprise approximately 22% of cash costs).
     The rock hoisting capacity at Bambanani is 116,000 tons per month. The average tons milled in fiscal 2010 were 48,500 tons per month where we planned 54,500 tons per month for fiscal 2010.
     Assuming no additional reserves are identified, at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 4.9 million tons (1.4 million ounces) will be sufficient for Bambanani to maintain underground production until approximately 2021. Any future changes to the assumptions upon which the mineral reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: Bambanani incurred approximately R207 million (US$27.3 million) in capital expenditure in fiscal 2010, primarily to extract the shaft pillar (R72 million (US$9.4 million)) and to equip the two Steyn shafts (R94 million (US$12.4 million).We budgeted R250 million (US$32.8 million) for capital expenditure in fiscal 2011, primarily for the access development for the shaft pillar extraction (R163 million (US$21.4 million)) and the Steyn shafts (R66 million (US$8.7 million).
Doornkop
Introduction: Doornkop is located in the Gauteng Province of South Africa, approximately thirty kilometers west of Johannesburg. The operation is owned by Randfontein Estates Limited (“Randfontein”). Doornkop currently operates under its own mining authorization of 2,941 hectares. Production is treated at the Doornkop plant.
History: Harmony acquired this operation when it took over Randfontein.
Geology: These operations are situated in the West Rand Goldfield of the Witwatersrand Basin, 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 Doornkop operation lease area is bounded by and lies to the south-east of the major north-easterly striking Roodepoort Fault, which dips to the south and constitutes the southern edge of the Witpoortjie Horst Block or Gap. This Horst Block is comprised of the stratigraphically older sediments of the West Rand Group, the overlying Central Rand Group sediments having been removed by erosion. A number of other faults, forming part of and lying southeast of the Roodepoort Fault, including the Saxon Fault, also constitute conspicuous structural breaks. A second major fault, the Doornkop Fault, which trends in an east west direction occurs towards the southern portion of the lease area. This fault dips to the south and has an up-throw to the north. Nearly the entire upper Witwatersrand section is present in the lease area and therefore all the major zones are present, though due to the distance of the area from the fan head, the number of economic bands and their payability is limited. Eight of the well-known reefs are present in the area, but only the Kimberley Reef and South Reef are considered viable at this stage. The resource is concentrated in the Kimberley and South Reefs. The Kimberley Reef is contained in the Vlakfontein Member of the Westonaria Formation. This reef, also known as the K9 Reef horizon, rests on an unconformity and is a complex multi-pulse conglomerate, which can be separated into four facies or cycles. All four cycles consist on average of an upper conglomerate and a lower quartzite. The characteristics of every cycle are area-dependent and the grades are variable within each cycle. The South Reef is approximately 900 meters below the current Kimberley Reef mining, and between 7.5 and 60 meters above the Main Reef horizon. The hanging wall to the South Reef consists of siliceous quartzites with non-persistent bands of “blue-shot” grit and thin argillite partings. The footwall to the South Reef is a light colored and fairly siliceous quartzite. Secondary conglomerate bands and stringers in the hanging wall and footwall of the South Reef may contain sporadic gold values. The general strike of the reef is east-west, with a dip from 10 to 20 degrees. The orebody at Doornkop has a strike length of 4km and a width of 4km from west to east.
     During fiscal 2010, the gathering of additional geological information from on-reef development and exploration drilling on the South Reef resulted in an increase in confidence to successfully build up maximum production. The geological, depositional, facies & evaluation models receive regular attention and are being expanded as the new data becomes available. A 3-D geological model was developed for the mine. This model incorporates the Kimberley, South & Main Reefs.
Mining Operations: These operations are subject to the underground mining risks detailed in the Risk Factors section. Due to the shallow to moderate depths of the operations, seismicity and high rock stress related problems are infrequent. There is a risk of subterranean water

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and/or gas intersections in some areas of the mines. However, this risk is mitigated by active and continuous management and monitoring, which includes the drilling of boreholes in advance of faces. Where water and/or gas are indicated in the drilling, appropriate preventative action is taken.
     The Doornkop South Reef Project was announced on January 22, 2003. The project involved the deepening of the Doornkop main shaft to 1,973 meters to access the South Reef between 1,650 and 2,000 meters below surface, and includes development towards these mining areas. The estimated final capital cost is R1,772 million (US$233.7 million) with R1,470 million (US$193.9 million) spent as of June 30, 2010.
     Production from the Kimberley reef section of the mine continued in the trackless sections and will continue for a further four years while the build-up of production from the South Reef sections continues. The development of the geological model of the Kimberley reef to identify target areas for exploration may result in an extension of the four year plan currently in place. The Kimberley section constantly underperformed during the 2010 year, mainly due to the low availability of trackless equipment. The purchase of a new trackless fleet will improve production in fiscal 2011.
     The South Reef exceeded planned gold production for the year as a result of the logistical constraints being alleviated and the grade being higher than expected. The main pump station on 207 level was completed in August 2009 and is now able to provide sufficient pumping capacity to support the build-up to maximum production in 2015. During fiscal 2010, the winder compartments were subsequently equipped and the conveyor belt on 212 level (shaft bottom) was completed. There were however delays encountered with the equipping of the shafts as a result of shaft time constraints. These constaints resulted in a change in the scope of the project following the delays.
     The most significant achievement for fiscal 2010 was the build-up achieved in gold production that increased by 49% from fiscal 2009. This increase was driven by an increase in production from the South Reef.
     During fiscal 2010, Doornkop accounted for 5% (3% in 2009 and 2% in 2008) of our total gold production.
Safety: The safety record at Doornkop during fiscal 2010 was as follows: in terms of LTFR of 5.50 (2009: 6.25) per million hours worked achieved at Doornkop compared favorably with the group average of 7.72 (2009: 9.35). Regrettablly there were two fatalities at Doornkop during fiscal 2010.
     A greater focus on safety-related matters led to streamlined procedures and improved training, maintenance and behavior.
Plants: The processing facilities presently comprises of one operating plant, the Doornkop metallurgical plant. The Doornkop metallurgical plant, commissioned in 1985, is a conventional CIP plant, which was used to treat waste rock and other surface accumulations. It is now treating all ore from underground mining at the Doornkop and some of the ore from Rand Uranium’s Cooke operations. The plant is serviced by a surface rail network from the Cooke shafts and by a conveyor belt configuration system from Doornkop shaft.
The following table sets forth processing capacity and average tons milled during fiscal 2010 for the Doornkop plant:
                 
            Average Milled for the
    Processing   Fiscal Year Ended
Plant   Capacity   June 30, 2010
 
  (tons/month)   (tons/month)
Doornkop
    242,500       146,429  
     In fiscal 2010, the Doornkop plant recovered approximately 94.6% of the gold contained in the ore delivered for processing. During fiscal 2010 a split-stream configuration that isolates the Doornkop ore from the Rand Uranium ore was adopted to improve the accuracy of gold accounting to the respective companies.
Production analysis:
                         
    Fiscal Year Ended June 30,  
Doornkop   2010     2009     2008  
Production
                       
Tons (‘000)
    595       605       494  
Recovered grade (ounces/ton)
    0.105       0.070       0.089  
Gold produced (ounces)
    62,694       42,150       44,038  
Gold sold (ounces)
    62,275       43,211       44,143  

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    Fiscal Year Ended June 30,  
Doornkop   2010     2009     2008  
Results of operations ($)
                       
Product sales (‘000)
    68,169       38,128       35,489  
Cash cost (‘000)
    54,042       31,253       31,014  
Cash profit (‘000)
    14,127       6,875       4,475  
Cash costs
                       
Per ounce of gold ($)
    822       804       749  
Capex (‘000) ($)
    45,097       43,918       48,039  
Tons milled from Doornkop were 605,000 in fiscal 2009, compared with 494,000 in fiscal 2008. Volumes increased, largely as a function of the increase in tons mined at the South Reef workings (296,000), as well as an increase in the stoping width at the Kimberley reef mining. Ounces produced were 42,150 in fiscal 2009, compared 44,038 in fiscal 2008. The decrease in ounces sold was primarily due to the lower recovery grade. The recovered grade deteriorated to 0.070 in fiscal 2009, compared with 0.089 in fiscal 2008, mainly due to the decline in the grade mined from the Kimberley reef trackless mining sections. Production from trackless areas will continue during the build-up phase of mining from the South Reef project areas. Grade from the South Reef project was negatively affected by the large unavoidable volumes of development waste rock that were included in the reef stream which resulted in diluted head-grade. South Reef ore is now hoisted separately from waste which resulted in much improved recovered grades during the final two months of fiscal 2009.
     Cash costs per ounce of gold were US$804 in fiscal 2009, compared with US$749 in fiscal 2008. The increase was mainly from labor, consumables and services cost. Labor cost increased due to an increase in labor to cater for the new South reef production levels and from annual wage increases. Consumable costs increased as a result of the South reef production build-up where additional square meters were mined. In addition significant increases in power cost (38%) and company overhead cost (78%) were incurred, measured against fiscal 2008.
     Tons milled from Doornkop were 595,000 in fiscal 2010, compared with 605,000 in fiscal 2009. Although throughput remained flat, the higher grade South Reef made up a much larger portion of total ore milled than in fiscal 2009. This change in the mix of milled tons resulted in an increase in recovered grade to 0.105 in fiscal 2010, compared with 0.070 in fiscal 2009. Ounces produced were 62,694 in fiscal 2010, compared with 42,150 in fiscal 2009.
     Production from trackless areas in the Kimberley Reef section will continue through the build-up phase of mining from the South Reef project areas.
     Cash costs per ounce of gold were US$822 in fiscal 2010, compared with US$804 in fiscal 2009. This increase was mainly from labor, services and consumables costs. Labor costs increased due to an increase in labor to cater for the new South Reef production levels and from annual wage increases. Consumable costs increased as a result of the South Reef production build-up where additional square meters were mined. In addition, significant increases in power cost (35%) were incurred, measured against fiscal 2009.
     The hoisting capacity of the Doornkop shaft is 185,000 tons per month. The average tons milled in fiscal 2010 were 49,583 tons per month.
     On a simplistic basis, assuming no additional resources are identified, at expected production levels, it is foreseen that: the reported proven and probable mineral reserve of 4.4 million tons (0.4 million ounces) will be sufficient for the Doornkop shaft to maintain production until approximately fiscal 2024.
Capital Expenditure: Harmony incurred R342 million (US$45.1 million) in capital expenditure in fiscal 2010 at Doornkop, primarily for shaft equipping, supporting infrastructure, development and rolling stock for material and rock transport. The planned capital expenditure for fiscal 2011 is R320 million (US$41.9 million) at the Doornkop South Reef project. Total project expenditure incurred amounts to R1,470 million (US$193.9 million) as of June 30, 2010.
Evander Operations
Introduction: The Evander operations are located in the province of Mpumalanga in South Africa and comprise of an amalgamation of the former Kinross, Bracken, Leslie and Winkelhaak mines into a mining right of 36,898 hectares and additional adjacent Prospecting Rights comprising 19,933 hectares. Ore is treated at the Kinross plant, after the closure of the Winkelhaak plant following the closure of Evander 7 and 2 and 5 shafts.
History: Gold mining in the Evander Basin began in 1955. Eventually, four mining operations were established at Evander. In 1996, as a result of the depletion of mineral reserves, all four mining areas were merged to form Evander Gold Mines Limited. In August 1998, Harmony acquired Evander as a wholly-owned subsidiary.

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Geology: The area covered by Evander’s mining authorization and mineral rights is situated within the Evander basin, a geologically discrete easterly extension of the main Witwatersrand Basin. Only one economic reef type, the Kimberley Reef, is mined at Evander. In addition to the faulting of the reef horizon, there are numerous dykes and sills that complicate the mining layouts, the most significant of which is an extensively developed dolerite footwall sill that occasionally intersects the Kimberley Reef, causing displacements within it.
Mining Operations: The Evander operations are primarily engaged in underground mining but a limited amount of surface material, containing gold, from the surface cleanup operations are also processed. These operations are subject to the underground mining risks detailed in the Risk Factors section. Due to the shallow to moderate depths of the Evander underground operations, seismicity and high rock stress related problems are relatively infrequent. There is a risk of subterranean water and/or gas intersections in some areas of the mine. However, this risk is mitigated by active and continuous management and monitoring, which includes the drilling of boreholes in advance of faces. Where water and/or gas is indicated in the drilling, appropriate preventative action is taken. In fiscal 2004, an agreement was reached with the unions for the implementation of Conops at Evander. Downsizing and restructuring of the 7 Shaft area resulted in labor surpluses and it was also decided to stop Conops in fiscal 2008 at Evander 5 Shaft. Subsequently, Conops has also been stopped at Evander 8 Shaft in June 2010.
     A due diligence of the operations during fiscal 2010 led to the conclusion that the only economically viable shaft was Evander 8. Mining operations at Evander 2 and 5 and 7 shafts ceased during the year and Evander 8 was restructured. The shaft infrastructure at Evander 7 will be utilised by Evander 8 for the pumping of water and the hoisting of rock as well as being available for use as a second escape. High temperatures underground, caused by ventilation return capacity restrictions at Evander 8 remained problematic and hampered production.
     Once the restructuring of Evander had been completed, a feasibility study was undertaken which proved the viability of Evander 8. Greater attention was given to this shaft and a re-engineering project was implemented which involves not just the deepening of the decline but its repositioning within the high grade payshoot. This will give immediate access to the high-grade areas between 24 and 25 level, and will contribute to improved productivity with consequent financial benefits. The project’s parameters include the optimisation of logistics, cooling and ventilation as well as an upgrade of the refrigeration plant.
     Following the closure of the Evander 2 and 5 shafts as well as the Winkelhaak plant, a one-year clean up program commenced at and in the vicinity of the plant. The aim of this program, which will continue into fiscal 2011, is to clean up any metal contained in the plant footprints, to process rock from the rock dumps in the vicinity, to rehabilitate the Winkelhaak plant, and to clean the surface rail network.
     Evander 9 Shaft was re-opened to establish the feasibility of mining high grade areas in limited quantities in an effort to improve the mine call factor. It was subsequently decided to put the exercise on hold in fiscal 2010 due to discouraging results.
     Because of the closure of Evander 2 and 5 and 7 Shafts, the services departments at Evander were downsized and incorporated under the management of Evander 8 Shaft during fiscal 2010.
     Potential exists at several areas in Evander:
Evander South
    The exploration drilling program was completed and the pre-feasibility study re-done.
 
    The pre-feasibility study gave a negative net present value and it was decided not to proceed to the feasibility study at this stage.
Shaft 7 portion of the 2010 Payshoot
    Project at exploration stage following the geological study.
 
    Underground development, to be used as an underground drilling platform, advanced 233 meters (or 19%). This is intended for investigation of the 7 Shaft flank of the postulated 2010 payshoot.
 
    Feasibility study to follow, pending confirmation of the mineral resource in this area.
 
    This project is on hold following the closure of the shaft.
Twistdraai and Shaft 6
    Joint Venture with the African Precious Minerals (“APM”) was formed to explore these two target areas.
 
    APM may earn in a 52% equity stake upon completion of the full bankable feasibility study for each area.
 
    A conceptual study was completed and approval given during fiscal 2010 for the project to proceed to pre-feasibility.
 
    Surface drilling will commence in fiscal 2011.
 
    Subsequent to year-end, we entered into an agreement with Taung Gold Mining Limited for the sale of these assets. Refer to Item 8. Recent Developments.”

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Rolspruit
    This is a future mining area on the down-dip extension of the 8 shaft payshoot.
 
    Synergies with the current 8 Shaft deepening are being considered.
Poplar
    Surface exploration drilling is required to bring this project into the full bankable feasibility study.
 
    Surface drilling was started in fiscal 2010 and is continuing throughout 2011.
 
    Results from the drilling will be used to update the pre-feasibility study.
In fiscal 2010, the Evander operations accounted for approximately 8% (12% in fiscal 2009 and 12% in fiscal 2008) of Harmony’s total gold production.
Safety: The safety record at the Evander operations in terms of LTIFR of 7.41 (2009: 10.39) per million hours worked during fiscal 2010 is favorable when compared to the group average of 7.72 (2009: 9.35). There were regrettably two fatalities at Evander during fiscal 2010 (2009: two fatalities).
Plants: Evander has one active processing plant, the Kinross plant. Ore from Evander 8 is hoisted directly to and treated at the Kinross plant, which is a hybrid CIP/CIL plant.
     The following table sets forth processing capacity and average tons milled during fiscal 2010 for the operating plant:
                 
            Average Milled for the
    Processing   Fiscal Year Ended
Plant   Capacity   June 30, 2010
 
  (tons/month)   (tons/month)
Kinross
    220,460       97,788  
     In fiscal 2010, the plant at Evander operations recovered approximately 94.2% of the gold contained in the ore delivered for processing.
Production analysis:
                         
    Fiscal Year Ended June 30,  
Evander operations   2010     2009     2008  
Production
                       
Tons (‘000)
    869       1,241       1,447  
Recovered grade (ounces/ton)
    0.129       0.153       0.160  
Gold produced (ounces)
    111,724       190,075       231,799  
Gold sold (ounces)
    111,499       195,668       240,037  
Results of operations ($)
                       
Product sales (‘000)
    120,092       168,180       192,978  
Cash cost (‘000)
    113,327       110,869       125,995  
Cash profit (‘000)
    6,765       57,311       66,983  
Cash costs
                       
Per ounce of gold ($)
    1,018       572       526  
Capex (‘000) ($)
    23,100       23,352       33,388  
     Tons milled at the Evander operations were 1,241,000 in fiscal 2009, compared with 1,447,000 in fiscal 2008, and ounces produced were 190,075 in fiscal 2009, compared with 231,799 in fiscal 2008. The decrease in tons milled is partially attributable to the reduction of the development at Evander 7 in November 2007 and the closure of the pillar section in February 2008. At Evander 8, tons milled decreased by 56,000 tons due to unfavorable environmental conditions in the decline area that affected mining from this area. The shaft completed a raise-borehole from 17 Level to 24 Level during fiscal 2009 that enables chilled ventilation to reach 24 level on the decline directly which alleviated the medium term ventilation constraints. Recovered grade was 0.153 ounces per ton in fiscal 2009, compared with 0.160 ounces per ton in fiscal 2008.
     The increase in cash costs from US$526 per ounce in fiscal 2008 to US$572 per ounce in fiscal 2009 was attributable primarily to the decrease in gold ounces produced in fiscal 2009 compared to fiscal 2008 due to the successful restructuring and downscaling at Evander 7 that was implemented in January 2008. Cash costs decreased from US$125.9 million to US$110.9 million, primarily as a result of the closure of Evander 7.

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     Tons milled at the Evander operations were 869,000 in fiscal 2010, compared with 1,241,000 in fiscal 2009, and ounces produced 111,724 in fiscal 2010 compared with 190,075 in fiscal 2009. The decrease in tons milled is predominantly attributable to the closure of Evander 2 and 5 and 7 Shafts. Recovered grade was 0.129 ounces per ton in fiscal 2010, compared with 0.153 in fiscal 2009.
     The increase in cash costs from US$572 per ounce in fiscal 2009 to US$1,018 per ounce in fiscal 2010 was attributable primarily to the decrease in gold ounces produced in fiscal 2010 compared to fiscal 2009 due to the closure of Evander 2 & 5 and 7.
     Assuming no additional reserves are identified, at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 4.3 million tons (0.99 million ounces) (excluding the below infrastructure reserves) will be sufficient for the Evander operations to maintain production until approximately fiscal 2021 at Evander 8. Any future changes to the assumptions upon which the reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: Harmony incurred approximately R175 million (US$23.1 million) in capital expenditures at the Evander operations in fiscal 2010. The expenditure was primarily for ongoing development, abnormal expenditure for the upgrading of the infrastructures as well as phase 6 of the No 2 Decline at Evander 8 and 2 ventilation bore holes. Harmony budgeted R196 million (US$25.7 million) for capital expenditures in fiscal 2011 primarily for ongoing development and the upgrading of major equipment.
Joel
Introduction: Joel is located in the Free State province, on the south-western edge of the Witwatersrand basin. The mine comprises of two shafts, North and South shafts. Previously ore mined at Joel was transported to Central Plant, 38 kilometers away, for processing, but since the recommissioning of the Joel plant in November 2009, the ore is now processed on site.
History: Joel was purchased from a subsidiary of AngloGold at the same time as the rest of the Freegold assets in January 2002.
Geology: Joel is mining the shallow flat-dipping Beatrix/VS5 Reef. This varies from a single-pebble lag to a multiple conglomerate, often showing mixing of the reef with some of the overlying lower grade VS5 (mixed pebble conglomerate) material. None of the other reefs are present this far south, having sub-cropped against the Beatrix Reef.
Mining operations: These operations are subject to the underground mining risks detailed in the Risk Factors section.
     Scattered mining takes place on the Beatrix Reef, down to a depth of some 1,400 meters. Upgrading of the infrastructure at North Shaft is currently in progress.
     Volumes mined during fiscal 2010 were negatively affected by a mud slide at the bottom of North shaft, a guided rope shaft. A temporary mud press was subsequently installed and mud is removed daily from the bottom of the shaft. Despite this, raise boring of the North shaft expansion to 129 level was completed although hoisting constraints resulted in the equipping of the shaft deepening project to 129 level being delayed. An extensive program to rectify the problems experienced with North shaft had begun by the end of June 2010. While production at Joel has progressively moved to the deeper portions of the mine, the North Shaft, which accesses these areas, was never fully equipped for this and adjustments to the shaft spillage arrangements are now being made retrospectively. The modifications being made include:
    changing the winder from sinking to production mode;
 
    installing larger skips; ensuring that emergency egress is available; raise boring the lift shaft from 121 to 129 level; and
 
    improving cleaning arrangements at the shaft bottom.
Operations were halted while these changes were under way. The shaft resumed operations in August 2010, once repairs to the shaft bottom had been completed. In the interim, the Joel plant has been processing waste to maximise gold production. The opportunity will be taken to install the permanent spillage arrangement during December 2010.
     Once mining from 129 level has begun, production is expected to peak at around 78,000 ounces annually. To ensure that the production targets are met, plans have been put in place to ensure the operability of the North shaft and conduct a planned maintenance program to minimise breakdowns, to maintain blast advances and to assess the feasibility of mining below 129 level to 137 level. A successful drilling program has been completed and a pre-feasibility study is in progress.
     During fiscal 2010, Joel accounted for 5% of our total gold production (4% in fiscal 2009 and 3% in fiscal 2008).

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Safety: Safety at Joel deteriorated during fiscal 2010. After having no fatalities for two years, there was tragically one fatality, the result of a rockfall, during fiscal 2010. However, the LTIFR at Joel of 4.26 (2009: 2.59) per million hours worked compared favorably with the group average of 7.72 (2009: 9.35).
Plants: The Joel plant is a hybrid CIP/CIL plant and was commissioned in 1987. During fiscal 2005, it was decided to close the Joel Plant and place the plant under care and maintenance. Joel Plant was re-commissioned in November 2009 and the plant is currently running with two mills at 80,000 tons per month. The current monthly capacity is 88,185 tons of rock, which is made up of 55% reef and 45% waste rock dumps.
     The following table sets forth processing capacity and average tons milled during fiscal 2010 for the operating plant:
                 
            Average Milled for the
    Processing   Fiscal Year Ended
Plant   Capacity   June 30, 2010
    (tons/month)   (tons/month)
Joel Plant
    88,185       71,378  
     In fiscal 2010, the Joel Plant operations recovered approximately 93% of the gold ore delivered for processing.
Production analysis:
                         
    Fiscal Year Ended June 30,  
Joel   2010     2009     2008  
Production
                       
Tons (‘000)
    484       566       449  
Recovered grade (ounces/ton)
    0.133       0.116       0.133  
Gold produced (ounces)
    64,495       65,684       59,557  
Gold sold (ounces)
    63,788       64,784       61,215  
Results of operations ($)
                       
Product sales (‘000)
    69,150       55,862       51,557  
Cash cost (‘000)
    50,017       40,649       39,131  
Cash profit (‘000)
    19,133       15,213       12,426  
Cash costs
                       
Per ounce of gold ($)
    792       636       638  
Capex (‘000) ($)
    11,587       6,183       5,375  
     Tons milled from Joel increased to 556,000 in fiscal 2009, compared with 449,000 in fiscal 2008. This was due to the rehabilitation work done on North Shaft. Further work was done to improve the smooth operation, which included the reconditioning of the liquid controller, installing an additional cooling tower, increasing lubrication intervals of the guide ropes on the south side. There was also a significant increase in square meters from 60,752 in fiscal 2008 to 83,413 in fiscal 2009.
     Grade was affected by the loss of two high-grade raise lines which necessitated a move to lower grade raise lines. Higher than expected stoping widths were encountered which affected the face grade. Joel has a centralized high grade area with the outskirts being of lower grade. Due to flexibility and availability constraints Joel was forced to move to the outskirts therefore causing a lower recovery grade.
     Ounces produced were 65,684 in fiscal 2009, compared with 59,557 in fiscal 2008. The increase in tons positively influenced ounces produced. Recovery grade decreased to 0.116 in fiscal 2009, compared with 0.133 in fiscal 2008.
     The cash costs for Joel increased to US$40.6 million in fiscal 2009, compared with US$39.1 million in fiscal 2008. This increase was due to wage and salary increases granted to labor, as well as an increase in labor complement to increase stoping panels from 16 to 18. Development labor also increased as development meters increased from 2,141 meters in 2008 to 3,554 meters in 2009. An afternoon shift was also introduced to reduce the underground lockup tons. This was done with contract labor, which increased the contractor costs. There was a substantial increase in electricity charges, which came about due to the electricity shortage experienced.
     Cash costs per ounce were US$636 in fiscal 2009, compared with US$638 in fiscal 2008. This decrease was primarily attributable to the increased tonnage due to the increase in square meters in 2009 compared to 2008 as well as a decrease in lockup tons year on year.

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     The decrease in tons milled from 566,000 in fiscal 2009 to 484,000 in fiscal 2010 is mainly due to the lift shaft between 110 level and 121 level being stopped as a project was initiated to deepen this shaft from 121 level down to 129 level to enable the mining of 129 level. This entailed raising a borehole from 129 level to 121 level. This extension was then equipped, resulting in all men and material having to travel down raise lines, which slowed the delivery of material to the working places and also impacted on stoping and development crews’ face time. This also resulted in a decrease in square meters from 83,413 in fiscal 2009 to 78,229 in fiscal 2010.
The increase in cash costs for Joel from US$40.6 million in fiscal 2009 to US$50.0 million in fiscal 2010 is due to wage and salary increases granted. Development labor also increased as development meters increased from 3,554 meters in 2009 to 4,537 meters in 2010. Development costs were also severely impacted by costs to contain excessive fissure water encountered during development of level 129. Also impacting on costs was a substantial increase of 32% in electricity rates.
     Cash costs per ounce were US$792 in fiscal 2010, compared with US$636 in fiscal 2009. This decrease was primarily attributable to the increase in costs as discussed above, and the reduction in ounces recovered due to the drop in tonnage due to closure of the lift shaft.
     The rock hoisting capacity at Joel is 50,000 tons per month. The average tons milled in fiscal 2010 was 40,333 tons per month.
     Assuming no additional reserves are identified, at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 2.9 million tons (0.5 million ounces) will be sufficient for Joel to maintain underground production until approximately 2017. Any future changes to the assumptions upon which the mineral reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: We incurred R88 million (US$11.4 million) in capital expenditures at Joel in fiscal 2010 on the shaft bottom cleaning at North Shaft, the lift deepening project, and general replacement and maintenance. Capital budgeted for fiscal 2011 is R66 million (US$8.7 million) , primarily for deepening the lift shaft from 121 level to 129, to enable mining on 129 level and to equip it, spillage skip at North Shaft and LED projects.
Kusasalethu (formerly Elandsrand)
Introduction: Kusasalethu is located near Carletonville in the North West province of South Africa. The assets and associated liabilities were purchased during fiscal 2001 for approximately R1 billion (US$128.4 million) from Anglogold. Ore from the operation is treated at the Kusasalethu plant. The name of Elandsrand was changed to Kusasalethu on January 23, 2010. The rebranding and name change was based on entrenching a culture, endorsed by both management and the unions, to ensure safe, productive mining.
History: Gold mining began at Kusasalethu in 1978 following approval of the project in 1974 by Elandsrand Gold Mining Company. Two surface shafts and two adjoining sub-vertical shafts were sunk at Elandsrand. The sub-vertical shafts at Elandsrand, which accessed the deeper part of the VCR reef in the lease area, were completed in 1984. The deepening of the sub-vertical shafts to approximately 3,600 meters below surface has been completed after the deepening project was commissioned in 1991. Activities are currently focused on accessing and opening up areas of the new mine and on the development and construction of support infrastructure.
Geology: At Kusasalethu we primarily exploit the Ventersdorp Contact Reef, or VCR, the Carbon Leader Reef, or CLR and the Elsburg Reef. Only the VCR is economic to mine and has been mined at depths below surface between 1,600 and 3,400 meters with future production to take place up to 3,600 meters below surface at the Kusasalethu operations. The VCR consists of a narrow (20 centimeters to 2 meters) tabular orebody of quartz pebble conglomerates hosting gold, with extreme lateral continuity. The VCR strikes east-northeast and has a regional dip of 21 degrees to the south-southeast. Local variations in dip are largely due to the terrace-and-slope palaeotopography surface developed during VCR deposition.
Mining Operations: The Kusasalethu mine is subject to the underground mining risks detailed in the Risk Factors section.
     The Kusasalethu mine has the challenge of developing a new mine underneath the original mine after the shaft was deepened to access the deeper part of the VCR orebody. The operation is still hampered by the lack of flexibility, an issue that will be addressed by the full commissioning of the new mine. Due to the operating depths of the Kusasalethu underground operations, seismicity and high rock stress are significant risks at the mine. Steps were taken during fiscal 2010 to improve the quality of the pre-conditioning at the stope face and seismic management systems so as to reduce the possibility of face ejection during small, volatile seismic events.

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     Under-performance on square metres broken was the mine’s biggest challenge in fiscal 2010. Scaling in the main reef and waste ore pass systems resulted in blockages in both systems, which contributed to waste dilution and resulted in the lower recovered grade during the year. By year-end it was decided to separate reef and waste and to continue with the removal of the blockage in the waste pass system between the old mine (above 100 level) and the new mine (below 100 level). Once the blockage has been removed, waste rock and reef ore will again be tipped into one ore pass system to accommodate the rehabilitation of both ore pass systems. While this will dilute the recovered grade, it will not affect gold production.
     The mine deepening project infrastructure is 95% complete. The shaft infrastructure is in place and work over the next two years will focus mainly on the provision of sufficient cooling and ventilation into the new mine areas. The project is expected to be completed by fiscal 2012 and is expected to have a life of mine of 26 years. From the inception of the project through to the end of fiscal 2010, R1,035 million (US$136.5 million) has been expended. A further R77 million (US$10.2 million) has been budgeted to complete the project.
     In fiscal 2010, our Kusasalethu operations accounted for approximately 12% (11% in 2009 and 9% in fiscal 2008) of our total gold production.
Safety: Over the past year, an improvement was noted in the safety record at Kusasalethu. During fiscal 2010, LTIFR was 6.68 (2009: 12.67) per million hours worked. Regrettably there were two fatalities during fiscal 2010 (2009: five fatalities).
Plants: Commissioned in 1978, the Kusasalethu Plant consist of milling in closed circuit with primary and secondary hydrocyclones, thickening and cyanide leaching in a CIP pump cell carousel circuit. The CIP was commissioned after an upgrade of the facility in 1999. Ore from Kusasalethu underground operations is delivered to the plant for treatment via conveyor belt after being hoisted from underground. Loaded carbon from the Kusasalethu Plant is transported by road to the Evander Plant for elution, electro-winning and smelting to produce gold. Residues from the CIP are pumped either to a backfill plant or directly to the tailings facility.
     The following table sets forth processing capacity and average tons milled during fiscal 2010 for the plant:
                 
            Average Milled for the
    Processing   Fiscal Year
Plant   Capacity   June 30, 2010
    (tons/month)   (tons/month)
Kusasalethu Plant
    203,925 (1)     102,753  
 
(1)   Processing capacity will reach its optimal capacity upon completion of the Kusasalethu New Mine Project.
     In fiscal 2010, the Kusasalethu Plant recovered approximately 95.0% of the gold contained in the ore delivered for processing.
Production analysis:
                         
    Fiscal Year Ended June 30,  
Kusasalethu   2010     2009     2008  
Production
                       
Tons (‘000)
    1,141       1,061       981  
Recovered grade (ounces/ton)
    0.153       0.164       0.167  
Gold produced (ounces)
    175,029       174,321       164,215  
Gold sold (ounces)
    168,244       183,676       158,631  
Results of operations ($)
                       
Product sales (‘000)
    183,603       157,956       132,699  
Cash cost (‘000)
    143,985       117,321       103,351  
Cash profit (‘000)
    39,618       40,635       29,348  
Cash costs
                       
Per ounce of gold ($)
    857       660       652  
Capex (‘000) ($)
    56,687       46,915       43,830  
     Tons milled from Kusasalethu were 1,061,000 in fiscal 2009, compared with 981,000 in fiscal 2008. Ounces produced increased to 174,321 in fiscal 2009, compared with 164,215 in fiscal 2008 as a result of the increased volumes in production. Mining continues in the old, upper areas of the mine, while the new mine project is completed. Recovered grades decreased marginally during fiscal 2009, resulting in an average of 0.164 ounces per ton in fiscal 2009, compared to the average of 0.167 ounces per ton in fiscal 2008.

