As filed with the Securities and Exchange Commission on December 7, 2007

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 20-F

ANNUAL REPORT
PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934

HARMONY GOLD MINING COMPANY LIMITED

REPUBLIC OF SOUTH AFRICA

RANDFONTEIN OFFICE PARK, CNR WARD AVENUE AND MAIN REEF ROAD,
RANDFONTEIN, SOUTH AFRICA, 1760

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)

*

Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

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:

399,608,384 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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o

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

Item 1. Identity of Directors, Senior Management and Advisers

Item 2. Offer Statistics and Expected Timetable

Item 3. Key Information

Item 4. Information on the Company

Item 4A. Unresolved Staff Comments

Item 5. Operating and Financial Review and Prospects

Item 6. Directors, Senior Management and Employees

Item 7. Major Shareholders and Related Party Transactions

Item 8. Financial Information

Item 9. The Offer and Listing

Item 10. Additional Information

Item 11. Quantitative and Qualitative Disclosures About Market Risk

Item 12. Description of Securities Other than Equity Securities

Part II

Item 13. Defaults, Dividend Arrearages and Delinquencies

Item 14. Material Modifications to the Rights of Security and Use of Proceeds

Item 15. Disclosure Controls and Procedures

Item 16. [Reserved]

Item 16A. Audit Committee Financial Expert

Item 16B. Code of Ethics

Item 16C. Principal Accountant Fees and Services

Item 16D. Exemptions from Listing Standards for Audit Committees

Item 16E. Purchases of Equity Securities by the Issuer and Affiliates

Item 17. Financial Statements

Item 18. Financial Statements

Item 19. Exhibits

SIGNATURE

INDEX TO FINANCIAL STATEMENTS

Exhibit 2.1

Exhibit 4.2

Exhibit 4.16

Exhibit 4.17

Exhibit 4.18

Exhibit 4.19

Exhibit 4.20

Exhibit 4.21

Exhibit 12.1

Exhibit 12.2

Exhibit 13.1

Exhibit 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; the terms “South African Government” and “Government” refer to the government of South Africa and, where the context requires, include the South African state.

     In this annual report, references to “R”, “Rand”, “rand” and “c”, “cents” are to the South African Rand, the lawful currency of South Africa, “A$” refers to Australian dollars, “GBP” refers to British Pounds Sterling and references to “$” and “U.S. dollars” are to United States dollars.

     This annual report contains information concerning the gold reserves of Harmony. 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

     Harmony is a South African company and the majority of its operations are located there. Accordingly, its books of account are maintained in South African Rand and its annual and interim financial statements are prepared in accordance with International Financial Reporting Standards, or IFRS. Harmony also prepares annual financial statements in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, which are translated into U.S. dollars. The financial information, other than total cash costs and total cash costs per ounce, included in this annual report has been prepared in accordance with U.S. GAAP and is presented in US dollars. Total cash costs and total cash costs per ounce are non-GAAP measures. For further information, see Item 5. “Operating and Financial Review and Prospects — Costs — Reconciliation of Non-GAAP Measures.” 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 (Rand 7.04 per $1.00 as at June 29, 2007), except for specific items included within shareholders’ equity that are converted at the exchange rate prevailing on the date the transaction was entered into, and income statement item amounts are translated from Rand to US dollars at the average exchange rate for the period (Rand 7.20 per $1.00 for fiscal 2007).

     For the convenience of the reader, certain information in this annual report is presented in Rand and A$ and has been translated into U.S. dollars. By including convenience currency translations in this annual report, we are not representing that the Rand and A$ amounts actually represent the U.S. and Australian dollar amounts, as the case may be, or that these amounts could be converted at the rates indicated. Unless otherwise stated, the conversion rate for translations from Rand amounts into U.S. dollar amounts is Rand 7.04 per $1.00, which was the noon buying rate of the Federal Reserve Bank of New York on June 29, 2007.

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 Harmony’s 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 the future business prospects, revenues and income of Harmony, wherever they may occur in this annual report and the exhibits to this annual report, are necessarily estimates reflecting the best judgment of the senior management of Harmony 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 Harmony operates.

     Harmony undertakes 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

     The following selected historical consolidated financial data for the last five fiscal years has been extracted from the more detailed information and financial statements, including Harmony’s audited consolidated financial statements as of June 30, 2007 and 2006 and for each of the years in the three years ended June 30, 2007 and the related notes, which appear elsewhere in this annual report. The historical consolidated financial data at June 30, 2005, 2004 and 2003, and for each of the years in the two years ended June 30, 2004, has been extracted from Harmony’s audited consolidated financial statements not included in this annual report as adjusted for discontinued operations and the historical accounting changes described below.

     As of June 30, 2007, Harmony has classified the assets and liabilities of certain of its South African and all of its Australian operations as held for sale. See note 17 of the consolidated financial statements and Item 4. “Information of the Company – Business — Australasian Operations”. In connection with this determination, Harmony has presented the results of its Australia operations for all periods as discontinued operations. This is because the operations and cash flows of the Australian operations will be eliminated from the ongoing operations of Harmony as a result of the proposed disposal transactions, and the fact that Harmony will not have any significant continuing involvement in the Australian operations. In contrast, since Harmony continues to produce and sell gold within South Africa, the results associated with certain of its South African assets that has been classified as held for sale, continues to be presented within continuing operations.

     During fiscal 2006, Harmony changed its method for accounting for underground development costs, stripping costs incurred during the production phase of a mine and share-based payments. In connection with the changes relating to underground development costs and stripping costs incurred during the production phase of a mine, Harmony early adopted SFAS No. 154, “Accounting Changes and Error Corrections” and therefore adjusted its previous financial statements as if the revised principles had always been used. In connection with the change relating to share-based payments, Harmony followed the modified retrospective approach permitted by SFAS No. 123(R), “Share-based Payments”. Under this method, Harmony also adjusted its previous financial statements based on the amounts previously recognized under SFAS No. 123 for purposes of pro forma disclosures, without adjustment.

     The financial information, other than total cash costs and total cash costs per ounce, included in this annual report has been prepared in accordance with U.S. GAAP unless otherwise noted. Total cash costs and total cash costs per ounce are non-GAAP measures. For further information, See Item 5. “Operating and Financial Review and Prospects — Costs — Reconciliation of Non-GAAP Measures.”

		Fiscal Year Ended June 30,
		2007				2006				2005				2004				2003
		(in $ thousands, except per share amounts)
Income Statement Data
Continuing operations
Revenues			1,346,596				1,140,838				1,139,531				1,120,896				628,211
Operating profit/(loss)			146,453				(30,789	)			(303,825	)			(44,613	)			18,112
Equity income of joint venture			1,702				445				—				9,503				52,843
Equity (loss)/income of associate companies			(2,576	)			(16,444	)			—				2,020				(1,233	)
(Loss)/Income from continuing operations before taxes and minority interests			(188,846	)			(97,324	)			(536,266	)			(10,286	)			135,700
Loss from discontinued operations			(72,386	)			(61,483	)			(80,335	)			(18,983	)			(14,692	)
Minority interests			—				—				—				1,281				(468	)
(Loss)/income before cumulative effect of change in accounting principles			(295,435	)			(157,783	)			(552,549	)			184				89,597
Cumulative effect of change in accounting principles, net of tax			—				2,058				—				—				14,770
Net (loss)/income			(295,435	)			(155,725	)			(552,549	)			184				104,367
Continuing Operations
Basic (loss)/earnings per share($) before cumulative effect of change in accounting principles			(0.56	)			(0.28	)			(1.30	)			0.00				0.58

		Fiscal Year Ended June 30,
		2007				2006				2005				2004				2003
		(in $ thousands, except per share amounts)
Basic (loss)/earnings per share($)			(0.56	)			(0.28	)			(1.30	)			0.00				0.67
Diluted (loss)/earnings per share before cumulative effect of change in accounting principles			(0.56	)			(0.24	)			(1.30	)			0.00				0.57
Diluted (loss)/earnings per share			(0.56	)			(0.24	)			(1.30	)			0.00				0.65
Discountinued Operations
Basic loss per share($)			(0.18	)			(0.16	)			(0.22	)			0.00				(0.08	)
Diluted loss per share			(0.18	)			(0.16	)			(0.22	)			0.00				(0.08	)
Weighted average number of shares used in the computation of basic earnings per share			398,593,297				394,409,512				362,499,012				254,240,500				177,954,245
Weighted average number of shares used in the computation of diluted earnings per share			398,593,297				394,409,512				362,499,012				255,570,834				182,721,629
Cash dividends per share ($)(1)			—				—				0.05				0.26				0.57
Cash dividends per share (R)(1)			—				—				0.30				1.90				5.50
Other Financial Data
Cash cost per ounce of gold ($/oz)(2)			486				436				378				338				239

		Fiscal Year Ended June 30,
		2007				2006				2005				2004				2003
						(in $ thousands)
Balance Sheet Data
Continuing operations
Cash and cash equivalents			99,759				89,189				266,746				217,022				189,040
Other current assets			1,053,874				339,156				324,611				294,502				162,487
Non-current assets held for sale			182,475				—				—				—				—
Property, plant and equipment — net			3,533,938				3,306,555				3,451,963				3,769,971				1,188,910
Intangible assets			34,005				28,256				30,367				32,480				—
Restricted cash			723				35,599				7,798				9,922				—
Investments in associates			853				266,331				—				19,908				63,782
Investment in joint ventures			1,336				2,065				—				—				272,754
Other long-term assets			206,954				395,048				655,333				435,058				79,562
Total assets			5,113,917				4,462,199				4,736,818				4,778,863				1,956,535
Current liabilities			685,596				343,802				428,756				393,764				189,668
Liabilities relating to non-current assets held for sale			77,614				—				—				—				—
Provision for environmental rehabilitation			131,913				110,164				120,450				125,917				62,977
Provision of social plan			2,429				2,259				2,109				1,958				—
Deferred income and mining taxes			512,829				521,000				541,188				580,086				218,995
Provision for post-retirement benefits			15,257				14,964				13,276				1,584				1,017
Deferred financial liability			354,896				150,038				76,720				91,513				37,228
Share appreciation rights liability			877
Long-term loans			270,079				394,608				409,486				509,195				301,572
Minority interest			—				—				—				—				18,408
Shareholders’ equity (3)			3,062,426				2,925,364				3,144,833				3,074,846				1,126,670
Total liabilities and shareholders’ equity			5,113,917				4,462,199				4,736,818				4,778,863				1,956,535

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 (Rand 7.04 per $1.00 as at June 29, 2007), except for specific items included within shareholders’ equity that are converted at the exchange rate prevailing on the date the transaction was entered into, and income statement item amounts are translated from Rand to U.S. dollars at the average exchange rate for the period (Rand 7.20 per $1.00 for fiscal 2007).

