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

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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)

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):

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

 

 

TABLE OF CONTENTS

Part I			4
Item 1. Identity of Directors, Senior Management and Advisors			4
Item 2. Offer Statistics and Expected Timetable			4
Item 3. Key Information			4
Item 4. Information on the Company			19
Item 4A. Unresolved Staff Comments			88
Item 5. Operating and Financial Review and Prospects			88
Item 6. Directors, Senior Management and Employees			114
Item 7. Major Shareholders and Related Party Transactions			129
Item 8. Financial Information			131
Item 9. The Offer and Listing			133
Item 10. Additional Information			136
Item 11. Quantitative and Qualitative Disclosures About Market Risk			152
Item 12. Description of Securities Other than Equity Securities			154
Part II			160
Item 13. Defaults, Dividend Arrearages and Delinquencies			160
Item 14. Material Modifications to the Rights of Security and Use of Proceeds			161
Item 15. Disclosure Controls and Procedures			162
Item 16A. Audit Committee Financial Expert			163
Item 16B. Code of Ethics			163
Item 16C. Principal Accountant Fees and Services			164
Item 16D. Exemptions from Listing Standards for Audit Committees			164
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers			164
Item 16F. Change in Registrant’s Certifying Accountant			164
Item 16G. Corporate Governance			165
Part III			166
Item 17. Financial Statements			166
Item 18. Financial Statements			167
Item 19. Exhibits			168
SIGNATURE			170
INDEX TO FINANCIAL STATEMENTS			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

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.

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.

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”.

		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

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

     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.

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.

     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.

     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

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.

     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

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

•

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.

     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.

     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.

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.

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

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.

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.

     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.

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.

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.

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.

•

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.

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”.

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.

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

			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.

     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.

     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.

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

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

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.

Worldwide Operations

Description of Property

     The following is a map of our worldwide operations:

     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”.

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.

     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.

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.

36

     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

     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.

     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

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

		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.

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.”

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.

     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).

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.

     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.

     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

     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.

     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.

     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