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     The increase in electricity costs, labor rates and inflation were the main contributors to the increase in cash cost from US$652 per ounce in fiscal 2008 to US$660 per ounce in fiscal 2009. Cash cost per ounce only increased by 1% due to increased ounces produced which neutralized the higher than normal increases in labor rates and electricity increases approved by the NERSA. Electricity rates are expected to continue rising above the norm until Eskom has developed additional power generating plants.
     Tons milled from Kusasalethu were 1,141,000 in fiscal 2010, compared with 1,061,000 in fiscal 2009. Ounces produced increased to 175,029 in fiscal 2010, compared with 174,321 in fiscal 2009 as a result of the increased volumes in production. Mining continues in the old, upper areas of the mine, while the new mine project is completed. Recovered grades decreased during fiscal 2010, resulting in an average of 0.153 ounces per ton in fiscal 2010, compared to the average of 0.164 ounces per ton in fiscal 2009.
     The increase in labor rates and the higher than normal electricity increases approved by NERSA were the main contributors to the increased cash cost. Electricity rates are expected to continue rising by an estimated 25% annually for the next two years. Potable water previously received from Rand Water Board was increased by 32% for fiscal 2010 by the Merafong Local Council due to a change in legislation allowing local councils to take over this service from Rand Water Board. The increase in electricity costs, labor rates and inflation were the main contributors to the increase in cash cost from US$660 per ounce in fiscal 2009 to US$857 per ounce in fiscal 2010.
     Kusasalethu has a hoisting capacity of 209,440 tons per month. The average tons milled in fiscal 2010 was 95,083 tons per month.
     Assuming no additional reserves are identified, at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 39.5 million tons, or 7.5 million ounces will be sufficient for the Kusasalethu shaft to maintain underground production until approximately calendar year 2035. Any future changes to the assumptions upon which the mineral reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: Harmony incurred R429.7 million (US$56.7 million) in capital expenditure at the Kusasalethu operations in fiscal 2010 mainly for the sub shaft deepening project and ongoing development. An additional project, the Emergency Escape project was started during fiscal 2009, to improve the effectiveness of evacuation of people from underground during a shaft emergency, and is expected to be completed in fiscal 2011.
     Harmony budgeted R414 million (US$54.2 million), for capital expenditure at the Kusasalethu operations in fiscal 2011, primarily for the sub-shaft deepening project and ongoing development expenditure.
Masimong
Introduction: Masimong is located in the Free State province, near Riebeeckstad. The Masimong complex comprises an operating shaft, 5 shaft and 4 shaft which, although closed, is used for ventilation, pumping, and as a second outlet. Mining is conducted at depths ranging from 1,518 meters to 2,300 meters. Ore is treated at the Harmony 1 Plant, approximately 23 kilometers away.
History: Masimong is located in the Free State Goldfield on the south-western edge of the Witwatersrand Basin. The company purchased the Masimong complex (formerly know as Saaiplaas Shafts 4 and 5) during September 1998.
Geology: The operation exploits the Basal Reef, which varies from a single pebble lag to channels on more than 2m thick. It is commonly overlain by shale, which thickens northwards. Masimong is also mining secondary reefs, most notably the Leader Reef (15-20m above Basal) and the B Reef (140m above Basal). The Leader Reef consists of multiple conglomerate units, separated by thin quartzitic zones, often totaling up to 4 meters thick. A selected mining cut on the most economic horizon is often undertaken. The B Reef is a highly channelized orebody. Within the channels, grades are excellent, but this falls away to nothing outside of the channels. Consequently, the operation has undertaken extensive exploration to locate these pay channels.
Mining Operations: The operations are subject to the underground mining risks detailed in the Risk Factors section. Due to the shallow to moderate depths of the underground operations, seismicity related problems are relatively infrequent. We regularly revisit our mining strategy and management procedures in connection with our efforts to mitigate risks of these problems. There is a risk of subterranean water and/or gas intersections in some areas of the mine. However, this risk is mitigated by active and continuous management and monitoring, which includes the drilling of boreholes in advance of faces. Where water and/or gas are indicated in the drilling, appropriate preventative action is taken.

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     Maintaining grades on the B Reef proved challenging as mining moved out of the high-grade channels while those mined on the Basal Reef generally remained constant. Nevertheless grades were maintained overall for the year at 0.157 oz/t. The infrastructural upgrade, begun in fiscal 2009 and which included improved resource management and the installation of new tracks, locomotives, and compressors, was completed in fiscal 2010. Masimong will reap the benefits of this upgrade by way of improved productivity, efficiencies and output in coming years.
     Ventilation is a challenge at Masimong as the booster fans currently installed themselves generate heat and consume electricity. Steps are being taken to counter this. Pressure doors have been installed as an interim measure and a new ventilation system is being installed. A new refrigeration plant is to be installed by September 2011 at a cost of R61 million (US$8.0 million). Following the upgrade program, full production is scheduled for 2012. To achieve this, every effort has been made to ensure that panels are well equipped and crews motivated, and steps have been taken to overcome the erratic grade of the B reef.
     In fiscal 2010, Masimong accounted for approximately 11% (10% in fiscal 2009 and 6% in fiscal 2008) of our total gold production.
Safety: The safety record at Masimong during fiscal 2010 in terms of LTIFR of 7.37 (2009: 8.67) per million hours worked compared favorably with the group average of 7.72 (2009: 9.35). Tragically, there was one fatality during fiscal 2010 (2009: two fatalities). Various initiatives are in place to correct and reduce the human element in accidents.
Plants: The ore from theses operations are sent to Harmony 1 Plant for processing. See Item 4.“Information of the Company — Business — Bambanani” for a discussion on the plant.
Production analysis:
                         
    Fiscal Year Ended June 30,
Masimong Shaft Complex   2010     2009     2008  
Production
                       
Tons (‘000)
    991       981       892  
Recovered grade (ounces/ton)
    0.157       0.157       0.131  
Gold produced (ounces)
    155,609       154,034       116,424  
Gold sold (ounces)
    153,937       154,581       117,575  
Results of operations ($)
                       
Product sales (‘000)
    168,439       135,025       96,147  
Cash cost (‘000)
    92,571       73,494       87,630  
Cash profit (‘000)
    75,868       61,531       8,517  
Cash costs
                       
Per ounce of gold ($)
    602       476       756  
Capex (‘000) ($)
    23,407       14,479       15,686  
     Tons milled from Masimong were 981,000 in fiscal 2009, compared with 892,000 in fiscal 2008, and ounces produced were 154,034 in fiscal 2009, compared with 116,424 in fiscal 2008. Year on year gold production increased due to an increase in tons as well as the recovered grade.
     Cash costs were US$73.5 million in fiscal 2009 compared with US$87.6 million in fiscal 2008 with cash costs per ounce at US$476 in fiscal 2009 compared with US$756 in fiscal 2008. This decrease in cash cost is mainly attributable to a 9.7% decrease in labor. Labor efficiencies contributed significantly to the improved performance. This was the first year that Masimong was fully off the Conops cycle.
     The increase in recovered grade by 0.026 ounces per ton from fiscal 2008 to fiscal 2009 can be attributed to an increase in quality mining discipline. Most notable was the 6.9% increase in MCF and a 20% increase in face grade mined. This was achieved on the back of the Masimong transformation process initiated in April 2008.
     Furthermore the amount of B reef mining was decreased from 25% of total mining to 16% of total mining. This step reduced the high risk with regards to grade associated with the traditionally variable B Reef ore body.
     Tons milled from Masimong were 991,000 in fiscal 2010, compared with 981,000 in fiscal 2009, and ounces produced were 155,609 in fiscal 2010, compared with 154,034 in fiscal 2009. Year-on-year gold production increased due to an increase in tons.
     Cash costs were US$92.6 million in fiscal 2010 compared with US$73.5 million in fiscal 2009 with cash costs per ounce at US$602 in fiscal 2010 compared with US$476 in fiscal 2009. This increase in cash cost is mainly attributable to a 16% lower R/US$ exchange rate and annual

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cost increases. The biggest cost increase contributors were annual labor cost and electricity cost increases.
     Recovered grade remained unchanged in fiscal 2010 compared to fiscal 2009.
     Assuming no additional reserves are identified, at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 8.1 million tons (1.2 million ounces) will be sufficient for the Masimong shaft complex to maintain underground production until approximately fiscal 2023. Any future changes to the assumptions upon which the reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: Masimong incurred approximately R177 million (US$23.4 million) in capital expenditures in fiscal 2010. We have budgeted a total of R208 million (US$27.2 million) for capital expenditures at Masimong in fiscal 2011. Of this, R19 million (US$2.5 million) is for upgrading of the rail bound equipment and R28 million (US$3.7 million) for the fridge plant on Masimong 5.
Phakisa
Introduction: We acquired Phakisa when we, in January 2002, acquired the Freegold operations from Anglogold through a 50% joint venture with ARMgold. In September 2003, we acquired 100% of these operations when ARMgold became a wholly owned subsidiary. The operation is located in the Free State province. Production from the operations is processed through Harmony 1 Plant.
History: Exploration, development and production history in the area of the Freegold assets dates from the early 1900’s, leading to commercial production by 1932. Subsequent consolidation and restructuring led to the formation of Free State Consolidated Gold Mine (Operations) Limited, which became a wholly-owned subsidiary of Anglogold in June 1998.
Geology: The operation is located in the Free State Goldfield, which is on the southwestern edge of the Witwatersrand basin. The Goldfield is divided into two sections, cut by the north-south striking De Bron Fault. The Phakisa mine is located to the west of the De Bron Fault. Mining is conducted in the Basal reef. The reefs generally dip towards the east.
Mining Operations: These operations are subject to the underground mining risks detailed in the Risk Factors section. The management teams regularly revisit their mining strategy and management procedures in order to minimize risks.
     The development at Phakisa, a surface shaft, sunk to 75 level elevations and a planned decline shaft to 85 level will access the mineral reserves to a depth of 2,662 meters below surface. It is estimated that the area will yield 22.1 million tons, recovering 4.96 million ounces of gold over a project life of 19 years. Project completion requires sinking, equipping and commissioning of a decline shaft up to 85 level. The major project includes access development and stoping to maximum production build-up at a capital cost of R2,074 million (US$273.6 million). To date, R1,508 million (US$199 million) has already been spent.
     Good progress was achieved during fiscal 2010, with completion of all infrastructures except the underground cooling plants. Installation of the permanent water handling systems (i.e., Settlers, Main Pump Station on 77 Level, Mud press and underground dams) have been completed and are operative. The third train on the Rail-veyor was successfully commissioned in December 2009. Eight of the ten ice plant modules have been commissioned, although five were found to be underperforming and the orginal equipment manufacturers have been engaged to assist with remedial action and to advise on ways of improving performance. The first phase of surface offices and change houses have been successfully completed with the second phase scheduled to start in September 2010. Two critical issues to be completed are the installation of underground cooling plants and upgrading the return air system with the installation of 4m raise bore hole from 75 level to 66 level and a booster fan on 59 level. All this work is planned for fiscal 2011.
     Phakisa started the first production during September 2007 and will be opening up mineral reserves going forward. The project is expected to be in full production in July 2013 at 93,476 tons per month. The average production rate per annum over the peak period of life of mine is 245,234 ounces. During fiscal 2010, the build-up in production has been hampered by geological issues, illegal mining activities and down-time on the new infrastructure. Since it is a new mine, development at Phakisa is currently centred close to the shaft in the lower grade southern areas. The major drive is on development of the area to the north to access higher grade areas and to move closer to the average reserve grade. Grades will improve as development progresses towards the north and more reef is exposed within the major north-west to south-east tranding Basal Reef payshoot. Mining was also undertaken at Nyala shaft during fiscal 2010 were payable pillars are available for mining.
     During fiscal 2010, Phakisa accounted for 3% (1.4% in 2009 and 0.2% in 2008) of our total gold production.

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Safety: During fiscal 2010, the safety statistics for Phakisa was 8.4 (2009: 9.19) per million hours worked. Three fatal accidents occurred during fiscal 2010, two resulting from a fall of ground in the development section and one caused by a training accident. Post year-end, an explosion underground tragically resulted in five fatalities.
Plants: The ore from these operations are sent to Harmony 1 Plant for processing. See Item 4.“Information of the Company — Business — Bambanani” for a discussion on the plant.
                         
    Fiscal Year Ended June 30,
Phakisa   2010     2009     2008  
Production
                       
Tons (‘000)
    374       204       34  
Recovered grade (ounces/ton)
    0.118       0.109       0.118  
Gold produced (ounces)
    44,079       22,216       4.024  
Gold sold (ounces)
    44,496       21,477       4,212  
Results of operations ($)
                       
Product sales (‘000)
    49,458       19,009       3,891  
Cash cost (‘000)
    43,040       11,903       2,348  
Cash profit (‘000)
    6,418       7,106       1,543  
Cash costs
                       
Per ounce of gold ($)
    953       555       497  
Capex (‘000) ($)
    64,106       51,210       40,335  
     Tons milled increased from 34,000 tons in fiscal 2008 to 204,000 tons in fiscal 2009, with gold production increasing from 4,024 ounces to 22,216 ounces. This was as a result of the planned ramp up in production during the year. Grade was lower in fiscal 2009 at 0.109 ounces per ton, compared to 0.118 in fiscal 2008. This was due to the fact that mining was confined to a single raise line in a lower grade area.
     Cash costs per ounce for Phakisa was US$555 per ounce in fiscal 2009, compared with US$497 per ounce in fiscal 2008. This increase is primarily attributable to the increase in tons mined.
     Tons milled increased from 204,000 tons in fiscal 2009 to 374,000 tons in fiscal 2010, with gold production increasing from 22,216 ounces to 44,079 ounces. This was as a result of the planned ramp up in production during the year. Grade was higher in fiscal 2010 at 0.118 ounces per ton, compared to 0.109 in fiscal 2009.
     Cash costs per ounce for Phakisa was US$953 per ounce in fiscal 2010, compared with $555 per ounce in fiscal 2009. This increase is primarily attributable to the increase in tons mined, as well as the cost of employees transferred to Phakisa from shafts that were closed during fiscal 2010.
     The expected capacity of Phakisa will be 131,175 tons per month. Phakisa has no rock hoisting facilities and all rock will be transported via a rail system on 55 level to the Nyala shaft for hoisting to surface. First production took place during September 2007, with a build up to full production expected by fiscal 2013.
     On a simplistic basis reported proven and probable underground mineral reserves of 22.1 million tons (5.16 million ounces) will be sufficient for the Phakisa shaft to, once production commence, maintain production until approximately fiscal 2029. Any future changes to the assumptions upon which the reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: We incurred approximately R486 million (US$64.1 million) in capital expenditures at the Phakisa operations in the fiscal year ended June 30, 2010. We have budgeted R391 million (US$51.2 million) for capital expenditures in fiscal 2011, primarily for the establishing and development of the shaft.
Target operation
Introduction: The Target operation consists of Target 1, Target 3 and Freddies 7 & 9 shafts. We acquired Target 1 when Avgold became a wholly owned subsidiary in fiscal 2004. Target 3, previously Loraine 3, and Freddies 7 & 9 shafts were acquired from Pamodzi FS in Feburary 2010. They have been incorporated into our Target operation. Target is situated near the town of Allanridge in the Free State Province,

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some 270 kilometers southwest of Johannesburg. Located on the northern limit of the Welkom Goldfields, the site is accessed via the R30 motorway situated between the towns of Bothaville and Welkom.
History: Target 1 was initially explored through surface drilling in the late 1980s with further exploration being undertaken from a 5.6 kilometers long decline, commenced in 1995, driven from 203L at Loraine No. 1 Shaft. A positive feasibility study into the development of a 105 ktpm operation was produced in May 1998 resulting in the decision to develop Target 1. A detailed mine design was produced in 2000 and the mine officially opened in May 2002. Upon closure of the Loraine mine in August 1998, the Loraine No. 1 and No. 2 Shafts were transferred to the Target mine, becoming Target No. 1 and No. 2 Shafts, respectively. No 5 Shaft being the up-cast Ventilation Shaft.
     Numerous corporate actions since the 1940’s until the 1990’s saw the Loraine 3 and Freddies 7 & 9 shafts change ownership a number of times. Previous owners include the Free State Development and Investment Corporation, Johannesburg Consolidated Investment, Avgold and Anglogold. In 1998, PSGM was formed after purchasing Loraine 3 and Freddies 7 & 9 shafts from various individuals. During 2002, the mine was sold to Thistle Mining Inc, an international company with interests in the Philippines and South Africa. The mine struggled to make operational profits, and Thistle undertook a restructuring program in 2006, which together with an increase in the Rand gold price resulted in positive operational cash flows. In February 2008, PSGM was purchased by Pamodzi FS. The mine was operated from that time until March 2009, when Pamodzi FS was placed into liquidation.
Geology: The gold mineralization currently exploited by Target is contained within a succession of Elsburg and Dreyerskuil quartz pebble conglomerate reefs hosted by the Van Heeverrust 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 life of mine plan.
     The majority of the mineral reserves at Target are contained within the Eldorado fan, a structure with dimensions of some 135 meters vertically, 450 meters down-dip and 500 meters along strike. The Eldorado fan is connected to the subsidiary Zuurbron fan by a thinner and lower grade sequence of Elsburg reefs termed the Interfan area. To the north of the Eldorado fan, a number of 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 life of mine mineral reserve.
     A number of faults that displace the reefs of Target 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 border of Target.
     Target North is sub-divided into the Paradise, Siberia and Mariasdal areas by the east-west trending Siberia and Mariasdal 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 2,500 meters below surface. Resources have been delineated on strike up to 15 kilometers north of Target mine.
     Approximately 40 kilometers north of Target 1, 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 Elsburg at depths of approximately 2,750 meters below surface.
Mining operations: Target is subject to the risks associated with underground mining detailed in the Risk Factors section.
     Mining operations at Target 1 comprise one primary underground mine commissioned in May 2002, making use of information systems and mechanization, combined with process-driven organizational design that relies on a multi-skilled workforce. The majority of the production is derived from mechanized mining; however, conventional stoping is still employed primarily to de-stress areas ahead of the mechanized mining.
The mine had successful and consistent production throughout fiscal 2010. Improved volumes resulted from an increase in massive availability, improved environmental conditions in the narrow reef stoping section, maintained development levels and improved discrepancy figures due to clean mining. Grade also improved due to a program of geological remodeling and re-estimation of the orebody, which led to better estimates of ore mined. Concerted efforst, including back-analysis of the orebody, resulted in improved planning and the implementation of more effective control systems. Block 3 remains an important future mining area and the orebody re-assessment process was completed in December 2009.
     The infrastructural upgrade program enabled the mine to maintain its current levels of production by June 30, 2010 and the benefits of this upgrade is fully felt in fiscal 2010. A 15-point turnaround plan continues at Target. In particular, a great deal of attention is being paid to development and improving flexibility. Some of the improvements effected during fiscal 2009 bore fruit by the end of fiscal 2010.

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     Target 3 is unique in that, for a mature mine, there still remains an excellent mix of remnant ore blocks including shaft pillar blocks where scattered mining can be exploited and ample areas of virgin ground where conventional mining can take place and even potential to exploit the Golden Triangle in the Freddies 9 Shaft area.The Target 3 orebody also has characteristics that suit massive mining techniques in the Eldorados which enables design to be centred on a mechanized operation making use of Target 1 skilled employees and the latest proven technology to produce gold at low cash costs.
     The origin of massive mining methods on Target 3 is derived from the massive mining techniques used currently at Target 1 Shaft workings, in particular the open stoping method used in the No. 1 Shaft area where a stope of 30m x 25m x 400m was excavated.
     The depth of the workings at Target would normally eliminate the potential massive mining methods; however narrow reef mining can be done to create a de-stressed environment for the areas to be mined by massive mining techniques. The complex multiple reefs may require backfill as a support medium in association with the various mining methods.
     In order to exploit the above mentioned reef horizons an extensive program of opening up of collapsed or caved airways has been embarked upon and the repair/reconditioning of both the York and Carrier Fridge Plants in order to improve the mine cooling conditions to the required standard.
     The shaft bottom, which was damaged during flooding in May and June 2009 as a result of the pumps that were not repaired or maintained by Pamodzi FS, is in the process of rehabilitation.
     In fiscal 2010, Target’s operations accounted for 8% of our total gold production, compared to 6% in fiscal 2009 and 4% in fiscal 2008.
Safety: The safety statistics at Target during fiscal 2010 in terms of LTIFR of 3.39 (2009: 9.66) per million hours worked is lower than the group average of 7.72. Regrettablly there were two fatalities at Target during fiscal 2010 (2009: two fatalities).
     Safety at the operation remains the number one priority and received constant and high-level attention. Our mission is to create and maintain a positive Health and Safety awareness and mindset amongst all our employees. More focus is also placed on being proactive by reporting and addressing incidents. Good safety improvements were evident during fiscal 2010.
Plants: Target Plant was commissioned in November 2001 and currently treats both underground ore and surface sources, which include both waste rock dump and plant clean up material. The process route comprise of a closed circuit SAG mill as well as a closed circuit ROM mill. Both these mills are in closed circuit with hydro-cyclones. The milling circuit is followed by thickening, cyanide leaching, CIP adsorption, elution, electro-winning, smelting and tailings disposal. Both the milling circuits are incorporated in the gravity concentration circuit and the concentrates from this circuit are processed via intensive cyanidation and electro-winning.
     The ROM mill was commissioned in November 2008 and it was installed in order to reduce the steel ball consumption on the plant. The initial objective was to save R 1.2 million (US$0.13 million) on grinding media monthly, but when a review of the project was done in June 2009 it was found that the actual saving amounted to R1.4 million (US$0.16 million) per month.
     In February 2010 the plant obtained substantial ICMI accreditation, which will change to full accreditation in January 2011. During the year the plant also embarked on a reagent saving campaign, especially on cyanide, and through some minor process modifications cyanide consumption was reduced by 76.09 tons year on year. Several power saving initiatives have also been implemented on the plant to reduce the power consumption of the plant, and during the fourth quarter of fiscal 2010 there were already indications that this initiative was paying dividends.
     The following table sets forth processing capacity and average tons milled during fiscal 2010:
                 
            Average Milled For the
    Processing   Fiscal Year Ended
Plant   Capacity   June 30, 2010
    (tons/month)   (tons/month)
Target Plant
    105,000       101,935  
     In fiscal 2010, the Target Plant recovered approximately 95.3% of the gold contained in the ore delivered for processing.

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Production analysis:
                         
    Fiscal Year Ended June 30,  
Target (includes Target 1 and 3)   2010     2009     2008  
Production
                       
Tons (‘000)
    857       710       686  
Recovered grade (ounces/ton)(1)
    0.128       0.123       0.116  
Gold produced (ounces) (1)
    113,782       87,225       79,602  
Gold sold (ounces) (1)
    110,598       87,611       85,006  
Results of operations ($)
                       
Product sales (‘000)
    115,772       76,435       69,469  
Cash cost (‘000)
    87,563       59,599       51,463  
Cash profit (‘000)
    28,209       16,836       18,006  
Cash costs
                       
Per ounce of gold ($)(1)
    783       645       716  
Capex (‘000) ($)
    50,446       37,994       35,307  
 
(1)   3,762 ounces were produced by Target 3 and sold. The revenue has been credited against capital expenditure as the shaft is not in production yet. The costs and ounces were not used in the cash cost per ounce calculation. The ounces were also excluded from the grade calculation.
     Tons milled from Target increased from 686,000 in fiscal 2008 to 710,000 in fiscal 2009. Target experienced a number of issues impacting on production. These include:
    infrastructural problems with the belts, fridge plants and other environmental infrastructure, resulting in higher face temperatures and lower efficiencies;
 
    water handling; and
 
    low availability of massive stopes.
     The conveyor belt system was extensively rehabilitated during the course of fiscal 2009. An executive audit was done by Good Year which formed the basis of the rehabilitation plan that was implemented. The belt availability and reliability has increased. The crusher plant, which feeds the belts, is in the process of rehabilitation.
     During 2009 a campaign was started to update the reticulation, clean out the dams and getting the dewatering equipment to a standard. In addition to updating the reticulation in the mining areas, flow meters and dual pressure reducing valve systems are being installed to better understand, measure and manage the water usage in the actual workplaces. This campaign was completed in fiscal 2010. Electrical substations are being reviewed for compliance purposes.
     Availability of massive stopes has been improved with increased focus on planning and development.
     Ounces produced were 87,225 in fiscal 2009, compared with 79,602 in fiscal 2008. The increase in ounces produced was due to higher milled tonnages and improved recovered grade. The recovery grade increased marginally from 0.116 in fiscal 2008 to 0.123 in fiscal 2009.
     Cash costs for Target were US$59.6 million in fiscal 2009, compared with US$51.5 million in fiscal 2008. This increase was primarily attributed to increased tonnages produced, increase in total employees costed and inflationary cost increases. Cash costs per ounce were US$645 in fiscal 2009, compared with US$716 in fiscal 2008. This reduction in $/oz terms was due to more ounces produced.
     Ounces produced were 113,782 in fiscal 2010, compared with 87,225 in fiscal 2009. The increase in ounces produced was due to higher milled tonnages and improved recovered grade.
     Continued upgrading of infrastructure, resulting improved environmental conditions and higher availability of the mechanized fleet have led to increasing and consistent production levels. Tonnages milled from the Target 1 Shaft increased significantly from 710,000 in fiscal 2009 to 857,000 in fiscal 2010.
     Maintenance of the average mining grades, and continuing focus on clean-up and clean mining resulted in an improved recovery grade which increased marginally from 0.123 ounces per ton in fiscal 2009 to 0.128 ounces per ton in fiscal 2010.

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     Cash costs for Target were US$87.6 million in fiscal 2010, compared with US$59.6 million in fiscal 2009. This increase was primarily attributed to increased tonnages produced, increase in total employees costed and inflationary cost increases, as well as the effect of the appreciation of the Rand against the US$ dollar. Cash costs per ounce were US$783 in fiscal 2010, compared with US$645 in fiscal 2009. This increase was due to higher production levels and the appreciation of the Rand against the US$ exchange rate.
     A major review of the geological modeling and evaluation of Target’s mineral resources was completed as planned. This resource was then utilized in a “Life of Mine” planning exercise which was completed in December 2009. The outcomes should lead to improved confidence in short-term and strategic planning. Plans to increase tonnages to 75,000 tons per month together with a capital project to access Mining Block 3 through an additional decline are well advanced.
     Assuming no additional reserves are identified, at expected production levels and, at the current planned gold price, it is foreseen that the reported proven and probable mineral reserves of 18.0 million tons (2.8 million ounces) will be sufficient for Tshepong to maintain underground production until approximately 2023. Any future changes to the assumptions upon which the mineral reserves are based, as well as any unforeseen events affecting production levels, could have an effect on the expected period of future operations.
Capital Expenditure: Target incurred approximately R382 million (US$50.4 million) in capital expenditures in fiscal 2010, principally for on-going underground development, Phase 1 of Block 3 to improve environmental conditions, continuing replacement of the underground vehicle fleet and infrastructural rehabilitation. We have budgeted R457 million (US$59.9 million) in fiscal 2011, of which R101 million (US$13.2 million) will be spent on Block 3.
Tshepong
Introduction: We acquired Tshepong when we, in January 2002, acquired the Freegold operations from Anglogold through a 50% joint venture with ARMgold. In September 2003, we acquired 100% of these operations when ARMgold became a wholly owned subsidiary. These operations are located in the Free State province. Production from the operations is processed through Harmony 1 Plant.
History: Exploration, development and production history in the area of the Freegold assets dates from the early 1900’s, leading to commercial production by 1932. Subsequent consolidation and restructuring led to the formation of Free State Consolidated Gold Mine (Operations) Limited, which became a wholly-owned subsidiary of Anglogold in June 1998.
Geology: The operations are located in the Free State Goldfield, which is on the southwestern edge of the Witwatersrand basin. The Tshepong mine is located to the north and west of Welkom. Mining is primarily conducted in the Basal reef, with limited exploitation of the B Reef. The reefs generally dip towards the east or northeast while most of the major faults strike north-south.
Mining Operations: These operations are subject to the underground mining risks detailed in the Risk Factors section. The management teams regularly revisit their mining strategy and management procedures in order to minimize risks.
     Mining is conducted at depths ranging from 1,671 and 2,245 meters at Tshepong. Operations at Tshepong were hampered during fiscal 2010 by safety stoppages, following two fatal accidents.
     Given the proximity of Tshepong to Phakisa, there are access, ventilation and service synergies that can be exploited to allow access at depth.
     The Tshepong Decline project, which started in April 2003, has accessed an additional two levels (69 and 71) of the Tshepong Shaft. The Sub 66 project was completed at the end of June 2010 with a total capital expenditure of R295 million (US$36 million). Production commenced at Sub 66 Decline during fiscal 2010, with the build-up to continue over the next three years. Emphasis is being placed on increasing mineable reserves from this area. The final development component was completed in June 2008. Poor ground condition necessitated intense secondary support and ore pass lining delayed completion. Secondary support has been completed and the lining of orepasses was completed safely during fiscal 2010.
     Sub 71 Project made good progress until November 2008 when extreme poor ground conditions were experienced in the developed section. A decision was taken to stop all development and install secondary support in the area. The stoppage continued for seven months until end fiscal 2009. The work was completed safely, without disrupting the production operations from the Sub 66 decline. The development of the Material Decline and Chairlift ends commenced during July 2009 as planned following the stoppage of the ends due to bad ground conditions in November 2008. Progressive a total of 2,146 meters have been completed. The material decline is 50% complete and the chairlift is 62% complete. The installation of the Sub 71 main conveyor has commenced with the civil work and mechanical erecting of steelwork. To date the baseline variation on the original plan is one year. During fiscal 2010 the project was negatively impacted by mine stoppages resulting

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from two fatalities, as well as flooding incidents and long hauling distances from the working faces to the temporary tipping arrangements. The escalation of input costs, combined with delays and additional material required had a negative impact on the project. First production is expected in towards the end of fiscal 2012, with full production anticipated in July 2019. The total estimated cost of this project is R247 million (US$30.2 million).
     During fiscal 2010, Tshepong accounted for 15% (15% in 2009 and 14% in 2008) of our total gold production.
Safety: During fiscal 2010, the LTIFR for Tshepong was 12.2 (2009: 15.8) per million hours. There were regrettably two fatalities during the year (2009: 7). Tshepong achieved 1 million fatality-free shifts on February 18, 2010 and came seventh in the category for the most improved LTIFR at the second Hard Rock Safety Summit. Safety at these operations receives constant and high-level attention.
Plants: The ore from these operations are sent to Harmony 1 Plant for processing. See Item 4. Information of the Company — Business — Bambanani” for a discussion on the plant.
Production analysis:
                         
    Fiscal Year Ended June 30,  
Tshepong   2010     2009     2008  
Production
                       
Tons (‘000)
    1,674       1,516       1,649  
Recovered grade (ounces/ton)
    0.130       0.152       0.161  
Gold produced (ounces)
    216,986       230,778       265,914  
Gold sold (ounces)
    219,332       227,113       273,119  
Results of operations ($)
                       
Product sales (‘000)
    240,473       197,726       223,185  
Cash cost (‘000)
    151,382       108,605       124,720  
Cash profit (‘000)
    89,091       89,121       98,465  
Cash costs
                       
Per ounce of gold ($)
    677       483       455  
Capex (‘000)($)
    34,402       27,711       26,834  
     Tons milled declined by 8% from 1,649,000 tons in fiscal 2008 to 1,516,000 in fiscal 2009, with gold production decreasing by 13% from 265,914 ounces in fiscal 2008 to 230,778 ounces in fiscal 2009. The decrease was attributable to the decrease in the recovery grade to 0.152 in fiscal 2009, compared with 0.161 in fiscal 2008. The decrease in recovery grade was primarily due to a decrease in the average mining grade which was 1153 cmg/t in fiscal 2009, compared to 1275 cmg/t in fiscal 2008. The drop in the average mining grade is in line with the Life of Mine profile. During fiscal 2008 the mining in the east south block was on the edge of the main high grade pay shoot and as mining continued south during fiscal 2009 mining have moved out of this high grade channel. The continuation of this channel will be mined once Sub 66 and Sub 71 decline is completed.
     Cash costs for Tshepong were US$108.6 million in fiscal 2009, compared with US$124.7 million in fiscal 2008. Cash costs per ounce were US$483 in fiscal 2009, compared with US$455 in fiscal 2008. This increase in unit cost is attributable primarily to decrease in the number of ounces of gold produced. Cash cost for fiscal 2009 was impacted by increases in the costs of labor and electric power.
     Tons milled increased year on year by 10% (1,516,000 tons in fiscal 2009 compared with 1,674,000 tons in fiscal 2010), with gold production decreasing by 6% from 230,778 ounces in fiscal 2009 to 216,986 ounces in fiscal 2010. The decrease was attributable to the decrease in the recovery grade to 0.130 in fiscal 2010 compared with 0.152 in fiscal 2009. The decrease in recovery grade was primarily due to a decrease in the average mining grade, which was 1039 cmg/t in fiscal 2010 compared with 1153 cmg/t in fiscal 2009. The drop in the average mining grade is in line with the Life of Mine profile. During fiscal 2009 the mining in the east south block was on the edge of the main high grade pay shoot and as mining continued south during fiscal 2010 mining has moved out of this high grade channel. The continuation of this channel will be mined in the decline area once Sub 71 decline reaches full production.
     Cash costs for Tshepong were US$151.4 million in fiscal 2010, compared with US$108.6 million in fiscal 2009. Cash costs per ounce were US$677 in fiscal 2010, compared with US$483 in fiscal 2009. The increase in unit cost is attributable primarily to the decrease in the number of ounces of gold produced. The increase in cash costs were primarily due to increases in the costs of labor and abnormal tariff increases in electrical power rates as well as the effect of inflation on costs of materials and supply contracts. In addition, the cost of medical separation was included in operational cost. This was historically not included in operational cost. Also, the effect of the appreciation of the Rand against the US dollar had a negative impact in US$ dollar terms.

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     Assuming no additional reserves are identified, at expected production levels and, at the current planned gold price, it is foreseen that the reported proven and probable mineral reserves of 24.9 million tons (3.9 million ounces) will be sufficient for Tshepong to maintain underground production until approximately 2026. Any future changes to the assumptions upon which the mineral reserves are based, as well as any unforeseen events affecting production levels, could have an effect on the expected period of future operations.
Capital Expenditure: Tshepong incurred approximately R261 million (US$34.4 million) in capital expenditure during fiscal 2010. The expenditure was primarily for the decline project and ongoing development. For fiscal 2011 capital expenditure of R273 million (US$35.8 million) is planned, primarily for ongoing capital development.
Virginia operations
Introduction: The Virginia operations are located in the Free State province, near Virginia and Welkom. The Virginia operations consist of the original Harmony mines, the Unisel mine, Brand shafts 1 and 3 (mined from Brand 1 shaft). Mining is conducted at these operations at depths ranging from 1,000 meters to 2,000 meters. Ore is treated at the Central Plant and Harmony 1 Plant. During fiscal 2010, Harmony 2, Merriespruit 3 and Brand 3 shafts were placed on care and maintenance.
History: Our operations in the Free State began with the Harmony mine, which is an amalgamation of the Harmony, Virginia and Merriespruit mines. Beginning in 1996, we began purchasing neighboring mine shafts. The Unisel mine was purchased in September 1996, the Saaiplaas mine Shafts 2 and 3 were purchased in April 1997, the Brand mine Shafts 1, 2, 3 and 5 were purchased in May 1998.
Geology: These operations are located in the Free State Goldfield on the south-western edge of the Witwatersrand Basin. The basin, situated on the Kaapvaal Craton, has been filled by a 6-kilometre thick succession of sedimentary rocks, which extends laterally for hundreds of kilometers. The Free State goldfield is divided into two sections, cut by the north-south striking De Bron Fault. This major structure has a vertical displacement of about 1,500m in the region of Bambanani, as well as a lateral shift of 4km. This lateral shift can allow a reconstruction of the orebodies of Unisel to the west of the De Bron and Merriespruit to the east.
     A number of other major faults (Stuirmanspan, Dagbreek, Arrarat and Eureka) lie parallel to the De Bron Fault.
     Unisel and Brand are situated to the west of the De Bron. Dips are mostly towards the east, averaging 30 degrees but become steeper approaching the De Bron Fault. To the east of the fault lie Merriespruit 1 and 3 and Harmony 2 mines. These mostly dip towards the west at 20 degrees, although Masimong is structurally complex and dips of up to 40 degrees have been measured. Between these two blocks lies the uplifted horst block of West Rand Group sediments with no reef preserved. The western margin area is bound by synclines and reverse thrusts faults and is structurally complex. Towards the south and east, reefs sub-crop against overlying strata, eventually cutting out against the Karoo to the east of the lease area.
     Most of the Mineral Resource tends to be concentrated in reef bands located on one or two distinct unconformities. A minority of the Mineral Resource is located on other unconformities. Mining that has taken place is mostly deep-level underground mining, exploiting the narrow, generally shallow dipping tabular reefs.
     The Basal Reef is the most common reef horizon and is mined at all shafts. It varies from a single pebble lag to channels on more than 2m thick. It is commonly overlain by shale, which thickens northwards.
     The second major reef is the Leader Reef, located 15-20m above the Basal Reef. This is mostly mined at the shafts to the south — Unisel, Harmony 2, Merriespruit 1 and Merriespruit 3. Further north, it becomes poorly developed with erratic grades. The reef consists of multiple conglomerate units, separated by thin quartzitic zones, often totaling up to 4 meters thick. A selected mining cut on the most economic horizon is often undertaken.
Mining Operations: The operations are subject to the underground mining risks detailed in the Risk Factors section. Due to the shallow to moderate depths of the underground operations, seismicity related problems are relatively infrequent with the exception of Unisel and Harmony shafts and Merriespruit 1 shaft pillar, where these problems receive constant attention. We regularly revisit our mining strategy and management procedures in connection with our efforts to mitigate risks of these problems. There is a risk of subterranean water locally at Merriespruit 1, referred to as water pillar area, and/or gas intersections in some areas of the mine. However, this risk is mitigated by active and continuous management and monitoring, which includes the drilling of boreholes in advance of faces. Where water and/or gas are indicated in the drilling, appropriate preventative action is taken. The principal challenges at the operations of achieving optimal volumes and grades of ore production are addressed by stringent mineral reserve management.