     As of November 28, 2007, the noon buying rate of the Federal Reserve Bank of New York per $1.00 was Rand 6.8825.

     The following table sets forth, for the past five fiscal years, the average and period end noon buying rates in New York City for cable transfers in Rand and, for the past six months, the high and low noon buying rates in New York City for cable transfers in Rand, in each case, as certified for customs purposes by the Federal Reserve Bank of New York for Rand expressed in Rand per $1.00.

Fiscal Year Ended
June 30,		Average(1)				Period End
2003			9.13				7.51
2004			6.89				6.23
2005			6.18				6.67
2006			6.36				7.17
2007			7.20				7.04

Month of		High				Low
June 2007			7.27				7.04
July 2007			7.15				6.81
August 2007			7.5				7.07
September 2007			7.25				6.89
October 2007			6.91				6.49
November 2007 (through November 28 )			7.0				6.45

     Fluctuations in the exchange rate between Rand and the US 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 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 paid in Rand on ordinary shares.

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 carefully consider the following factors related to Harmony’s ordinary shares and ADSs. There may be additional risks that Harmony does not currently know of or that Harmony currently deems immaterial based on information currently available to it. Any of these risks could have a materially adverse effect on Harmony’s business, financial condition or results of operations, resulting in a decline in the trading price of Harmony’s ordinary shares or its ADSs. The risks described below may, in retrospect, turn out not to be complete 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, 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 Our Industry

The profitability of Harmony’s operations, and the cash flows generated by those operations, are affected by changes in the market price of gold, such that a fall in the price of gold below Harmony’s cash cost of production for any sustained period may lead Harmony to experience losses and curtail or suspend certain operations.

     Substantially all of Harmony’s 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 Harmony has no control, including:

	•		the demand for gold for industrial uses and for use in jewelry;
	•		international or regional political and economic trends;
	•		the strength of the U.S. dollar 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, United States, Australia and China.

     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
		High				Low				Average
Calendar Year		($)				($)				($)
1997			367				283				331
1998			313				273				294
1999			326				253				279
2000			313				264				282

		Price per ounce
		High				Low				Average
Calendar Year		($)				($)				($)
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 (through November 28)			833				608				687

     On November 28, 2007, the afternoon fixing price of gold on the London Bullion Market was $805 per ounce.

     While the aggregate effect of these factors is impossible for Harmony to predict, if gold prices should fall below Harmony’s cash cost of production and remain at such levels for any sustained period, Harmony may experience losses and may be forced to curtail or suspend some or all of its operations. In addition, Harmony would also have to assess the economic impact of low gold prices on its ability to recover any losses it may incur during that period and on its ability to maintain adequate reserves. Harmony’s average cash cost per ounce of gold sold was $486 in fiscal 2007, $436 in fiscal 2006 and $378 in fiscal 2005.

Due to the fact that the majority of Harmony’s production costs are incurred in Rand and that gold is sold in U.S. dollars, Harmony’s financial condition could be materially harmed by an appreciation in the value of the Rand against the U.S. dollar.

     Gold is sold throughout the world in U.S. dollars, but the majority of Harmony’s operating costs are incurred in Rand. As a result, any significant and sustained appreciation of Rand against the U.S. dollar will serve materially to reduce Harmony’s Rand revenues and overall net income.

     Harmony is significantly influenced by the fluctuations in the Rand/U.S. dollar exchange.  While the Rand has both depreciated and appreciated against the U.S. dollar in the past year, these fluctuations have an impact on Harmony’s operating environment.

Harmony’s gold reserve figures are estimated based on a number of assumptions, including assumptions as to mining and recovery factors, future cash costs of production and the price of gold and may yield less gold under actual production conditions than currently estimated.

     The ore reserve estimates contained in this annual report are estimates of the mill delivered quantity and grade of gold in Harmony’s deposits and stockpiles. They represent the amount of gold which Harmony believes can be mined, processed and sold at prices sufficient to recover its estimated future cash costs of production, remaining investment and anticipated additional capital expenditures. Harmony’s ore reserves are estimated based upon a number of factors, which have been stated in accordance with SEC Industry Guide 7. As Harmony’s ore reserve estimates are calculated based on estimates of future cash costs, (which in some cases are assumed to decrease significantly), future gold prices and, because of the fact that Harmony’s gold sales are primarily in U.S. dollars and Harmony incurs most of its cash costs in Rand, the exchange rate which is not under our control, between the Rand and the U.S. dollar and, in the case of Harmony’s Australian operations, between the Rand and the Australian dollar, significantly impacts this ore reserve estimate. As a result, the reserve estimates contained in this annual report should not be interpreted as assurances of the economic life of Harmony’s gold deposits or the profitability of its future operations.

     Since ore reserves are only estimates that Harmony makes based on the above factors, Harmony may in the future need to revise these estimates. In particular, if Harmony’s cash costs of operating and production increase or do not decrease as assumed (whether in U.S. dollar terms, Rand terms, Australian dollar terms, or in relative terms due to appreciation of the Rand or the Australian dollar against the U.S. dollar) or the gold price decreases, the recovery of a portion of Harmony’s ore reserves may become uneconomical. This will force Harmony to lower its estimated reserves.

To maintain gold production beyond the expected lives of Harmony’s existing mines or to increase production materially above projected levels, Harmony will need to access additional reserves through exploration or discovery.

     Harmony’s 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, is frequently unsuccessful and involves many risks, including risks 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.

     Harmony’s exploration efforts might not result in the discovery of mineralization and any mineralization discovered might not result in an increase in Harmony’s proven and probable reserves. To access additional reserves, Harmony will need to successfully complete development projects, including extending existing mines and, possibly, developing new mines. Development projects would also be necessary to access any new mineralization discovered through our exploration activities around the world. Harmony typically uses 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 production, production and economic returns may differ significantly from those anticipated by Harmony’s feasibility studies for new development projects.

     It can take a number of years from initial feasibility studies 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 necessary to construct 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.

     Harmony has addressed growth through the recent expansion of its exploration activities. Harmony currently maintains a range of focused exploration programs, concentrating on areas not too distant from its operational mines, as well as a number of prospective known gold mineralized regions around the world. During fiscal 2007 and for fiscal 2006, the bulk of exploration expenditure was allocated to activities in Australia, Papua New Guinea (“PNG”) and South Africa. However, there is no assurance that any future development projects will extend the life of Harmony’s existing mining operations or result in any new commercial mining operations.

As we currently do not enter into forward sales, 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 market prices. Currently, we generally do not enter into forward sales, 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, we may realize the positive impact 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.

Harmony may experience problems in identifying, financing and managing new acquisitions and integrating them with its existing operations.

     Acquiring new gold mining operations involves a number of risks including:

	•		Harmony’s ability to identify appropriate acquisition candidates or 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 the financial and strategic focus of Harmony 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 Harmony acquires mining operations outside South Africa or Australia encountering difficulties relating to operating in countries in which Harmony has 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 Harmony’s business, operating results, financial condition and share price.

Due to the nature of mining and the type of gold mines it operates, Harmony faces 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:

	•		rockbursts;
	•		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 pit mining 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;
	•		pillar mining; and
	•		production disruptions due to weather.

     Harmony is at risk of experiencing any and all of these environmental or other industrial hazards. The occurrence of any of these hazards could delay production, increase cash costs and result in financial liability to Harmony.

The nature of Harmony’s mining operations presents safety risks.

     The environmental and industrial risks identified above also present safety risks for Harmony’s operations and its employees and can lead to the suspension and potential closure of operations for indeterminate periods. For example, in October 2007, an incident occurred at the Elandsrand operation involving a compressed pipe column which broke off below the shaft surface bank and fell to the bottom of the men – and – material shaft, causing extensive damage to the shaft stee work and electrical cables. The incident resulted in 3,000 workers being stranded underground for more than 30 hours. Mining operations were temporarily suspended for 44 days to allow for repairs to be conducted in the shaft. These and other safety risks, even in situations where no injuries are experienced, can have a material adverse effect on the company’s operations and production.

Harmony’s insurance coverage may prove inadequate to satisfy future claims against it.

     Harmony has third-party liability coverage for most potential liabilities, including environmental liabilities. While Harmony believes that its current insurance coverage for the hazards described above is adequate and consistent with industry practice, Harmony may become subject to liability for pollution (excluding sudden and accidental pollution) or other hazards against which it has not insured or cannot insure, including those in respect of past mining activities. Further, Harmony maintains and intends 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 Harmony’s insurance coverage may not cover the extent of claims against it for environmental or industrial accidents or pollution.

Harmony’s operations may be negatively impacted by inflation.

     Harmony’s operations have been materially affected by inflation in recent years. Even though the inflation rate has decreased over the last three years, working costs and especially wages have increased considerably over the past three years resulting in significant cost pressures on the mining industry. Harmony’s profits and financial condition could also be affected adversely in the absence of a concurrent devaluation of the Rand and an increase in the price of gold.

The socio-economic framework in the regions in which we operate may have an adverse effect on Harmony’s operations and profits.

     Harmony has operations in South Africa, Australia 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 an investment in Harmony. 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 Harmony’s operations and profits.

     Harmony’s 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 on the supply of any of these materials would require Harmony to find substitute suppliers acceptable to it and could require it to pay higher prices for such materials. Any significant increase in the prices of these materials will increase Harmony’s operating costs and affect production considerations.

Harmony’s financial flexibility could be materially constrained by exchange control regulations as imposed by the South African Reserve Bank (“SARB”).

     South Africa’s exchange control regulations provide for restrictions on exporting capital from South Africa. As a result, Harmony’s ability to raise and deploy capital outside South Africa is restricted. In particular, Harmony:

	•		is 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;
	•		is 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;
	•		is generally required to repatriate to South Africa profits of foreign operations; and
	•		is limited in its ability to utilize profits of one foreign business to finance operations of a different foreign business.

     These restrictions could hinder Harmony’s normal corporate functioning, including its ability to make foreign investments and procure foreign currency denominated financings in the future. While exchange controls have been relaxed in recent years, it is difficult to predict whether or how the South African Government will further relax the exchange control regulations 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 of relaxation. Further relaxation, or abolition of exchange controls may precipitate a change in the capital flows to and from South Africa. In the event of the immediate abolition of exchange control there may be a sudden withdrawal of Rand from the South African market by investors. Because South Africa has a fully floating exchange rate and a flexible interest rate policy, this would result in a rapid depreciation of the Rand exchange rate which would serve to stem the withdrawal and would also result in an increase in interest rates due to the depreciation of the Rand.

Since Harmony’s South African labor force has substantial trade union participation, Harmony faces 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 Harmony’s employees, Harmony is at risk of having, and did experience in both fiscal 2006 and 2005 for example, production stoppages for indefinite periods due to strikes and other disputes. The National Union of Mineworkers (“NUM”) is a major union representing more than 75% of the employees in South Africa. Harmony is currently negotiating a compromise with the NUM to develop improved safety standards and performance by all stakeholders and to avoid antagonistic attitudes developing around safety issues. Failure to reach agreement on any disputes with NUM could have an adverse affect on our operations. 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 upon by agreements concluded between Harmony and the trade unions, the prescribed minimum terms and conditions forms the benchmark for all employment contracts.

     South African employment law regulates the working hours of employees and provides for severance payment equivalent to one week for each completed year of service insofar as an employee’s employment is terminated due to operational requirements. Agreements between Harmony and the trade unions may vary the working hours and the payments employees are entitled to where their employment is terminated due to operational requirements.

     South African employment law allows an employer and trade unions to apply for exemption from certain sections of employment legislation. The Minister of Labor granted certain exemptions to gold and colliery members of the South African Chamber of Mines. These determinations by the Minister of Labor are designed to take into account the practical circumstances and arrangements which prevail in the gold and coal mining industries and not catered for in legislation. A number of the variations cater for the employees’ preferences in relation to working hours.

     Harmony is 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, Harmony could attract substantial penalties.

     Development 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.

Harmony may suffer adverse consequences as a result of its reliance on outside contractors to conduct its operations.

     A portion of Harmony’s operations are currently conducted by outside contractors. As a result, Harmony’s operations are subject to a number of risks, some of which are outside Harmony’s control, including:

	•		negotiating agreements with contractors on acceptable terms;
	•		the inability to replace a contractor and its operating equipment in the event that either party terminates the agreement;
	•		reduced control over those aspects of operations which are the responsibility of the contractor;
	•		failure of a contractor to perform under its agreement with Harmony;
	•		interruption of operations in the event that a contractor ceases its business due to insolvency or other unforeseen events;
	•		failure of a contractor to comply with applicable legal and regulatory requirements, to the extent it is responsible for such compliance; and
	•		problems of a contractor with managing its workforce, labor unrest or other employment issues.

     In addition, Harmony may incur liability to third parties as a result of the actions of its contractors. The occurrence of one or more of these risks could have a material adverse effect on Harmony’s business, results of operations and financial condition. See “Directors, Senior Management and Employees—Employees.”

HIV/AIDS poses risks to Harmony 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 Harmony in terms of potentially reduced productivity and increased medical and other costs. Harmony expects that 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 then this may have an adverse impact on Harmony’s operations, projects and financial status. This expectation, however, is based on assumptions about, among other things, infection rates and treatment costs which are subject to material risks and uncertainties beyond Harmony’s control. As a result, actual results may differ from the current estimates.

The cost of occupational healthcare services may increase in the future.

     Harmony’s 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, or the Mine Health and Safety Act, which imposes various duties on Harmony at its 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, or the Occupational Diseases Act, 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 Harmony’s employees from its existing healthcare facilities in South Africa. There is a risk that the cost of providing such services could increase in future depending on changes in the

nature of underlying legislation and the profile of Harmony’s employees. This increased cost, should it transpire, is currently indeterminate. Harmony has embarked on a number of initiatives focused on improving the quality of life of Harmony’s 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.

     Harmony is governed by the South African Mineral and Petroleum Resources Development Act 2002 (“MPRDA”). See “Regulation—Health and Safety Matters—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 apply for new order mining rights over existing operations within five years of May 1, 2004 or before the existing right expires, whichever is the earlier date and fulfill requirements specified in the MPRDA and the Broad-Based Socio-Economic Empowerment Charter for the South African mining industry (“Mining Charter”).

     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 historically disadvantaged South Africans, as defined in the Mining Charter (“HDSA”). An interim target of 15% HDSA participation over 5 years has also been set and to this end, the South African mining industry has committed to securing financing to fund participation by HDSAs in an amount of R100.0 billion within the first five years of the Mining Charter’s tenure. The Mining Charter provides for the review of the participation process after five years to determine what further steps, if any, are needed to achieve the 26% target participation. In order to measure progress in meeting the requirements of the Mining Charter, companies are required to complete a “Scorecard”, in which the levels of compliance with the objectives of the Mining Charter can be “ticked off” after 5 and 10 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.

     Currently, the South African government has given its assurance that the Mining Charter will take precedence over the more recently promulgated Black Economic Empowerment Act, 2003 and particularly the Codes of Good Practice published thereunder, which are of general application to the South African economy. It is therefore envisaged that the Mining Charter will remain relevant to securing the conversion of mineral rights.

     Harmony actively carries out mining and exploration activities in all of its material mineral rights areas. All of Harmony’s operations have been granted their mining licenses and execution of the licences will be finalised by January 2008. We will be eligible to apply for new licenses over existing operations, provided that we comply with the Mining Charter. We have taken steps to comply with the expected provisions of the Mining Charter, such as promoting value-added production, exploring black empowerment initiatives and increasing worker participation. Failure to comply with the conditions of the mining licences could have a material adverse effect on our operations and financial condition.

     The MPRDA also makes reference to royalties payable to the South African state in terms of the envisaged Mining and Petroleum Royalty Act which has not yet been finalized. However, a Bill, known as the Royalty Bill, has been made available for public comment. The introduction of the Mining and Petroleum Royalty Act will have an adverse impact on the profits generated by Harmony’s operations in South Africa. According to the terms of the draft regulations, royalties will only be payable from 2009.

     In Australia, most mineral rights belong to the government, and mining companies pay royalties to the government based on production. There are, however, limited areas where the government granted freehold estates without reserving mineral rights. Harmony’s subsidiary, New Hampton, has freehold ownership of its Jubilee mining areas, but the other mineral rights in Harmony’s Australian operations are subject to royalty payments. In addition, current Australian law generally requires landowner title approval to be obtained before a mining license can be granted and mining operations can commence. New Hampton and Hill 50 have approved mining leases for most of their reserves, including all reserves that are currently being mined. Should New Hampton or Hill 50 desire to expand operations into additional areas under exploration, these operations would need to convert the relevant 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 “Regulation” for further information.

     In PNG, Harmony’s mining operations will be subject to royalty payments to the government of PNG. Should we desire to expand any of our initiatives in PNG operations into additional areas under exploration, these operations would need to convert the relevant

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 “Regulation” for further information.

Harmony is subject to extensive environmental regulations.

     As a gold mining company, Harmony is subject to extensive environmental regulation. Harmony has experienced and expects to continue to experience increased cash costs of production arising from compliance with South African and Australian environmental laws and regulations. The MPRDA, certain other environmental legislation and the administrative policies of the South African government regulate the impact of Harmony’s 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 in South Africa, Harmony will remain liable for compliance with the provisions of the MPRDA, including any rehabilitation obligations. This liability will continue until such time as the South African Department of Minerals and Energy certifies that Harmony has complied with such provisions.

     In the future, Harmony may incur significant costs associated with complying with more stringent requirements imposed under new legislation and regulations. This may include the need to increase and accelerate expenditure on environmental rehabilitation and alter provisions for this expenditure, which could have a material adverse effect on Harmony’s results and financial condition. Harmony may also face increased environmental costs resulting from other mines in the vicinity of Harmony’s mines failing 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 wastes, the pollution of ground and ground water systems and the duty to rehabilitate closed mines, may result in additional costs and liabilities.

     Harmony’s Australian and 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.

Harmony may not pay cash dividends to its shareholders in the near future.

     While it is the intention of Harmony to declare and pay cash dividends, it is its policy to only do so if profits and funds are available for that purpose. Whether or not funds are available depends on a variety of factors, including the amount of cash available and on capital expenditures and other cash requirements existing at that time. Under South African law, cash dividends may only be paid out of the retained or current profits of Harmony. We did not declare a cash dividend in fiscal 2007, 2006 or 2005 and we cannot guarantee that cash dividends will be paid in the future.

Non-South African shareholders of Harmony face additional investment risk from currency exchange rate fluctuations since any dividends will be paid in Rand.

     Dividends or distributions with respect to Harmony’s ordinary shares have historically been paid in Rand. The U.S. dollar equivalent of any dividends or distributions with respect to Harmony’s ordinary shares would be adversely affected by potential future decreases in the value of the Rand against the US dollar.