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     The inner Basal Reef shaft pillar at Merriespruit 1 is being successfully mined. Approximately 90% of the pillar is mined out. A decision was taken on April 14, 2010 to issue a section 189 to close this operation. After negotiation with organized labor, it was decided to continue operating the shaft, as long as it is profitable. Subsequent to year-end, the decision was made to close the shaft as it failed to meet the agreed targets. See Item 8.“Recent Developments.” A decision was taken on April 14, 2010 to issue a section 189 to close Merriespruit 3 Shaft, and the shaft was placed on care and maintenance.
     A decision was taken during November 2009 to close Brand 3 and the shaft has been placed on care and maintenance. Brand 5 serves as a major pumping shaft for the Steyn, Brand, Unisel and Bambanani mining areas. Harmony 2 was also placed on care and maintenance during fiscal 2010.
     Unisel mining is scattered to the south of the shaft and in the decline area towards the east of the shaft. Mining also takes place to the west in the Tarka block. Development is targeted towards Basal and Leader Reef channels which cut the lease area in a west to east direction. Prospecting for A and B Reefs is in progress. Prospecting did not prove any significant values and was discontinued during 2010.
     In fiscal 2010, Virginia operations accounted for approximately 12% (17% in fiscal 2009 and 13% in fiscal 2008) of Harmony’s total gold production. This reduction is attributable to the closures of Brand 1, Harmony 2 and Merriespruit 3 during fiscal 2010.
Safety: The safety record during fiscal 2010 in terms of LTIFR of 12.86 (2009: 12.38) per million hours worked compared unfavorably to the group average of 7.72. Regrettably there were five fatalities during fiscal 2010 (2009: 1).
Plants: Ore from Virginia operations is treated at Central plant. The Central plant was commissioned in 1986 and employs CIP/CIL hybrid technology. It is currently dedicated to the treatment of both underground ore and waste rock.
     The following table sets forth processing capacity and average tons milled during fiscal 2010 for the Central plant:
                 
            Average Milled
            for the Fiscal Year
    Processing   Ended
Plant   Capacity   June 30, 2010
    (tons/month)   (tons/month)
Central
    185,190       152,120  
     In fiscal 2010, Central plant recovered approximately 92.3% of the gold contained in the ore delivered for processing.
Production analysis:
                         
    Fiscal Year Ended June 30,  
Virginia operations   2010     2009     2008  
Production
                       
Tons (‘000)
    1,826       2,493       2,349  
Recovered grade (ounces/ton)
    0.093       0.104       0.106  
Gold produced (ounces)
    170,013       258,170       247,820  
Gold sold (ounces)
    173,035       259,070       250,324  
Results of operations ($)
                       
Product sales (‘000)
    186,649       225,897       204,807  
Cash cost (‘000)
    176,774       165,274       180,133  
Cash profit (‘000)
    9,875       60,623       24,674  
Cash costs
                       
Per ounce of gold ($)
    1,036       638       726  
Capex (‘000) ($)
    23,744       22,133       20,868  
     Tons milled from the Virginia operations increased to 2,493,000 in fiscal 2009, compared with 2,349,000 in fiscal 2008. This is partially attributable to the fire in the Basal pillar as well as power shortages in 2008.
     Ounces produced were 258,170 in fiscal 2009, compared with 247,820 in fiscal 2008. The increase in ounces produced was as a result of improved volumes.

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     Cash costs were US$165.3 million in fiscal 2009, compared with US$180.1 million in fiscal 2008. Cash costs per ounce were US$638 in fiscal 2009, compared with US$726 in fiscal 2008. This decrease was attributable primarily to higher tons produced resulting in higher ounces as well as the effect of the weakening Rand/US$ exchange rate.
     Tons milled from the Virginia operations decreased to 1,826,000 in fiscal 2010, compared with 2,493,000 in fiscal 2009. This is mainly attributable to the closure of Brand 3 during November 2009, and Harmony 2 and Merriespruit 3 during April 2010. Merriespruit 1 has downscaled production from February 2010.
     Ounces produced were 170,013 in fiscal 2010, compared with 258,170 in fiscal 2009. The decrease in ounces produced was as a result of volumes that decreased due to the closure of the three shafts as mentioned above during fiscal 2010, while Merriespruit 1 has downscaled production from February 2010.
     Cash costs were US$176.8 million in fiscal 2010, compared with US$165.3 million in fiscal 2009. Cash costs per ounce were US$1,036 in fiscal 2010, compared with US$638 in fiscal 2009. This increase was attributable primarily to lower tons produced resulting in lower ounces as well as an increase in our cash costs and the effect of the appreciation of the Rand against the US dollar.
     Assuming no additional reserves are identified, at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 4.7 million tons (0.6 million ounces) will be sufficient for the Virginia operations to maintain production until approximately 2018, but at a reduced rate from 2012 as some shafts have closed. However, any future changes to the assumptions upon which the reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of the future operations.
Capital Expenditure: Virginia incurred approximately R180 million (US$23.7 million) in capital expenditures at the Virginia operations in fiscal 2010, principally for ongoing capital development. We have only budgeted R57 million (US$7.4 million) for ongoing capital development in fiscal 2011, as well as R21 million (US$2.8 million) for maintaining/upgrading the shaft infrastructure of Unisel due to the closure of the other three shafts during fiscal 2010.
Other — Surface
Introduction: Other — Surface consists of Kalgold, Phoenix and the surface operations owned by the Freegold, Avgold and Evander companies. As the results of operations for Other — Surface consists primarily of the results from Kalgold and Phoenix, these two operations are discussed separately.
Kalgold
Introduction: Harmony’s only open pit mining operation in South Africa is the Kalgold gold mine that is situated 60 kilometers south of Mafikeng in the North West Province of South Africa. Through Kalgold, Harmony also control extensive mineral rights on the Kraaipan Greenstone Belt in the North West Province of South Africa.
History: Harmony acquired Kalgold on July 1, 1999 and fully incorporated Kalgold into its existing operations in October 1999. Prior to Harmony’s acquisition of the Kalgold mine, the mine had already been in operation for three years.
Geology: The Kalgold operation is located within the Kraaipan Greenstone Belt, 60km south of Mafikeng. This is part of the larger Amalia-Kraaipan Greenstone terrain, consisting of north trending linear belts of Archaean meta-volcanic and metasedimentary rocks, separated by granitoid units. Mineralization occurs in shallow dipping quartz veins, which occur in clusters or swarms, within the steeply dipping magnetitechert banded iron formation. Disseminated sulphide mineralization, dominated mostly by pyrite, occurs around and between the shallow dipping quartz vein swarms. The D Zone is the largest orebody encountered and has been extensively mined within a single open-pit operation, along a strike length of 1,300m. Mineralization has also been found in the Mielie Field Zone (adjacent to the D Zone), the A Zone and A Zone West (along strike to the north of the D Zone), and the Watertank and Windmill areas to the north of the A Zone.
Mining Operations: The Kalgold operation is engaged in open-pit mining. This operation is subject to the open cast mining risks detailed in the Risk Factors section. Small subterranean water intersections in the pit are common and are actively managed and appropriate action is taken when necessary. The primary mining challenges at the Kalgold operations of achieving optimal volumes and grades of ore production are addressed by stringent mineral reserve management. The processing design capacity of the Kalgold operation is 150,000 tons per month. The average tons milled in fiscal 2010 were 156,083 tons per month.
Gold production declined by 24% to 49 063 ounces in fiscal 2010, a result of the planned decline in grade as operations at the high-grade D Zone pit came to an end in March 2009. The sulphide material, which does not present the same problems as the oxidised material, is now

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being mined at the lower-grade Watertank pit. Mining at the A zone pit, where grades will be similar to those at the Watertank pit, is scheduled to start in 18 months’ time. Harmony continued with the brownfields exploration in areas surrounding the Kalgold operation.
     In fiscal 2010, the Kalgold operations accounted for approximately 3% (4% in fiscal 2009 and 5% in fiscal 2008) of our total gold production.
Safety: The Kalgold operations had a LTIFR of 1.49 (2009: 2.94) per million hours worked in fiscal 2010, and recorded no fatal accidents in fiscal 2010. Kalgold achieved 2,250,000 fatality free shifts on June 14, 2010.
Plants: Ore is trucked from the pit and is directly tipped into the feed bin of the pre-primary crusher or stockpiled. The ore then undergoes a four phase crushing process before it reaches the Dome stockpile. Three ball mills are used to grind the ore down to between 70-80% less than 75 micron for the leaching process.
     The following table sets forth processing capacity and average tons milled during fiscal 2010 for the plant:
                 
            Average Milled for the
    Processing   Fiscal Year Ended
Plant   Capacity   June 30, 2010
    (tons/month)   (tons/month)
CIL
    165,345       141,681  
Heap Leach(1)
           
 
(1)    Active use of heap leaching was discontinued in July 2001.
     In fiscal 2010, the plant at our Kalgold operations recovered approximately 85.6% of the gold contained in the ore delivered for processing.
Production analysis:
                         
    Fiscal Year Ended June 30,  
Kalgold   2010     2009     2008  
Production
                       
Tons (‘000)
    1,873       1,700       1,687  
Recovered grade (ounces/ton)
    0.026       0.038       0.055  
Gold produced (ounces)
    49,063       64,784       92,229  
Gold sold (ounces)
    48,097       66,841       93,172  
Results of operations ($)
                       
Product sales ($) (‘000)
    51,437       56,915       76,685  
Cash cost ($) (‘000)
    36,162       32,390       38,272  
Cash profit ($) (‘000)
    15,275       24,525       38,413  
Cash costs
                       
Per ounce of gold ($)
    748       506       404  
Capex ($) (‘000)
    1,389       1,090       1,347  
     Tons milled increased from 1,687,000 in fiscal 2008 to 1,700,000 in fiscal 2009. Ounces produced decreased to 64,784 in fiscal 2009, compared with 92,229 in fiscal 2008, due to a lower recovered grade.
     Cash costs decreased from US$38.3 million in fiscal 2008 to US$32.4 million in 2009 mainly due to the deferred stripping write off from the previous financial year.
     Tons milled increased from 1,700,000 in fiscal 2009 to 1,873,000 in fiscal 2010. Ounces produced decreased to 49,063 in fiscal 2010, compared with 64,784 in fiscal 2009, due to the a lower recovered grade.
     Cash costs increased from US$32.4 million in fiscal 2009 to US$36.2 million in 201, mainly due to an increase in plant costs in lieu of engineering breakdowns.
     The processing design capacity of the Kalgold operation is 165,345 tons per month. The average tons milled in fiscal 2010 were 141,681 tons per month.

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     Assuming no additional reserves are identified and at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 32.4 million tons (0.8 million ounces) will be sufficient for the Kalgold operations to maintain production until approximately fiscal 2024. However, any future changes to the assumptions upon which the reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: Harmony incurred approximately R11 million (US$1.4 million) in capital expenditures at the Kalgold operations in the fiscal 2010. Harmony budgeted R67 million (US$8.8 million) for capital expenditures in fiscal 2011, primarily for CIL tank farm replacement and replacing some of the plant structures.
Phoenix
Introduction: Phoenix is a tailings retreatment operation, located at Virginia and adjacent to our current and historical mining operations in the Free State province. The Saaiplaas plant is used for the treatment of the material from this project.
History: The project commenced during fiscal 2007 and is aimed at treating the surface sources from our operations in the Free State province.
Safety: Safety at the Phoenix operations improved year-on-year in fiscal 2010. The LTIFR improved by 32.4% to 1.46 per million hours worked from 2.16 in fiscal 2009. There were no fatalities during fiscal 2010.
Plant: The Saaiplaas plant, commissioned in the late 1950’s, has been converted from the zinc precipitation filter process to the CIL. During 2007, the ROM mills were de-commissioned and the plant started treating slime from Dam 22 and Brand A tailings storage facilities. The plant currently processes reclaimed slime at 6 million tons per annum.
     The following table sets forth processing capacity and average tons milled during fiscal 2010 for the Saaiplaas plant:
                 
            Average Milled
            for the Fiscal Year
    Processing   Ended
Plant   Capacity   June 30, 2010
    (tons/month)   (tons/month)
Saaiplaas
    551,155       507,063  
     In fiscal 2010, Saaiplaas plant recovered approximately 40.6% of the gold contained in the ore delivered for processing.
Mining operations: Slimes tonnage reclamation decreased during fiscal 2010, to an average of 459,812 tons per month by year end, adversely affected by heavy rain, low slurry densities, and critical equipment breakdown. The focus during the year was on improving efficiencies, recoveries and ultimately profitability.
     Slime deposition capacity constraints played a major factor in the treatment capacity of Phoenix. Two new deposition sites were earmarked for use by Phoenix late in fiscal 2009. These Tailing Storage Facilities (“TSF’s”) were commissioned in fiscal 2010. Although the FSS 1 and FSS 4 dams were commissioned to provide additional deposition capacity, residue slime deposition remained problematic due to low pulp densities below 1,300, heavy rain, pipe bursts and penstock failure on the newly commissioned FSS 4. A floating penstock and new ring main have been installed at FSS 4 and the dam was re-commissioned during August 2010.
     Fiscal 2010 was characterized by tonnage production problems mainly due to heavy rain, low reclamation slurry densities and thickener breakdown and settling problems. The mining mix from the Brand A source was changed to move from reclaiming top low grade only to 50:50 top:bottom with the bottom higher grade lifting the average grade from the source to above 0.30g/t, though the recovery from this source remains below 40%. The dam 22 source is depleting fast and will be replaced by dam 21 towards the end of fiscal 2011. Dam 21 is planned to deliver 60% of plant feed to improve the average recovery grade once commissioned.
     Upgrading of the flocculent plant storage capacity at the end of fiscal 2010 yielded improved thickener settling and throughput capacity to achieve target tonnage, which greatly improves the outlook for fiscal 2011. The installation and commissioning of cluster dewatering cyclones ahead of the thickeners is expected to improve the ability to operate at ideal 50% solids through the plant even further.
During fiscal 2010, Phoenix accounted for 1.5% of our total gold production (1.4% in fiscal 2009 and 1.7% in fiscal 2008).

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Production analysis:
                         
    Fiscal Year Ended June 30,  
Free State (Phoenix)   2010     2009     2008  
Production
                       
Tons (‘000)
    6,083       6,578       7,033  
Recovered grade (ounces/ton)
    0.003       0.003       0.005  
Gold produced (ounces)
    20,801       22,345       32,215  
Gold sold (ounces)
    20,801       22,345       32,215  
Results of operations ($)
                       
Product sales (‘000)
    22,723       19,448       26,247  
Cash cost (‘000)
    15,856       11,924       12,286  
Cash profit (‘000)
    6,867       7,524       13,961  
Cash costs
                       
Per ounce of gold ($)
    762       534       381  
Capex (‘000) ($)
    0.660       0.279       0.492  
     Tons treated from Phoenix decreased to 6,578,000 tons in fiscal 2009, compared with 7,033,000 in fiscal 2008. Ounces produced decreased to 22,345 ounces in fiscal 2009, compared with 32,215 in fiscal 2008, primarily due to the decrease in tons treated as well as the lower recovery grade.
     Cash costs decreased to US$11.9 million in fiscal 2009 from US$12.3 million in fiscal 2008, despite the increase in some reagent costs, rising by as much as 40%. Cash costs per ounce increased to US$534 per ounce, primarily due to the decrease in ounces produced for fiscal 2009.
     Tons treated from Phoenix were 6,083,000 in fiscal 2010, compared with 6,578,000 in fiscal 2009. Ounces produced dropped to 20,801 in fiscal 2010, compared with 22,345 in fiscal 2009, primarily due to the decrease in tons treated. The recovered grade remained at 0.003 ounces/ton in fiscal 2010. The grade of the tons treated is dependent on the waste grade at the time at which the original deposition was done.
     Cash costs were US$15.9 million in fiscal 2010, compared with US$11.9 million in fiscal 2009, primarily due to the decrease in volumes as well as the higher costs of reagents. Cash costs per ounce increased during fiscal 2010 to US$762 per ounce, compared with US$534 in fiscal 2009 due to the decrease in volume and increase in transport rates and the price of consumables and electricity.
Capital Expenditure: We incurred approximately R5 million (US$0.7 million) in capital expenditures at the Free State operations in fiscal 2010. For 2011, R30 million (US$3.9 million) is planned for commissioning of Dam 21, plant feed dewatering cluster cyclones, pipeline replacement, completion of additional adsorption stage, flotation pilot plant trials and other minor plant upgrades.
Cooke operations
Introduction: The Cooke operations are located in the Gauteng Province of South Africa, approximately thirty kilometers west of Johannesburg.
     During fiscal 2008, an agreement was entered into for the sale of the Cooke operations, together with the associated surface assets. As a result, the assets and related liabilities were classified as held for sale and the results from operations have been included under “Discontinued Operations” in the income statement. On November 21, 2008, the conditions precedent were fulfilled and the sale of an effective 60% interest in the operations was recognized. The discussion below relates to the period up to the effective date of the sale.
Geology: These operations are situated in the West Rand Goldfield of the Witwatersrand Basin, 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. At the Cooke operations, two major fault trends are present. The first is parallel to the Panvlakte Fault and strikes north to north-east, having small throws and no lateral shift. The second trend, which runs north-west to west, has small throws, but significant lateral shift, resulting in the payshoots becoming displaced.
     There are six identified main reef groupings in the area of these operations: the Black Reef; the Ventersdorp Contact Reef; the Elsburg Formations; the Kimberleys; the Livingstone Reefs; and the South Reef. Within these, several economic reef horizons have been mined at depths below surface between 600 and 1,260 meters.

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     The reefs comprise fine to coarse grained pyritic mineralization within well developed thick quartz pebble conglomerates or narrow single pebble lags, which in certain instances are replaced by narrow carbon seams.
Mining Operations: The Cooke assets and related liabilities were classified as a disposal group and held-for-sale during fiscal 2008.
     Production at the Cooke operations was negatively affected in fiscal 2008 by a change in the mining mix, with less ore from the high grade VCR reef at Cooke 3 Shaft and lower than expected grades from 128 South project at Cooke 3 Shaft and from the 90 North 6 area at Cooke 2 Shaft. The power shortages during the third quarter in 2008 also impacted negatively on volumes.
     The Cooke operations accounted for 5% and 12% in fiscal 2009 and 2008, respectively of our total gold production.
Plants: The processing facilities at the operations presently comprises of the Cooke metallurgical plant, which is serviced by a surface rail network. The Cooke metallurgical plant, commissioned in 1977, is a hybrid CIP/CIL plant, which processes the tailings from the surface sands dumps around Randfontein.
     Feasibility studies are being done for a proposed Uranium Plant of an approximate capacity of 500,000 tons per month. It is envisaged that the plant will be completed in approximately three years once approved, when it will treat uranium ore from the Cooke dumps as well as from the Cooke 3 underground operations.
Production analysis:
                         
    Fiscal Year Ended June 30,  
Cooke operations   2010     2009(1)     2008  
Production
                       
Tons (‘000)
          1,419       3,905  
– Underground
          514       1,322  
– Surface
          905       2,583  
Recovered grade (ounces/ton)
          0.057       0.060  
– Underground
          0.137       0.152  
– Surface
          0.011       0.013  
Gold produced (ounces)
          80,377       236,170  
– Underground
          70,378       201,884  
– Surface
          9,999       34,286  
Gold sold (ounces)
          85,746       236,242  
– Underground
          75,747       201,939  
– Surface
          9,999       34,305  
Results of operations ($)
                       
Product sales (‘000)
          68,204       193,613  
Cash cost (‘000)
          49,625       121,978  
Cash profit (‘000)
          18,579       71,635  
Cash costs
                       
Per ounce of gold ($)
          644       511  
– Underground
          613       545  
– Surface
          868       525  
Capex (‘000) ($)
          9,655       22,357  
 
(1)   As the operations were sold on November 21, 2008, the results are for the five months then ended and are not comparable with the prior years.
     During fiscal 2008, the assets and related liabilities for Cooke 1, 2 and 3 as well as the Cooke plant were classified as a disposal group and are held for sale. The results from the operations were also classified as discontinued operations in the income statement. The table above and the discussion below include the results of the surface operations.
Other — Discontinued operations
Introduction: The results of operation from Other — Discontinued Operations in fiscal 2008 consists of results from the Orkney operations and South Kalgoorlie. South Kalgoorlie formed part of our International operations. Refer to “Western Australia” below for a discussion on its operations and results.
     The discussion on Orkney follows below.

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Introduction: We acquired the Orkney operations when on September 22, 2003, we merged with ARMgold via a share exchange which resulted in ARMgold becoming our wholly-owned subsidiary. In September 2007, we announced that we had entered into formal agreements with Pamodzi for the sale of the Orkney Shafts. The sale was finalized on February 27, 2008 and the related assets and liabilities derecognized.
History: Exploration and development at Orkney started 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 in 1944.
Geology: At the Orkney operations, the Vaal Reef is the most significant reef mined. The reef strikes northeast, dipping southeast and is heavily faulted to form a series of graben structures. The dip is generally less than 30 degrees but can vary locally in direction and magnitude to exceed 45 degrees. The VCR is also exploited, as well as the Elsburg Reef. There are several major faults in the lease area, being Nooitgedacht, Buffelsdoorn, Witkop, WK2, No 3 BU, No 5 BU and No 2 BU Fault. These faults typically have throws of tens of meters and further divide the reef into blocks of up to 100 meters in width.
Mining operations: During February 2008, the Orkney shafts were sold to Pamodzi. These shafts had been managed by Pamodzi since October 2007.
     For fiscal 2008, the Orkney operations accounted for approximately 2% of our total gold production.
Plants: Ore from the Orkney operations was treated at Vaal River Operations (“VRO”) No. 1 Gold Plant (of Anglogold). Various agreements between us and VRO governed the supply and quality of the ore and gold apportionment.
Production analysis:
                         
    Fiscal Year Ended June 30,  
Orkney operations   2010     2009     2008(1)  
Production
                       
Tons (‘000)
                571  
Recovered grade (ounces/ton)
                0.100  
Gold produced (ounces)
                46,655  
Gold sold (ounces)
                57,132  
Results of operations ($)
                       
Product sales (‘000)
                42,810  
Cash cost (‘000)
                51,482  
Cash (loss)/profit (‘000)
                (8,672 )
Cash costs
                       
Per ounce of gold ($)
                1,093  
Capex ($)
                3,579  
 
(1)     The results are for the eight months ended February 2008.
     The Orkney operations were sold to Pamodzi during fiscal 2008 and therefore the results for fiscal 2008 are only for eight months.

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International Mining Operations
Western Australia Operations
Corporate Action — Mount Magnet and Big Bell Operations
     As indicated previously in various applications Harmony has been pursuing an exit strategy from its Western Australian assets. This led to an agreement by Harmony to sell Mount Magnet and Big Bell Gold Operations (“BBGO”) to Monarch Gold Mining Company Limited (“Monarch”).
     However, the transaction fell through as Monarch was subsequently liquidated in July 2008. Still in pursuant of the Western Australia exit strategy, Harmony opened a competitive bidding process with three Australian companies for the disposal and sale of Mount Magnet and BBGO.
     The highest and most attractive offer for the purchase of Mount Magnet was received from Ramelius in July 2010. Harmony entered into a Share Sales Agreement with Ramelius for a total consideration of A$35.3 million in cash plus replacement environmental bonds of A$4.7 million totaling A$40.0 million consideration. Final settlement of the transaction took place in July 2010.
     In accordance with IFRS requirements the Mount Magnet disposal group is classified as a held-for-sale and discontinued operation at 30 June 2010.
     The highest and most attractive offer for the purchase of BBGO was received from Fulcrum in November 2009. Harmony entered into a Share Sales Agreement with Fulcrum for a total consideration of A$3.5 million in cash plus replacement environmental bonds of A$3.2 million totaling A$6.7 million consideration. The sale effective on January 18, 2010 and final settlement of the transaction took place in May 2010.
     As of June 30, 2010, our Western Australian operations had 14 employees (these include care and maintenance and exploration personnel on the Mount Magnet site).
     In fiscal 2010, our Australian operations accounted for 0% of our total gold production, as compared to 0% in fiscal 2009 and 4% in fiscal 2008.
Mount Magnet Operations
Introduction: In 2002, we acquired Mount Magnet as part of the Hill 50 transaction. In fiscal 2009, Mount Magnet’s operations accounted for approximately 0% of our total gold production, as compared to 4% and 6% respectively in fiscal years 2008 and 2007. This change was the result of the site being placed on care and maintenance as from December 31, 2007.
History: Mining at Mount Magnet began after the discovery of gold in 1896. From that time to June 30, 2009, the Mount Magnet area has produced approximately 6 million ounces. The most recent Mount Magnet operations commenced production in the late 1980s on the Hill 50 and Star underground mines and nearby open-pits, and the processing of low grade ore from previously accumulated stockpiles. Production ceased at the Star underground mine in June 2005. The Star underground mine was subsequently replaced by St. George, a new underground mine. The Mount Magnet site was put on care and maintenance as from December 31, 2007.
Geology: The Mount Magnet operations are located near the town of Mount Magnet in the Murchison region, some 600 kilometers northeast of Perth. The geology consists of folded basaltic and komatiitic greenstones with intercalated banded iron formations and volcaniclastic units. In addition to having been intensely folded, the area has undergone substantial faulting and later intrusion by felsic intrusives. Mineralization within the Murchison belt consists of sulphide replacement style (characteristic of the Hill 50 mine) and quartz lode and shear-hosted hydrothermally emplaced bodies proximal to fault conduits. Smaller stockwork bodies within felsic intrusives are also common. As is typical of the Archaean Shield, the deep weathering profile at Mount Magnet has resulted in supergene enrichment and hypogene dispersion of gold in the oxidizing environments. These effects lend themselves well to the process of small scale open-pit mining. Historically underground mining of primary lodes was the largest contributor to Mount Magnet’s gold production.
Mining Operations:. The Mount Magnet operations were engaged in underground, open-pit and waste rock mining prior to site closure. These operations are subject to the underground, open-pit, and waste rock mining risks detailed in the Risk Factors section.

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     Underground operations at Mount Magnet consisted of the Hill 50 and St. George mines, each of which operated a decline. The Hill 50 mine, which approached 1,525 meters in depth, was one of Australia’s deepest underground mines. The St. George Mine was approximately 300 meters in depth. Underground mining was conducted by decline tunnel access. The principal challenges confronted by the Hill 50 underground mine related to its continuing depth and the geotechnical, ventilation and cost impediments that increased depth imposes, including increased ground stress and potential increased seismic activity. A decision was made in May 2007 which placed the Hill 50 mine’s decline development on hold due to significant seismic activity, and effectively put the mine in harvest mode at that time.
     With the closure of Star, the development of the new underground mine at the St. George open-pit provided additional underground tonnage for the Mount Magnet operations. Underground development at St. George started in December 2005. The first stope was mined in the second quarter of fiscal 2006. Underground mining continued at this mine during fiscal 2007. This mine reached its economic depth limit during fiscal 2007, and was put in harvest mode, with mining operations ceasing in October 2007. Open-pit production was hindered by the delay in the start up of the Cue open-pits until the last quarter of fiscal 2005 as a result of delayed mining approvals and extended contractor negotiations, although these were subsequently resolved and mining commenced in fiscal 2006. Open-pit mining mainly took place around Mount Magnet during fiscal years 2007 and 2008.
     Surface operations at Mount Magnet exploited several medium-sized open-pits, as well as numerous smaller open-pits. Surface materials from areas previously involved in production, including waste rock dumps and tailings dams, are also processed at Mount Magnet. The principal challenge faced by the Mount Magnet operations involved the short mine lives which result from the open-pits being situated on small orebodies. The Mount Magnet site was put on care and maintenance as from December 31, 2007.
Plant: The Mount Magnet operations include one metallurgical plant which was built in 1989 as a CIL plant and upgraded in 1999 to a CIP plant. Actual throughputs of the Mount Magnet plant varies based upon the blend of oxide and sulphide ores in their feed. Processing capacity is an estimate of nominal throughput based on a 70% hard (sulphide) and 30% oxide (soft) blend.
     Throughput rates at Mount Magnet were at zero during in fiscal 2009 and 2010 due to the site being closed and the plant being placed on care and maintenance.
Production analysis:
                         
    Fiscal Year Ended June 30,  
Mount Magnet   2010     2009     2008  
Production
                       
Tons (‘000)
                966  
Recovered grade (ounces/ton)
                0.080  
Gold produced (ounces)
                75,297  
Gold sold (ounces)
                77,097  
Results of operations ($)
                       
Product sales (‘000)
                56,215  
Cash cost (‘000)
                41,405  
Cash profit (‘000)
                14,810  
Cash costs
                       
Per ounce of gold ($)
                545  
Capex (‘000) ($)
                3,909  
     The majority of declared mineral reserves were mined during fiscal 2008. The mines were closed and the processing plant has been put on care and maintenance in December 2007.
Capital Expenditure: We spent A$0 million on capital expenditure at the Mount Magnet operations in fiscal 2009 and 2010, primarily due to the fact that the site was put on care and maintenance during 2009 and a feasibility study was commenced during April 2009. No capital expenditure was therefore incurred.
Exploration: Activities at Mount Magnet, Western Australia, were performed to the minimum level required to keep the tenements in good standing as the site and the plant is currently on care and maintenance.

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South Kalgoorlie Operations
Introduction: The South Kalgoorlie Operations are made up of New Hampton’s Jubilee Operations and Hill 50’s New Celebration operations. Since the commencement of operations to November 30, 2007, total gold production from the mines in the South Kalgoorlie area has exceeded 2.5 million ounces. In fiscal 2008, South Kalgoorlie operations accounted for 1% of Harmony’s total gold production, and accounted for 4% of our total gold production in 2007.
     In July 2007, we announced the sale of the South Kalgoorlie Mine to Dioro. The total purchase price was A$45 million (US$39.8 million), which consisted of a cash and a shares component. On November 30, 2007, all conditions precedent to the transaction were satisfied. The results for fiscal 2008 below reflect only the 5 months ended November 30, 2007.
History: The South Kalgoorlie operations included several open-pits at Jubilee and New Celebration, as well at the Mount Marion underground mine. The Jubilee operations were originally comprised of the large Jubilee open-pit and a number of smaller open-pits. The New Celebration operations were initially developed in 1987 by Newmont exploiting the same ore body that hosted the Jubilee Pit. Hill 50 acquired these operations from Newcrest in June 2001. The Mount Marion decline was established in 1998. Open-pit mining ceased at the South Kalgoorlie Operations at the end of fiscal 2005, with only low grade stockpiles treated during fiscal 2006 together with Mount Marion ore. During fiscal years 2008 and 2007, open-pit mining recommenced at South Kalgoorlie Mines, with a cutback on the HBJ pit, as well as the Shirl open-pit.
Geology: The South Kalgoorlie mines were located approximately 30 kilometers south of Kalgoorlie in the Eastern Goldfields region of Western Australia. The South Kalgoorlie orebodies were located in a number of geological domains including the Kalgoorlie-Kambalda belt, the Boulder-Lefroy Structure, the Zuleika Shear, the Coolgardie Belt and Yilgarn-Roe Structures. At South Kalgoorlie, the mining tenure and geology straddled the three major fault systems or crystal sutures considered to be the main ore body plumbing systems of the Kalgoorlie Goldfield. The geology consisted of Archaean greenstone stratigraphy of basalts and komatiites with intercalated sediments, tuffs, volcaniclastics and later felsic intrusives. Late stage and large scale granitic (Proterozoic) intrusion stoped out large sections of the greenstone. Quartz filled lode and shear-hosted bodies are the most dominant among many mineralization styles. Large scale stockwork bodies hosted in felsic volcanics were an important contributor to bulk tonnage of relatively low grade deposits.
Mining Operations: The South Kalgoorlie operations are engaged in open-pit, underground and waste rock mining. These operations are subject to the underground, open pit and waste rock mining risks detailed in the Risk Factors section.
     At the South Kalgoorlie operations during fiscal 2008, open cast mining took place at Shirl open-pit, together with a cutback project on the HBJ open-pit. The HBJ open-pit had a mine life of three years and consisted of 3.3 million tons of 0.048 ounces per ton at the time the cutback was completed. The discovery of the Shirl prospect during fiscal 2006, which resulted in an open-pit reserve of 50,000 ounces and a 15 month mine life, together with an improved gold price environment, lead to the recommencement of open-pit mining at South Kalgoorlie mines during fiscal years 2008 and 2007. The primary challenge that faced the South Kalgoorlie operations involved identifying adequate sources of new open-pit and underground reserves and managing the geotechnical risk on the HBJ pit cutback. See Item 3. “Key Information — Risk Factors — Risks Relating to Our Business and Our Industry — To maintain gold production beyond the expected lives of Harmony’s existing mines or to increase production materially above projected levels, Harmony will need to access additional reserves through development or discovery.”
Plant:. The South Kalgoorlie operation had a metallurgical plant located at Jubilee. This CIL treatment plant was capable of treating the planned production from the mining operations. Ore was hauled from the open-pits and from low grade Shirl stockpiles to the treatment plant by conventional road trains. Actual throughputs of the Jubilee plant varied based upon the blend of oxide and sulphide ores in their feed. Processing capacity was an estimate of nominal throughput based on a 70% hard (sulphide) and 30% soft (oxide) blend.
Production analysis:
                         
    Fiscal Year Ended June 30,
South Kalgoorlie   2010(1)   2009(1)   2008(1)
Production
                       
Tons (‘000)
                477  
Recovered grade (ounces/ton)
                0.058  
Gold produced (ounces)
                27,778  
Gold sold (ounces)
                27,778  

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    Fiscal Year Ended June 30,
South Kalgoorlie   2010(1)   2009(1)   2008(1)
Results of operations ($)
                       
Product sales (‘000)
                18,858  
Cash cost (‘000)
                14,453  
Cash profit (‘000)
                4,405  
Cash costs
                       
Per ounce of gold($)
                517  
Capex (‘000) ($)
                12,526  
 
(1)   The South Kal Operations sales process was concluded on November 30, 2007. The results for fiscal 2008 are for the five months ended November 2007.

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(MAP)
Papua New Guinean Operations and Exploration
Overview
Introduction: Fiscal 2010 was the second year of the Morobe Mining Joint Venture between Harmony and Newcrest. The Morobe Mining Joint Venture is a 50:50 Joint Venture encompassing:
  1.   the Hidden Valley Operation;
 
  2.   the Wafi-Golpu Project; and
 
  3.   an Exploration Joint Venture on the surrounding tenement package.
     Outside of the Morobe province Harmony have expanded the PNG exploration portfolio with four new projects that are 100% owned:
  1.   Mount Hagen in the Western Highlands
 
  2.   Amanab in the Sandaun Province
 
  3.   Two tenement applications in the Central Province
 
  4.   Two tenement applications in the Southern Highlands Province
     In addition several tenement applications have been lodged with the MRA including ELA1785-1786 In the Southern Highlands and ELA1784-1785 in the Central Province. However, grant notifications for these applications had not been received by the end of fiscal 2010.
     In terms of regional geological setting, Harmony’s tenement interests are all located within the New Guinea mobile belt. The mobile belt comprises tracts of metamorphosed Lower Jurassic and Cretaceous sediments and oceanic crust. These rocks have undergone deformation in the collision zone between the Australian and Pacific Plates and multiple intrusive events including Tertiary granodiorite and younger mineralized porphyries.
     Exploration expenditure in PNG for fiscal 2010 was A$22.4 million (US$19.8 million). This breaks down into A$18.5 million (US$16.3 million) as Harmony’s 50% contribution to the Morobe Mining Joint Venture exploration program and A$3.9 million (US$3.4 million) for Harmony 100% projects. Results from exploration work have been highly encouraging, with a major Resource expansion achieved at the Wafi-Golpu Project, and a number of targets with the potential for major stand-alone gold and copper/gold deposits identified and advanced to the drill testing phase.

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Hidden Valley Operation
Introduction: The Hidden Valley project is an open pit gold-silver mine and processing plant. Two separate open pits are in operation, being Hidden Valley-Kaveroi (“HVK”) pit, and Hamata pit. The mill has been constructed to process a nominal 4.2 million tonnes (dry metric) of ore per year from the two pits, with de-bottlenecking of the plant planned up to 4.7 million tonnes per year.
     Newcrest purchased an initial 30.01% interest in the project on June 30, 2008, and provided sole funding of the project to June 30, 2009 to earn a further 19.99%. On June 30, 2009 Newcrest formally achieved 50% ownership in the project, such that the project is now a 50:50 joint venture between Newcrest and Harmony.
     The mine is located in a highly prospective exploration lease area and it is envisaged that, as active exploration continues, the life of the process facility may be extended as it is fed from a number of sources.
     The project comprises four exploration licenses of 966 square kilometers in the Wau District of Morobe Province, PNG and is located 210 kilometers north-northwest of Port Moresby and 90 kilometers south-southwest of Lae, the two largest cities in PNG. Access to the project is presently by sealed road from the deepwater port of Lae to Bulolo. Harmony constructed an all-weather gravel road from Bulolo to the Hidden Valley mine site to access the site.
History: Alluvial gold was first discovered at Hidden Valley in 1928 but it was not until the early 1980’s that the area was investigated by CRA Exploration using modern exploration techniques that resulted in the discovery of the Hidden Valley and Kaveroi gold deposits on EL 677. A number of feasibility studies have been prepared for the Hidden Valley Project by the various owners, including one by Abelle in 2003. Harmony extensively reviewed and updated the Abelle feasibility study during fiscal 2006 in order to: (a) reflect changes in the project’s ore body interpretation; (b) incorporate increases in capital and operating costs as a result of energy prices and scarce resources in the mining industry as well; and (c) resolve technical aspects that were outstanding from the previous study. The updated feasibility study was presented to the board during June 2006 with subsequent approval given for construction of the project. In late 2007, Harmony began a search for a partner to partake in all of our PNG mining and exploration activities, culminating in the selection of Newcrest as a partner.
Project Overview: Currently ramping up to full production, the Hidden Valley Mine is expected to initially process 4.6 million tons (short) of ore per annum from ore mined at two open-pits, The HVK pit and the Hamata pit. Currently planned de-bottlenecking is expected to increase the processing rate to 5.2 million tons (short) of ore per annum by year three of operations.
     The HVK pit, at an elevation of between 2,500 m and 2,700 m above sea level, is the larger pit supplying the majority of the ore. The HVK pit is located some 5 to 6 kilometers from the processing plant.
     The smaller Hamata pit is directly adjacent to the processing plant on the northern side of the processing plant and is at an elevation of between 1,850 m and 2,040 m above sea level.
     Current estimates are that at annual full production over 14 years, Hidden Valley will process an average of 4.7Mt from both pits to produce around 250 000oz of gold and 3.4Moz of silver annually.
     The resources will be mined in a sequence that sees the low silver, high gold Hamata ore mined first, with plant and infrastructure development for the project developed in close proximity to the Hamata deposit. The next ore mined will be the Hidden Valley/Kaveroi oxide/transition ores (high silver) followed by the Hidden Valley/Kaveroi primary ores.
Geology: The major gold-silver deposits of the Morobe Goldfield, and the Hidden Valley project are hosted in the Wau Graben. The Wau Graben developed as a back-arc rift basin in the southern extension of the New Guinea Mobile Belt (Owen Stanley Foreland Thrust Belt) covering an area of approximately 850 square kilometers in which the Morobe Goldfield, including the Hidden Valley and Hamata deposits are developed.
     The Hidden Valley Deposit is interpreted as a low-sulphidation or adularia-sericite-type epithermal gold-silver system. The Hidden Valley deposit further forms part of the carbonate-base-metal-gold subgroup, with abundant carbonate vein-gangue. Other gold-silver deposits around the Pacific Rim in this sub-group are Kelian (Indonesia), Woodlark (PNG) and Gold Ridge (Solomon Islands).
     Discrete zones of intense stockwork fracture and mineralized veining comprise individual lodes. At the Hidden Valley deposit, gold and silver are related to steeply dipping (Hidden Valley Zone, “HVZ”) and flat-lying (Kaveroi Creek Zone, “KCZ”) sheeted vein swarms associated with an underlying shallow thrust.
Reserves: The proven and probable gold reserves for the Hidden Valley/Kaveroi/Hamata deposits (50% attributable interest) are 1.8 million ounces at 0.054 ounces per ton. Silver proven and probable reserves at Hidden Valley/Kaveroi and Hamata amount to 32.0 million ounces at 1.036 ounces per ton. See Item 4. “Reserves.”

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Site Access: The Hidden Valley site is located approximately 90 kilometers south-southwest of Lae, which is the nearest deepwater port for the project, and the Capital of Morobe Province. Access to the site from Lae uses an existing 110 kilometers sealed two-lane main road to the town of Bulolo, continuing to Hidden Valley via an all-weather two-lane gravel access road constructed by Harmony.
Power Supply: The ability to obtain an alternate power supply from PNG’s national power supplier, PNG Power Limited (“PPL”), is of importance to the project. On May 14, 2007, Harmony announced that it had signed an agreement with PPL to supply the Hidden Valley mine with electricity. PPL has committed to construct new transmission lines and infrastructure in order to supply hydro-electricity from the Yonki Dam. Contracts for this work have already been awarded. Construction on site of the connecting supply power lines and pylons is currently underway. We expect to receive our full quota of electricity from PPL by the end of December 2010.
     Harmony acquired and installed sufficient diesel generators for the purpose of providing 100% backup power supply to the project, and has to date been powering the site with these diesel generators.
Customs and Excise: In November 2006 the PNG National Executive Committee approved exemptions to customs and excise on a range of commodities that will be required for the construction of the project. This was gazetted, and customs officials at Lae port are already applying the exemptions, based on the draft gazettal notice.
Environment: The environmental investigation and completion of the Environmental Impact Statement (EIS), was undertaken by Enesar Consulting Pty Ltd. The investigation applied the data and knowledge gathered since 1987 and baseline studies undertaken as part of the 2004 Feasibility Study, to establish the environmental impacts of the revised development plan.
     The EIS has been approved by the Minister for Environment and Conservation of the PNG Government and Environment (Waste Discharge) and Environment (Water Extraction) permits were granted in March 2005. The Hidden Valley Project is the first mining project in PNG to be completely permitted under the new Environment Act 2000.
     A condition of the Environmental Permit is the development and submission for approval of an Environmental Management Plan (“EMP”). The EMP was approved in April 2006. Other conditions of the Environmental Permit included the development of an Acid Mine Drainage (“AMD”) management strategy and a waste management strategy, which were submitted in 2007. Management of AMD and waste disposal remain a critical issue being tackled by the site.
     Hidden Valley is the first major open pit mine in PNG to build a Tailings Storage Facility (“TSF”) to contain all tailings, followed by discharge of treated decant (involving cyanide detoxification).
Community affairs/landowner discussions: Through its subsidiary Morobe Consolidated Gold (“MCG”), Harmony worked extensively with the landowners, local and national government to agree an appropriate sharing of the benefits of the Hidden Valley proposed mine. This culminated in the signing of a Memorandum of Agreement (“MOA”) between MCG and relevant affected parties on the August 5, 2005. These parties were PNG National Government, the Morobe Provincial Government, the immediate area Local Level Government units and the local Landowner Association. This MOA clearly defines the roles and responsibilities of each signatory and in particular removes any of the “grey” area with regards to the distribution of proceeds from mineral royalties.
     Community support and development of the mine in compliance with the MOA with landowner groups is critical to the success of the project. Meetings are held regularly with these groups and officials from the provincial and national government to monitor progress and ensure these objectives are met. A range of opportunities for the commercial participation of landowner groups in the development of the project have occurred, and community relations initiatives focused on positive outcomes for health, education and infrastructure are ongoing.
Mining and Mining Fleet: The mine is being developed by conventional open pit mining techniques. The primary mining fleet consists of three Komatsu PC-2000 hydraulic backhoe excavators, two Komatsu PC-800 hydraulic backhoe excavators, two Komatsu WA-900 front-end loaders and 25 Komatsu 785-7 rigid dump trucks (100 t class). Drilling equipment comprises seven Atlas Copco ECM720 drill rigs, drilling 6.5 meter holes at 127 mm diameter. A range of ancillary equipment includes track dozers, graders, a fuel truck, and numerous light vehicles.
     Ore is delivered by truck to the Hamata and Hidden Valley crusher stations. Crushed Hamata ore is delivered by conventional conveyor to the primary stockpile and Hidden Valley ore is delivered via an overland pipe conveyor to the same stockpile.

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Plant: Once fully operational the processing plant is expected to process ore at a rate of approximately 4.6 million tons of ore per annum and has been designed with three distinct process routes that complement the metallurgical characteristics of the three ore types to be mined. The processing plant will commence as:
  (a)   a primary crushing, grinding (with the incorporation of a gravity gold recovery circuit), CIL, Merrill-Crowe zinc precipitation, goldroom and tailings detox plant for the low silver Hamata ores, and
 
  (b)   will revert to a primary and secondary crushing, grinding, flotation, concentrate regrind, counter-current decantation circuit with Merrill-Crowe zinc precipitation, flotation concentrate and tailing CIL, goldroom and tailings detox for the high silver oxide/transition ores, and
 
  (c)   then a similar circuit without flotation tail CIL for high silver sulphide ores from Hidden valley/Kaveroi ores.
     The gravity gold recovered will be processed through an intensive cyanide leach followed by electro-winning circuit to produce a high quality ore product.
     All tailings will be stored in a tailings storage facility, and all water recovered will be subject to detoxification prior to being re-cycled or released to the environment. The processing plant and tailings storage facility will be built to meet or exceed the requirement of the International Cyanide Management Code. Gold production commenced in August 2009, and the plant is currently ramping up to nameplate production.
Government royalty and other rights: The gold and silver production from the Hidden Valley Project will be subject to a 2% royalty, payable on the net return from refined production if refined in PNG or 2% royalty on the realized price if refined out of PNG.
     The government of PNG also has a statutory right to acquire up to a 30% participatory interest in mining development projects, at sunk cost. Once an interest is acquired by the government of PNG, it contributes to the further exploration and development costs on a pro rata basis. This right was not exercised by the government over Hidden Valley, however the memorandum of agreement signed between the government and ourselves negotiated a participation right of 5%, for the landowners. Subsequent negotiations have seen this right transferred into a Benefit Sharing Agreement. The benefit is equivalent to a 0.2% royalty on gold and silver production and payable into an agreed community trust structure, the Hidden Valley Mine Trust. This Trust is administered by a reputable corporate trustee, who is guided by the recommendations of a Board of Governors, comprising representatives of the three landowner villages, the Morobe Provincial government, the MRA and the Hidden Valley Mine Joint Venture.
Third Party Royalties: On March 28, 2007, we announced that we had concluded negotiations with Rio Tinto pursuant to which we would purchase the Rio Tinto rights under a royalty agreement relating to Hidden Valley, which was entered into prior to our acquisition of the Hidden Valley and Kerimenge deposits in PNG. Under the royalty agreement, Rio Tinto had the right to receive a portion of between 2% and 3.5% of future ounces produced by the Hidden Valley mine in PNG. The consideration we paid to Rio Tinto totaled US$22.5 million, which was settled with our issue of ordinary shares valuing US$20 million, with the balance of US$2.5 million paid in cash.
     The transaction will reduce the cash costs per ounce of gold produced at Hidden Valley, and all further extensions to the project, mine life and reserves will be free of this royalty.
Production analysis: Full production began in May 2010 and by the end of fiscal 2010 monthly production had risen to 300KMt, equivalent to 87% of nameplate capacity and reflecting the more stable operating performance and consistent plant use. In all for fiscal 2010, 2.7 million tons were processed to yield 122,346 ounces of gold and 445,435 ounces of silver.
Capital Expenditure: Capital expenditure on the project for fiscal 2010 was US$121 million (A$143 million) compared to the US$319 million (A$399 million) spent in fiscal 2009. Capital was mainly spent on completing the overland pipe conveyor, flotation and regrind circuit in the processing plant and capitalization of commissioning costs prior to reaching commercial levels of production on 1st May 2010. The total project capital cost was US$661 million (A$781 million), which represents a 1.6% increase in A$ terms on the last reported budget. There were no significant changes in the scope of work of the project. This value excludes US$37 million for mine fleet repayments post the construction phase which is not considered part of the construction capital.

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Wafi-Golpu Project
Introduction: The Wafi prospect is a 50:50 joint venture with Newcrest of Australia. Harmony’s ownership is through its wholly owned subsidiary, Wafi Mining Limited. The first exploration at Wafi dates back to the nationwide porphyry copper search by CRA Exploration Ltd in the late 1960’s. Elders Resources farmed-in to the project from 1989-1991, and AGF subsequently farmed-in to the project for a short period in 1997 prior to going into administration in 1998. Aurora subsequently acquired the project from Rio Tinto (CRA) in 1999, with ownership passing to Abelle when it merged with Aurora in 2002. We assumed control of the Wafi Project by way of the acquisition of Abelle in 2003. The project is held under 2 contiguous exploration licenses (EL 440, and EL 1105), totaling 130.5 square kilometers. The Wafi Golpu Project comprises a porphyry and epithermal copper and gold systems within a 2.5km x 2.5km area and contains numerous lodes including the Golpu copper gold porphyry, the Nambonga gold copper porpyryr and the Wafi epithermal gold lodes. The Wafi gold mineralization is hosted by sedimentary/volcanoclastic rocks of the Owen Stanley Formation which surrounds the intrusive Wafi Diatreme. Gold mineralization occurs in the form of extensive high-sulphidation epithermal alteration overprinting porphyry mineralization and epithermal style vein-hosted and replacement gold mineralization with associated wall-rock alteration. Exploration expenditure (including Pre-feasibility studies) on the project for fiscal 2010 was US$17.1 million (A$20.2 million).
Geography: The Wafi prospect is located near Mount Watut in the Morobe Province of PNG, approximately 60 kilometers southwest of Lae and about 60 kilometers northwest of Wau. The Wafi camp is located at an elevation of approximately 400 meters above sea level in terrain that is mountainous and forested in most areas. The site is accessed by sealed road (Lae to Bulolo) which comes within 5 kilometers of the eastern edge of the tenements and 15 kilometers from the Wafi camp. From the sealed road, a 38 kilometer dirt-base access track to the prospect is accessible during most weather conditions. The site is serviced by helicopter when the road access is cut due to extreme wet weather. Watut Valley is located immediately west of the project, and the foothills of Watut Valley provide an option for placement of ore processing and mine infrastructure. Alternatively, the processing plant may be located in the Markham River valley closer to Lae.
Mining Reserves. Following completion of the Golpu Copper/Gold pre-feasibility study, a probable mineral reserve has been declared. See Item 4. “Reserves”.
     The Golpu Mineral Reserve is derived from the 2007 Golpu Stand Alone Project Pre Feasibility Study. This study assumes a block cave underground mine with ore processed on site to produced a copper and gold concentrate for shipping to smelter. Metallurgical Studies indicate that recoveries of 88% for copper, 54% for gold and 36% for molybdenum can be expected. Metal prices are assumed at US$2.30/lb for copper, US$520/oz gold and US$20/lb for molybdenum in this declaration
In declaring the probable reserve, the following considerations are required:
  1.   The PFS is completed to industry accepted standards for a PFS (±20-25% accuracy). The outcome of further more detailed studies may affect the reserve.
 
  2.   The location for the tailings storage facility has not been finalized, however potential sites proximal to the project have been defined.
 
  3.   There are outstanding issues associated with traditional land owners required to be resolved before the project is able to be constructed.
 
  4.   The board has not yet committed to completing subsequent phases of study, or to project construction.
     Subsequent drilling has expanded the Resource considerably. This new Resource is allowing a re working of the Pre Feasibility study and a new Reserve will be declared upon completion of the study, which is expected in 2011.
     A reserve for the Wafi gold ore bodies has not been declared.
Government Royalty and Other Rights: The metal production from the Wafi Project is subject to a 2% royalty payable on the net return from refined production if refined in PNG or a 2% royalty payable on the realized price if refined outside of PNG. The government royalty has been accounted for in project financial models. PNG also has a statutory right to acquire up to a 30% participatory interest in mining development projects at sunk cost. Once an interest is acquired by the government of PNG, it contributes to the further exploration and development costs on a pro rata basis.
Third Party Royalties: There are no third party royalties. A royalty that was over the project was bought out from Rio Tinto in 2008.
Capital Expenditures: No capital expenditures were incurred during fiscal 2010 as exploration drilling work was still underway, and costs were expensed as a result.

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Concept Study: Due to the increased resource at Golpu a Concept study was completed for Wafi-Golpu that builds on previous studies and is updated based on new information and enhanced development approaches.
The objective of the concept study is to:
    Outline the key drivers and major development options;
 
    Define at least one technically and commercially viable business case; and
 
    Establish further value building opportunities and a work plan for Prefeasibility;
     The concept study evaluated a number of development alternatives for Wafi and Golpu respectively. A range of potential viable alternatives were identified. The base case involves the integrated development of Wafi and Golpu in a number of sequenced development stages.
     The initial development focuses on the early establishment of open pit mining and oxide process plant to treat the gold rich Wafi and Golpu oxide ores to minimize upfront capital and reduce the timeframe from execution to production.
     The second phase of development focuses on increasing gold production through the expansion of the Wafi orebody at depth and expansion of the process plant to increase throughput and treat the refractory ore.
     The last phase of development is the construction of the Golpu underground block cave and construction of a 14mtpa copper concentrator with a pyrite circuit integrated into the refractory treatment plant. Significant additional resources have been identified below the current Golpu mining footprint and are likely to result in a second mining lift directly below the current design.
     The development strategy generates future opportunities for value creation that are not currently included in the project, including:
    Expansion of the Golpu resources to the north;
    Improved Wafi resource recovery through enhanced resource modeling;
 
    Development of Wafi at depth and the Western zone adjacent to Wafi A zone;
 
    Further refractory process development and enhancement; and
 
    Produce a Molybdenum concentrate from Golpu copper concentrate.
     It is estimated that capital investment of between US$2,000 and US$2,600 million (real) is required to develop all necessary mining openings and physical infrastructure to allow establishment of all three stages. The range reflects the range of potential mining methods and refractory processing routes.
     Wafi-Golpu open pits and Golpu underground produce standalone positive NPV projects.
Wafi Gold Projects
Introduction: The Wafi Gold resource is comprised of three main zones: Zone A, Zone B and the Link Zone (high grade lenses within Zone B). In addition to the Wafi resource, the Western Zone is an advanced exploration project.
Geology: The Wafi-Golpu deposit is hosted by the regionally extensive Owen Stanley Metamorphics in a location characterized by a north-west trending structural corridor and an associated intrusive cluster. About 60 km to the south the same structural corridor forms Wau Graben which is host to the Hidden Valley-Kaveroi deposits.
     Mineralization covers an approximate aerial extent of 1.5 km square and a known depth of 1,500 meters. Trends indicate mineralization may extend to 2000 meters or more. Exploration drilling is in progress to systematically evaluate the depth extents. This exploration is driven by indications that significant tonnage may yet remain to be discovered that is higher in gold grade and copper grade.
     The mineralization is associated with an intermediate intrusive complex comprising diorite-dacite-andesite intrusives. At one point an explosive release from the intrusive complex produced a large diatreme breccia which occupies the central part of the deposit. Evolution of the mineralizing system continued through a porphyry mineralization phase (which produced the Golpu and Nambonga deposits) and into an epithermal veining phase which produced advanced argillic mineralization and both high sulphidation (pyrite) and low sulphidation — carbonate base metal mineralization for example the Zone A-B-Link deposits.

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     The combination of low grades and the partially refractory nature of the ore, means in order to achieve the desired business outcomes the processing scale and geo-metallurgical knowledge required will be at or greater than that achieved elsewhere for a refractory gold deposit.
Geological activities will provide key geo-metallurgical inputs to ongoing exploration, geotechnical, mining, metallurgical and environmental studies inclusive of a structural model, oxidation surface, geochemistry, mineralogy and ore types.
Project Status: The Wafi lodes will be taken in Pre Feasibility study testing the various mining and milling options identified in the Concept Study. This will include but not be limited to geotechnical, mining, infrastructure, and environmental investigations.
Golpu Copper-Gold Project
Introduction: The Golpu Copper-Gold Project, or Golpu Project, is located approximately one kilometer northeast of the Wafi gold orebodies and is part of the same geological system.
Geology: The Golpu copper gold deposit is a typical zoned porphyry copper system. Alteration grades from potassic to phyllic to advanced argillic upwards from the core. Outwards from the core, the alteration grades from intense potassic to propylitic alteration around the margin. Sulphide species are also zoned from chalcopyrite dominant core to pyrite dominant around the margins. The mineralized body is a porphyritic diorite intrusive, approximately 300 meters by 200 meters plan dimension. However this mineralized body still remains open to the north.
     Copper and gold mineralization extends some way into the metasediment host rock immediately adjacent to the porphyry body by virtue of a stock vein network containing chalcopyrite and molybdenum. As vein density decreases away from the porphyry contact, the copper-gold grades also decreases. The overall footprint of the system is currenty 500m by 700m with drilling continuing to extend mineralisation to the north.
The surface expression is oxidized and leached to about 150 meters vertical depth, resulting in a residual gold only mineralization from which the copper has been leached. At the oxidation interface, a strong 20- to 30 meters thick zone of supergene copper enrichment is developed which transitions at depth into a lower grade covellite-enargite ore. Beneath this is a zone of more covellite rich mineralization that contains lesser enargite and consequently less arsenic. From approximately 300 meters below surface, the ore exists in a covellite-rich (arsenic-poor) form grading into a chalcopyrite rich zone from approximately 500 meters to its current known depth of approximately 1.4 kilometers.
Project Status: Both Wafi gold and the Golpu copper-gold deposits were considered as part of a concept study with Golpu and Wafi integrated into one operation. This concept study has been based on:
    previous work carried out by Harmony (at PFS level) in 2007;
 
    further study work carried out by the MMJV during mid 2009 and early 2010;
 
    mine re-design using a new integrated geological model extrapolated based on new drill results from Golpu deposit extensions in February 2010;
 
    process re-design and thinking to process Wafi refractory ores; and
 
    re-evaluation of hydropower generation.
     The studies have been based on the February 2010 geological model, and has since been revised to include additional drilling results and provide an updated Mineral Resource. The new resource model has validated the Golpu deeps extrapolation and as a result the model used for the study is considered satisfactory at the concept stage.
     The standard of mine design engineering is satisfactory for a concept level study. The mining study has utilized a block model, and recognized open pit and block cave modeling packages. Costing completed for mining the ore deposit is considered to be of a satisfactory standard for this level of study and within the +/-35% accuracy level. The major exposure to the mining plan is the limited geotechnical knowledge of the deposit and surrounding country rock. The Wafi area is geologically very complex, and as such the limited geotechnical drilling which has been completed gives an indication only of the likely structural, hydrological, and lithological conditions to be encountered. Planning has commenced for the exploration decline which will be important for collecting data necessary to complete the geotechnical and mine designs.
     The standard for process engineering is of an acceptable level for the concept study. The primary processing plant requirements for the oxide and Golpu copper porphyry have been established, allowing a reasonable estimate or recovery and costs to be calculated. The basis for the refractory ore processing alternatives are less defined and a number of enhancements have little basis, but are considered acceptable at the concept stage. Reagent consumption and other parameters such as power and water requirements, as well as manning levels have been established to a level to allow the calculation of a concept level operating estimate for the project. Costs have been calculated using factors.

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     It is considered that the on site infrastructure investigations have been completed to a concept level. Conceptual level studies have been completed for all major infrastructure areas and these studies will be used to assess which options should be progressed to pre-feasibility stage.
     A Competent Independent Review (“CIR”) has been completed for study. The CIR forms a key part of the submission of the project proposal to the MMJV and the respective partner’s boards to ensure that due diligence and corporate governance are maintained.
Additional Prospects and Exploration Potential: The Golpu and Wafi pre-feasibility studies focused on developing the Golpu copper-gold, the high-grade gold link zone mineralization and the non-refractory (oxide) portion of the A and B zone gold mineralization. However, excellent prospects remain in the immediate vicinity of the existing resource areas for porphyry Cu-Au and related epithermal Au mineralization. During fiscal 2008, the focus of the exploration program was within a 2 km radius of the Wafi Golpu deposits, and the Nambonga North Prospect has been identified where drilling has obtained a number of significant porphyry Cu-Au intercepts. At Western Zone, drilling has intersected high-grade Au mineralization similar to that of the Link Zone.
Wafi Transfer Structure & Regional Targets
Introduction: The Wafi Transfer structure comprises approximately 17km of strike and includes the Wafi-Golpu Project area. The area has seen little exploration and remains highly prospective for gold and porphyry copper gold resources similar to those at Wafi Golpu. A major regional exploration program commenced during fiscal 2010 which included both grid based and ridge and spur soil sampling (1252 samples), stream sediment sampling (208 samples), rock chip sampling (688 samples), magnetic interpretation and geological mapping (48 line kilometers). Drilling included 4 holes at the Kesiago prospect for 2508m.
Geology: The Wafi Transfer structure separates the Tertiary Babwaf conglomerate in the west from Jurassic and Cretaceous metasedimentary rocks of the Owen Stanley Metamorphic group in the east. Regional magnetics show the contact is intruded by a number of magnetic intrusive bodies similar to those at the Wafi-Golpu project and suggest excellent potential for additional mineralized porphyry copper-gold and related gold deposits.
Project Status: Work completed to date has defined three high priority prospect areas , Mount Tonn, Pekumbe, and Bavaga, all located within a 7 km radius of the Wafi-Golpu project
     Bavaga is located approximately 5 km north of Wafi-Golpu. Results for stream sediment reconnaissance over the area has been particularly encouraging with a large high tenor Au anomaly defined from first pass sampling. A program of follow-up ridge and spur soils and reconnaissance mapping and sampling is underway.
     At Pekumbe prospect, grid based soil sampling defined a high tenor, coherent, coincident copper, gold, molybdenum anomaly. Four drill holes have been approved for the first quarter of fiscal 2010 to test the core of the anomaly over approximately 600m of strike
     At Mount Tonn, grid based surface soil sampling has defined a significant Au anomaly associated with a magnetic intrusive complex on the Wafi Transfer structure. Infill sampling is underway to provide detail for optimizing first pass drilling in fiscal 2011.
Mount Hagen Project (Harmony 100%)
Introduction: Exploration work on the Mount Hagen project comprised ridge and spur soil sampling (906 samples), trench sampling (9 trenches / 186 samples) and mapping (426 samples). First pass drilling was completed at Kurunga prospect for a total of 4 holes for 1501.2 meters.
Project Status: During the year, the focus of exploration activities was drill testing the Kurunga prospect where local artisanal miners were actively recovering gold from outcropping copper-gold skarn mineralization.
     Initial field-work involved the trenching of the area surrounding the outcropping Au mineralization, in order to determine the orientation and controls to mineralization. A systematic program of ridge and spur soil sampling was also undertaken in order to obtain geochemical coverage over the surrounding area and the associated strong aeromagnetic anomalies. Ridge and spur soil sampling was accompanied by creek traverses and mapping by geologists, in order to provide not only a background geological context to the area, but also to delineate potential controlling structures and pathfinder features.

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     The soil sampling and mapping were successful in delineating the extent of the potential mineralized system at Kurunga, along with a series of further targets hosting structurally controlled Au and Cu mineralization. An eight hole diamond drilling program was designed to test these targets, with four holes completed during the reporting period. Drilling was successful in intersecting the observed surface Au and Cu mineralization at depth below the artisanal workings. Additionally, other potential mineralization styles including epithermal style Au mineralization was also intersected. The drill program and compilation of results was ongoing at the end of the reporting period.
     With the commencement of drilling operations at Kurunga, further reconnaissance mapping and sampling was undertaken at the Bakil prospect, approximately 8km southwest of Kurunga. This prospect was identified by visual observation of a significant area of landslip activity in an area of no previous exploration activity, possibly corresponding to a large alteration system. Subsequent initial investigations revealed an extensive system of altered volcaniclastic sediments and intrusive units, with visible structurally hosted Cu mineralization. Several float samples demonstrating visual Cu mineralization were also observed and sampled from local creeks and rivers. Further reconnaissance work is ongoing at Bakil at the reporting period end including ridge and spur soil sampling, with the goal of defining suitable drill targets for testing in the first half of the fiscal 2011.
Amanab Project (Harmony 100%)
Introduction: Exploration work on the Amanab project commenced during the fourth quarter of fiscal 2010 with initial field visits to plan activities, and develop community contacts and support. This is an extremely remote area of western PNG and only accessible by air, with the nearest regional centre at Vanimo some 180kms to the north. Fly camps were in place and surface sampling commenced at year end.
Project Status: The Amanab project consists of one granted lease, EL1708, with in the Sandaun Province of PNG. During the reporting period, the final grant was received for EL1708. A thorough review of previous exploration activities was undertaken by Brisbane based technical staff, resulting in the definition of several highly prospective target areas (Yup River East, Yup River West, Biaka, Dio River, Akraminag, Mouri and Akrani Nth). However, initial field work was postponed until exploration activities could successfully be established at Mount Hagen.
     An initial field team was established at Amanab station, with construction of a fly camp at Oweniak village. Initial sampling commenced with ridge and spur soil sampling at the Yup East prospect, which was defined from an examination of historic exploration results and reported local alluvial gold mining. This program will continue with additional ridge and spur soil sampling campaigns planned for Yup River West, and the Biaka prospects during fiscal 2011.
Hidden Valley ML Exploration
Introduction: Exploration work on the Hidden Valley ML (outside of the deposit areas) comprised ridge and spur soil sampling (803 samples), trench sampling and mapping (1080 samples). First pass drilling was completed at Apu Creek, Big Wau, and Yafo prospects for a total of 3 holes/1253 meters.
Project Status: With major drill programs undertaken for Hidden Valley resource definition and the Wafi Golpu resource expansion, drilling activities on grassroots prospects on the ML was curtailed during 2010. Work focused on integrating the geological and geochemical datasets with detailed helimagnetics to generate new targets for fiscal 2011.
     Project generation work together with continuous channel sampling and mapping south of the Hidden Valley Kaveroi deposits generated several high priority targets for drill testing. These include the Tais Creek and Waterfall prospect areas.
     Follow-up drilling at Apu creek returned several zones of base metal mineralization with associated alteration. Interpretation of alteration patterns and the metal zonation through the main deposit, as well as, prospects along strike such as Hidden Valley South and Apu Creek, is being completed to develop a mineralization model.
     Drilling at Big Wau has downgraded the prospect and no further work is planned at this stage.
Kerimenge and the broader prospect potential
Introduction: The Broader Kerimenge project area lies approximately 7 kilometers east of the Hidden Valley — Kaveroi deposit. The area is being targeted for high grade satellite mineralization to supplement the ore feed through Hamata Processing Plant . Work completed during fiscal 2010 focused on trenching and reconnaissance sampling over the broader project area. A total of 433 surface samples were collected and assayed, and over 22.3 line kilometers of creek mapping completed.
Project Status: Results from the work have highlighted the Kauri — Wara Muli areas located approximately 2km north of the Kerimenge Prospect. First pass ridge and spur soils was completed over a 7 square kilometer. Results have highlighted a mineralized contact with anomalous gold and base metal assays with potential for up to 4 km of strike. Mapping has confirmed prospectivity with mineralized vein stockworks along the porphyry-granodiorite contact. Follow-up work and first pass drilling is planned for fiscal 2011.

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Figure 1: Morobe Mining Joint Venture (Harmony 50%) Tenement Location Map
(MAP)
Morobe Coast Exploration License
Introduction: The Morobe Coast exploration license, EL1403, encompasses 520.2 square kilometers of tenure. A compulsory 50% reduction was completed in April 2010, although a application (ELA 1849) encompassing the relinquished portion was successful in securing priority to the ground. The area lies to the southeast of the Morobe Goldfield, and we believe it presents grassroots exploration potential. Historical exploration work has been limited, but returned anomalous gold assays in rock chip and stream sediment samples from the Lokaniu volcanics.
     Wiwo and Giu Prospect. The Giu and Wiwo prospect areas fall approximately 10 kilometers southwest of the Morobe township on the east coast of PNG, and has been the main focus of exploration activities on EL1403. A detailed airborne magnetic survey was completed during fiscal 2010 for over 8000 line kilometers. 563 surface soil samples were completed as part of a first pass ridge and spur soil sampling program over the Wiwo prospect area
     Mapping to date has outlined several areas of structurally controlled epithermal vein mineralization, hosted in vesicular basalts. Rock chip results continue to be encouraging with anomalous values of copper, gold, molybdenum and zinc returned.
Project Status: Integration of new geochemical and geophysical datasets is currently underway to define targets for follow-up work.