Investors in the United States may have difficulty bringing actions, and enforcing judgments, against Harmony, its directors and its executive officers based on the civil liabilities provisions of the federal securities laws or other laws of the United States or any state thereof.

     Harmony is incorporated in South Africa. All of Harmony’s directors and executive officers (and certain experts named herein) reside outside of the United States. Substantially all of the assets of these persons and substantially all of the assets of Harmony are located outside the United States. As a result, it may not be possible for investors to enforce against these persons or Harmony a judgment obtained in a United States court predicated upon the civil liability provisions of the federal securities or other laws of the

Unites 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 Harmony. 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.

     Beginning this fiscal year ending June 30, 2007, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, Harmony is required to furnish a report by its management on its internal control over financial reporting. The report in this annual report contains, among other matters, an assessment of the effectiveness of Harmony’s internal control over financial reporting as of the end of the fiscal year, including a statement as to whether or not its internal controls over financial reporting are effective. Harmony is required to have its independent auditors publicly disclose their conclusions regarding the evaluation. 

     During fiscal 2007, we experienced a breakdown in internal controls over financial reporting related in part to the implementation of a new Enterprise Resource Planning (ERP) system. Certain month-end controls relating to accounts payable, cash and bank deposits as well as inventory could not be performed during the fiscal year due to difficulties encountered with the implementation of the system which led to material adjustments being required in our financial statements. Accordingly, we have identified certain material weaknesses in our internal controls over financial reporting, in particular relating to the information technology control environment and the financial reporting closing process which have also negatively impacted the report issued by our auditors regarding our internal controls over financial reporting. See Item 15. – “Disclosure Controls and Procedures.”

     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.

Investors may face liquidity risk in trading Harmony’s ordinary shares on the JSE Limited.

     The primary listing of our ordinary shares is on the JSE Limited. Historically, trading volumes and liquidity of shares listed on the JSE have been low in comparison with other major markets. The ability of a holder to sell a substantial number of Harmony’s ordinary shares on the JSE in a timely manner, especially in a large block trade, may be restricted by this limited liquidity. See “The Offer and Listing—The Securities Exchange in South Africa.”

Because Harmony has a significant number of outstanding share options and convertible debt instruments, Harmony’s ordinary shares are subject to dilution.

     Harmony has employee share option schemes as well as other share schemes. The employee share option schemes came into effect in 1994, 2001 and 2003 respectively and a new share scheme was introduced in 2006. Harmony’s board has authorized up to 14% of the issued share capital to be used for these plans. Additionally, the company has convertible uncollaterized fixed rate bonds in the amount of $237 million which are due on May 21, 2009. These bonds may be converted into equity at the option of the bondholder at any time from July 1, 2004 and May 15, 2009 at a specific conversion price based on the outstanding principal amount divided by the conversion price in effect on that date. As a result, shareholders’ equity interests in Harmony are subject to dilution to the extent of the future exercises of the options, through share schemes and convertible debt instruments.

Item 4. INFORMATION ON THE COMPANY

BUSINESS

History and Development

     Harmony conducts 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 19.7% of the country’s annual gold output, and the fifth largest gold producer in the world with operations and projects in South Africa, Australia and PNG. Harmony’s gold sales have increased from 650,312 ounces of gold in fiscal 1995 to approximately 2.3 million ounces of gold in fiscal 2007. As at June 30, 2007, our mining operations reported total proven and probable reserves of 53.67 million ounces, primarily from South African sources. In fiscal 2007, we processed approximately 22.8 million tons of ore.

     In fiscal 2007, approximately 90% of Harmony’s gold production took place in South Africa and approximately 10% in Australia. In fiscal 2007, approximately 95% of Harmony’s South African gold came from underground mines, approximately 3% came from its Kalgold opencast operation, and approximately 2% was produced from the treatment of surface sand and slime operations. For more detailed geographical information about Harmony’s 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”.

     We also have exploration and evaluation programs focused on parts of Australia, PNG and West Africa. Exploration and evaluation of Africa is handled through the South African office, while Australian and PNG exploration and evaluation opportunities are handled through the Australian office.

     Harmony was incorporated and registered as a public company in South Africa on August 25, 1950 (under registration number 1950/038232/06). Harmony poured its first gold on 11 September 1954. In the early seventies it was merged with the Anglovaal mines, Merriespruit and Virginia, forming Harmony Gold Mining Company Limited. In 1995, Harmony was rejuvenated. It 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. 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. In 2007 we became a member of the World Gold Council, the association representing the wider marketing and public policy issues of many of the world’s biggest gold mining companies.

     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, Harmony operates a total of 22 shafts, 1 project shaft, 1 open cast mine, and 9 processing plants which are located in all of the currently known goldfields in the Witwatersrand basin of South Africa as well as the Green Stone belt. These operations produced 2.1 million ounces in fiscal 2007, and South Africa represented approximately 91% (or 48.95 million ounces) of Harmony’s total proven and probable reserves. The deep level gold mines located in this basin include those in the Free State province, the Evander gold mine in Mpumalanga province, the Randfontein and Elandskraal mines in the West Rand goldfields in Gauteng province

and the Orkney and Kalgold operations in the North West province. In September 2007, Harmony announced that it has signed formal agreements with Pamodzi Gold Limited (“Pamodzi Gold”) regarding the sale of Orkney shafts. See Item 8 — “Recent Developments”.

     Ore from the shafts and surface material are treated at 9 metallurgical plants in South Africa (4 in the Free State, 1 in Carltonville, 2 in Evander, 2 in Randfontein and 1 near Mafikeng). There are 2 plants on care and maintenance which can be restarted if additional processing capacity is required (Joel plant and St. Helena plant).

     We manage and evaluate our operations on a shaft-by-shaft basis. The South African underground operations are treated as three separate reporting segments for management and reporting purposes. We have found this system to be very effective as, among other things, it allows for different management styles and capital allocations.

     These 3 segments are:

	•		the Quality Assets, which typically have a larger reserve base and hence a longer mine life. These form the core of our operations;
	•		the Leveraged Assets are those that have a large resource base and provide significant upside in the event of a rising gold price; and
	•		the Growth Assets, which comprise the expansion projects and new mines currently under development in South Africa.

     There are also a number of surface operations around existing mines, which treat historic sand dumps, rock dumps and tailings dams next to our underground operations in addition to the Kalgold open-cast mine:

						Surface
Quality Assets		Leveraged Assets***		Growth Assets		Operations
Target		Bambanani		Elandsrand mine and project		Kalgold
Tshepong		Joel		Doornkop mine and project		Freegold
Masimong shaft complex		West Shaft*		Phakisa capital project		Free State
Evander 2,3 & 5		St. Helena				Randfontein
Evander 7		Harmony 2				Target
Evander 8		Merriespruit 1
Cooke 1		Merriespruit 3
Cooke 2		Unisel
Cooke 3		Brand 3
		Orkney 2**
		Orkney 4**
		Orkney 7**

Australasian Operations

     Harmony’s interests in Australasia are located in Australia and PNG and represent 9% (or 4.72 million ounces) of Harmony’s total proven and probable reserves.

     Harmony’s interests in Australia consist of two operating centers, consisting of both underground and open pit mines located at Mt. Magnet and South Kalgoorlie in Western Australia. Underground and surface mining is conducted at each of our Australian operations, with underground access through two declines at Mt. Magnet and one decline at South Kalgoorlie and surface access through open pits (mining at the decline at South Kalgoorlie ceased at the end of the financial year). These operations produced 224,799 ounces in fiscal 2007 (2006: 231,461 ounces) and represented approximately 1% (or 0.46 million ounces) of Harmony’s total proven and probable reserves. Ore from the shafts and surface material are treated at two metallurgical plants in Australia (one at Mt. Magnet and one at South Kalgoorlie).

     Harmony has classified the Western Australia operations as available for sale. In July 2007, Harmony entered into an agreement with Dioro Exploration NL (Dioro) to acquire Harmony’s South Kalgoorlie assets in Western Australia. The total purchase price is A$45 million, which consists of a cash component and a share component. The share component entails the issuance of 160 million Dioro shares, or shares to the value of A$20 million, and a cash component of A$25 million. The transaction is subject to various conditions precedent, including a minimum capital raising by Dioro of A$35 million by the completion date. The completion of the agreement is subject to regulatory approvals.

     In November 2007, Harmony announced that it has signed a letter of intent with the Australian-based junior miner Monarch Gold Mining Company for the sale of its Mt Magnet operations for A$65 million. The Mt Magnet asset package, which includes Hill 50, Great Fingall, St George, Star and Big Bell mines, comprises a resource inventory of 2.7Moz of gold, tenements covering approximately 62,000 hectares and 166 exploration licence blocks, along with a 2.7Mt a year capacity plant. The offer is made up of a combination of A$30 million cash, A$20 million in shares and A$15 million in convertible notes. The transaction will require a capital raising by Monarch on the Toronto Stock Exchange by the completion date.

In PNG, Harmony owns development and exploration prospects in the Morobe Province. Harmony is in the process of building a new mine in Hidden Valley which is expected to commence production in the March 2009 quarter. In addition, Harmony has completed its Golpu stand alone pre-feasibility study (PFS) during the June 2007 quarter, on time and within budget. The study has identified a technically and economically viable project plan, with the highlight being the definition of a probable ore reserve of 70.8 million tonnes grading 1.1% copper, 0.61g/t gold and 121ppm molybdenum. Importantly, the mining plan has restricted the overall average arsenic grade to 136ppm, with the highest grade in any single year restricted below 300ppm, to ensure that a saleable concentrate is maintained throughout the project life. PNG represents approximately 8% (or 4.26 million ounces) of Harmony’s proven and probable reserves. Harmony has indicated that it will be looking at a partnership on the PNG assets, to assist in the development thereof.