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REGULATION
Mineral Rights
South Africa
     South African law no longer provides for the separate ownership of surface and mineral rights. Prior to the promulgation of the MPRDA on May 1, 2004, it was therefore possible for one person to own the surface of a property, another to own rights to precious metals, and yet another to own rights to base minerals. In terms of the MPRDA, all mineral rights in South Africa are now vested in the South African State. The principal objectives of the Act are:
    to recognize the internationally accepted right of the state of South Africa to exercise full and permanent sovereignty over all the mineral and petroleum resources within South Africa;
 
    to give effect to the principle of South Africa’s custodianship of its mineral and petroleum resources;
 
    to promote equitable access to South Africa’s mineral and petroleum resources to all the people of South Africa;
 
    to substantially and meaningfully expand opportunities for HDSAs including women, to enter the mineral and petroleum industry and to benefit from the exploitation of South Africa’s mineral and petroleum resources;
 
    to promote economic growth and mineral and petroleum resources development in South Africa;
 
    to promote employment and advance the social and economic welfare of all South Africans;
 
    to provide security of tenure in respect of prospecting, exploration, mining and production operations;
 
    to give effect to Section 24 of the South African Constitution by ensuring that South Africa’s mineral and petroleum resources are developed in an orderly and ecologically sustainable manner while promoting justifiable social and economic development; and
 
    to ensure that holders of mining and production rights contribute towards socio-economic development of the areas in which they are operating.
     Under the MPRDA, tenure over established mining operations is secured for up to 30 years (and renewable for periods not exceeding 30 years each thereafter), provided that mining companies apply for new order mining rights over existing operations within five years of May 1, 2004, or before the existing right expires, whichever is the earlier date and fulfill requirements specified in the MPRDA, its Regulations and the Mining Charter.
     The Mining Charter was signed by government and stakeholders in October 2002 and contains principles relating to the transfer, over a ten-year period, of 26% of South Africa’s mining assets (as equity or attributable units of production) to HDSAs, as defined in the Mining Charter. An interim target of 15% HDSA participation over five years was set and to this end, the South African mining industry committed to securing financing to fund participation of HDSAs in an amount of R100.0 billion within the first five years of the Mining Charter’s tenure. The Mining Charter provides for the review of the participation process after five years to determine what further steps, if any, are needed to achieve the 26% target participation. In order to measure progress in meeting the requirements of the Mining Charter, companies are required to complete a “scorecard”, in which the levels of compliance with the Mining Charter can be ticked-off after five and ten years respectively. The Mining Charter and Scorecard require programs for black economic empowerment and the promotion of value-added production (mineral beneficiation), such as jewelry-making and other gold fabrication, in South Africa. In particular, targets are set out for broad-based black economic empowerment in the areas of human resource and skills development; employment equity; procurement beneficiation and direct ownership. In addition, the Mining Charter addresses socio-economic issues such as migrant labor, mine community and rural development, and housing and living conditions.
     Following a review of the progress made by the mining industry after five years of implementing the provisions of the Mining Charter , the DMR recently amended the Mining Charter and the Revised Mining Charter was released on September 13, 2010. The requirement under the Mining Charter for mining entities to achieve a 26% HDSA ownership of mining assets by the year 2014 has been retained. Amendments to the Mining Charter in the Revised Mining Charter include, inter alia, the requirement by mining companies to:
  (i)   facilitate local beneficiation of mineral commodities;

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  (ii)   procure a minimum of 40% of capital goods, 70% of services and 50% of consumer goods from HDSA suppliers (i.e. suppliers of which a minimum of 25% + 1 vote of their share capital must be owned by HDSAs) by 2014. These targets will however be exclusive of non-discretionary procurement expenditure;
 
  (iii)   achieve a minimum of 40% HDSA demographic representation by 2014 at executive management (board) level, senior management (EXCO) level, core and critical skills, middle management level and junior management level;
 
  (iv)   invest up to 5% per cent of annual payroll in essential skills development activities; and
 
  (v)   implement measures to improve the standards of housing and living conditions for mineworkers by converting or upgrading mineworkers’ hostels into family units, attaining an occupancy rate of one person per room and facilitating home ownership options for all mineworkers in consultation with organised labour, all of which must be achieved by 2014.
     In addition, mining companies are required to monitor and evaluate their compliance to the Revised Mining Charter, and must submit annual compliance reports to the DMR. The Scorecard makes provision for a phased-in approach for compliance with the above targets over the five year period ending in 2014. For measurement purposes, the Scorecard allocates various weightings to the different elements of the Revised Mining Charter. Failure to comply with the provisions of the Revised Mining Charter will amount to a breach of the MPRDA and may result in the cancellation or suspension of a mining company’s existing mining rights.
     We actively carry out mining and exploration activities in all of our material mineral rights areas. Accordingly, the MPRDA has not had a significant impact on these mining and exploration activities because we applied for and were granted the conversion of all of our old order mining rights into mining rights in terms of the MPRDA. We now have to comply with the required annual and bi-annual reporting to the DMR on the Social and Labor Plans, Environmental Management Programmes, and Progress Reports on our prospecting rights.
     We have already complied with the requirements of the Mining Charter, with an equivalent of 36% of production ounces qualifying as empowerment credit ounces. We have been working on our program of licensing since 2004, which involved the compilation of a mineral assets register and the identification of all of our economic, mineral and mining rights. We have secured all “old mining rights” and validated existing mining authorizations. Our strategy has been to secure all strategic mining rights on a region-by-region basis. The first application for conversion from “old order” to “new order” mining rights was for the Evander Operations and was lodged on May 21, 2004. The Evander mining license was the first conversion application in the region and in October 2004 we became the first senior company to convert “old order” to “new order” mining rights for our Evander and Randfontein operations. We have worked closely with the DMR to help ensure, to the extent we are able, that the licenses are granted as swiftly as possible. The conversion of licenses for all our remaining operations were granted during November 2007 and Doornkop was executed in October 2008. All of our mining areas are therefore secured/supported by new order mining rights.
     The Mineral and Petroleum Royalty Act 28 of 2008 and the Mineral and Petroleum Royalty Administration Act 29 of 2008 were assented to on November 21, 2008 with the commencement date set as May 1, 2009. However, the date on which royalties became payable was deferred to March 1, 2010. Royalties are payable to the government according to formula based on earnings before interest and tax. This rate is then applied to revenue to calculate the royalty amount due, with a minimum of 0.5% and a maximum of 5% for gold. Since the effective date of March 1, 2010, the average royalty rate for our South African operations is 1.5% of gross sales.
     The MPRDA intends to, among other things:
    give effect to the Minister’s stated intention to promote investment in the South African mining industry;
 
    establish objective criteria for compliance with the MPRDA’s socio- economic objectives;
 
    remove the technical deficiencies of the MPRDA;
 
    align the MPRDA with the Promotion of Administrative Justice Act, 2000; and
 
    coordinate the environmental requirements between the MPRDA and the National Environmental Management Act.
Papua New Guinea
     According to the Mining Act of 1992 (PNG) mineral rights in PNG belong to the government of PNG and they have a statutory right to obtain up to a 30% participating interest in mining development projects. The government then issues and administers mining tenements under the relevant mining legislation, and mining companies must pay royalties to the government based on production.

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     The key difference in PNG is that citizens have the right to carry out non-mechanized mining of alluvial minerals on land owned by them. These customary rights do not extend over a mining lease, unless an alluvial mining lease is obtained.
     Almost all land in PNG is owned by a person or group of persons, and is not generally overlaid by landowner title issues. There is, however, considerable difficulty in identifying landowners of a particular area of land because land ownership may arise from both contract and inheritance, and because of the absence of a formal written registration system.
     Prior to commencing exploration, compensation for loss or damage must be agreed with the landowners. Prior to commencing mining, a written agreement must be entered into with landowners dealing with compensation and other matters.
     In PNG, Morobe Consolidated Goldfields Limited and Newcrest PNG 1 Limited hold a mining lease and various exploration licenses granted by the Department of Mineralogy and Geohazards Management for the Hidden Valley Project. Both parties have obligations under a memorandum of agreement with the state, local government and the landowners.
     Wafi Mining Limited and Newcrest PNG 2 Limited hold various exploration licenses granted by the Department of Mineralogy and Geohazards Management for the Wafi-Golpu Project, and has entered into a compensation agreement with landowners on one of its exploration licenses.
     Harmony Gold (PNG) Exploration Limited manages three exploration licences granted in the Western Highlands and the Sandaun Provinces. The company has also applied for four tenements in the Central and Southern Highlands Provinces and is still awaiting ministerial approval.
     In PNG there are no applicable exchange control restrictions but the PNG central bank does have to be informed of all transactions and has to approve lending facilities and interests rates charged.
Environmental Matters
South Africa
     We are committed to conducting our business in an ethically, morally, socially and environmentally responsible manner that will protect human health, natural resources and the environment in which we live. We aim to balance our economic, social and environmental goals and responsibilities to achieve sustainable, profitable growth in our business and, more importantly, to work with communities and regulatory agencies to implement sound management practices which will ensure that our mining is conducted in an environmentally-safe manner. In addition, with regard to legacy mining impacts, we remain committed to identifying and implementing coordinated remediation plans that are acceptable to all relevant parties.
     Harmony has recently approved its environmental strategy which is geared towards:
    managing the business with environment as an integral part of the business processes;
 
    focusing relentlessly on effectiveness of risk controls;
 
    radically reducing the environmental liability in the organisation;
 
    create a sharing, learning, challenging and innovative enviromental culture.
     In support of the above commitment, our environmental policy stipulates that:
    Compliance
 
      We will strive to comply with all applicable municipal, provincial and national laws and regulations, as well as the other requirements to which the company subscribes that are relevant to the environmental aspects of our activities.
 
    Continual Improvement
 
      We will evaluate and continually improve the effectiveness of our Environmental Management System (“EMS”) through periodic audits and management reviews, and we will review our environmental policy on an annual basis.
 
    Pollution Prevention
 
      We will actively design our operations and undertake our mining activities so as to prevent pollution. We will strive towards the continual reduction of adverse environmental effects and support the principle of sustainable development.

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    Awareness
 
      We will communicate our environmental policies to our employees, contractors and suppliers, and will provide appropriate training to all employees to ensure their continuing awareness of our environmental responsibilities.
     To address and minimize the impact of the company’s operations on the environment, taking into account regulatory requirements, the board has approved a number of five year targets relating to emissions to air, water consumption and usage, energy consumption, recycling and land use based on fiscal 2008, namely:
    Compliance
 
      The Company will reduce the number of significant incidents to zero.
 
    Air Pollution
 
      All sites with emissions >100,000 tonnes per year CO2 equivalent is required to have and maintain energy conservation plans by 2012.
 
      Harmony’s aggregate group target for reduction in energy consumption per ton milled is 10% by 2013 based on a 2005 base year.
 
      Harmony’s aggregate group target for reduction in GHG per ton milled is 5% by 2013 based on a 2005 base year.
 
    Biodiversity
 
      All sites will have a biodiversity action plan by 2012.
 
    Water Management
 
      The aggregate group target for increased affected water consumption per ton milled is a 5% improvement by 2013 based on a 2008 base year.
 
      The aggregate group target for reducing fresh water consumption per ton milled is a 2% improvement by 2013 based on a 2008 base year.
 
    Recycling
 
      All steel, plastic and timber waste to be handled through designated areas, to improve levels of recycling, and 50% of all oil and grease to be recycled.
 
    Land Use
 
      The aggregate group target is a 5% reduction in the land available for rehabilitation.
Environmental performance
ISO14001 implementation
     An ISO14001 EMS is being introduced progressively across our operations, and it is planned that the implementation program at the longer-life operations will be completed in 2012. Formal certification will be sought progressively. By the end of June 2010, the implementation status at the various operations was estimated as follows:
    Doornkop — shaft achieved certification in fiscal 2010; Doornkop plant is scheduled for certificate in November 2010;
 
    Kusasalethu — Certification audit planned for March 2011;
 
    Evander 8 Shaft — Certification audit planned for October 2010;
 
    Kalgold — Certification audit planned for October 2010; and
 
    Free State Harmony 1 plant — December 2011.

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     The EMS forms the basis for the implementation of the environmental policy and monitoring compliance, while the Environmental Management Programme Report (“EMPR”) developed in line with legislative requirements, contain specific as well as general principles governing environmental management during the life of the mine. The EMPRs identify individual impacts, mitigation measures and rehabilitation requirements.
     Generic closure objectives are set and high-level closure plans formulated within the EMPR, including investigation of the potential for re-use of existing infrastructure, preparation of a rehabilitation plan, rehabilitation and vegetation of the affected area and post-closure monitoring. These EMPRs are legally binding and forms part of our submission for, and receipt, of mining rights conversions. Revised EMPRs (aligned with new minerals legislation) were developed for Doornkop, Kalgold, Joel, St Helena, Target, Evander, the Virginia operations and Kusasalethu in fiscal 2009, and submitted to the regulatory authorities for approval. As part of this process, public participation meetings have been held with interested and affected parties.
     A number of annual compliance audits were undertaken during the year, most notably by the DMR. Areas of non-compliance identified by the audits have been and are being addressed.
Significant environmental incidents
     Significant incidents are defined as those that have an impact outside the Group’s boundaries, which may cause irreparable harm or which require significant expenditure to remedy. In fiscal 2010, five significant environmental incidents were reported. These related primarily to:
    localised sewage spill onto adjacent land (one incident);
 
    localised slimes spillage into the Winkelhaakspruit (two incidents);
 
    overflow of affected water from a water containment facility into a tributary stream as a result of flash floods (one incident); and
 
    overflow of affected water from a water containment facility into the adjoining storm water facility (one incident).
Financial provision
     In accordance with legislation, Harmony has constituted independent environmental rehabilitation trust funds to make adequate financial provision for the expected cost of environmental rehabilitation at mine closure and for the discharge of its obligations and contingent liabilities. Each operation reviews and updates the financial provision for its expected environmental closure liability annually in consultation with a consultant. This estimate is then used to calculate the contributions to be made to the rehabilitation trust funds, and, if necessary, adjustments are made to the trust fund provisions.
     The accumulated amount in the various South African rehabilitation trust funds was R1,702 million (US$223.2 million) at the end of June 2010 (compared with fiscal 2009, which was R1,597 (US$206.8 million)), while the total rehabilitation liability was estimated at R2,229 million (US$292.2 million) (compared with fiscal 2009, which was R1,918 (US$248.3 million)). During the year, we contributed R5 million (US$0.7 million) to the trust funds.We also arranged guarantees for the environmental liabilities with Nedbank Limited amounting to R286 million (US$37.5 million).
     The assets of each mine within each fund are ring-fenced and may not be used directly to cross-subsidise one another.
Papua New Guinea
     Our PNG operations are in various phases of activity including exploration, pre-feasibility study and commissioning. We are subject to applicable environmental legislation including specific site conditions attached to the mining tenements imposed by the PNG Government DEC, the terms and conditions of operating licenses issued by the PNG MRA and DEC, and the Environment Permits for water extraction and waste discharge issued by DEC.
     Some non-compliances with these requirements have been identified at the Hidden Valley Mine and remedial actions are being implemented in consultation with DEC and MRA. All other operations in PNG are compliant with their respective statutory requirements.
     All PNG operations have departments and personnel dedicated to environmental matters who are responsible for implementing the company environmental management programs, monitoring the impact of mining on the environment and responding to impacts that require specific attention outside of the normal program of environmental activities.

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     A framework for a Sustainable Business Management System (“SBMS”) has been completed which complies with relevant Australian and international standards and principles for safety, environment, quality and sustainable development (including AS/NZS ISO14001:Environmental Management Systems, Equator Principles, and the Cyanide Code). This system will be implemented at all PNG operations over the next two years.
Significant environmental incidents
     There were a number of environmental incidents reports in PNG that may have had a moderate impact on the receiving environment but were not considered major or at a level that would have affected ecosystem function.

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Health and Safety Matters
South Africa
The Mine Health and Safety Act
     For many years, the safety of persons working in South African mines and quarries was controlled by the Mines and Works Act of 1956 and then by the Minerals Act of 1991 which was replaced by the Mine Health and Safety Act. The Minerals Act of 1991 has subsequently been repealed and the MPRDA promulgated. The Mine Health and Safety Act has since been amended by Act 74 of 2008. The objectives of the Mine Health and Safety Act are:
    to protect the health and safety of employees and other persons at mines;
 
    to promote a culture of health and safety;
 
    to require employers and employees to identify hazards and eliminate, control and minimize the risks relating to health and safety at mines;
 
    to give effect to the public international law obligations of South Africa that concern health and safety at mines;
 
    to provide for employee participation in matters of health and safety through health and safety representatives and health and safety committees at mines;
 
    to provide for the effective monitoring of health and safety conditions at mines;
 
    to provide for the enforcement of health and safety measures at mines; and
 
    to foster and promote co-operation and consultation on health and safety between the DMR, employers, employees and their representatives.
     The Mine Health and Safety Act prescribes general and specific duties for employers and others, determines penalties and a system of administrative fines, and provides for employee participation by requiring the appointment of health and safety representatives and the establishment of health and safety committees. It also entrenches the right of employees to refuse to work in dangerous conditions. Key amendments to this Act are the following:
    Training records to be kept
 
    Employer investigations
 
    Permanent committees of the MHSC
 
    Health and Safety Management system
 
    Administrative fines increased from R200,000 to R1million
 
    Offences — applicable to the Employer
     Government, through the DMR, ordered the institution of audit teams to conduct legal compliance and systems and explosives control audits on mines across all commodities.
     It is anticipated that Harmony will incur additional expenditure in order to comply with the prescribed legislative requirements. Management anticipates that such additional expenditure will not have a material adverse effect upon our operational results or financial condition.

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Criminal mining
     Security issues with regard to criminal mining came to the fore during fiscal 2009. In June 2009, criminal mining resulted in the deaths of criminal miners. Harmony continues to address the issue of criminal mining on a daily basis with enhanced security, together with the South African Police Services, the Department of Justice, the National Prosecuting Authority and other affected mining companies. We are doing everything reasonably practicable to ensure that the unauthorized miners do not get access to shafts in order to prevent them from going underground illegally and to prevent them from destroying existing infrastructure. We have invested a significant amount of money in infrastructure and systems to achieve this.
Healthcare services
     In South Africa, approximately 80% of primary health care and occupational health services are provided to employees and their dependants through company-managed healthcare facilities which include two private hospitals, one mine hospital and three private pharmacies. Casualty departments at these hospitals provide 24-hour emergency services to local communities as well as to the company’s employees. The health and well-being of the remainder of Harmony employees, their dependants and contractors is ensured through medical aid membership or third-party service-providers, as part of their employment benefits.
     In fiscal 2010, we embarked on a pro-active healthcare strategy with a shift in focus from curative care towards preventative healthcare. Integrated individual healthcare was provided to employees with the assistance of management information systems which enable Harmony Healthcare to monitor and track the risk profile of each individual in terms of health and well-being. An individual disease management plan is then developed and continually reviewed to assess progress.
Occupational health
     In compliance with the Mine Health and Safety Act, medical surveillance continued at the group’s four medical surveillance centres. Medical surveillance examinations were conducted including entry examinations (for new employees), annual examinations, exit (end of service) examinations, and out-of-cycle examinations (for transfers, for example).
     We align our occupational health statistics reporting to international standards such as the International Labour Organization’s Code of Practice on the Recording and Notification of Occupational Accidents and Diseases, as well as the Mine Health and Safety Act. In the case of an employee being identified as having a compensable occupational illness, the company submits his or her details on the employee’s behalf to the Medical Bureau for Occupational Diseases (“MBOD”) or to the Rand Mutual Assurance Company (“RMA”), depending on the illness and legislation that covers it. The MBOD is a statutory body, responsible for certification and compensation in terms of the Occupational Diseases in Mines and Works Act, 1973, to which Harmony contributes. RMA is an industry body that provides compensation under the Compensation for Occupational Injuries and Diseases Act of 1993.
     The primary occupational health risk areas in fiscal 10 were silicosis, noise induced hearing loss (“NIHL”), tuberculosis (“TB”) and occupational injuries.
HIV & AIDS Policy
     We have managed to look at HIV & AIDS awareness campaigns holistically with our South African workforce. Our HIV and AIDS campaigns are in line with the national HIV counseling and testing (“HCT”) campaigns. Our treatment policy is also in line with the National Guidelines on Anti Retroviral Treatment, which assists employees who decide to leave their place of work and return home for care and are cared for at their homes through the TEBA home based care system, to which we contribute. See Item 3. Key Information — Risk Factors — Risks Relating to Our Business and Our Industry — HIV & AIDS poses risks to Harmony in terms of productivity and costs” and Item 3. “Key Information — Risk Factors — Risks Relating to Our Business and Our Industry — The cost of occupational healthcare services may increase in the future”.
     In South Africa, we have an agreement with the relevant stakeholders concerning the management of HIV & AIDS in the workplace. This agreement, originally signed in 2002 with the National Union of Mine Workers (“NUM”) and the United Association of South Africa (“UASA”) has been subsequently amended, the latest in August 2006. While many aspects of the policy have remained unaltered, the most fundamental change is the inclusion in the policy of a broad spectrum of chronic manageable diseases other than HIV & AIDS such as diabetes, asthma and hypertension. This was done in order to minimize the stigma surrounding stand alone HIV & AIDS treatment centers and also to emphasize our view that HIV & AIDS should no longer be viewed as a death sentence, but rather a chronic, manageable disease. We have decentralized some of the functions of the HIV and AIDS centers to the clinics at the shafts where these functions can be easily accessed by employees. The agreement also serves to reassure our employees of our commitment to the respect of all human rights and commitment to non-discriminatory practices and zero tolerance to discrimination of any of our employees. During the early stages of the implementation of the

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HIV & AIDS program, the agreement was also used as a marketing tool to encourage employee participation in the Harmony HIV & AIDS Program.
Management of HIV & AIDS & Tuberculosis (TB)
     The HIV & AIDS pandemic continues to have a significant impact on the company (through absenteeism, reduced performance, loss of skills) and employees and their families. At Harmony HIV & AIDS is managed at three levels.
    At a clinical level, the symptoms of the illness are managed by the Group’s health care services.
 
    Company-wide and mine-specific initiatives are conducted. Shaft-based HIV & AIDS committees form an integral part of the Health and Safety Committees, which meet on a monthly basis.
 
    Group policy and practice is overseen by a specialist health care professional.
     A revised integrated clinical strategy, developed as part of the new strategy to address TB and HIV & AIDS was implemented during the year. This strategy was developed through a workshopping process that was led by academics and experts drawn from the Universities of Cape Town, Pretoria and Witwatersand, and with the participation of the 19 Harmony health care staff, ranging from medical doctors, to occupational health practitioners, nursing sisters and others.
     A number of key issues have been highlighted in this new strategy that integrate and consolidate the traditional HIV &AIDS and TB approaches. These include:
    Concerted efforts will be made to enhance and sustain the group’s Voluntary Counselling and Testing (“VCT”) programs.
 
    Enhanced education and counselling will be provided to employees who are HIV-negative.
 
    Anti-retroviral therapy (“ART”) will be introduced at an earlier stage, which is expected to have a significant impact on reducing HIV & AIDS incidence rates.
 
    In addition, efforts will be made to intensify case findings, introduce isoniazid preventative treatment and improve infection control with further infection control measures such as the use of masks, ultra-violet lights, etc.
HIV & AIDS performance
     It is currently estimated (based on estimates within the gold mining industry) that around 27% of Harmony’s employees are HIV positive. It is possible, however, that actual prevalence rates are higher than this as a result of the current treatment campaigns (including ART). We continue to focus on early detection and treatment to increase the likelihood of extended, healthy lives for infected employees. New electronic data collation systems were implemented in fiscal 2009 and we envisage that there will be an improvement in monitoring and evaluation of the program outcomes in fiscal 2011. During fiscal 2010, a total of 18,971 individuals were tested (2009: 22,806 tests), a decrease of 17%. The decrease is because the initial VCT campaigns targeted a broader spectrum of candidates and included the community as well as dependants.
Australia
     Australia, via each State and Territory has a well regulated system of occupational health and safety (OH&S), comprised of legislation (Acts and Regulations) and Codes of Practice. Australia is moving to National OH&S Legislation and Draft Legislation has been circulated to the various levels of government and industry for consultation. Several of these specifically apply to the mining industry, including specific legislation and extensive codes of practice and guidelines. There is also a well developed certification and licensing system for employees for the usage of certain items of plant and equipment. The legislation governing this area also refers to the many Australian Standards and specifically AS/NZS 4801 — Occupational health and safety management systems — Specification with guidance for use which is the specific AS for the management of Safety Systems.
     In the event of injury while at work, employees are protected by a compulsory workers compensation scheme, which are different for each state.

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Papua New Guinea
     PNG has a significant mining industry, and a developing system of occupational health and safety. The PNG Mining (Safety) Act of 1977 is the principal legislation that addresses a range of issues such as working hours, minimum safety and reporting requirements. Other legislation and regulations also apply.
     Although reliable statistics with regard to infection rates are not readily available, preliminary results indicate that PNG is in the early stages of an AIDS pandemic. As part of the development of the Hidden Valley project, and other exploration activities carried out by us in PNG, we have rolled out a health care strategy for our employees to increase AIDS awareness. See Item 3. Key Information — Risk Factors — Risks Relating to Our Business and Our Industry — HIV/AIDS poses risks to Harmony in terms of productivity and costs” and Item 3. Key Information — Risk Factors — Risks Relating to Our Business and Our Industry — The cost of occupational healthcare services may increase in the future”.

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Item 4A. UNRESOLVED STAFF COMMENTS
     Not applicable.
Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
     You should read the following discussion and analysis together with the consolidated financial statements, including the related notes, appearing elsewhere in this annual report.
Overview
     We conduct underground and surface gold mining and related activities, including exploration, processing, smelting and beneficiation. We are currently the third largest producer of gold in South Africa, producing some 22% of the country’s gold output, and are among the world’s top ten gold producers. Our gold sales for fiscal 2010 were approximately 1.4 million ounces of gold. As at June 30, 2010, our mining operations reported total proven and probable reserves of approximately 48.1 million ounces and in fiscal 2010, we processed approximately 19.8 million tons of ore.
     For segment purposes, management distinguishes between “Underground” and “Surface”, with each shaft or group of shafts managed by a team (headed by a single general manager) being considered to be an operating segment.
     Our reportable segments are as follows:
     Bambanani, Doornkop, Evander, Joel, Kusasalethu (previously Elandsrand), Masimong, Phakisa, Target, Tshepong, Virginia and PNG;
     Cooke operations (sold in November 2008) and Mount Magnet are classified as discontinued operations; and
     All other shafts and surface operations, including those that treat historic sand dumps, rock dumps and tailings dams, are grouped together under “Other — Underground” and “Other — Surface”.
Critical Accounting Policies and Estimates
     The preparation of our financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported results of our operations. Actual results may differ from those estimates. We have identified the most critical accounting policies upon which our financial results depend. Some of our accounting policies require the application of significant judgment and estimates by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty and are based on our historical experience, terms of existing contracts, management’s view on trends in the gold mining industry and information from outside sources.
     Our significant accounting policies are described in more detail in note 2 to the consolidated financial statements. This discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in Item 18. Financial Statements”. Management has identified the following as critical accounting policies because estimates used in applying these policies are subject to material risks and uncertainties. Management believes the following critical accounting policies, together with the other significant accounting policies discussed in the notes to the consolidated financial statements, affect its more significant judgments and estimates used in the preparation of the consolidated financial statements and could potentially impact our financial results and future financial performance.
Gold mineral reserves
     Gold mineral reserves are estimates of the amount of ounces that can be economically and legally extracted from the Group’s properties. In order to calculate the gold mineral reserves, estimates and assumptions are required about a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, commodity prices and exchange rates.
     Estimating the quantities and/or grade of the reserves requires the size, shape and depth of the orebodies to be determined by analyzing geological data such as the logging and assaying of drill samples. This process may require complex and difficult geological judgments and calculations to interpret the data. These reserves are determined in accordance with SAMREC, JORC and SEC Industry Guide 7.
     Because the economic assumptions used to estimate the gold mineral reserves change from year to year, and because additional geological data is generated during the course of operations, estimates of the mineral reserves may change from year to year. Changes in the proven and

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probable reserves may affect the Group’s financial results and financial position in a number of ways, including depreciation and amortization charged in the income statement may change as they are calculated on the units-of-production method.
The estimate of the total expected future lives of our mines could be materially different from the actual amount of gold mined in the future. See Item 3. “Key Information — Risk Factors — Harmony’s gold reserve figures are estimated based on a number of assumptions, including assumptions as to mining and recovery factors, future cash costs of production and the price of gold and may yield less gold under actual production conditions than currently estimated.”
Impairment of Property, Plant and Equipment
     We review and evaluate our mining assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Each operating shaft, along with allocated common assets such as plants and administrative offices, is considered to be a cash generating unit as each shaft is largely independent of the cash flows of other shafts and assets.
Future cash flows are estimated based on estimated quantities of recoverable minerals, expected gold prices (considering current and historical prices, price trends and related factors), production levels and cash costs of production, capital and reclamation costs, all based on detailed life-of-mine plans. The significant assumptions in determining the future cash flows for each individual operating mine at June 30, 2010, apart from production cost and capitalized expenditure assumptions unique to each operation, included a long-term gold price of US$1,050 per ounce and South African and Australian dollar exchange rates of US$1 = R8.19 and A$1 = US$0.80, respectively. The term “recoverable minerals” refers to the estimated amount of gold that will be obtained from proven and probable reserves and related exploration stage mineral interests, except for other mine-related exploration potential and greenfields exploration potential discussed separately below, after taking into account losses during ore processing and treatment. Estimates of recoverable minerals from such exploration stage mineral interests are risk adjusted based on management’s relative confidence in such materials. With the exception of other mine-related exploration potential and Greenfields exploration potential, estimates of future undiscounted cash flows are included on an area of interest basis, which generally represents an individual operating mine, even if the mines are included in a larger mine complex. In the case of mineral interests associated with other mine-related exploration potential and Greenfields exploration potential, cash flows and fair values are individually evaluated based primarily on recent exploration results and recent transactions involving sales of similar properties.
     As discussed above under “Gold mineral reserves”, various factors could impact our ability to achieve our forecasted production schedules from proven and probable reserves. Additionally, gold prices, capital expenditure requirements and reclamation costs could differ from the assumptions used in the cash flow models used to assess impairment. The ability to achieve the estimated quantities of recoverable minerals from exploration stage mineral interests involves further risks in addition to those factors applicable to mineral interests where proven and probable reserves have been identified, due to the lower level of confidence that the identified mineralized material can ultimately be mined economically. Assets classified as other mine-related exploration potential and Greenfields exploration potential have the highest level of risk that the carrying value of the asset can be ultimately realized, due to the still lower level of geological confidence and economic modeling.
     During fiscal 2010, 2009 and 2008, we recorded impairments of US$43 million, US$89 million and US$27 million respectively, on property, plant and equipment, all from continuing operations. Reversal of previously recorded impairments amounted to US$28 million and US$5 million in fiscal 2009 and fiscal 2008 respectively. These reversals related to the Mount Magnet operation, which has been classified as discontinued operations. Material changes to any of these factors or assumptions discussed above could result in future impairment charges, particularly around future gold price assumptions. A 10% decrease in gold price at June 30, 2010 would have resulted in the additional impairments amounting to US$1.8 million at the Steyn 2 shaft in the Bambanani segment.
Carrying Value of Goodwill
     We evaluate, on at least an annual basis, the carrying amount of goodwill to determine whether current events and circumstances indicate that such carrying amount may no longer be recoverable. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Each operating shaft, along with allocated common assets such as plants and administrative offices, is considered to be a cash generating unit as each shaft is largely independent of the cash flows of other shafts and assets. To accomplish this, we compare the recoverable amounts of our cash generating units to their carrying amounts. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. If the carrying value of a cash generating unit were to exceed its recoverable amount at the time of the evaluation, an impairment loss is recognized by first reducing goodwill, and then the other assets in the

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cash generating unit on a pro rata basis. Assumptions underlying fair value estimates are subject to risks and uncertainties. If these assumptions change in future, we may need to record impairment charges on goodwill not previously recorded.
     During fiscal 2008, we recorded an impairment of US$13 million on goodwill. No impairment was recorded during fiscal 2009 and 2010.
Provision for environmental rehabilitation
     Our mining and exploration activities are subject to various laws and regulations governing the protection of the environment. Estimated long term environmental obligations, comprising pollution control, rehabilitation and mine closure, are based on the Group’s environmental management plans. Annual changes in the provision consist of finance costs relating to the change in the present value of the provision and inflationary increases in the provision estimate, as well as changes in estimates. The present value of environmental disturbances created is capitalized to mining assets against an increase in the rehabilitation provision. The rehabilitation asset is depreciated as discussed above. Rehabilitation projects undertaken, included in the estimates are charged to the provision as incurred. The cost of ongoing current programs to prevent and control pollution is charged against income as incurred.
Deferred taxes
     The taxable income from gold mining at our South African operations is subject to a formula to determine the taxation expense. The tax rate calculated using the formula is capped to a maximum mining statutory rate of 43% or 34%, depending on whether or not the taxpayer has elected to be exempt from Secondary Taxation on Companies. See Item 5. “Results of Operations—Continuing Operations—Income and Mining Taxes”. Taxable income is determined after the deduction of qualifying mining capital expenditure to the extent that it does not result in an assessed loss. Excess capital expenditure is carried forward as unredeemed capital and is eligible for deduction in future periods, taking the assessed loss criteria into account. Further to this, mines are ring-fenced and are treated separately for tax purposes, with deductions only being utilised against the mining income of the relevant ring-fenced mine.
     In terms of IAS 12 — Income Taxes, deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, and at our South African operations, such average tax rates are directly impacted by the profitability of the relevant ring-fenced mine. The deferred tax rate is therefore based on the current estimate of future profitability of an operation when temporary differences will reverse, based on tax rates and tax laws that have been enacted at balance sheet date.
The future profitability of each ring-fenced mine, in turn, is determined by reference to the life-of-mine plan for that operation. The life-of-mine plan is based on parameters such as the Group’s long term view of the US$ gold price and the Rand/US$ exchange rate, as well as the reserves declared for the operation. As some of these parameters are based on market indicators, they differ from one year to the next. In addition, the reserves may also increase or decrease based on updated or new geological information.
     We do not recognize a deferred tax asset when it is more likely than not that the asset will not be utilized. Assessing recoverability of deferred tax assets requires management to make significant estimates related to expectation of future taxable income. Estimates of future taxable income are based on forecasted cash flows from operations, reversals of deferred tax liabilities and the application of existing tax laws in each jurisdiction. To the extent that future taxable income differs significantly from estimates, our ability to realize the net deferred tax assets recorded at the balance date could be impacted. Additionally, future charges in tax laws in the jurisdictions in which we operate could limit our ability to obtain the future tax benefits represented by deferred tax assets recorded at the balance date.
Revenue
     Substantially most of our revenues are derived from the sale of gold. As a result, our operating results are directly related to the price of gold. Historically, the price of gold has fluctuated widely. The gold price is affected by numerous factors over which we do not have control. See Item 3. “Key Information — Risk Factors — The profitability of Harmony’s operations, and the cash flows generated by those operations, are affected by changes in the market price for gold, which in the past has fluctuated widely”.
     As a general rule, we sell our gold produced at market prices to obtain the maximum benefit from increases in the prevailing gold price and do not enter into hedging arrangements such as forward sales or derivatives that establish a price in advance for the sale of our future gold production.

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     Significant changes in the price of gold over a sustained period of time may lead us to increase or decrease our production in the near-term.
Harmony’s Realized Gold Price
     The average gold price in U.S. dollars received by us has generally increased since January 1, 2002. In fiscal 2010, the average gold price in U.S. dollars received by us for continuing operations was US$1,092 per ounce. The market price for gold (and, accordingly, the price received by us) is affected by numerous factors over which we have no control. See Item 3. “Key InformationRisk Factors — The profitability of Harmony’s operations, and the cash flows generated by those operations, are affected by changes in the market price for gold, which in the past has fluctuated widely”.
     The following table sets out the average, the high and the low London Bullion Market price of gold and our average U.S. dollar sales price during the past three fiscal years:
                         
    Fiscal Year Ended
    June 30,
    2010   2009   2008
            ($/oz)        
Average
    1,089       874       821  
High
    1,261       989       1,011  
Low
    908       713       649  
Harmony’s average sales price — continuing operations(1)
    1,092       867       818  
 
(1)   Our average sales price differs from the average gold price due to the timing of our sales of gold within each year.
Costs
     Our cash costs and expenses typically make up over 80% of our total costs. The remainder of our total costs consists primarily of exploration costs, employment termination costs, corporate and sundry expenditure, and depreciation and amortization. Our cash costs consist primarily of production costs exclusive of depreciation and amortization. Production costs are incurred on labor, equipment, consumables and utilities. Labor costs are the largest component and typically comprise approximately 54% of our production costs.
     Our cash costs for continuing operations has increased from US$600 per ounce in fiscal 2008 to US$801 per ounce in fiscal 2010, mainly as a result of lower production volumes, the impact of increased labor and energy costs as well as inflationary pressures on supply contracts. In U.S. dollar terms, the appreciation of the Rand-U.S. dollar exchange rate added to these increases.
     Our U.S. translated costs are very sensitive to the exchange rate of the Rand and other non-U.S. currencies to the U.S. dollar. See Item 5. “Operating and Financial Review and Prospects — Exchange Rates”. Appreciation of the Rand and other non-U.S. currencies against the U.S. dollar increases working costs at our operations when those costs are translated into U.S. dollars. See Item 3. “Key Information — Risk Factors — Because most of Harmony’s production costs are in Rand and other non-U.S. currencies, while gold is generally sold in U.S. dollars, Harmony’s financial condition could be materially harmed by an appreciation in the value of the Rand and other non-U.S. currencies”.
     The average rate of the South African Rand appreciated approximately 16% against the U.S. dollar in fiscal 2010 compared to fiscal 2009. In the case of our International operations, the Australian dollar appreciated approximately 18%, while the Kina remained steady against the U.S. dollar in fiscal 2010 compared to fiscal 2009.
Reconciliation of Non-GAAP Measures
     Total cash costs and total cash costs per ounce are non-GAAP measures.
     Our cash costs consist primarily of production costs and are expensed as incurred. The cash costs are incurred to access ore to produce current mined reserves. Cash costs do not include capital development costs, which are incurred to allow access to the ore body for future mining operations and are capitalized and amortized when the relevant reserves are mined.
     We have previously calculated total cash costs and total cash costs per ounce by dividing total cash costs, as determined using the guidance previously provided by the Gold Institute, by gold ounces sold. Total cash costs, as defined in the guidance provided by the Gold Institute, include mine production costs, transport and refinery costs, applicable general and administrative costs, costs associated with movements in

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production inventories, ore stockpiles, as well as ongoing environmental rehabilitation costs as well as transfers to and from deferred stripping and costs associated with royalties. Ongoing employee termination cost is included, however, employee termination costs associated with major restructuring and shaft closures are excluded. Management has recalculated these measures to exclude the costs associated with movements in production inventories, and in line with this change, now use gold ounces produced as the denominator. The measures have been re-presented for all comparative periods shown.
     Changes in cash costs per ounce are affected by operational performance, as well as changes in the currency exchange rate between the Rand and the U.S. dollar and, in the case of the International operations, the Australian dollar and Kina. Total cash costs and total cash costs per ounce are non-GAAP measures. Total cash costs and total cash costs per ounce should not be considered by investors in isolation or as an alternative to production costs, cost of sales, or any other measure of financial performance calculated in accordance with IFRS. In addition, while the Gold Institute has provided guidance for the calculation of total cash costs and total cash costs per ounce, the calculation of total cash costs and total cash costs per ounce may vary from company to company and may not be comparable to other similarly titled measures of other companies. However, we believe that cash costs per ounce is a useful indicator to investors and management of a mining company’s performance as it provides (1) an indication of the cash generating capacities of our mining operations, (2) the trends in cash costs as the company’s operations mature, (3) a measure of a company’s performance, by comparison of cash costs per ounce to the spot price of gold and (4) an internal benchmark of performance to allow for comparison against other companies.
     Continuing operations
     The following is a reconciliation of total cash costs from continuing operations, as a non-GAAP measure, to the nearest comparable GAAP measure, cost of sale from continuing operations:
                         
    Fiscal year ended June 30,
    2010   2009   2008
    (in $ millions, except per ounce amounts)
Total cost of sales from continuing operations — under IFRS
    1,383       1,083       1,122  
Depreciation and amortization expense
    (181 )     (139 )     (117 )
Rehabilitation costs
    (4 )     (1 )     (1 )
Care and maintenance costs of restructured shafts
    (8 )     (5 )     (10 )
Employment termination and restructuring costs
    (27 )     (4 )     (29 )
Share-based payments
    (20 )     (13 )     (6 )
Impairment of assets
    (43 )     (71 )     (40 )
Reversal/(provision) for post retirement benefits
    3             (1 )
Gold inventory movement
          2       (4 )
Total cash costs from continuing operations — using Gold Institute guidance
    1,103       852       914  
Per ounce calculation:
                       
Ounces produced (1)
    1,377,499       1,460,831       1.524,557  
Total cash cost per ounce from continuing operations — using Gold Institute guidance
    801       583       600  
 
(1)   The ounces produced for fiscal 2010 exclude ounces from Hidden Valley, Target 3 and Steyn 2 for the period in which these shafts were not in production. The associated costs have been capitalized.

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     Discontinued operations
     The following is a reconciliation of total cash costs from discontinued operations, as a non-GAAP measure, to the nearest comparable GAAP measure, cost of sales from discontinued operations:
                         
    Fiscal year ended June 30,
    2010   2009   2008
    (in $ millions, except per ounce amounts)
Total cost of sales from discontinued operations — under IFRS
    1       71       237  
Depreciation and amortization expense
          (28 )     (7 )
Rehabilitation costs
          (2 )     (1 )
Care and maintenance costs of restructured shafts
    (1 )     (1 )      
Employment termination and restructuring costs
                (4 )
Share-based payments
                 
Reversal of impairment of assets
          10       5  
Gold inventory movement
          2       6  
Total cash costs from discontinued operations — using Gold Institute guidance
          52       236  
Per ounce calculation:
                       
Ounces produced
          80,377       385,900  
Total cash cost per ounce from discontinued operations — using Gold Institute guidance
          644       612  
Total Harmony — Continuing and discontinued operations
     The following is a reconciliation of total cash costs, as a non-GAAP measure, to the nearest comparable GAAP measure, cost of sales under IFRS:
                         
    Fiscal year ended June 30,
    2010   2009   2008
    (in $ millions, except per ounce amounts)
Total production costs — under IFRS
    1,384       1,154       1,359  
Depreciation and amortization expense
    (181 )     (167 )     (124 )
Rehabilitation costs
    (4 )     (3 )     (2 )
Care and maintenance costs of restructured shafts
    (9 )     (6 )     (10 )
Employment termination and restructuring costs
    (27 )     (4 )     (33 )
Share-based payments
    (20 )     (13 )     (6 )
(Impairment)/reversal of impairment of assets
    (43 )     (61 )     (35 )
Reversal/(provision) for post retirement benefits
    3             (1 )
Gold inventory movement
          4       2  
Total cash costs — using Gold Institute guidance
    1,103       904       1,150  
Per ounce calculation:
                       
Ounces produced
    1,377,499       1,541,208       1,910,457  
Total cash cost per ounce — using Gold Institute guidance
    801       586       602  
     Within this disclosure document, our discussion and analysis is focused on the total cash costs measure as defined by the Gold Institute, as modified to exclude the effects of changes in production inventory.
     While recognizing the importance of reducing cash costs, our chief focus is on controlling and, where possible, reducing total costs, including overhead costs. We aim to control total unit costs per ounce produced by maintaining our low total cost structure at our existing operations. We have been able to reduce total costs by implementing a management structure and philosophy that is focused on reducing management and administrative costs, implementing an mineral reserve management system that allows for greater grade control and acquiring higher grade reserves. See Item 4. “Information on the Company — Business — Strategy”.
Exchange Rates
     Our revenues are very sensitive to the exchange rate of the Rand and other non-U.S. currencies to the U.S. dollar.
     Currently, the majority of our earnings are generated in South Africa and, as a result, most of our costs are incurred in Rand. Since gold is generally sold in U.S. dollars, most of our revenues are received in U.S. dollars. The average gold price received by us during fiscal 2010 increased US$225 per ounce to US$1,092 per ounce from US$867 per ounce during fiscal 2009. Appreciation of the Rand against the U.S. dollar increases our U.S. dollar working costs at our South African operations when those costs are translated into U.S. dollars, which serves to reduce operating margins and net income from our South African operations. Depreciation of the Rand against the U.S. dollar reduces these

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costs when they are translated into U.S. dollars, which serves to increase operating margins and net income from our South African operations. Accordingly, strength in the Rand generally results in poorer earnings for us if there is not a similar increase in the gold price.
     The exchange rates obtained when converting U.S. dollars to Rand are determined by foreign exchange markets, over which we have no control. The conversion rate for balance sheet items as at June 30, 2010 is R7.63 per US$1.00, expect for specific items within equity that are converted at the exchange rate prevailing on the date the transaction was entered into. This compares with a conversion rate of R7.72 per US$1.00 as at June 30, 2009, reflecting an appreciation of 1% of the Rand against the U.S. dollar when compared with June 30, 2009. Income statement items were converted at the average exchange rate for the fiscal 2010 (R7.58 per US$1.00), reflecting an appreciation of 16% of the Rand against the U.S. dollar when compared with fiscal 2009. The majority of our working costs are incurred in Rands and as a result this appreciation of the Rand against the U.S. dollar would increase our working costs when translated into U.S. dollars. Adding to this increase are increases in our labor costs as well as inflationary pressures on our consumable stores and energy cost, which served to decrease operating margins and net income reflected in our consolidated income statement for fiscal 2010. Depreciation of the Rand against the U.S. dollar would cause a decrease in our costs in U.S. dollar terms. Similarly, at our International operations, depreciation of the Australia dollar or Kina against the U.S. dollar would cause a decrease in our costs in U.S. dollar terms. See Item 3. “Key Information — Risk Factors — Because most of Harmony’s production costs are in Rand and other non-U.S. currencies, while gold is generally sold in U.S. dollars, Harmony’s financial condition could be materially harmed by an appreciation in the value of the Rand and other non-U.S. currencies”.
Inflation
     Our operations have been materially affected by inflation. At the end of fiscal 2010, inflation in South Africa was 4.2%, although it reached 6.9% in fiscal 2009 and over 12% in fiscal 2008. However, working costs, and wages especially, have increased considerably over the past three years resulting in significant cost pressures for the mining industry. In addition, the effect on inflation of the increase in electricity tariffs of 25% during fiscal 2010, together with two more increases of approximately 26% each in the next two years, will have a negative effect on the profitability of our operations.
     The inflation rate in PNG eased from 10.6% to 7.0% in fiscal 2009 and remained relatively stable at 7% in fiscal 2010. Due to higher food and energy prices, as well as increased labor prices, the inflation rate is expected to be 8.0% in fiscal 2011. This increase in inflation together with the strength of the Kina against the US and Australian dollar could have an adverse effect on the profitability of the PNG operations.
     Our profits and financial condition could be adversely affected if the cost inflation is not offset by a concurrent devaluation of the Rand and other non-U.S. currencies and/or an increase in the price of gold. See Item 3. “Key Information — Risk Factors — Our operations may be negatively impacted by inflation”.
South African Socio-Economic Environment
     We are a South African company and the majority of our operations are in South Africa. As a result, we are subject to various economic, fiscal, monetary and political policies and factors that affect South African companies generally. See Item 3. “Key Information — Risk Factors — Socio-economic instability in South Africa or regionally may have an adverse effect on Harmony’s operations and profits”.
     South African companies are subject to exchange control limitations. While exchange controls have been relaxed in recent years, South African companies remain subject to restrictions on their ability to deploy capital outside of the Southern African Common Monetary Area. See Item 10. “Additional Information — Exchange Controls”.
     Social and Labor Plans, or SLPs, have been developed for each of our South African operations. These SLPs are prepared in line with legislation governing the participation of HDSAs in mining assets.
     We have been granted all of our mining licenses under the MPRDA. We have therefore already started to incur expenses relating to HDSA participation. We believe the biggest challenge will lie in maintaining these licenses, as we will have a responsibility in respect of human resource development, procurement and local economic development. We are unable, however, to provide a specific amount of what the estimated cost of compliance will be but we will continue to monitor these costs on an ongoing basis.

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Royalties
     The MPRDA makes reference to royalties payable to the South African state in terms of the Mineral and Petroleum Resources Royalty Act (Act 28 of 2008). The Act provides for the payment of a royalty according to a formula based on earnings before interest, tax and depreciation, after the deduction of capital expenditure. This rate is then applied to revenue to calculate the royalty amount due, with a minimum of 0.5% and a maximum of 5% for gold mining companies. At the end of fiscal 2010, the average royalty rate for the South African operations was 1.5%. The royalty became effective on March 1, 2010 and will have an adverse impact on the profits generated by our operations in South Africa.
     As our operation at Hidden Valley is now in production, they are subject to a 2% royalty payable to the PNG government and local community groups.
Cost control
     As part of our Back-to-Basics strategy in fiscal 2008, we reinstated the focus on monthly reviews to ensure that stringent cost control measures are in place and enforced. This will assist us in monitoring and reducing consumable costs.
     Due to the fact that the new mines are expected to start producing high volumes of ore, with better economies of scale, at higher grades, we expect that real cash operating costs in dollar per ounce terms will be reduced. This will be dependent on our achieving our operational plans. An increase is expected in revenue due to the increase in the gold price, as per our long term view on the various factors influencing the Rand gold price.
     We reassessed our labor force and implemented several measures to reduce labor costs. These measures included terminating some contractors and offering voluntary severance packages to employees.
Conops
     For some years, mining companies have been trying to implement the concept of Conops on the basis that it is, in theory, a better practice to utilize the company’s capital intensive, fixed assets for every day (excluding public holidays) of the year rather than for 80% of the year. It was estimated that Conops should result in increased production of around 25%, with a cost increase in the region of 18%, which would lead to increased profitability. We have been one of the few companies that has actually been able to implement Conops, with some degree of success and with the cooperation of the labor unions.
     However as part of our complete review of the operations in fiscal 2008, our Executive Committee took a long and hard look at the real benefits of Conops. In essence, we undertook a due diligence as if we were evaluating it for the first time.
     As a result of these assessments, Conops was stopped at all operations by the end of fiscal 2008, with the exception of Evander 8 and Target. During 2009 and 2010, Conops continued at these two operations. It was, however, decided to cease Conops at Evander 8 during June 2010.
Productivity
     The decline in productivity has been one of the challenges facing the South African gold industry for a number of years. This decline in our productivity mainly came as a result of an aging workforce, the health of the workforce that has been negatively impacted by HIV and AIDS, increased working distances from shafts and aging infrastructure. We reacted to these challenges through various initiatives including the “Healthy workforce” drive, the VCT campaign, upgrade of rail bound equipment and track work and other improvement projects.
Electricity in South Africa
Supply
     Historically, South Africa has enjoyed both low-cost electrical energy provision, and a stable supply. In early 2008, however, the national power utility Eskom experienced a major capacity shortage resulting in country-wide blackouts and reduced energy supply. The mining industry was severely affected for a period of five days in January 2008, and thereafter Eskom imposed limitations which continued to have an impact. We have devised new strategies so as to optimize our usage of 90% of our previous electricity supply allowed in terms of the Energy Conservation Scheme (“ECS”) and interim rules imposed by Eskom. All operations were allocated an ECS allocation in line with the Eskom allocation and equipment and management structures were put in place to monitor and manage real-time consumption. Since 2008, we have reduced our electricity consumption by 28%.

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     Applications submitted to Eskom for additional energy allocation to the four future growth projects were approved, enabling us to proceed with the projects and to ramp-up to full capacity utilizing Eskom power. We also submitted applications for additional power allocation for four metallurgical projects in the Free State, which were also approved by Eskom. Annual re-submissions for the verification of the fiscal 2010/2011 allocations, including additional allocation for all approved projects, and Nominated Maximum Demand (“NMD”) to secure adequate network capacity were made to Eskom in June 2010 as required by the interim ECS and new NMD rules.
Government at national level intervened to develop an integrated resource plan in order to arrest the supply constraint situation and map a long-term plan to add much needed generation capacity to the grid according to projected electricity demand increase. It is also expected that the electricity supply constraint situation will intensify towards the end of calendar 2010 and that it will continue to worsen until the first generators at the 4 800 MW Medupi power station are commissioned in calendar 2012. Alleviation of the situation will however remain dependant on Eskom’s ability to execute the build program successfully and on time as well as the successful development and implementation of the integrated resource plan. We will remain a voluntary participant in the ECS until such time that the national ECS becomes compulsory and Eskom relationships are maintained on this basis. The challenge for us is to improve production to the required levels without compromising the cost-saving initiatives achieved during fiscal 2008 and 2009.
Cost
     The average 25% per annum tariff increase for the three year multi-year price determination period (“MYPD”), as approved by NERSA, contributes significantly to escalate the cost of production well above inflationary figures in the foreseeable future. Electricity price projections based on the approved tariffs and extrapolations indicate that electricity costs could be as high as 25% of the total cost of production within the next five years. Spiralling electricity costs sparked renewed electrical consumption awareness where operations and service departments alike are actively analysing all opportunities to improve energy efficiency and optimising electricity usage.
Renewable energy
     The Eskom supply constraint renewed South African industry’s interest in renewable energy and various companies have obtained access to internationally-proven technology that was previously not readily available or affordable in South Africa. Investigations into solar heating and solar electricity generation initiatives are currently underway to identify viable projects that could potentially contribute towards our energy efficiency improvement and carbon footprint reduction.
     Although progress has been made with the investigations, capital cost and subsequent cost of generation remain high and are not yet comparable to Eskom-projected tariffs. This has not deterred the willingness of industry to participate in such projects, a number of which are being considered currently. Technical development of renewable technologies are however accelerating, with international implementation contributing towards cost reduction. International investors with access to green funds are also interested in South African renewable projects. This latest development can open the door to enter into direct private power agreements at Eskom with comparable tariffs in the foreseeable future.
Results of Operations
Years Ended June 30, 2010 and 2009
Continuing Operations
Revenues
     Revenue increased by US$212 million, or 17%, from US$1,277 million in fiscal 2009 to US$1,489 million in fiscal 2010. This increase can primarily be attributed to the higher average price of gold received by us, US$1,092 per ounce in fiscal 2010 compared to US$867 per ounce in 2009. This was offset by a decrease in ounces sold.
     Our gold sales decreased 109,699 ounces, or 7%, from 1,473,562 in fiscal 2009 to 1,363,863 (excluding the capitalized ounces from Target 3, Steyn 2 and Hidden Valley) in fiscal 2010. The grade recovered was constant, at 0.07 ounces per ton in fiscal 2010 and 2009.The decrease in ounces can be attributed to the operations in Evander and Virginia being placed on care and maintenance.
     At Bambanani ounces sold increased by 11%, from 119,665 in fiscal 2009 to 133,105 in fiscal 2010. This was due to a better recovery grade which increased from 0.213 in fiscal 2009 to 0.227 in fiscal 2010.

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     At Doornkop ounces sold increased by 44% from 43,211 in fiscal 2009 to 62,275 in fiscal 2010. This is due to the higher recovery grade, which improved from 0.070 in fiscal 2009 to 0.105 in fiscal 2010 due to the change in the mining mix by the increase in higher grade ore from the South Reef section.
     At Evander ounces sold decreased by 43%, from 195,668 in fiscal 2009 to 111,499 in fiscal 2010. This was primarily due to a decrease in production volumes as a result of the closure of Evander 2, 5 and 7 shafts.
     At Phakisa ounces sold increased from 21,477 in fiscal 2009 to 44,496 in fiscal 2010. This was due to an increase in production volumes as the various sections moved into production, building up to full production in the next three to five years.
At Target ounces sold increased by 22% from 87,611 in fiscal 2009 to 106,837 in fiscal 2010. This is due to higher production volumes of 857,000 tons in fiscal 2010, compared with 710,000 tons in fiscal 2009.
At Virginia ounces sold decreased to 173,035 ounces from 259,070 in fiscal 2009. This is due to the closure of Harmony 2, Brand 3 and Merriespruit 3 shafts during fiscal 2010.
At Hidden Valley in PNG ounces sold was 8,327 in fiscal 2010. This was the first year that production has been recognized from the operation.
Cost of sales
     Cost of sales includes production costs, depreciation and amortization, impairment of assets and employment termination and restructuring costs.
a) Production costs (cash costs)
     The following table sets out our total ounces produced and weighted average cash costs per ounce for fiscal 2010 and fiscal 2009:
                                         
                                    Percentage
    Year Ended June 30,   Year Ended June 30,   (Increase)/decrease
    2010   2009   in Cash
    (oz)   ($/oz)   (oz)   ($/oz)   Costs per ounce
SOUTH AFRICA
                                       
 
                                       
Bambanani(1)
    133,007       723       121,530       611       (18.3 )
Doornkop
    62,694       822       42,150       804       (2.2 )
Evander
    111,724       1,018       190,075       572       (78.0 )
Joel
    64,495       792       65,684       636       (24.3 )
Kusasalethu (2)
    175,029       857       174,321       660       (29.8 )
Masimong
    155,609       602       154,034       476       (26.5 )
Phakisa
    44,079       953       22,216       555       (71.7 )
Target (3)
    113,782       783       87,225       645       (21.4 )
Tshepong
    216,986       677       230,778       483       (40.2 )
Virginia
    170,013       1,036       258,170       638       (62.4 )
Other — surface
    119,954       680       114,648       521       (30.5 )
INTERNATIONAL
                                       
PNG (4)
    61,173       1,003                   (100 )
 
                                       
Total continuing operations
    1,428,544               1,460,831                  
Weighted average
            801               583       (37.4 )
 
(1)   Includes 1,061 ounces from President Steyn 2 shaft, which have not been included in the cash cost calculation as the shaft was not in production.
 
(2)   Previously known as Elandsrand.
 
(3)   Includes 3,762 ounces from Target 3, which have not been included in the cash cost calculation as the shaft was not in production.
 
(4)   Includes 46,223 ounces for the period ended April 2010, which have not been included in the cash cost calculation as the operation was not in production during that period.
     Our average cash costs from continuing operations increased by US$218 per ounce, or 37.4%, from US$583 per ounce in fiscal 2009 to U.S$801 per ounce in fiscal 2010. Cash costs per ounce vary with the working costs per ton (which is, in turn, affected by the number of tons

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processed) and grade of ore processed. Cash costs expressed in U.S. dollars per ounce also vary with fluctuations in the Rand-U.S. dollar exchange rate, because most of our working costs are incurred in Rand. The increase in cash cost expressed in U.S. dollars per ounce in fiscal 2010 was attributable primarily to the appreciation of the South African Rand against the U.S. dollar, as well as an increase in operating cost and the decrease in ounces produced when compared to fiscal 2009. Annual increases in labor cost as well as inflationary pressures on our consumable stores and energy costs were the main contributors towards a higher operating cost.
     At Evander, the cash costs per ounce increased by 78%, from US$572 in fiscal 2009 to US$1,018, primarily due to a decrease in ounces produced as a result of the closure of Evander 2, 5 and 7 shafts.
At Joel, the cash costs per ounce increased from US$636 in fiscal 2009 to US$792. This increase is due to the increase in labor and energy costs as well as additional costs related to the development of level 129.
At Kusasalethu the cash costs per ounce increased by 30% from US$660 in fiscal 2009 to US$857 in fiscal 2010. This increase is primarily due to the increase in labor and utility costs as well as inflationary pressures on supply costs.
     At Masimong, the cash costs per ounce increased by 27% from US$476 in fiscal 2009 to US$602 in fiscal 2010, primarily due to the higher labor and electricity costs, as well as the appreciation of the Rand against the US dollar.
     At Phakisa, the cash costs per ounce increased from US$555 to US$953, or 72%, in fiscal 2010. This was due to the increase in tons mined as a result of the planned ramp-up in production.
     At Target, the cash costs per ounce increased from US$645 in fiscal 2009 to US$783, or by 21%. This increase was due to higher production volumes, an increase in employees at the operation as well as inflationary cost increases.
     At Tshepong, the cash costs per ounce increased from US$483 in fiscal 2009 to US$677, or 40%, in fiscal 2010. This was due to the decrease in ounces produced in fiscal 2010, increases in labor and electricity costs as well as inflationary increases in material and supply costs.
     At Virginia, the cash costs per ounce increased from US$638 to US$1,036 in fiscal 2010, primarily due to the decrease in ounces produced in fiscal 2010, increases in labor and electricity costs, as well as other inflationary cost increases.
     At Hidden Valley in PNG, the cash costs per ounce was US$1,003 in fiscal 2010. The operation has started ramping up and this is the first year that its production has been included.
b) Depreciation and amortization
     Depreciation and amortization increased from US$139 million in fiscal 2009 to US$181 million in fiscal 2010, or 30%. In Rand terms, the increase was 9.7%. The increase in US dollar terms was partially due to the appreciation of the Rand against the US dollar in fiscal 2010. Also contributing to the increase was the commencement of depreciation at Hidden Valley in PNG, Doorkop and Phakisa as these operations were brought into production.
c) Employment termination and restructuring costs
     The charge for employment termination and restructuring costs increased from US$4 million in fiscal 2009 to US$27 million in fiscal 2010. The charge in fiscal 2010 relates primarily to the cost of placing the Evander and Virginia shafts on care and maintenance. The charge for fiscal 2009 relates to the voluntary retrenchment process that was commenced in December 2007 when management decided to de-centralize certain of the central services departments and the cessation of continuous operations at several of the shafts.
d) Impairment of assets
     The impairment charge decreased from US$71 million in fiscal 2009 to US$43 million in fiscal 2010. The charge in 2010 primarily relates to the impairments at the Virginia and Evander operations when several shafts at these operations were placed on care and maintenance. These operations were approaching the end of their planned lives, with between two and four years left in marginal areas. The closures were due to it no longer being economically viable to continue operating these shafts as a result of the increase in costs such as labor and electricity. The charge in fiscal 2009 relates to impairments at the Virginia, Evander and Target operations amounting to US$71 million. These impairments resulted primarily from a decrease in the expected life of mine of these operations, as well as an increase in the costs to operate the shafts. At Target and Evander, additional capital expenditure has been included in the revised life-of-mine plans in order to access reserve ounces in

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areas where geological anomalies have been discovered. These changes resulted in the carrying amount exceeding the recoverable amount.
e) Share based compensation
     The charge for share based compensation increased from US$13 million in fiscal 2009 to US$20 million in fiscal 2010. This increase is primarily attributable to the appreciation of the Rand against the US dollar, as well as the granting of additional share awards in November 2009.
Corporate, administration and other expenditure
     The charge increase from US$36 million in fiscal 2009 to US$50 million in fiscal 2010. The increase in US dollar terms was partially due to the appreciation of the Rand and Australian dollar against the US dollar.
Corporate social investment expenditure
     In fiscal 2010, the charge for corporate social investment expenditure increased from US$4 million in fiscal 2009 to US$11 million. This increase is primary due to the increase of costs related to meeting our obligations in terms of our social and labor plans, or SLPs.
Profit on sale of property, plant and equipment
     The profit decreased from US$114 million in fiscal 2009 to US$14 million in fiscal 2010. The profit for fiscal 2009 included the sale of 50% of our interest in the PNG gold and copper assets to Newcrest, which contributed US$112 million to the total. The profit for fiscal 2010 includes the sale of the Jeanette prospecting rights to Taung Gold Limited for a total consideration and profit of US$10 million, and the sale of royalty rights in Australia to Regis Resources Limited for a total consideration and profit of US$4 million.
Other expenses — net
     The charge for other expenses increased to US$8 million, compared with a charge of US$3 million in fiscal 2009. The charge for fiscal 2010 includes a loss of US$12 million relating to the translation of intercompany loans within the Australian operations which do not form part of the net investment in foreign operations. Included in the total for fiscal 2009 is a charge of US$22 million recognized in the income statement for the foreign exchange movements after the de-designation of loans previously designated as forming part of the net investment in foreign operations. Also included in the total for fiscal 2009 is an amount of US$53 million relating to the reclassification to the income statement, following the partial repayment of the loans, of a portion of the accumulated gains recorded in equity that arose while these loans were considered to form part of the net investment in the foreign operations. During fiscal 2010, bad debts written off increased from US$3 million in fiscal 2009 to US$4 million. A credit of US$2 million was recorded against the provision for bad debts in fiscal 2010. This compared favorably with the provision for bad debts of US$11 million in fiscal 2009.
Profit from associates
     The profit from associates was US$7 million in fiscal 2010, compared to US$1 million in fiscal 2009. The increase relates primarily to inclusion of a full year of profits from Rand Uranium in fiscal 2010, compared to the seven months in fiscal 2009 since acquisition on November 21, 2008. Also contributing to the increase was the fact that no losses where included for Pamodzi in fiscal 2010, compared to losses amounting to US$4 million in fiscal 2009.
Impairment of investment in associate
     The charge in fiscal 2009 for the impairment of investment in associate relates primarily to the impairment of the investment in Pamodzi. When Pamodzi was placed into liquidation and the trading of its shares on the JSE suspended during fiscal 2009, the investment was fully impaired.
Loss on sale of investment in subsidiary
     The amount in fiscal 2010 relates to the sale of the Australian subsidiary, Big Bell, after taking the reclassification of foreign exchange losses recorded in other reserves into account.

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Net gain/(loss) on financial instruments
     The gain of US$5 million in fiscal 2010 relates primarily to the fair value gains on the equity-linked deposits held by the environmental trusts, which are classified as fair value through profit or loss investments. Also contributing to the gain is the realized portion of mark-to-market gains prevously recognized in other reserves being reclassified to the income statement on the disposal of certain listed investments during the year. The loss in fiscal 2009 relates primarily to the impairment of the investment in Dioro of US$11 million reclassified from other reserves to the income statement when the investment was considered to be permanently impaired at December 31, 2008. This was offset by the subsequent gain recognized in the income statement on the disposal of the investment in April 2009.
Investment income
     Investment income decreased from US$49 million in fiscal 2009 to US$25 million in fiscal 2010, primarily due to the reduction in interest received on cash balances and loans receivables, where the balances were lower, throughout the year. Interest received from the investments held by the environmental trusts was also lower as the profile of these investment portfolios were diversified from cash only to include equity-linked deposits.
Finance costs
     Finance costs increased from US$24 million in fiscal 2009 to US$32 million in fiscal 2010. This was due primarily to the decrease in interest capitalized to qualifying assets, from US$31 million in fiscal 2009 to US$nil in fiscal 2010, as well as the increase of US$6 million in the time value of money and inflation component of rehabilitation costs from fiscal 2009.
Income and Mining Taxes
     South Africa. We pay taxes on mining income and non-mining income. The amount of our South African mining income tax is calculated on the basis of a formula that takes into account our total revenue and profits from, and capital expenditures for, mining operations in South Africa. 5% of total mining revenue is exempt from taxation in South Africa as a result of the application of the applicable gold mine formula. The amount of revenue subject to taxation is calculated by deducting qualifying capital expenditures from taxable mining income. The amount by which the taxable mining income exceeds 5% of mining revenue constitutes taxable mining income. We and our subsidiaries each make our own calculation of taxable income.
     The tax rate applicable to the mining and non-mining income of a gold mining company depends on whether the company has elected to be exempt from the Secondary Tax on Companies (“STC”). STC is a tax on dividends declared and, at present, the STC tax rate is equal to 10% (previously 12.5%). To the extent we receive dividends, such dividends received are offset against the amount of dividends paid for purposes of calculating the amount subject to STC. In 1993, all existing South African gold mining companies had the option to elect to be exempt from STC. If the election was made, a higher tax rate would apply for both mining and non-mining taxable income. In 2009 and 2008, the tax rates for companies that elected the STC exemption were 43% for mining income and 35% for non-mining income, compared with 34% for mining income and 28% for non-mining income if the STC exemption election was not made. In 1993, the Harmony Company elected to pay the STC tax. All of our South African subsidiaries, excluding Avgold, elected the STC exemption.
                 
Income and Mining Tax   2010   2009
Effective tax rate expense
    183 %     9 %
     The effective tax rate for fiscal 2010 was higher than the statutory tax rate of 43% for us and our subsidiaries as a whole. The higher effective tax rate results primarily from non-deductible expenses and changes in the rates used to provide deferred tax at our South African operations, offset by the additional capital allowance we receive at our Avgold operation (effectively resulting in no tax payable at this operation).
     Deferred tax rates for the South African operations are calculated based on estimates of the future profitability of each ring-fenced mine when temporary differences will reverse. The future profitability of each ring-fenced mine, in turn, is determined by reference to the life-of-mine plan for that operation, which is is based on parameters such as the Group’s long term view of the US$ gold price and the Rand/US$ exchange rate, as well as the reserves declared for the operation. As some of these parameters are based on market indicators, they differ from one year to the next. In addition, the reserves may also increase or decrease based on updated or new geological information. Changes in the future profitability if each ring-fenced mine impact the deferred tax rates used to recognize temporary differences at these operations. See “— Critical Accounting Policies and Estimates — Deferred taxes.” The increase in deferred tax on temporary differences due to changes in estimated effective tax rates results primarily from increases in the effective deferred tax rate at Evander Gold Mines Limited and Harmony Gold Mining Company Limited. The deferred tax rate for Evander Gold Mines Limited increased from 6.9% in fiscal 2009 to 22.9% in fiscal 2010 due to the increased estimated profitability of the operation over the life-of-mine as a result of the closure of loss-making shafts, as well as an increase in the gold price and a planned decrease in capital expenditure. Similarly, Harmony Gold Mining Company Limited’s deferred tax rate increased from 17.1% to 23.1 mainly as a result of the closure of loss-making shafts.