Competitive Strengths

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

	•		Harmony’s ore reserves as of June 30, 2007 amounted to 53.67 million ounces of gold spread across our assets in South Africa, Australia and PNG. This ore reserve base is sufficient to support our existing operations in excess of 20 years at current production levels. Year-on-year depletion accounted for 2.3 million ounces after disposals, shaft closures and the loss of Western Area equity ounces of 5.4 million ounces. However, the positive progress made with prefeasibility studies at the Evander South Project and at Wafi/Golpu in PNG added 3.5 million ounces to reserves.
	•		Of the company’s 53.67 million ounces of reserves, 41.5 million ounces are classified as above infrastructure and 12.2 million ounces are classified 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 Elandsrand, Doornkop, Tshepong and Phakisa in South Africa, and Hidden Valley in PNG, which, when developed, could deliver up to 1.4 million ounces of additional production by 2011.

	•		We believe the relatively higher grade of these South African deposits and/or lower cost base will result in these additional 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 Mega Dumps projects, the processing of rock dumps, and developing the Wafi/Golpu copper/gold deposit in PNG, which, when all developed, could increase production by a further 1.0 million ounces per annum.
	•		We have also expanded our exploration skill base, evidenced by our progress in PNG.
	•		We are also currently assessing potential options for our uranium deposits.

     Positive gold market outlook

	•		The gold market continued its strong trend over the last year, with the fiscal 2007 average gold price of $694 per ounce. This increase in the gold price has been driven predominantly by a combination of increased investment, consumer demand, flat mine production and relatively weak US dollar.
	•		Increased investment demand has been one of the major catalysts behind a recent surge in gold demand, with private investors now owning more gold than the governments of the world. The reasons behind this increased demand are varied, and include: concerns over the future of the U.S. economy and its currency; investors seeking portfolio diversification; the launch of a number of gold exchange traded funds; and investors seeking a safe haven in turbulent geopolitical tensions.
	•		We believe these 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, Harmony will benefit from a rising gold price environment.
	•		In addition, the fundamental demand for gold appears to have continued with lower official sales and an acceptance of a new “floor price” in the gold jewelry sector. Producer de-hedging, combined with the continued decline in global gold output, underpins the positive view.

     Increased focus on earnings margins and cost

	•		Our aim to return to profitability is assisted by improved market conditions for South African gold producers, but also importantly, through a restructuring of our portfolio to increase productivity and optimize overall production levels, while closing or divesting lower quality ounces.
	•		We are committed to lower our cost base and extensively benchmark our costing parameters both internally between operations within Harmony, and externally against other gold producers.
	•		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

	•		Harmony is proud to be a South African company and fully embraces the country’s transformation initiatives. We are 16% owned by African Rainbow Minerals (“ARM Limited”), a black empowerment company in which our chairman, Patrice Motsepe, owns an interest.
	•		We believe that we have gone beyond the requirements of the Mining Charter by ensuring that our historically disadvantaged South African (“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.

Strategy of organic growth

Harmony’s organic growth strategy is focused on the extraction of high-quality ounces and developing and operating our long-life mines. Through our back to basics approach of disciplined mining, we aim to reduce costs and increase productivity. Our dedicated and participative management team endeavours to meet production targets, reduce costs and optimize the orebodies for the benefit of all our stakeholders.

Organic growth focused on high quality ounces

	•		Harmony’s extensive experience and ten-year track record of successfully identifying, exploring and developing its own projects is a core component of our value creation strategy.
	•		Our ongoing exploration programme is focused on both on-mine exploration, which targets resources within the economic radius of existing mines, and new mine exploration, which targets promising early to advanced stage projects around the world.
	•		Harmony is currently expanding its 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.
	•		We currently have a diverse project pipeline, comprising five projects that are well advanced and, if all developed, could deliver up to an additional 1.4 million ounces of low-cost production by 2011. These projects include Elandsrand New Mine, Doornkop South Reef, Tshepong Sub 66 Decline and Phakisa in South Africa, and Hidden Valley in PNG, which, if all developed, would contribute to a reduction in our overall cash costs per ounce when they come on-stream.
	•		In addition to these projects, we have a number of additional development prospects that are being progressed, including surface sand dumps, rock dumps and tailings dams, reviewing the potential of our uranium deposits, and developing the Wafi/Golpu copper/gold deposit in PNG, which, when an investment decision is taken by the board to develop them once feasibility studies are complete, could increase production by up to a further 1.0 million ounces.
	•		We have also expanded our exploration skill base, evidenced by our progress in PNG.

Operational Strategy: “Back to Basics”:

Our operational strategy is underpinned by the back to basics strategy of disciplined mining, cost control, ore reserve management and efficiency.

Empowered management teams

•

At each mining site, Harmony has established small, multi-disciplinary, focused management teams responsible for planning and implementing the mining operations at the site. Each of these teams is accountable for the results at its particular site and reports directly to Harmony’s Board.

     Active involvement and management

•

Annual operational goals and targets, including cost, volume and grade targets are established in consultation with Harmony’s executive committee for each mining site. Each management team develops an operational plan to implement the goals and targets for its mine site. Members of Harmony’s executive committee review and measure the results at each mining site on a regular basis throughout the year.

     Focus on increased productivity

•

Gold mining in South Africa is labor intensive, accounting for about 50% of Harmony’s South African operating costs. To control these costs, Harmony structures its operations to achieve maximum productivity with the goal of having 60% of Harmony’s workforce directly engaged in stoping, or underground excavation, and development rock breaking activities.

     Commitment to cost control

•

Harmony is committed to reducing its cost base and, to this end, Harmony benchmarks its costing parameters both internally between operations within Harmony and externally against other gold producers.

     Proactive maintenance practices

•

Harmony applies a principle of “appropriate maintenance” which allows it to spend capital commensurate with the life of a specified operation. This principle ensures safe operation and reduces capital that may be used ineffectively on mines that have a limited life.

     Implementation of new systems

•

Harmony has implemented cost accounting systems and strict ore accounting and ore reserve management systems to measure and track costs and ore reserve depletion accurately, so as to enable it to be proactive in its decision making.

     Increasing consistency at our operations

	•		We are committed to increasing the consistency of our operations, in terms of both gold ore grades and production levels, in order to extract optimal value from our orebodies. To achieve this, we have undertaken an intensive program over the last 18 months to significantly improve the mining flexibility of our operations by increasing our development expenditure and focusing on comprehensive ore reserve management. We have made significant progress on this objective, as evidenced by our substantially improved development rates.
	•		We are currently reviewing potential opportunities in respect of certain deposits and assets which we may develop independently of our core gold business, and in particular, our uranium assets, of which the underground resources are not currently reflected on our balance sheet or reserve statement. In respect of our Wafi/Golpu copper/gold prospects, we may seek to develop those assets with partners.

     Selected acquisitions that diversify our operations and complement our competitive strengths

	•		Harmony has a long track-record of acquisitions, having completed over 25 transactions over the last eleven years and successfully integrating each of these operations into the Company.
	•		We possess broad and extensive gold mining experience gained through the development and operation of both surface, opencast mines and mechanized, underground mines. This breadth of expertise provides us with a competitive advantage when evaluation acquisition opportunities.
	•		Our acquisition strategy is currently focused on establishing another major growth area outside of South Africa by 2011. We believe that there is value in further diversifying our production base outside of South Africa, as well as applying our broad development and operational skills to new types of deposits.

     Targeted disposals that will upgrade our overall portfolio quality

	•		Harmony has accumulated a diverse portfolio of assets, a number of which are nearing the end of their productive lives for Harmony and are considered non-core to our business. However, these assets may be of higher value to smaller producers who are less concerned about short mine lives, and can still profitably operate these assets for a number of years.
	•		As a result, we believe our disposal strategy will create value through the targeted sale of these assets which for Harmony have relatively higher cost bases and/or shorter mine lives.
	•		However, we will look to retain upside gold exposure from any disposal through gold royalty arrangements. essentially a deferred purchase payment that is geared to increased production and increased gold price.
	•		This disposal process is already well progressed, with an agreement entered into for the sale of the Orkney operations in September 2007. This sale includes gold royalty arrangements, and is due to be concluded by the first half of calendar 2008.
	•		We have also signed sale agreements or letters of intent for the disposal of our Western Australian gold operations which includes South Kal and Mt Magnet.

     Initiatives that target specific opportunities

•

We acknowledge significant capital expenditure and a commitment to a long time horizon are required to develop our projects into new mines. However, we firmly believe that this is the foundation of Harmony’s future, and to this end, have made substantial investments in our major projects both in South Africa and PNG.

Principal Investments

     We have concluded several other strategic transactions within and outside South Africa in the last three fiscal years, which are summarized below.

     In March 2007, Harmony concluded negotiations with Rio Tinto plc (“Rio Tinto”) in which we purchased Rio Tinto’s rights to the royalty agreement entered into prior to the acquisition by Harmony of the Hidden Valley and Kerimenge deposits in PNG. The cost to Harmony of approximately US$22.5 million (R158 million) will be met through the issue of shares and a cash payment of US$2.5 million (R18 million). The effect of the transaction will be to reduce the cost of gold produced at Hidden Valley by US$13 per ounce, estimated at around US$35 million savings over the life of the mine. The remaining condition precedent, which is to obtain approval of the relevant PNG minister on the recommendation of the Mining Advisory Council that the royalty rights may be transferred to Harmony, has not yet been satisfied. As a result the agreement was extended to the end of December 2007; however there can be no guarantee that the Mining Advisory Council will approve the transfer.

     On June 21, 2006, Harmony announced that it had acquired 37.8% of the issued share capital of Village Main Reef Gold Mining Company Limited (“Village”) for an amount of R458,775 (US$0.1 million). The equity stake was purchased from ARM Limited at a price of SA 20 cents per share. Due to the fact that the acquisition surpasses the 35% mark, Harmony was obliged under the securities Regulation Code on Takeovers and Mergers to extend an offer to the remaining shareholders of Village to acquire all of their shares at

the same price at which it acquired the 37.8% stake. On August 14, 2006, Harmony announced that minority shareholders holding 3,163 shares in Village (being 0.08% of the shares in respect of which the offer was made) had accepted its offer. Harmony now holds 2,295,663 shares representing 37.83% of the issued share capital of Village. See Item 7. “Related Party Transactions.”