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     Australia. Generally, Australia imposes tax on the worldwide income (including capital gains) of all of our Australian incorporated and tax resident entities. The current income tax rate for companies is 30%. Ongoing business, mining, exploration and rehabilitation costs incurred each year are fully deductible. The cost of plant and capital mining expenditure may be depreciated and deducted over its effective life.
     Harmony Gold Australia Proprietary Limited and its wholly owned Australian subsidiary companies are recognized and taxed as a single entity. Under the consolidations rules all of the Australian subsidiary companies are treated as divisions of the Head Company, Harmony Gold Australia. As a result inter company transactions between group members are generally ignored for tax purposes. This allows the group to transfer assets between group members without any tax consequences, and deems all tax losses to have been incurred by the Head Company of the group.
     Withholding tax is payable on dividends, interest and royalties paid by Australian residents to non-residents, which would include any dividends on the shares of our Australian subsidiaries that are paid to us. In the case of dividend payments to non-residents, a 30% withholding tax applies. However, where the recipient of the dividend is a resident of a country with which Australia has concluded a double taxation agreement, the rate of withholding tax is generally limited to 15% (or in the case of South Africa 5% where the dividend is paid to a company which controls at least 10% of the Australian dividend paying company). Where dividends are fully franked, no withholding tax applies as an effective credit is allowed against any withholding tax otherwise payable, regardless of whether a double taxation agreement is in place. However, due to the tax profile of Harmony Gold Australia it is not expected to have any franking credits in the foreseeable future.
     PNG. The Hidden Valley Project in PNG commenced operations in fiscal 2010. We are also reviewing other potential projects and carrying out extensive exploration.
     PNG mining projects are taxed on a project basis. Therefore each project is taxed as a separate entity, even though it may be one of a number of projects carried on by the same company. In certain circumstances there is an ability to transfer the tax benefit obtained through exploration expenditure between projects and wholly owned companies. Tax losses are generally quarantined and cannot be transferred between projects.
     PNG mining companies are taxed at a rate of tax of 30%. Mining operations in PNG are subject to a 2% royalty which is payable to the PNG Government.
     Capital development and exploration expenditure incurred in PNG is capitalized for tax purposes and can be generally deducted at 25% per annum on a diminishing value basis against project income, with the deduction being limited to the lesser of 25% of the diminished value or the income of the project for the year.
     PNG imposes dividend withholding tax of 10% on dividends paid by PNG mining operations to non residents. Although PNG also imposes interest withholding tax on interest paid off-shore, the PNG Tax Act exempts interest paid to non resident lenders from withholding tax where the PNG company is engaged in mining operations in PNG.
Discontinued Operations
Revenues
     Revenues decreased from US$69 million in fiscal 2009 to US$nil in fiscal 2010. This was due to the fact that the Cooke operation was sold in November 2008 and that Mount Magnet was placed on care and maintenance in December 2007.
Costs
     Costs decreased from US$103 million in fiscal 2009 to US$4 million in fiscal 2010. This was due to fact that the sale of the Cooke operation was recognized in November 2008.
Reversal of impairment
     The gain recognized in fiscal 2009 relates to the reversal of impairment when Mount Magnet was re-measured in terms of IFRS 5 on no longer being classified as held for sale.
Profit on sale of shares
     The profit on shares in fiscal 2009 relates to the sale of the Cooke operations in November 2008.

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Income and Mining Taxes
     South Africa. We pay taxes on mining income and non-mining income. For details, refer to the discussion under “Income and Mining Taxes” in the Continuing Operations section.
     In 2010 and 2009, the tax rates for companies that elected the STC exemption were 43% for mining income and 35% for non-mining income, compared with 34% for mining income and 28% for non-mining income if the STC exemption election was not made.
     Australia. We pay taxes on mining income and non-mining income. For details, refer to the discussion under “Income and Mining Taxes” in the Continuing Operations section. In fiscal 2010 and 2009, the income tax rate for companies was 30%.
Continuing and discontinued operations
Net (loss)/profit
     The net (loss)/profit decreased from a net profit of US$311 million in fiscal 2009 to a net loss of US$24 million. This is due to the factors discussed above.
Years Ended June 30, 2009 and 2008
Continuing Operations
Revenues
     Revenue increased US$8 million, or 1%, from US$1,269 million in fiscal 2008 to US$1,277 million in fiscal 2009. This was mainly due to the higher average price of gold received by us, US$867 per ounce in 2009 compared to US$813 per ounce in 2008. This was offset by the decrease in ounces sold.
     Our gold sales decreased 76,965 ounces, or 5%, from 1,550,527 in fiscal 2008 to 1,473,562 in fiscal 2009. The grade recovered was lower, at 0.07 ounces per ton in fiscal 2009 compared to 0.08 ounces per ton in fiscal 2008, negatively impacting on the ounces produced. The lower recovery grade was as a result of the increase in tons treated from surface tailings dams at a lower recovery grade.
     At Bambanani ounces sold decreased by 25%, from 158,985 in fiscal 2008 to 119,665 in fiscal 2009. This was due to a lower production as a result of the restructuring due to power constraints. This was offset by a better recovery grade which increased from 0.170 ounces per ton in fiscal 2008 to 0.213 ounces per ton in fiscal 2009.
     At Doornkop ounces sold decreased from 44,143 in fiscal 2008 to 43,211 in fiscal 2009. This is due to the lower recovery grade, which deteriorated to 0.070 in fiscal 2009, compared with 0.089 in fiscal 2008.
     At Evander ounces sold decreased by 18%, from 240,037 in fiscal 2008 to 195,668 in fiscal 2009. This was due to a decrease in production volumes as a result of the closure of the pillars in the old mine and poor environment conditions in the decline area which affected mining.
     The ounces sold at Kalgold decreased by 28% from 93,172 in fiscal 2008 to 66,841 in fiscal 2009. This was due to a 31% decrease in recovery grade from 0.055 ounces per ton in fiscal 2008 to 0.038 ounces per ton in fiscal 2009. This was due to the depletion of the D-zone.
     At Kusasalethu (previously known as Elandsrand ounces increased from 158,631 in fiscal 2008 to 183,676 in fiscal 2009. This was due to an increase in the production volumes.
     At Masimong ounces sold increased by 31%, or 37,006 ounces, from 117,575 in fiscal 2008 to 154,581 in fiscal 2009. This was due to an increase in production volumes from 892,000 tons to 981,000 tons in fiscal 2009 and a higher recovery grade of 0.157 ounces per ton due to a higher face grade being mined.
     At Phakisa ounces sold increased from 4,212 in fiscal 2008 to 21,477 in fiscal 2009. This was due to an increase in production volumes as the various sections moved into production, building up to full production in the next two to three years.

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     At Tshepong ounces sold decreased by 17%, from 273,119 in fiscal 2008 to 227,113 in fiscal 2009. This was due to a lower recovery grade of 0.152 ounces per ton compared with 0.161 ounces per ton in fiscal 2008.
Cost of sales
     Cost of sales includes production costs, depreciation and amortization, impairment of assets and employment termination and restructuring costs.
a) Production costs (cash costs)
     The following table sets out our total ounces produced and weighted average cash costs per ounce for fiscal 2009 and fiscal 2008:
                                         
                                    Percentage
    Year Ended June 30,   Year Ended June 30,   (Increase)/decrease
    2009   2008   in Cash
    (oz)   ($/oz)   (oz)   ($/oz)   Costs per ounce
SOUTH AFRICA
                                       
 
                                       
Bambanani
    121,530       611       154,879       639       4.4  
Doornkop
    42,150       804       44,038       749       (7.3 )
Evander
    190,075       572       231,799       526       (8.7 )
Joel
    65,684       636       59,557       638        
Kusasalethu
    174,321       660       164,215       652       (1.2 )
Masimong
    154,034       476       116,424       756       37.0  
Phakisa
    22,216       555       4,024       497       (11.7 )
Target
    87,225       645       79,602       716       9.9  
Tshepong
    230,778       483       265,914       455       (6.2 )
Virginia
    258,170       638       247,820       726       12.1  
Other — underground
                8,305       1,565       (100 )
Other — surface
    114,648       521       147,980       378       (37.8 )
 
                                       
INTERNATIONAL
                                       
PNG
                             
Other
                             
Total continuing operations
    1,460,831               1,524,557                  
Weighted average
            583               600       2.8  
     Our average cash costs from continuing operations decreased by US$17 per ounce, or 2.8%, from US$600 per ounce in fiscal 2008 to US$583 per ounce in fiscal 2009. Cash costs per ounce vary with the working costs per ton (which is, in turn, affected by the number of tons processed) and grade of ore processed. Cash costs expressed in U.S. dollars per ounce also vary with fluctuations in the Rand-U.S. dollar exchange rate, because most of our working costs are incurred in Rand. The decrease in cash cost expressed in U.S. dollars per ounce in fiscal 2009 was attributable primarily to the depreciation of the South African Rand against the U.S. dollar. This was offset by an increase in operating cost as well as the decrease in ounces produced when compared to fiscal 2008. Annual increases in labor cost as well as inflationary pressures on our consumable stores and energy costs were the main contributors towards a higher operating cost.
     At Doornkop, the cash costs per ounce increased by 7%, from US$749 in fiscal 2008 to US$804 in fiscal 2009, primarily due to labor, consumables and services cost increases.
     At Evander, the cash costs per ounce increased by 9%, from US$526 in fiscal 2008 to US$572 in fiscal 2009, primarily due to a decrease in ounces produced.
     At Masimong, the cash costs per ounce decreased by 37% from US$756 in fiscal 2008 to US$476 in fiscal 2009, primarily due to the restructuring and cessation of Conops, as well as an increase in ounces produced.
     At Phakisa, the cash costs per ounce increased from US$497 in fiscal 2008 to US$555, or 12%, in fiscal 2009. This was due to an increase in tons mined as a result of the planned ramp-up in production.
     At Target, the cash costs per ounce decreased from US$716 in fiscal 2008 to US$645, or 10%, in fiscal 2009. This reduction was due to higher gold production.

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     At Tshepong, the cash costs per ounce increased from US$455 in fiscal 2008 to US$483, or 6%, in fiscal 2009. This was due to the decrease in ounces produced in fiscal 2009 as well as increases in labor and electricity costs.
     Under Other — Surface, the cash costs per ounce at Kalgold increased by 26% from US$401 in fiscal 2008 to US$506 in fiscal 2009, primarily due to the decrease in ounces produced. Also contributing was an increase of 40% at Phoenix, from US$381 to US$534, as a result of a decrease in grade.
b) Depreciation and amortization
     Depreciation and amortization increased to US$139 million in fiscal 2009 from US$117 million in fiscal 2008. This increase relates to the increase is the commencement of depreciation at Tshepong’s Sub 66 Decline as well as the acceleration at Evander and Bambanani as a result of the decrease in the reserves used as a denominator in the calculation.
c) Employment termination and restructuring costs
     The charge for employment termination and restructuring costs decreased from US$29 million in fiscal 2008 to US$4 million in fiscal 2009. The charges relate to the voluntary retrenchment process that was initiated in December 2007 when management decided to decentralize certain of the central services departments and the cessation of Conops at several of the operations.
d) Impairment of assets
     The impairment charge increased from US$40 million in fiscal 2008 to US$71 million in fiscal 2009. The charge in fiscal 2009 relates to impairments at the Virginia, Evander and Target operations amounting to US$71 million. These impairments resulted primarily from a decrease in the expected life of mine of these operations, as well as an increase in the costs to operate the shafts. At Target and Evander, additional capital expenditure has been included in the revised life of mine plans in order to access reserve ounces in areas where geological anomalies have been discovered. These changes resulted in the carrying amount exceeding the recoverable amount. The charge in fiscal 2008 relates to impairments at the Evander and other underground operations as well as surface operations (Kalgold). Included in the amount is US$13 million for goodwill related to certain shafts that were included under “Other — Underground”. These impairments resulted primarily from a decrease in the expected life of mine of these operations, as well as an increase in the costs to operate the shafts. These changes resulted in the carrying amount exceeding the recoverable amount.
e) Share based compensation
     The charge for share based compensation increased from US$6 million in fiscal 2008 to US$13 million in fiscal 2009. This increase is primarily attributable to the higher grant date fair value of share options granted to eligible employees in December 2008. Also included in the charge for 2009 is the acceleration of the cost relating to unvested shares attributable to the employees at the Cooke operations who were transferred to Rand Uranium.
Corporate, administration and other expenditure
     The charge increase from US$30 million in fiscal 2008 to US$36 million in fiscal 2009, primarily as a result of the allocation of certain central service departments and employees to the corporate budget, which is not included in production costs.
Profit on sale of property, plant and equipment
     The profit increased from US$nil in fiscal 2008 to US$114 million in fiscal 2009, primarily as a result of the sale of 50% of our interest in the PNG gold and copper assets to Newcrest.
Other expenses — net
     The charge for other expenses decreased to US$3 million, compared with a charge of US$15 million in fiscal 2008. Included in the total for fiscal 2009 is a charge of US$22 million recognized in the income statement for the foreign exchange movements after the de-designation of loans previously designated as forming part of the net investment in foreign operations. The amount in fiscal 2008 was a credit of US$15 million. Also included in the total for fiscal 2009 is an amount of US$53 million relating to the reclassification to the income statement, following the partial repayment of the loans, of a portion of the accumulated gains recorded in equity that arose while these loans were considered to form part of the net investment in the foreign operations. During fiscal 2009, bad debts amounting to US$3 million were written off. A provision for bad debts of US$11 million was also raised in fiscal 2009, a decrease from fiscal 2008 of US$2 million.

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Profit/(loss) from associates
     The profit from associates was US$1 million in fiscal 2009, compared to the loss of US$11 million in fiscal 2008. The increase relates primarily to inclusion of profits from Rand Uranium since acquisition on November 21, 2008. This was offset by the losses from Pamodzi of US$4 million in fiscal 2009. The loss in fiscal 2008 relates to losses from Pamodzi recognized from the date of acquisition.
Impairment of investment in associate
     The charges in fiscal 2009 and 2008 for the impairment of investment in associate relates primarily to the impairment of the investment in Pamodzi. When Pamodzi was placed into liquidation and the trading of its shares on the JSE suspended during fiscal 2009, the investment was fully impaired. At June 30, 2008, management determined that the recoverable amount of the investment was US$19 million, which represented the market value of the listed shares on that date.
Net (loss)/gain on financial instruments
     The loss in fiscal 2009 relates primarily to the impairment of the investment in Dioro of US$11 million reclassified from other reserves to the income statement when the investment was considered to be permanently impaired at December 31, 2008. This was offset by the subsequent gain recognized in the income statement on the disposal of the investment in April 2009. The gain in fiscal 2008 relates to the investment in ARM Limited held by the ARM Empowerment Trust, where the increase in the share value of the ARM Limited shares above R29 (US$4.62) per share was limited to the interest capitalized on the Nedbank loan.
Loss on sale of listed investments
     The loss on sale of listed investments of US$63 million in fiscal 2008 relates to the sale of the remainder of the investment in Gold Fields.
Investment income
     Investment income increased from US$39 million in fiscal 2008 to US$49 million in fiscal 2009, primarily due to the increase in interest received on cash balances, which were higher throughout the year, as well as on held-to-maturity investments held by our environmental trust funds.
Finance costs
     Finance costs decreased from US$70 million in fiscal 2008 to US$24 million in fiscal 2009. This was due primarily to the decrease in interest rates as well as the decrease in the balance of the outstanding debt. Also contributing to the decrease in finance cost expensed was the increase in interest capitalized to qualifying assets, from US$22 million in fiscal 2008 to US$31 million in fiscal 2009.
Income and Mining Taxes
     South Africa. We pay taxes on mining income and non-mining income. The amount of our South African mining income tax is calculated on the basis of a formula that takes into account our total revenue and profits from, and capital expenditures for, mining operations in South Africa. 5% of total mining revenue is exempt from taxation in South Africa as a result of the application of the applicable gold mine formula. The amount of revenue subject to taxation is calculated by deducting qualifying capital expenditures from taxable mining income. The amount by which the taxable mining income exceeds 5% of mining revenue constitutes taxable mining income. We and our subsidiaries each make our own calculation of taxable income.
     The tax rate applicable to the mining and non-mining income of a gold mining company depends on whether the company has elected to be exempt from the Secondary Tax on Companies, (“STC”). STC is a tax on dividends declared and, at present, the STC tax rate is equal to 10% (previously 12.5%). To the extent we receive dividends, such dividends received are offset against the amount of dividends paid for purposes of calculating the amount subject to STC. In 1993, all existing South African gold mining companies had the option to elect to be exempt from STC. If the election was made, a higher tax rate would apply for both mining and non-mining taxable income. In 2009 and 2008, the tax rates for companies that elected the STC exemption were 43% for mining income and 35% for non-mining income, compared with 34% for mining income and 28% for non-mining income if the STC exemption election was not made. In 1993, the Harmony Company elected to pay the STC tax. All of our South African subsidiaries, excluding Avgold, elected the STC exemption.

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Income and Mining Tax   2009   2008
Effective tax rate expense
    9 %     (167 %)
     The effective tax rate for fiscal 2009 was lower than the statutory tax rate of 43% for us and our subsidiaries as a whole. The lower effective tax rate results primarily from changes in the rates used to provide deferred tax at our South African operations and the additional capital allowance we receive at our Avgold operation (resulting in no tax payable at the operation). Offsetting this is non-deductible expenses and prior year adjustments. Included in the non-deductible expenses is non-deductible interest of US$17 million, impairments of US$20 million, as well as US$24 million relating to transfer pricing.
     Deferred tax rates for the South African operations are calculated based on estimates of the future profitability of each ring-fenced mine when temporary differences will reverse. The future profitability of each ring-fenced mine, in turn, is determined by reference to the life-of-mine plan for that operation, which is is based on parameters such as the Group’s long term view of the US$ gold price and the Rand/US$ exchange rate, as well as the reserves declared for the operation. As some of these parameters are based on market indicators, they differ from one year to the next. In addition, the reserves may also increase or decrease based on updated or new geological information. Changes in the future profitability if each ring-fenced mine impact the deferred tax rates used to recognize temporary differences at these operations. See “— Critical Accounting Policies and Estimates — Deferred taxes.” The decrease in deferred tax on temporary differences due to changes in estimated effective tax rates results primarily from a decrease in the effective deferred tax rate for Evander Gold Mines Limited and Randfontein Estates Limited. The deferred tax rate for Evander Gold Mines Limited decreased from 27.7% in fiscal 2008 to 6.9% in fiscal 2009. This was primarily due to a decrease in profitability over the life-of-mine as a result of the significant increase in working costs as well as capital expenditure. This was offset by an increase in the gold price. Similarly, Randfontein Estates Limited’s deferred tax rate increased from 28.4% to 20.0% for the same reasons.
     Australia. Generally, Australia imposes tax on the worldwide income (including capital gains) of all of our Australian incorporated and tax resident entities. The current income tax rate for companies is 30%. Ongoing business, mining, exploration and rehabilitation costs incurred each year are fully deductible. The cost of plant and capital mining expenditure may be depreciated and deducted over its effective life.
     Harmony Gold Australia Proprietary Limited and its wholly owned Australian subsidiary companies are recognized and taxed as a single entity. Under the consolidations rules all of the Australian subsidiary companies are treated as divisions of the Head Company, Harmony Gold Australia. As a result all inter company transactions between group members are ignored for tax purposes. This allows the group to transfer assets between group members without any tax consequences, and deems all tax losses to have been incurred by the Head Company of the group.
     Mining operations in Western Australia are also subject to a 2.5% gold royalty because the mineral rights are owned by the State Government. All gold production from the Mount Magnet operations is subject to this royalty.
     Withholding tax is payable on dividends, interest and royalties paid by Australian residents to non-residents, which would include any dividends on the shares of our Australian subsidiaries that are paid to us. In the case of dividend payments to non-residents, a 30% withholding tax applies. However, where the recipient of the dividend is a resident of a country with which Australia has concluded a double taxation agreement, the rate of withholding tax is generally limited to 15% (or in the case of South Africa 5% where the dividend is paid to a company which controls at least 10% of the Australian dividend paying company). Where dividends are fully franked, no withholding tax applies as an effective credit is allowed against any withholding tax otherwise payable, regardless of whether a double taxation agreement is in place.
     PNG. The Hidden Valley Project in PNG is expected to commence operations in fiscal 2010. We are also reviewing other potential projects and carrying out extensive exploration.
     PNG mining projects are taxed on a project basis. Therefore each project is taxed as a separate entity, even though it may be one of a number of projects carried on by the same company. In certain circumstances there is an ability to transfer the tax benefit obtained through exploration expenditure between projects and wholly owned companies. Tax losses are generally quarantined and cannot be transferred between projects.
     PNG mining companies are taxed at a rate of tax of 30%.
     Capital development and exploration expenditure incurred in PNG is capitalized for tax purposes and can be generally deducted at 25% per annum on a diminishing value basis against project income.

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     PNG imposes dividend withholding tax of 10% on dividends paid by PNG mining operations to non residents. Although PNG also imposes interest withholding tax on interest paid off-shore, the PNG Tax Act exempts interest paid to non resident lenders from withholding tax where the PNG company is engaged in mining operations in PNG.
Discontinued Operations
Revenues
     Revenues decreased from US$312 million in fiscal 2008 to US$69 million in fiscal 2009, due to the fact that the Cooke operation was sold in November 2008 and Mount Magnet was placed on care and maintenance during December 2007.
Costs
     Costs decreased from US$243 million in fiscal 2008 to US$75 million in fiscal 2009. This was due to the recognition of the sale of the Cooke operation in November 2008.
Reversal of impairment
     The gain recognized in fiscal 2009 relates to the reversal of impairment when Mount Magnet was re-measured in terms of IFRS 5 on no longer being classified as held for sale.
Profit on sale of shares
     The profit on shares in fiscal 2009 relates to the sale of the Cooke operations in November 2008. The profit on sale of shares for fiscal 2008 relates to the profit of US$9 million on the sale of Orkney.
Profit on sale of property, plant and equipment
     The profit of US$4 million in fiscal 2008 relates primarily to the profit on sale of tenements in Australia of US$14 million. This was offset by the loss of US$13 million on the sale of South Kalgoorlie.
Income and Mining Taxes
     South Africa. We pay taxes on mining income and non-mining income. For details, refer to the discussion under “Income and Mining Taxes” in the Continuing Operations section.
     In 2009 and 2008, the tax rates for companies that elected the STC exemption were 43% for mining income and 35% for non-mining income, compared with 34% for mining income and 28% for non-mining income if the STC exemption election was not made.
     Australia. We pay taxes on mining income and non-mining income. For details, refer to the discussion under “Income and Mining Taxes” in the Continuing Operations section. In fiscal 2009 and 2008, the income tax rate for companies was 30%.
Continuing and discontinued operations
Net profit/(loss)
     The net profit/(loss) increased from a net loss of US$30 million in fiscal 2008 to a net profit of US$311 million. This is due to the factors discussed above.
Recent Accounting Pronouncements
     IFRS 1 (Amendment): First-time Adoption of International Financial Reporting Standards — Additional Exemptions for First-time Adopters (effective for periods beginning on or after January 1, 2010). The amendment addresses the retrospective application of IFRSs to particular situations including: the use of deemed cost for oil and gas assets; determination of whether an arrangement contains a lease; and decommissioning liabilities included in the cost of property, plant and equipment and is aimed at ensuring that the entities applying IFRSs will not face undue cost or effort in the transition process. This amendment will not have an impact on the group.
     IFRS 1 (Amendment): First-time Adoption of International Financial Reporting Standards — Limited Exemptions from Comparative IFRS 7 Disclosures for First-time Adopters (effective for periods beginning on or after July 1, 2010). The additional amendment relieves first-time

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adopters of IFRSs from presenting comparative information for new three level classification disclosures required by the March 2009 amendments to IFRS 7 “Financial Instruments: Disclosures”. It thereby ensure that first-time adopters benefit from the same transition provisions that amendments to IFRS 7 provides to current IFRS preparers. This amendment will not have an impact on the group.
     IFRS 2 (Amendment) — Group cash-settled and share-based payment transactions (effective from periods beginning January 1, 2010). The amendment provide a clear basis to determine the classification of share based payments in consolidated and separate financial statements. In addition to incorporating IFRIC 8, ‘Scope of IFRS 2’, and IFRIC 11, ‘IFRS 2 — group and treasury share transactions’, the amendment also expand on the guidance in IFRIC 11 to address group arrangements that were not considered by that interpretation. The group does not have a cash settled share based payments scheme.
     IFRS 5 (Amendment) — Measurement of non-current assets (or disposal groups) classified as held for sale (effective from periods beginning January 1, 2010). The amendment is part of the International Accounting Standards Board’s (“IASB”) annual improvements project published in April 2009. The amendment provides clarification on disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty). The group is still in process of determining the effect of this amendment on the financial statements.
     IFRS 9 — Financial instruments (effective from periods beginning January 1, 2013). IFRS 9 simplifies accounting for financial assets as requested by many constituents and stakeholders. In particular, it replaces multiple measurement categories in IAS 39 with a single principle-based approach to classification. IFRS 9 removes complex rule-driven embedded derivative guidance in IAS 39 and requires financial assets to be classified in their entirety. IFRS 9 eliminates the need for multiple impairment models, such that only one impairment model for financial assets carried at amortized cost will be required. The group is still in the process of determining the effect of this standard on the financial statements.
     IAS 1 (Amendment) — Presentation of financial statements (effective from periods beginning January 1, 2010). The amendment is part of the IASB’s annual improvements project published in April 2009. The amendment provides clarification that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time.
     IAS 7 (Amendment) — Statement of cash flows (effective from periods beginning January 1, 2010). The amendment is part of the IASB’s annual improvements project published in April 2009. The amendment clarifies that only expenditure that results in a recognized asset in the statement of financial position can be classified as a cash flow from investing activities. The group currently does not expect the amendment to impact the financial statements.
     IAS 17 (Amendment) — Leases (effective from periods beginning January 1, 2010). The amendment is part of the IASB’s annual improvements project published in April 2009. The amendment deletes relevant guidance regarding classification of leases of land, so as to eliminate inconsistency with the general guidance on lease classification. As a result, leases of land should be classified as either finance or operating, using the general principles of IAS 17.
     IAS 24 (Revised) — Related-party disclosures (effective from periods beginning January 1, 2011). The revised standard removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. It also clarifies and simplifies the definition of a related party.
     IAS 32 (Amendment) — Classification of rights issues (effective from periods beginning February 1, 2010). The amendment recognizes that the previous requirement to classify foreign-currency denominated rights issued to all existing shareholders on a pro rata basis as derivative liabilities is not consistent with the substance of the transaction, which represents a transaction with owners acting in their capacity as such. The amendment therefore creates an exception to the ‘fixed for fixed’ rule in IAS 32 and requires rights issues within the scope of the amendment to be classified as equity.
     IAS 36 (Amendment) — Impairment of Assets (effective from periods beginning January 1, 2010). The amendment is part of the IASB’s annual improvements project published in April 2009. The amendment clarifies that the largest cash generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment as defined by paragraph 5 of IFRS 8 — ‘Operating segments’, that is; before the aggregation of segments with similar economic characteristics permitted by paragraph 12 of IFRS 8.
     IAS 38 (Amendment) — Intangible assets (effective from periods beginning January 1, 2010). The amendment is part of the IASB’s annual improvements project published in April 2009. The amendment clarifies the description of valuation techniques commonly used by entities when measuring the fair value of intangible assets acquired in a business combination, where there is no active market. The effect of the amendment will be recorded in future periods when such transactions are entered into.

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     IAS 39 (Amendment) — Financial instruments: Recognition and measurement (effective from periods beginning January 1, 2010). There were 3 amendments made to IAS 39 as part of the IASB’s annual improvements project published in April 2009.
(i) The scope exemption within IAS 39.2(g) was amended to clarify that it only applies to forward contracts that will result in a business combination at a future date, as long as the term of the forward contract does ‘not exceed a reasonable period normally necessary to obtain any required approvals and to complete the transaction’.
(ii) Clarification that amounts deferred in equity are only reclassified to profit or loss when the underlying hedged cash flows affect profit or loss.
(iii) An additional example of a closely related embedded prepayment option in a debt instrument was added to the adoption guidance in IAS 39 AG 30. Wording with respect to the assessment of put and call features in convertible instruments was clarified.
     IFRIC 14 (Amendment): The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction — Prepayment of Minimum Funding Requirements (effective for financial periods beginning on or after January 1, 2011). This amendment applies in the limited circumstances when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements. The amendment permits such an entity to treat the benefit of such an early payment as an asset. The group does not believe the amendment will have an impact on the group.
     IFRIC 19 — Extinguishing financial liabilities with equity instruments (effective from periods beginning July 1, 2010). This interpretation addresses the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability. It does not address the accounting by the creditor, nor does it apply to situations where the liability may be extinguished with equity instruments in accordance with the agreed terms of the instrument (for example, convertible bonds). The group currently does not expect this interpretation to have a material effect on the financial statements.
     Improvements projects. Certain improvements to IFRS 2009 (periods beginning on or after January 1, 2010) and IFRS 2010 (each has its own effective date, the earliest being periods beginning on or after July 1, 2010).
Liquidity and Capital Resources
     We centrally manage our funding and treasury policies. There are no legal or economic restrictions on the ability of our subsidiaries to transfer funds to us. We have generally funded our operations and our short-term and long-term liquidity requirements from (i) cash generated from operations, (ii) credit facilities and other borrowings and (iii) sales of equity securities.
Cash Resources
                         
    Fiscal year ended June 30,
    2010   2009   2008
    ($ in millions)
 
                       
Continuing operations
                       
Operating cash flows
    216       246       165  
Investing cash flows
    (453 )     (108 )     (313 )
Financing cash flows
    85       (233 )     78  
Foreign exchange differences
    6       8       5  
Total cash flows from continuing operations
    (146 )     (87 )     (65 )
Discontinued operation
                       
Operating cash flows
    (6 )     8       71  
Investing cash flows
          202       (16 )
Financing cash flows
                 
Foreign exchange differences
          77       (7 )
Total cash flows from discontinued operations
    (6 )     287       48  
Operations
     Net cash provided by operations is primarily affected by the quantities of gold sold, the gold price, the Rand-U.S. dollar exchange rate, cash costs per ounce and, in the case of the International operations, the Australian dollar and Kina versus U.S. dollar exchange rate. A significant adverse change in one or more of these parameters could materially reduce cash provided by operations as a source of liquidity.
     Net cash generated by operations was US$210 million in fiscal 2010, as compared with US$254 million in fiscal 2009. The decrease is attributed primarily to the increase in production costs. Also contributing to the decline is the decrease in interest received from US$51

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million in fiscal 2009 to US$25 million. Offsetting this was a decrease in interest and taxation paid of US$19 million and US$68 million, respectively.
     Net cash generated by operations was US$254 million in fiscal 2009, as compared with US$236 million in fiscal 2008. This improvement is attributable primarily to the higher gold price received during the year as well as the increase in interest received of US$13 million to US$51 million. Also contributing to the improvement is the decrease of interest paid of US$26 million to US$31 million as a result of a decrease in the outstanding debt balances. Negating the effect of the improvement was the increase in taxation paid of US$67 million to US$85 million.
Investing
     Net cash utilized by investing activities was US$453 million in fiscal 2010, as compared with net cash generated of US$94 million in fiscal 2009. This movement is mainly due to an increase in capital expenditure of US$442 million during fiscal 2010, as well as the acquisition of the Pamodzi Free State assets for US$36 million. The inclusion of proceeds on disposal of mining assets in fiscal 2009 of US$444 million as contributed to the decrease year-on-year.
     Net cash generated by investing activities was US$94 million in fiscal 2009, as compared with net cash utilized of US$329 million in fiscal 2008. This movement was mainly due to the decrease in capital expenditure during fiscal 2009 from US$552 million to US$339 million. Also contributing was an increase in proceeds on disposal of mining assets, relating to the disposal of the PNG assets to Newcrest and the Rand Uranium transaction (US$444 million). Offsetting this was an increase in the restricted cash balance (US$9 million).
Financing
     Net cash generated by financing activities was US$85 million in fiscal 2010, as compared with net cash utilized of US$233 million in fiscal 2009. This movement is primarily attributed to the reduction in repayment of borrowings of US$427 million in fiscal 2009 to US$57 million in fiscal 2010. Also contributing is the raising of the Nedbank term facility in fiscal 2010. During fiscal 2010, dividends of US$29 million was paid.
     Net cash utilized by financing activities was US$233 million in fiscal 2009, as compared with net cash generated of US$78 million in fiscal 2008. This movement was mainly due to the repayment of the convertible bond and the Nedbank loan during the year. This decrease was partially offset by the cash raised by the two share issues during the year, raising US$188 million, net of transaction costs.
Outstanding Credit Facilities and Other Borrowings
     On December 11, 2009, we entered into a loan facility with Nedbank Limited (“Nedbank”), comprising a term facility of R900 million (US$119 million) and a revolving credit facility of R600 million (US$80 million). Interest accrues on a day to day basis over the term of the loan at a variable interest rate, equal to 3 month Johannesburg Interbank Agreed Rate (“JIBAR”) plus 3.5%. Interest is repayable quarterly. The term facility is repayable bi-annually in equal instalments of R90 million (US$12 million) over five years. The revolving credit facility is repayable after three years. The term facility was fully drawn during fiscal 2010 and R300 million (US$41 million) was drawn on the revolving credit facility on April 15, 2010. We need to comply with certain debt covenants, including that the interest cover ratios shall not be less than two times and the current ratio not less than one time. We complied with the relevant covenants during fiscal 2010.
     During July 2007, Morobe Consolidated Goldfields entered into a finance lease agreement with Westpac Bank for the purchase of mining fleet to be used on the Hidden Valley project amounting to US$37 million. Interest is charged at U.S. — LIBOR plus 1.25% per annum. Interest is accrued monthly and lease instalments are repayable quarterly terminating June 30, 2013. The mining fleet financed is used as collateral for these loans. During fiscal 2009, 50% of the liability was transferred to Newcrest as part of the sale of the PNG gold and copper assets. The balance at June 30, 2010 was US$11.9 million.
Recently Retired Credit Facilities and Other Borrowings
     On July 30, 2003, AVRD entered into a term loan facility of R140 million (US$19 million) with Nedbank for the purpose of partially funding AVR’s purchase of an undivided 26% share of the Mining titles, to be contributed to the Doornkop South Reef Project with Randfontein. Interest at a fixed rate equal to JIBAR plus 2%, compounded monthly, and any stamp duties and holding costs. The terms of the loan were extended from the original maturity of July 30, 2008, to September 30, 2009. It was then extended again until March 31, 2010,, at which date all loan amounts and any interest accrued were paid in terms of the agreement between AVRD and Harmony for the disposal of AVRD’s 26% interest in Doornkop. Interest capitalized during fiscal 2010 was US$2.2 million compared to US$3.3 million in fiscal 2009 (US$4.1 million in fiscal 2008). During fiscal 2005, AVRD borrowed an additional R18 million (US$2.8 million) from its holding company

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Africa Vanguard Resources to service working capital commitments. When the disposal of AVRD’s 26% interest in Doornkop to Harmony was finalized, the loan was derecognized as AVRD was no longer considered to be an SPE. The loan was uncollateralized and interest free.
     On November 12, 2009 the Australian operations raised a new loan with BMW Finance of US$3.6 million for insurance premium funding. A deposit of US$0.7 million was paid. The loan bore interest at 6.1% and was repayable monthly in equal installments of US$0.4 million with the last installment paid in June 2010.
     On May 21, 2004, we issued R1.7 billion (US$252.0 million) in international unsecured fixed-rate convertible bonds in order to refinance our domestic Rand debt. Interest was calculated on the convertible bonds at a rate of 4.875% per annum, payable semi-annually in arrears on May 21 and November 21 of each year. The bonds were convertible at the option of the bondholders into fully paid up ordinary shares at any time on or after July 1, 2004 and up to, and including, May 15, 2009, unless they had been previously redeemed, converted or purchased and cancelled by us. The trust deed for the convertible bonds contained clauses that restricted certain of our activities, including a negative pledge, according to which we were not permitted to create or permit any mortgage, charge, lien, pledge or other form of encumbrance of security interest with respect to any part of our undertaking or assets, present or future, to secure any relevant debt, guarantee or indemnity. In addition, the trust deed contained covenants that required us to, among other things, maintain the listing of the bonds with the UK Listing Authority and to do all things necessary, in the opinion of the trustee, to give effect to the trust deed. Included in the amortization charge as per the income statement is US$0.9 million compared to US$1.2 million in fiscal 2008 and US$1.2 million in 2007 for amortization of the bond issue costs. On May 20, 2009, we repaid the convertible bond.
     On September 28, 2007, we entered into a term loan facility of R2 billion (US$283.9 million) with Nedbank Limited, for the purpose of partially funding capital expenditure in respect of projects, as well as to repay the short term bridging loan amounting to R500 million (US$68.6 million). Interest accrued on a day to day basis over the term of the loan at a variable interest rate, which is fixed for three month periods, equal to the JIBAR plus 2.75% plus banking costs. The interest is repayable every quarter commencing on September 28, 2007. During fiscal 2009, the loan was repaid in tranches, with the last tranche of R750 million (US$83.6 million) being repaid on April 21, 2009.
Contractual Obligations and Commercial Commitments
     Our contractual obligations and commercial commitments consist primarily of credit facilities, post-retirement healthcare and environmental obligations.
Contractual Obligations on the Balance Sheet
     The following table summarizes our contractual obligations as of June 30, 2010:
                                         
    Payments Due by Period
            Less Than   12-36   36-60   After 60
            12 Months   Months   Months   Months
            July 1, 2010   July 1, 2011   July 1, 2013   Subsequent
            to June 30,   to June 30,   To June 30,   June 30,
    Total   2011   2013   2015   2015
    ($’million)   ($’million)   ($’million)   ($’million)   ($’million)
 
                                       
Nedbank facility (1)
    181       37       106       38        
Westpac Bank(1)
    12       4       8              
Post retirement health care(2)
    20                         20  
Environmental obligations(3)
    222                         222  
Total contractual obligations
    435       41       114       38       242  
 
(1)   See Item 5. “Operating and Financial Review and Prospects — Liquidity and Capital Resources — Credit Facilities and Other Borrowings — Outstanding Credit Facilities and Other Borrowings”.
 
(2)   This liability relates to post-retirement medical benefits of former employees who retired prior to December 31, 1996 and is based on actuarial valuations conducted during fiscal 2010.
 
(3)   We make provision for environmental rehabilitation costs and related liabilities based on management’s interpretations of current environmental and regulatory requirements. See Item 5. “Operating and Financial Review and Prospects — Critical Accounting Policies”.

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Contractual Obligations off the Balance Sheet
Our obligation with regards to operating leases is US$5 million for the next year and relates to the International office in Brisbane as well as expenditure on mineral tenements. Of this amount, US$4 million is due within 12 months.
Capital Expenditure
The following table sets forth our authorized capital expenditure as of June 30, 2010:
         
    $’million
Authorized and contracted for (1)
    44  
Authorized but not yet contracted for
    132  
Total
    176  
 
(1)   Including our share of the PNG joint venture’s capital expenditure of US$27 million.
Commercial Commitments
The following table provides details regarding our commercial commitments as of June 30, 2010:
                                         
    Amount of Commitments Expiring by Period
            Less            
            Than 12   12-36   36-60    
            Months   Months   Months   After 60
            July 1,   July 1,   July 1,   Months
            2010 to   2011 to   2013 to   Subsequent
            June 30,   June 30,   June 30,   to June 30,
    Total   2011   2013   2015   2015
    ($’million)   ($’million)   ($’million)   ($’million)   ($’million)
Guarantees(1)
    70                         70  
Capital commitments(2)
    44       44                    
Total commitments expiring by period
    114       44                   70  
 
(1)   Amount of Commitments Expiring by Period.
 
(2)   Capital commitments consist only of amounts committed to external suppliers, although a total of US$132 million has been approved by the board for capital expenditures.
Trend Information
     Information on recent trends in our operations is discussed in Item 4. “Information on the Company — Business — Strategy” and “— Results of Operations” above.
Working Capital and Anticipated Financing Needs
     The board believes that our working capital resources, by way of cash generated from operations and existing cash on hand, are sufficient to meet our present working capital needs. Several of the Growth projects will require additional capital expenditure over the next two to three years to complete construction, most of which will be funded from cash generated by operations and the balance by debt. For more information on our planned capital expenditures, see “— Capital Expenditures” above and Item 4. “Information on the Company — Business — Harmony’s Mining Operations”. We may, in the future, explore debt and/or equity financing in connection with our acquisition strategy. See Item 3. “Key Information — Risk Factors — Harmony’s strategy depends on its ability to make additional acquisitions”. Our board believes that we will have access to adequate financing on reasonable terms given our cash-based operations and modest leverage. Our ability to generate cash from operations could, however, be materially adversely affected by increases in cash costs, decreases in production, decreases in the price of gold and appreciation of the Rand and other non-US$ currencies against the U.S. dollar. Future financing arrangements would also be subject to the limits on the board’s borrowing powers described in Item 10. “Additional Information — Memorandum and Articles of Association — Directors — Borrowing Powers”. In addition, South African companies are subject to significant exchange control limitations, which may impair our ability to fund overseas operations or guarantee credit facilities entered into by overseas subsidiaries. See Item “10. Additional Information — Exchange Controls”.

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Other Financial Information
Export Sales
     In fiscal years 2008, 2009 and 2010, 100% of our gold produced in South Africa was refined by Rand Refinery, which is owned by a consortium of the major gold producers in South Africa. All of our gold produced in Australia and PNG in those periods was sold to The Perth Mint Australia (previously known as AGR Matthey), a Perth-based refinery.

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Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management
     The members of the board, their principal past affiliations, information on their business experiences and principal outside activities and selected other information are set forth below:
Board of directors
     
Name   Date of appointment
Patrice Motsepe (1)
  September 23, 2003
Frank Abbott (1)(2)
  October 1, 1994
Graham Briggs
  August 6, 2007
Joaquim Chissano (1)
  April 20, 2005
Fikile De Buck(1) (3)(4)
  March 30, 2006
Ken Dicks (1) (3)
  February 13, 2008
Cheick Diarra (1) (3)
  March 5, 2008
Dr Simo Lushaba (1) (3)
  October 18, 2002
Cathie Markus (1) (3)
  May 31, 2007
Harry Ephraim Mashego
  February 24, 2010
Hannes Meyer
  November 1, 2009
Modise Motloba (1) (3)
  July 30, 2004
Cedric Savage (1) (3)
  September 23, 2003
André Wilkens (1)
  August 7, 2007
 
(1)   Non-executive directors
 
(2)   Frank Abbott served as a non-executive director until August 20, 2007 and was appointed interim financial director on August 21, 2007. Frank retired at the end of July 2010, and was appointed as non-executive director on August 1 , 2010 .
 
(3)   Independent
 
(4)   Appointed lead independent director after June 30, 2010.
Non-Executive Chairman
     Patrice Motsepe (48) BA (Legal), LLB. Patrice was appointed to the board in 2003. Patrice was a partner in one of the largest law firms in South Africa, Bowman Gilfillan Inc. He was a visiting attorney in the USA with the law firm, McGuire Woods Battle and Boothe. In 1994 he founded Future Mining, which grew rapidly to become a successful contract mining company. He then formed ARMgold in 1997, which listed on the JSE in 2002. ARMgold merged with Harmony in 2003 and this ultimately led to the takeover of Anglovaal Mining (“Avmin”) by African Rainbow Minerals Limited (“ARM”). In 2002 he was voted South Africa’s Business Leader of the Year by the CEOs of the top 100 companies in South Africa. In the same year, he was winner of the Ernst & Young Best Entrepreneur of the Year Award. He is also the Executive Chairman of ARM and the Deputy Chairman of Sanlam. His various business responsibilities included being President of Business Unity South Africa (BUSA) from January 2004 to May 2008, which is the voice of organized business in South Africa. He is also President of Mamelodi Sundowns Football Club.
Executive Directors
     Frank Abbott (55), BCom, CA (SA), MBL. Frank was appointed executive interim financial director in August 2007. Frank initially joined the Harmony board as a non-executive director in 1994, after which he was appointed Financial Director in 1997. In 2004 Frank was appointed financial director of ARM, while remaining on the Harmony board as non-executive director. In August 2007, Frank was seconded to Harmony as interim financial director, a position he held until handing over to Hannes Meyer in November 2009. Frank remained executive director until his early retirement on July 31, 2010. Post-retirement, Frank serves as non-executive director of Harmony and ARM.
     Graham Briggs (57), BSc (Hons) (Geology), PrSciNat, Chief Executive Officer. Graham was appointed as chief executive officer in January 2008, after his appointment to the board in 2007. Having joined Harmony as new business manager in 1995, Graham’s previous positions include that of chief executive of Harmony Australia. A geologist by training, Graham has more than 35 years’ experience in the field and in an operational capacity at a number of South African gold mines. Graham serves as a director on Harmony’s subsidiary companies and is a member of the board of Virtual Metals Group in the United Kingdom.
     Harry Ephraim “Mashego” Mashego (46), BA Ed, BA (Hons), GEDP, JMDP, Executive: Organizational Development and Transformation. Mashego joined Harmony in July 2005 as Group Human Resources Development Manager. Mashego, who has more than 20 years’ experience in human resources, began his career as Human Resources Manager at Eskom. He then progressed in the field at JCI,

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Atlantis Diesel Engines and Foskor Ltd. He was promoted to General Manager at Harmony’s Evander Operations in November 2005 and was appointed Executive: Human Resources in August 2007. Mashego was appointed to the board as executive director in February 2010.
     Hannes Meyer (40), CA (SA), BCom (Hons), Financial Director. Hannes joined Harmony in August 2009. During his 14 year career in the mining industry, he gained extensive mining and financial experience at Randgold and Exploration Limited, Randgold Resources Limited, AngloGold and TEAL Exploration and Mining Limited (“TEAL”). His exposure extended to gaining knowledge of mines in Africa, corporate finance and business development. Before joining Harmony, Hannes served as chief financial officer of TEAL, and served as acting chief executive officer of TEAL from May 2008. He also serves as director on various Harmony subsidiaries and the board of Rand Uranium (Proprietary) Limited.
Non-Executive Directors
     Joaquim Chissano (70), Non-Executive Director. Joaquim was appointed to the board in April 2005. Formerly President of Mozambique (1986 — 2004), Joaquim also served as chairman of the African Union for 2003/2004. On leaving the presidency, he established the Joaquim Chissano Foundation for Peace Development and Culture, and has led various international peace initiatives on behalf of the United Nations, African Union and the Southern African Development Community to Guinea Bissau, the Democratic Republic of the Congo, Uganda and Madagascar. In 2006 he was awarded the annual Chatham House Prize for significant contributions to improving international relations and was the recipient of the inaugural Mo Ibrahim Prize for Achievement in African Leadership in 2007. He is also a non-executive director of ARM Limited and TEAL. Joaqim was appointed to the Bill and Melinda Gates Foundation in December 2009.
     Fikile De Buck (49), BA (Economics), FCCA (UK), Lead independent Non-Executive Director. Fikile joined the board on March 30, 2006. A chartered certified accountant, she is a fellow of the Association of Chartered Certified Accountants (ACCA) (UK) and a member. From fiscal 2000 to fiscal 2008, Fikile worked in various capacities at the Council for Medical Schemes in South Africa, including that of chief financial officer and chief operations officer. Prior to that she was treasurer at the Botswana Development Corporation. Fikile is also a non-executive director and chairman of the Audit Committee of Rand Uranium (Proprietary) Ltd and of Anooraq Resources Corporation. In August 2010 Fikile was appointed lead independent non-executive director and chairman of the Nomination Committee.
     Dr Cheick Diarra (58), PhD (Mechanical and Aerospace Engineering), Independent Non-Executive Director. Dr Cheick Diarra joined the board in March 2008. He is also the chairman for Africa at Microsoft. Dr Diarra graduated from the Pierre and Marie Curie University in Paris, France, and obtained his PhD in mechanical and aerospace engineering from Howard University, Washington DC, USA. After six years as an Assistant Professor at Howard, he joined the National Aeronautic and Space Association (NASA) Jet Propulsion Laboratory. Dr Diarra has served as a UNESCO goodwill ambassador and, in 2002 and 2003, he was chief executive officer of the African Virtual University based in Kenya. He is a member of several international and African scientific organisations, and was awarded an African Lifetime Achievement Award for Outstanding Contributions to Science.
     Ken Dicks (71), Mine Managers Certificates (Metalliferous and Fiery Coal Mines), Management Development Diploma and Management Diploma, Independent Non-Executive Director. Ken joined the board in February 2008. He has 39 years’ experience in the mining industry, mainly in the Anglo American group. He has served on the boards of mining companies such as Freegold, Western Deep Levels and Elandsrand. He is also a non-executive director of Gold One International, following a reverse takeover by Aflease Gold Limited and Bauba Platinum Limited.
     Dr Simo Lushaba (44), BSc (Hon), MBA and DBA, Independent Non-Executive Director. Simo joined the Harmony board in October 2002. An entrepreneur and an executive business coach, he previously held senior management positions at Spoornet and Lonmin plc and was chief executive of Rand Water. Simo is a member of the board of the Nepad Business Foundation (SA), chairman of Spescom Limited and a board member of Gidani.
     Cathie Markus (53), BA LLB, Independent Non-Executive Director. Cathie joined the board in May 2007. Cathie spent 16 years at Impala Platinum Holdings Limited (Implats), initially as legal advisor and latterly, from 1998 to 2007, as executive director with responsibility for legal compliance and public affairs. Having graduated from the University of the Witwatersrand, Cathie served articles at Bell Dewar & Hall. On qualifying as an attorney, notary and conveyancer, she joined the legal department of Dorbyl Limited. She is currently a trustee of the Impala Bafokeng Trust.
     Modise Motloba (44), BSc, Diploma in Strategic Management, Independent Non-executive Director. Modise joined the board in July 2004. Currently the chief executive of Quartile Capital (Proprietary) Limited, Modise is also a director of Rand Merchant Bank Structured Insurance, Deutsche Bank Securities SA (Proprietary) Limited, the Land Bank and the Small Enterprise Foundation. Modise’s 17 years’ experience in investment banking, treasury and fund management includes appointments at Rand Merchant Bank, African Harvest Fund

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Managers and Goldman Sachs. Modise is a former President of the Association of Black Securities and Investment Professionals (ABSIP) where he was instrumental in formulating and negotiating the historic Financial Services Charter in October 2003.
     Cedric Savage (71), BSc (Eng), MBA, ISMP (Harvard), Independent Non-executive Director. Cedric joined the board in September 2003. He retired as the chairman of the Tongaat Hulett Group in May 2009 but remains a trustee of the Tongaat Hulett Group Pension Fund. He started his career in the United Kingdom in 1960 as a graduate engineer with Fairey Aviation. He returned to South Africa in 1963 and worked in the oil (Mobil), textile (Felt & Textiles) and chicken (Rainbow Chickens Limited) industries. He was President of the South African Chamber of Business from 1993 to 1994. He has also served as Chairman of the Board of Governors of the University of KwaZulu-Natal’s Development Foundation and as a Member of Council of that university. He joined the Tongaat-Hulett Group Limited in 1977 as Managing Director of Tongaat Foods and progressed to Executive Chairman of the Building Materials Division; he became Chief Executive Officer of the group in 1991. In May 2000, he assumed the dual roles of Chief Executive Officer and Executive Chairman. He currently serves on the board of Denel (Proprietary) Limited. He also served on the Nedbank board from 2002 until May 2008 when he retired as Non-Executive Director, and on the board of Datatec Limited from 2001 and Datatec International from 2004, after which he retired from both boards in August 2009.
     André Wilkens (61), Mine Manager’s Certificate of Competency, MDPA, RMIIA, Non-Executive Director. André joined the board in August 2007. He is currently the chief executive officer of ARM Limited and previously held the same position at ARM Platinum. Prior to this, he was the chief operating officer at Harmony, following the merger of Harmony with ARMgold in 2003. André has a wealth of experience in the mining industry, having joined Anglo American in 1969 and moved up the ranks to mine manager of Vaal Reefs’ south mine.
Management
     The members of our management, their principal past affiliations, information on their business experiences and principal outside activities and selected other information are set forth below:
     Bob Atkinson (58), NHD (Metalliferous Mining), Executive: New Business and Projects. Bob joined Harmony as a Section Manager in 1986 and served as Operations Director on the Executive Committee from June 2001 to May 2003. He was appointed Chief Operating Officer at Harmony Gold Australia and was appointed as Executive: Sustainable Development (Safety and Occupational Health) at Harmony in South Africa in July 2004. He has more than 32 years’ experience in the mining industry.
     Jaco Boshoff (41), BSc (Hons), MSc (Geology), MBA, PrSciNat, Executive: Reserves and Resources. Jaco joined Harmony in April 1996. He has served as the Executive: Reserves and Resources and Competent Person since March 2004. Prior to this, he was a Ore Reserve Manager from 1998 to 2004 and before that was a geologist at Harmony and at Gengold. Jaco is registered as a professional geological scientist with the South African Council for Natural Scientific Professions and has worked in the mining industry for more than 12 years. In July 2010 Projects and New Business were added to his portfolio.
     Matthews Pheello Dikane (44), LLB, LLM (Labor Law), Postgraduate Diploma In Management Practice, Postgraduate Diploma in Corporate Law, Executive: Legal and Compliance. Matthews joined Harmony in 2009. He has more than 20 years’ experience in the mining industry, working his way up through the ranks from learner official to production mine overseer at AngloGold Ashanti Limited. During this time, he studied for his law degree and served his articles at Perrott Van Niekerk Woodhouse Incorporated. He also completed his Master’s degree in Labor Law and Postgraduate Diplomas in Management Practice and Corporate Law. He returned to AngloGold Ashanti’s corporate office as a Legal Counsel, later joining Brink Cohen Le Roux as a senior associate where he was made a director.
     Leon le Roux (54), NHD (Mechanical and Electrical Engineering), Executive: Risk Management and Engineering. Leon joined Harmony on its merger with ARMgold in 2003. Having begun his mining career as a learner official in 1979 and obtaining his GCC (Mines and Works), he worked as an engineer on several AngloGold operations. He joined ARMgold on its formation in 1999 where he held a number of positions in the management team and was later seconded to ARMplatinum. He was appointed to the Harmony executive team in June 2009. Post year-end, in September 2010, Leon was deployed to Harmony’s South East Asian operations.
     Jackie Mathebula (40), B Admin Honours, MBA, Master of Management (MM, HR), Executive: Corporate Affairs. Jackie joined Harmony in September 2002 as Employee and Industrial Relations Executive. In 2005, his portfolio became Training, Human Resource Development and Occupational Health, and in 2005 he was appointed Executive: Corporate Affairs. Prior to joining Harmony, he worked at Gensec Bank, Gold Fields Limited and then Iscor group (now ArcelorMittal South Africa). He also worked for the South African government in the Gazankulu Public Service Commission.
     Melanie Naidoo-Vermaak (36), MSc (Sustainable Development), Executive: Environment. Melanie joined Harmony in August 2009. She is an experienced environmental specialist who has worked for both the private sector in the mining industry, as well as the public

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sector in the Departments of Water Affairs and Forestry and Minerals and Energy. She has spent more than 10 years in this discipline and has international environmental management exposure gained in Australia, Papua New Guinea, Fiji as well as Africa. She has held various positions at some of the leading mining companies, including BHP Billiton, Anglo American PLC and De Beers Consolidated Mines Limited.
     Alwyn Pretorius (39), BSc Mining Engineering, BSc Industrial Engineering, Chief Operating Officer: North Region. Alwyn joined Harmony on its merger with ARMgold in 2003. He began his career at Vaal Reefs mine as a mining graduate in training in 1993 and was appointed shift boss in 1995, gaining experience in remnant mining. Alwyn obtained his BSc in Industrial Engineering in 1998 and joined ARMgold in 1999 at its Orkney operations progressing to become mine manager in 2003. Alwyn was appointed Executive, South African Operations at Harmony in March 2007, and is the Chief Operating Officer: North Region.
     Tom Smith (54), NHD (Mine Surveying and Metalliferous Mining), Chief Operating Officer: South Region. Tom joined Harmony in 2002. Tom began his career in the mining industry in 1975 as a sampler at Vaal Reefs mine, becoming chief surveyor in 1988. He made a career change in 1991 to mining and worked as a section manager on Great Noligwa, Elandsrand and Mponeng mines. He was also involved in projects at Tau Lekoa and Moab Khotsong, acquiring experience in conventional, trackless, pillar and deep-level mining. Tom was promoted to Production Manager at Mponeng in 1998. He was appointed General Manager of Tshepong in 2000. Following the merger with ARMgold he was involved in the restructuring of the Free State operations. He joined the executive team in September 2007 and is the Chief Operating Officer: South Region.
     Marian van der Walt (37), BCom (Law), LLB, Higher Diploma in Tax, Diploma in Corporate Governance, Diploma in Insolvency Law, Certificate in Business Leadership; Executive: Corporate and Investor Relations. Marian, who has more than 12 years’ legal experience, was appointed Company Secretary in 2003. She completed her articles at Routledges Modise Attorneys and was admitted as an attorney and conveyancer in 1998. She then joined Deloitte and Touche as an insolvency practitioner/administrator. She held legal and management positions at the Standard Bank of South Africa Limited in the Commercial Properties Division prior to joining Harmony. Marian was appointed to the Executive Committee in October 2005 with responsibility for legal, compliance and risk management. Internal audit and Sarbanes-Oxley compliance were added to her portfolio in September 2007. In October 2008, she resigned as company secretary enabling her to accept the position of Executive: Corporate and Investor Relations.
     Johannes van Heerden (38), BCompt (Hons), CA(SA), Chief Executive Officer: South East Asia. Johannes joined Harmony in 1998 as Financial Manager of the Free State operations. Here he obtained broad financial management experience at an operational level. He was subsequently appointed Group Financial Manager in 2001, before being relocated to Harmony Australasia as Chief Financial Officer in 2003. Johannes presently holds the position of Chief Financial Officer: South East Asia.
     Abre van Vuuren (50), BComm, MDP, DPLR, Executive: Services. Abre joined Harmony in 1997 when the Group acquired Grootvlei Gold Mine (“Grootvlei”). Abre’s career in the mining industry started in 1982 where he joined the Finance department at the Blyvooruitzicht Gold Mine. He gained experience in Human Resources and progressed through the ranks at various gold mines and collieries in the Rand Mines Group, including Grootvlei. On Harmony’s acquisition of Grootvlei, Abre was included in the management team and has since held various positions in services and human resource management. He was promoted to the Executive Committee in 2000 when he became the Industrial Relations Executive. In 2007, Abre was appointed to his current portfolio of Executive: Services. In September 2010, Risk and Insurance were added to his portfolio following the deployment of Leon le Roux to the Harmony’s South East Asian operations.
Board Practices
     Our Articles of Association provide that the board must consist of no less than four and no more than twenty directors at any time. The board currently consists of fourteen directors.
     Our Articles of Association provide that the longest serving one-third of directors retire from office at each annual general meeting. Retiring directors normally make themselves available for re-election and are re-elected at the annual general meeting at which they retire. Members of our senior management who are also directors retire as directors in terms of the Articles of Association, but their service as officers is regulated by standard industry employment agreements. According to the Articles of Association, the board meets not less than quarterly.
     Details of directors’ service contracts are described under “— Compensation of Directors and Senior Management” and “— Directors’ Terms of Employment,” below. We also describe significant ways in which our corporate governance practices differ from practices followed by U.S. companies listed on the NYSE on our website under “Corporate Governance.”

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     In order to ensure good corporate governance, the board has formed an Audit Committee, a Remuneration Committee, a Nomination Committee, an Investment Committee, an Empowerment Committee, a Sustainable Development Committee and a Technical Committee. All of the board committees are comprised of a majority of independent, non-executive directors.
Executive Management Committee
     Our Executive Committee comprises our executive directors and selected senior officers, each with his or her own area of responsibility. The Executive Committee consists of 11 executives who meet on a weekly basis and more often if required.
     The composition of the Executive Management Committee (with areas of responsibility indicated) is as follows:
     
Graham Briggs
  Chief Executive Officer
Hannes Meyer
  Financial Director
Harry Ephraim Mashego
  Executive Director: Organisational Development and Transformation
Frank Abbott
  Executive Director (1)
Bob Atkinson
  New Business and Projects
Jaco Boshoff
  Reserves and Resources
Jackie Mathebula
  Corporate Affairs
Alwyn Petorius
  Chief Operating Officer North Operations South Africa
Tom Smith
  Chief Operating Officer South Operations South Africa
Marian van der Walt
  Corporate and Investor Relations
Johannes van Heerden
  Chief Executive Officer: South East Asia
Abre van Vuuren
  Services (2)
Leon le Roux
  Risk Management and Engineering (2)
Melanie Naidoo-Vermaak
  Environment
Matthews Dikane
  Legal and Compliance
 
(1)   Frank Abbott retired as executive director on July 31, 2010 and was appointed non-executive director on August 1, 2010.
 
(2)   In September 2010 Leon le Roux was deployed to the South East Asian operations and Risk and Insurance were added to Abre van Vuuren’s portfolio.
Audit Committee
Members
     In terms of its charter this committee must comprise at least three members. As at June 30, 2010, the members of this committee were:
     
Cedric Savage
  Chairman; appointed to the committee on January 26, 2004 and chairman as from August 5, 2005
Fikile De Buck
  Appointed to the committee on March 30, 2006
Dr. Simo Lushaba
  Appointed to the committee on January 24, 2003
Modise Motloba
  Appointed to the committee on July 30, 2004
     The internal and external auditors, the chief executive officer, the financial director and executive managers are all invited to the Audit Committee meeting.
Frequency of meetings
     The Audit committee is, in terms of its charter, required to meet at least four times a year, or more frequently as circumstances dictate. During fiscal 2010, the committee met on five occasions.

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Purpose and function
     The Audit Committee was established to assist the board in discharging its duties relating to the safeguarding of assets; the operation of adequate system and internal controls and control processes; the preparation of accurate financial reporting and statements in compliance with all applicable legal requirements, corporate governance and accounting standards. It also provides support to the board on the risk profile and risk management of the group. The Audit Committee ensures that there is an internal audit function in place and that the roles of the internal and external audit functions are co-ordinated.
     The Audit Committee recommends the appointment of the external auditors to the board and shareholders, and also approved non-audit services provided by the external auditors. The Audit Committee has reviewed the independence of the external auditors and is satisfied that the external auditors are independent.
     The Audit Committee reports and makes recommendations to the board, and the board retains responsibility for implementing such recommendations.
     The Committee considered the appropriateness of the expertise and experience of the Financial Director and concluded that the Financial Director has the necessary expertise and experience. The Committee is also satisfied that the expertise, resources and experience of the finance function are adequate.
Independence/compliance
     All members of the Audit Committee are independent, non-executive directors.
     Currently, we do not have an individual audit committee financial expert as defined by the rules of the SEC. It is our contention that the audit committee members, through their collective experience, do meet the majority of the definitions of the SEC for an audit committee financial expert in both the public and private sectors. The members have served as directors and officers of numerous public companies and have over the years developed a good knowledge and understanding of IFRS, overseeing the preparation, audit and evaluation of financial statements. We believe that the combined knowledge, skills and experience of the Audit Committee, and their authority to engage outside experts to provide them with advice on matters relating to their responsibilities as they deem appropriate, enables them as a group to act effectively in the fulfillment of tasks and responsibilities required under U.S. Sarbanes-Oxley Act of 2002.
Empowerment Committee
Members
     The Empowerment Committee must comprise of at least three members. As at June 30, 2010, the members of this committee were as follows:
     
Joaquim Chissano
  Chairman; appointed as chairman with effect from May 3, 2006
Modise Motloba
  Appointed to the committee on May 3, 2006
Cathie Markus
  Appointed to the committee on October 29, 2007
     The chief executive officer and executive managers are all invited to attend the Empowerment Committee meetings.
Frequency of meetings
     The Empowerment Committee met on four occasions during fiscal 2010. The Empowerment Committee charter requires that at least two members are present to constitute a quorum. Cathie Markus acted as chairman of the meetings when Joaquim Chissano was unable to attend.
Purpose and function
     The Empowerment Committee was established by the board to ensure that the company meets not only regulations stipulated in the Employment Equity Act, the Labor Relations Act and the Mineral and Petroleum Resources Development Act’s Mining Charter Scorecard, but also in fulfilment of our own empowerment imperatives.
     The responsibilities of the Empowerment Committee include ensuring that a sustainable organizational culture, structures and processes are in place to support the development of empowerment in the company in line with the company’s needs and requirements; to monitor the

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development and progress of empowerment within the company; to address inequalities that may exist in staff profiles and organizational practices; and to review and monitor whether appropriate support is given to previously disadvantaged staff in order to equip them for successful careers in the company.
Independence/compliance
     Even though the chairman is not considered an independent non-executive director, the rest of the committee comprises of independent non-executive directors.
Investment Committee
Members
     The Investment Committee must comprise of at least three members. As at June 30, 2010, the members were:
     
Dr. Simo Lushaba
  Chairman; appointed to the committee on January 26, 2004 and as Chairman with effect from August 5, 2005)
Fikile De Buck
  Appointed to the committee on May 3, 2006
Ken Dicks
  Appointed to the committee on February 13, 2008
Cathie Markus
  Appointed to the committee on October 29, 2007
Cedric Savage
  Appointed to the committee on January 26, 2004
André Wilkens
  Appointed to the committee on August 7, 2007
     The chief executive officer, the financial director and executive managers are invited to attend the meetings.
Frequency of meetings
     The committee should meet at least four times a year, but may, at its discretion, meet more often depending on the circumstances. The committee met on five occasions in fiscal 2010.
Purpose and function
     The primary purpose of the Investment Committee is to consider projects, acquisitions and the disposal of assets in line with the Group’s overall strategy. This includes performing such other investment related functions as may be designated by the board from time to time, considering the viability of the capital project and/or acquisition and/or disposal and the effect it may have on the Group’s cash flow, as well as whether these will fit the Group’s overall strategy. This committee’s remit includes ensuring that due diligence procedures are followed when acquiring or disposing of assets.
Independence/compliance
     The Investment Committee consists of six non-executive members. Of the six non-executive members, five are independent. The chairman is an independent, non-executive director.
Nomination Committee
Members
     The Nomination Committee must comprise of at least three members. As at June 30, 2010, the members of this committee were:
     
Patrice Motsepe
  Chairman; appointed to the committee on October 24, 2003
Frank Abbott
  Appointed to the committee August 5, 2005
Joaquim Chissano
  Appointed to the committee on May 3, 2006
     In August 2010 Fikile De Buck was appointed Chairman of the Nomination Committee.
Frequency of meetings
     Members of this committee are required to meet annually or more often at the committee’s discretion, depending on prevailing circumstances. The committee met three times in fiscal 2010 to consider new appointments to the board in fiscal 2010.

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Purpose and function
     The primary purpose of the Nomination Committee is to ensure that the procedures for appointments to the board are formal and transparent, by making recommendations to the board on all new board appointments and reviewing succession planning for directors. The duties and responsibilities of this committee are set out in the Nomination Committee charter.
Independence/compliance
     The chairman of the Nomination Committee was until August 2010 non-executive, but not independent. Fikile De Buck was appointed as Chairman in August 2010. Frank Abbott retired as an executive director in July 2010, and remained on the Board and the Committee as a non-executive director.
Remuneration Committee
Members
     The Remuneration Committee must comprise of at least three members. As at June 30, 2010, the members of this committee were:
     
Cedric Savage
  Chairman; appointed to the committee on January 24, 2004, and as chairman from May 3, 2006
Simo Lushaba
  Appointed to the committee on August 5, 2005
André Wilkens
  Appointed to the committee on August 7, 2007
The chief executive officer, the financial director and the executive: organizational development and transformation are invited to attend all meetings.
Frequency of meetings
     The Remuneration committee is expected to meet at least on a quarterly basis or to pass a resolution by round robin if and when a formal meeting cannot be held. In fiscal 2010, the committee met on six occasions, including two special meetings held on July 1, 2009 and March 18, 2010 (for approval of the share allocation and incentive schemes and appointment of the financial director).
Purpose and function
     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 our overall performance and to demonstrate to all stakeholders that the remuneration of our senior executive members is set by a committee of board members who have no personal interest in the outcome of their decisions, and who will give due regard to the interests of our shareholders and to our financial and commercial health.
     The committee’s primary objectives are to monitor and strengthen the objectivity and credibility of our directors’ and senior executives’ remuneration system, and to make recommendations to the board on remuneration packages and policies applicable to directors. A formal reward philosophy was adopted by the Remuneration Committee in March 2006. This philosophy is reviewed annually by the committee.
Independence/compliance
     The committee comprises three non-executive directors, of which two are independent. It is therefore not compliant with King III which requires that the committee comprise independent directors only. The chairman of the Remuneration Committee is, however, an independent non-executive director and ensures that decisions are fair and not biased. The chairman, as independent non-executive director, was elected on the basis of his vast business knowledge and experience, and his familiarity with the challenges facing directors and executive managers.

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Sustainable Development Committee
Members
     The Sustainable Development Committee must comprise of at least three members. As at June 30, 2010, the following were members of this committee:
     
Modise Motloba
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