     On March 9, 2006, Harmony announced that it had acquired a total of 44.9 million shares in Western Areas Limited (Western Areas) for R2 billion (US$321 million), representing a 29.2% stake. This was done by acquiring 37.37 million shares from Allan Gray and buying a total of 7.62 million shares on the open market. To finance this acquisition, Harmony entered into a term loan facility of R1.0 billion (US$280.8 million) with Rand Merchant Bank (“RMB”), for the purpose of partially funding the acquisition of the 29.2% stake in Western Areas. Interest is compounded at a rate equal to three-month JIBAR plus 1.5%. The loan amount is payable on March 13, 2007, and interest, which is compounded monthly and payable quarterly from June 13, 2006. See Item 7. “Related Party Transactions.” The loan was repaid during March and April 2007. See Item 5. “Recently Retired Credit Facilities and Other Borrowings.”

     On December 8, 2006 the Company disposed of its interest in Western Areas in exchange for Gold Fields ordinary shares. This was in terms of an offer by Gold Fields whereby every 100 Western Areas Shares were exchanged for 35 Gold Fields shares. The Company received 15.7 million Gold Fields shares, issued at R135.02 per share, for its 44.9 million Western Areas shares.

     On October 18, 2004, Harmony announced the terms of a proposed merger between Harmony and Gold Fields Limited offering 1.275 newly issued Harmony shares for each Gold Fields share. The proposed merger was structured on the basis of an Initial Offer and a Subsequent Offer. As at December 1, 2004, Harmony had received valid acceptances of the Initial Offer in respect of a total of 57,993,991 shares representing approximately 11.5% of the entire issued share capital of Gold Fields. Between November 30, 2004, and December 14, 2004, Harmony issued 72,173,265 offer shares as consideration for the Initial Offer. On May 20, 2005, the Witwatersrand Local Division of the High Court of South Africa ruled that Harmony’s Subsequent Offer for Gold Fields had lapsed at midnight on December 18, 2004. Accordingly, the Subsequent Offer was no longer in force and no Gold Fields shares tendered into the Subsequent Offer were accepted. Harmony has since disposed of its Gold Fields investment.

Disposals

     See Item 8 — “Recent Developments” for post-year end disposals.

     The Company disposed of 1,150,000 Gold Fields shares for $19.7 million in a range of transactions between January 26, 2007 and February 12, 2007. The total cost of these shares was $21.4 million, resulting in a loss of $1.7 million. During May and June 2007, a further 1.5 million shares with a cost of $28.3 million were disposed of for $25.1 million, resulting a a loss of $3.2 million.

     In June 2007, Harmony announced that it has signed an agreement to divest of its nickel tenements at its South Kalgoorlie Mines for A$20 million in cash, subject to certain conditions precedent. The transaction is expected to conclude in the December 2007 quarter.

     In April 2007, the surface assets and metallurgical plant at Deelkraal was sold to Ogoerion Construction CC for R98 million ($13.7 million). It was agreed that the purchase price be paid in installments over a 24-month period.

     On October 19, 2006, Randfontein 4 shaft was sold to Simmer & Jack Limited for an amount of R60 million ($8.5 million).

     On March 31, 2006, the company disposed of the entire share capital of Buffalo Creek Mines (Pty) Ltd for R106 million (A$24 million). According to the agreement the A$24 million was to be settled as follows: (i) A$4.3 million to be paid in cash; (ii) 1,907,892 shares in GBS Gold International, valued at A$5 million; (iii) A$5 million to be paid in cash in September 2006; (iv) Shares in GBS Gold International, equal in value to A$4.4 million, to be issued in September 2006; and (v) A$5.4 million to be paid in cash in September 2007. The net asset value of Buffalo Creek Mines (Pty) Ltd was R92 million (A$20.1 million) (US$14.2 million), resulting in a profit of R14 million (A$3.1 million) (US$3 million). Final settlement was received as per contract in September 2007.

     On January 18, 2006, Harmony disposed of its investment in Atlas Gold Limited for R1 million (A$0.2 million). The investment of 500,000 shares was carried at a total cost of A$0.1 million, resulting in a profit of A$0.1 million.

     On December 29, 2005, Harmony disposed of its investment in San Gold Corporation for R19 million (US$3.1 million). The investment was carried at a total cost of R20 million (US$3.2 million), resulting in a loss of R1 million (US$0.1 million).

     On November 16, 2005, the company disposed of the remaining portion of the Gold Fields investment purchased in fiscal 2005 for R2.4 billion (US$361.8 million). The process was concluded through market disposals which began on November 10, 2005 and an open market offering on November 15 and 16, 2005. The investment was acquired at a cost of R2.1 billion (US$316.4 million), resulting in a profit of R307 million (US$45.4 million).

     On June 3, 2005, the company disposed of 30 million shares in Gold Fields for R2 billion (US$297.6 million). The investment was acquired at a cost of R2.4 billion (US$357.8 million), resulting in a loss of R372 million (US$60.4 million).

     On April 1, 2005 the Company disposed of its 12.7% holding in Bendigo Mining NL for $25.5 million, resulting in a realized profit of $4.9 million.

     On February 3, 2005, Harmony undertook a secondary placing of 3,703,704 shares of its holding in ARM Limited at a price of R27.00 per share. On March 15, 2005, Harmony placed another 3,418,803 of its ARM Limited shares at a price of R29.25 per share. On April 21, 2005, Harmony disposed of its 14% investment in ARM Limited to the ARM Broad-Based Empowerment Trust (“the ARM Empowerment Trust”) for a cash consideration of R829,827,460 representing a price of R29.00 per ARM Limited share. The ARM Empowerment Trust has been established for the purpose of holding the ARM Limited shares to further facilitate broad-based empowerment in ARM Limited’s shareholder base. ARM Limited is Harmony’s second largest shareholder and Broad-based Black Economic Empowerment (BEE) partner holding 16% of Harmony. For U.S. GAAP purposes, Harmony did not recognize the disposal of its investment in ARM Limited to the ARM Empowerment Trust as a sale. See Item 7. “Major Shareholders and Related Party Transactions” and the consolidated financial statements included in this annual report for a discussion on the treatment of this transaction.

Hedging Policy

     Harmony has consistently maintained a policy of not entering into forward sales, 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 to be entered into to secure loan facilities. Any change to this policy requires ratification by the Board.

     Where any such gold hedging position is acquired, Harmony’s 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, Harmony has historically closed out hedging arrangements inherited through its acquisitions. Harmony’s revenues are sensitive to the Rand to U.S. dollar exchange rates as all the revenues are generated by gold sales denominated in U.S. dollars. Harmony, does not enter into forward sales, derivatives or other hedging arrangements to establish a Rand to U.S. dollar exchange rate in advance for the sales of its future gold production.

     In May 2007, Harmony closed out the remainder of its Australian hedge book, which it had inherited with the acquisition of the Hill 50 mine. In total, some 220,000 ounces were closed out at an average spot rate of A$809/ounce, for a total cost of A$72.8 million ($60.0 million). This means that Harmony is now totally unhedged.

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, 2007, our prospecting interest in South Africa measured 95,827 hectares (236,798 acres), 348,000 hectares (859,926 acres) in PNG and 325,088 hectares (803,310 acres) in Australia.

     Harmony spent $26.9 million on exploration in fiscal 2007 and the bulk of exploration expenditure was allocated to activities in Australia, PNG and South Africa with smaller expenditures in other parts of Africa. In fiscal 2008, Harmony intends to carry out exploration in PNG, Australia, South Africa and other parts of 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 Harmony’s 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. In Harmony’s Australian underground mines access to the orebody is by means of declines. Horizontal development at various intervals of the decline extends access to the horizon of the ore to be mined. The declines are advanced on a continuous basis to keep ahead of the mining taking place on the levels above. In Harmony’s 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 Harmony’s 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. In the Australian underground mines once ore has been broken it is loaded into trucks, which transport it to the mill. In open pit mines, ore is transported to treatment facilities in large-capacity vehicles. The Hidden Valley mine in PNG will also be an open pit operation.

Processing

     We currently have 9 operational metallurgical plants and 3 metallurgical plants on care and maintenance in South Africa. We also have 2 operational metallurgical plants in Australia that treat ore to extract the gold and intend to construct 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

Rand Refinery. Most of the South African plants no longer use smelting to produce rough gold bars (dore). Harmony’s Australian plants and its South African zinc precipitation plants continue to smelt precipitate to produce rough gold bars. These bars are then transported to the Rand Refinery or in the case of the Australian plants, to an independent refinery, which is responsible for refining the bars to a minimum of good delivery status.

     In fiscal 2006, we operated the only independent gold refinery and fabrication plant in South Africa. In fiscal 2006, approximately 84% of Harmony’s South African gold production was refined at Harmony’s refinery and the remainder was refined at the Rand Refinery, which is owned by a consortium of the major gold producers in South Africa. The Australian gold production is refined in Australia at an independent refiner, AGR Matthey. Since July 2006, all of our gold produced in South Africa has been sent to the Rand Refinery, as a decision was made to close the Harmony Refinery for economic reasons.

     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”. Harmony supports 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, ore 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 an Ore Reserve Manager, a Business Analyst and a Human Resources Leader in ensuring the growth and long-term sustainability of the operations, and additional expertise and skill is obtained from the Mining Managers, Engineers and Human Resource Managers who also report to the respective General Managers.

Capital Expenditures

     Capital expenditures for continuing operations, including the non-cash portion, incurred for fiscal 2007 totalled $354.1 million, compared with $240.4 million for fiscal 2006 and $210.5 million for fiscal 2005. The focus of Harmony’s capital expenditures in recent years has been underground development and plant improvement and upgrades, and management currently expects the focus to remain on its growth projects in fiscal 2008. These growth projects will require a great deal of capital expenditure over the next two to three years and, given the current cash position of the company, we are re-evaluating the planned capital expenditure, together with project timelines. Additional funding options are being investigated, including debt raising and the disposal of certain assets, such as the Cooke uranium dump. The increase in capital expenditure in fiscal 2007 compared with fiscal 2006 resulted from the increased development in PNG, which accounted for 45% of the capital expended in the year. Expenditure was also incurred at Doornkop South Reef Project, Phakisa, Tshepong Sub 66 Decline and Elandsrand New Mine. The increase in capital expenditures in fiscal 2006 compared with fiscal 2005 resulted from the commencement of infrastructure establishment in PNG and further investment in the Doornkop South Reef Project, Phakisa and Elandsrand mine. During 2006, the Company changed its accounting policy for the capitalization of mine development costs. This change was made retrospectively, and comparative numbers have been restated. See Item 5. — “Operating and Financial Review and Prospects — Critical Accounting Policies and Estimates” for further information on the effects of this change on Harmony. The focus of capital expenditures in fiscal 2005 resulted from the commencement of infrastructure establishment in PNG and further investment in the Doornkop South Reef Project.

     Capital expenditure for discontinued operations, including the non-cash portion, incurred for fiscal 2007 totalled $26.9 million, compared with $24.9 million for fiscal 2006 and $25.8 million for fiscal 2005.

     Harmony has budgeted approximately $532.8 million for capital expenditures in fiscal 2008. 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. However, if we decide to expand major projects such as the Poplar Project and the Rolspruit Project at Evander beyond our current plans, we may consider alternative financing sources described below. See Item 4. — “Information on the Company — Business — Harmony’s Mining Operations — Evander Operations.”

Reserves

     As at June 30, 2007, Harmony has declared proven and probable reserves of 53.67 million ounces, broken down as follows: 48.95 million ounces in South Africa, 0.46 million ounces in Australia, 4.26 million ounces in PNG (4.2 million ounces from Western Areas were exchanged for shares in Gold Fields in December 2006 and are no longer included as part of Harmony’s reserves).

     Harmony uses the South African Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (the “SAMREC Code”), which sets out the internationally recognized procedures and standards for reporting of mineral resources and ore reserves. Harmony uses the term “ore reserves’’ herein, which has the same meaning as “mineral reserves”, as defined in the SAMREC code. In reporting of reserves, we have complied with Industry Guide 7 of the United States Securities and Exchange Commission.

     For the reporting of Ore Reserves at our South African and Australian operations Harmony uses a gold price of $520 per ounce. An exchange rate of R6.88 per U.S. dollar is used for South Africa and for Australia an exchange rate of $0.73 per Australian dollar is used giving a gold price of R115,000 per kilogram or AU$712 per ounce, respectively. These gold prices have also been used in mine planning. At Papua New Guinea, the Hidden Valley feasibility study was completed using a base case of US$520 per ounce (gold) and a silver price of US$8 per ounce and these prices have therefore been used in the declaration of Ore Reserves.

     In order to define that portion of a measured and indicated mineral resource that can be converted to a proven and probable ore reserve, Harmony applies the concept of a cut-off grade. This is done by defining the optimal cut-off 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 Harmony’s Optimiser computer program which requires the following as input:

	•		the database of measured and indicated resource blocks (per shaft section);
	•		an assumed gold price which, for this ore reserve statement, was taken as R115,000 per kilogram;
	•		planned production rates;
	•		the mine recovery factor (“MRF”) 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 ore 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 ore flow-related modifying factors used to convert the mineral resources to ore reserves through the life-of-mine planning process are stated for each individual shaft. For these factors, 18-month 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.

     Harmony’s standard for narrow reef sampling with respect to both proven and probable reserve calculations for underground mining operations at Elandskraal, Free State, Evander, Randfontein, Freegold, Orkney and Target 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, the Harmony 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. Harmony’s standard for sampling with respect to both proven and probable reserves at its Australian underground operations includes sampling development drives and crosscuts at intervals of up to 4 meters, drilling fans of diamond drill boreholes with a maximum spacing of 20 meters in any

orientation within the orebodies, and assaying core at 1 meter intervals. 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 tailings dams (slimes and sand) for which random sampling is used. Australian surface operations are sampled on diamond drill and reverse circulation drill spacing of no more than 20 meters on average.

     Our mining operations’ reported total proven and probable reserves as of June 30, 2007 are set out below:

Ore reserve statement (Imperial) as at June 30, 2007⁽⁴⁾

Gold

		PROVEN												PROBABLE													TOTAL
		Tonnes				Grade				Gold1				Tonnes				Grade				Gold1				Tonnes				Grade				Gold1
Operations		(million)				(oz/ton)				(Moz)				(million)				(oz/ton)				(Moz)				(million)				(oz/ton)				(Moz)
South Africa Underground
Elandskraal			7.1				0.222				1.57				27.9				0.240				6.71				35.0				0.237				8.28
Free State			10.2				0.161				1.64				8.5				0.155				1.32				18.8				0.158				2.96
Randfontein			3.5				0.232				0.80				4.7				0.173				0.82				8.2				0.198				1.62
Evander			5.4				0.195				1.04				15.5				0.184				2.84				20.8				0.187				3.88
Evander(below infrastructure)															57.2				0.213				12.21				57.2				0.213				12. 21
Target			8.7				0.209				1.82				13.4				0.185				2.47				22.1				0.194				4.29
Free Gold			15.2				0.198				3.02				45.9				0.224				10.28				61.1				0.217				13.30
Total S.A. Underground			50.0				0.198				9.90				173.2				0.213				36.64				223.2				0.209				46.54
South Africa surface
Randfontein			4.1				0.020				0.08				0.1				0.054				0.00				4.2				0.021				0.09
Kalgold			4.0				0.029				0.12				4.3				0.053				0.23				8.4				0.041				0.35
Free Gold			212.1				0.008				1.76				12.6				0.017				0.22				224.7				0.009				1.97
Total S.A. Surface			220.2				0.009				1.96				17.0				0.026				0.45				237.2				0.010				2.41
Australian operations2
Mt. Magnet			1.9				0.064				0.12				0.6				0.147				0.09				2.5				0.083				0.21
South Kalgoorlie			0.5				0.028				0.01				4.3				0.055				0.24				4.8				0.052				0.25
Total Australian Operations			2.4				0.056				0.14				4.9				0.066				0.32				7.3				0.063				0.46
Papua New Guinea
Hidden valley			5.6				0.064				0.36				36.4				0.055				2.01				42.0				0.056				2.37
Kaveroi and Hamata															7.3				0.070				0.51				7.2				0.070				0.51
Golpu															78.1				0.018				1.39				78.5				0.018				1.39
Total Papua New Guinea			5.6				0.064				0.36				121.7				0.032				3.90				127.3				0.033				4.26
Grand total			278.3				0.044				12.35				316.7				0.130				41.31				595.1				0.090				53.67

Silver

						PROVEN																PROBABLE																TOTAL
		Tonnes								Silver				Silver				Tonnes								Silver				Silver				Tonnes								Silver				Silver
Mine		(Mt)				g/t				(000kg)				(000oz)				(Mt)				g/t				(000kg)				(000oz)				(Mt)				g/t				(000kg)				(000oz)
Hidden Valley and Kaveroi			5.1				39.63				202.1				6498				33.0				33.23				1096.7				35261				38.1				34.09				1298.9				41759
Grand total			5.1				39.63				202.1				6498				33.0				33.23				1096.7				35261				38.1				34.09				1298.9				41759

Copper

						PROVEN																PROBABLE																TOTAL
		Tonnes								Cu				Cu				Tonnes								Cu				Cu				Tonnes								Cu				Cu
Mine		(Mt)				%				(000 t)				(M lbs)				(Mt)				%				(000 t)				(M lbs)				(Mt)				%				(000 t)				(M lbs)
Golpu			0.0				0.00				0.0				0.0				70.8				1.13				800.0				1763				70.8				1.13				800.0				1763
Grand total			0.0				0.00				0.0				0.0				70.8				1.13				800.0				1763				70.8				1.13				800.0				1763

Molybdenum

						PROVEN																PROBABLE																TOTAL
		Tonnes								Cu				Cu				Tonnes								Cu				Cu				Tonnes								Cu				Cu
Mine		(Mt)				ppm				(000 t)				(M lbs)				(Mt)				ppm				(000 t)				(M lbs)				(Mt)				ppm				(000 t)				(M lbs)
Golpu			0.0				0.00				0.0				0.0				70.8				121.00				8.6				19				70.8				121.00				8.6				19
Grand total			0.0				0.00				0.0				0.0				70.8				121.00				8.6				19				70.8				121.00				8.6				19

     Of Harmony’s 53.67 million ounces of ore reserves, 41.5 million ounces are classified as above infrastructure and 12.2 million ounces are classified as below infrastructure, those reserves for which the capital expenditure has yet to be approved.

     Of the decline in ore reserves, year-on-year depletion accounted for 2.3 million ounces after disposals, shaft closures plus the loss of Western Area equity ounces amounts to another loss of 5.3 million ounces. This however was offset by ounces generated as a result of progress made with pre-feasibility studies at the Evander South Project and at Wafi/Golpu in PNG which added 3.5 million ounces to reserves.

     The amount of gold mineralization which Harmony can economically extract, and therefore can classify as reserves, is sensitive to fluctuations in the price of gold. If gold prices differ from the R115,000 per kilogram ($520 per ounce with an exchange rate of US$/R6.88 for South Africa and A$/US$0.73 for Australia) that was used to estimate Harmony’s attributable reserves of 53.67 million ounces of gold as of June 30, 2007 listed above, Harmony’s operations would have had different reserves. Based on the same methodology and assumptions as were used to estimate Harmony’s reserves as of June 30, 2007 listed above, but applying different Rand gold prices that are 10% above or below the estimated Rand per kilogram gold price, the attributable gold reserves for Harmony’s operations would have been as follows:

R103,500 /kilogram (-10 percent)		R115,000/kilogram		R126,500 /kilogram (+10 percent)
50.685 million ounces		53.67 million ounces		55.747 million ounces

     The London afternoon fixing price for gold on November 28, 2007 was $ 801.75 per ounce.

     Harmony’s methodology for determining its reserves is subject to change and is based upon estimates and assumptions made by management regarding a number of factors as noted above under “ — Reserves”. Accordingly, the sensitivity analysis of Harmony’s reserves provided above should not be relied upon as indicative of what the estimate of Harmony’s reserves would actually be or have

been at the gold prices indicated, or at any other gold price, nor should it be relied upon as a basis for estimating Harmony’s ore reserves based on the current gold price or what Harmony’s reserves will be at any time in the future. See “Risk Factors”.

Worldwide Operations

 Description of Property

     The following is a map of our worldwide operations.

     Harmony’s operational mining areas in South Africa are set forth below:

		Hectares				Acres
Cooke (Randfontein)			8,696				21,488
Lindum (Randfontein)			3,143				7,766
Doornkop (Randfontein)			2,941				7,267
Elandskraal			5,113				12,634
Free State			22,583				55,802
Freegold			21,173				52,318
Kalgold			615				1,520
Evander			36,898				91,174
Target			7,952				19,649
Total			109,114				269,618

     Harmony’s discontinued operational mining areas (granted tenements) in Australia are set forth below:

		Hectares				Acres
Mt. Magnet			83,419				206,133
South Kalgoorlie			113,375				280,156
Total			196,794				486,289

     In PNG, Harmony holds granted tenements as set forth below:

		Hectares				Acres
PNG			346,138				855,326
Total Worldwide Operations			642,046				1,611,233

     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 disposed of properties and mining rights. 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.

     Harmony’s production from the Australian operations and South African Kalgold operations are sourced from Archaean greenstone gold deposits. These types of deposits are formed by the interaction of gold-bearing hydrothermal fluids with chemically or rheologically suitable rock types. The hydrothermal fluids are typically focused along conduits termed shear zones. The nature of the shear zone and the host rock determines the style of the mineralization, which may be narrow veins with high gold grades or wide disseminated mineralization with low-medium grades.

     Harmony’s 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.

     Harmony’s 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 and 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 6 sites:

	•		Elandskraal
	•		Free State
	•		Randfontein
	•		Evander
	•		Freegold
	•		Target

     We conduct surface mining at 5 sites:

	•		Free State
	•		Randfontein
	•		Freegold
	•		Kalgold
	•		Target

     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).

     In Australia, we presently conduct mining principally at two sites:

	•		Mt. Magnet – (we have signed a letter of intent for the sale of this operation – See “Disposals” above.)
	•		South Kalgoorlie – (we have entered into an agreement for the sale of this operation – See “Disposals” above.)

     Underground and surface mining is conducted at each of these operations, with underground access through two declines at Mt. 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 Mt. Marion ore and low grade stockpiles. Open pit mining recommenced at South Kalgoorlie mines during fiscal 2007. The Mt. Marion underground operation at South Kalgoorlie Mines ceased in June 2007, with only open pit operations continuing on that site.

     The following discussion is a three-part presentation of our operations:

	•		an overview of our South African mining operations with a discussion of each site;
	•		a production analysis of our South African mining operations based on individual shafts or mine grouped into categories (Quality, Leveraged and Growth); and
	•		an overview of our Australasian (Australian and PNG) operations.

South African Mining Operations — General

Introduction: On January 31, 2001, Harmony entered into an agreement to purchase the assets and liabilities of the Elandskraal mines in the North West and Gauteng provinces of South Africa for approximately R1 billion ($128.4 million). Harmony and AngloGold jointly managed the Elandskraal mines between February 1, 2001 and April 9, 2001 and Harmony completed the purchase on April 9, 2001. The assets and liabilities of the Elandskraal mines include the mineral rights and mining title (excluding a portion of the Carbon Leader Reef horizon, which AngloGold continues to mine), mining equipment, metallurgical facilities, underground and surface infrastructure necessary for the continuation of mining, ore treatment and gold extraction at Elandskraal as a going concern, and contributions to a rehabilitation trust fund equivalent to the current rehabilitation liability of this operation. The addition of Elandskraal to Harmony’s operations increased Harmony’s reserves by approximately 9.9 million ounces at that time. In fiscal 2007, Harmony’s Elandskraal operations accounted for approximately 8% (7% in fiscal 2006 and fiscal 2005) of Harmony’s total gold sales.

History: Gold mining began at Elandskraal in 1978 following approval of the project in 1974 by Elandsrand Gold Mining Company for the Elandsrand operations and by Gold Fields of South Africa Ltd. for the Deelkraal operations. Two surface shafts and two adjoining sub-vertical shafts were sunk at Elandsrand and Deelkraal. The sub-vertical shafts at Elandsrand were completed in 1984, which accessed a deeper reef in the lease area. The sub shaft deepening project, or SSDP, the deepening of the sub-vertical shafts to approximately 3,600 meters below surface, has been completed. Activities are currently focused on accessing and opening up areas of the new mine and on the development and construction of support infrastructure. Harmony believes that the SSDP will enable Elandskraal to produce approximately 364,954 ounces per year over the life of the mines.

Geology: Elandskraal contains three identified main reef groupings, the Ventersdorp Contact Reef, or VCR, the Carbon Leader Reef, or CLR and the Mondeor Reef. Only the VCR is economic to mine and has been mined at depths below surface between 1,600 and 2,800 meters with future production to 3,300 meters below surface at the Elandsrand operations and at depths below surface of 2,750 meters at the Deelkraal operations. The VCR and CLR consist of narrow (20 centimeters to 2 meters) tabular orebodies of quartz pebble conglomerates hosting gold, with extreme lateral continuity.

At the Elandsrand operations, the vertical separation between the VCR and CLR increases east to west from 900 meters to 1,300 meters as a result of the relative angle of the VCR unconformity surface to the regional stratigraphic strike and dip. The CLR strikes west-southwest and dips to the south at 25 degrees. 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.

The dip of the VCR at the Deelkraal operations is relatively consistent at 24 degrees, although there is some postulation of a slight flattening of dip at depth. The VCR has a limit of deposition running roughly north-south through the center of the lease area. The VCR is not developed to the west of this line. Some stoping has occurred to the west of this limit, but this was to exploit reefs from the Mondeor Conglomerates, stratigraphically underlying the VCR.

Mining Operations: The Elandskraal operations are divided into the Elandsrand and the Deelkraal mines. The Elandsrand mine engaged in both underground and waste rock mining. The Deelkraal mine engaged in underground mining but as a result of the lower gold price in rand terms (taking into account the stronger rand as against the U.S. dollar) the production was stopped in June 2004 and remained closed during fiscal 2005, 2006 and 2007. The treatment of waste rock became uneconomical and was discontinued during January 2004. These operations are subject to all of the underground and waste rock mining risks detailed in the Risk Factors section.

Following our acquisition of Elandskraal, we implemented the “Harmony Way” at Elandskraal in an effort to cut costs and increase productivity, which resulted in the retrenchment of approximately 1,450 employees. This has improved the overall cost structure, which has enabled us to pursue capital development.

     The Elandsrand mine, a mature mine with a declining production profile, has the challenge of a new mine being developed underneath the old mine. Due to the operating depths of the Elandskraal underground operations, seismicity and pressure related problems are a risk. Harmony regularly revisits its mining strategy and management procedures at all of its deeper mining operations in connection with its efforts to mitigate this risk. The primary challenges facing the Elandskraal operations are the lowering of working costs, increasing mining flexibility, controlling capital expenditure and the timely completion of the SSDP by fiscal 2010.

During August and September 2004, a major restructuring plan was implemented at Elandsrand. Along with the implementation of Continuous Operations or CONOPS between August 2004 and February 2005, production improved. Even so, it is still hampered by the lack of flexibility, an issue that will be addressed by the commissioning of the new mine. Capital development on three levels has been completed. Cash operating cost development is taking place in both easterly and westerly directions on these levels. Access development delays on two other levels resulted from slow progress of the access haulages through the Cobra Dyke. All the levels up to 113 Level are now through and developments rates have picked up substantially. Development and construction of support infrastructure has been completed. Work on the chambers for the refrigeration plants on 100 Level and the pump chamber on 115 Level is proceeding. The project is expected to be completed by fiscal 2010 and is expected to have a life of mine of 20 years. From the inception of the project through the end of fiscal 2007, R684 million (US$95.0 million calculated at the closing rate at balance sheet date) has been expended. A further R305 million (US$42.3 million calculated at the closing rate at balance sheet date) has been budgeted to complete the project. Good progress has been made with the Elandsrand New Mine Project.

In October 2007, an incident occurred at the Elandsrand operation involving a compressed pipe column which broke off below the shaft surface bank and fell to the bottom of the men – and - material shaft, causing extensive damage to the shaft steel work and electrical cables. The incident resulted in 3,000 workers being stranded underground for more than 30 hours. Mining operations were temporarily suspended for 44 days to allow for repairs to be conducted in the shaft. On November 16, 2007 the Company announced that a tripartite team, consisting of management, unions and the Department of Minerals and Energy had found the shaft to be in good working condition. Elandsrand mine was brought back into operation o November 19, 2007 after it followed precautionary safety procedures during the start up of underground workings. Management presented its the findings of the investigation to the DME relating to the pipe failure, emergency power, water and evacuation services and procedures, as well as the impact of CONOPS on maintenance. While the emergency services were found to be acceptable, Harmony has revised its emergency procedures and is in the process of completing a new Code of Practice relating to emergency preparedness. The DME is also expected to begin its own inquiry into the incident at the end of November 2007. Conditions in the working places, following a 44 day period during which no production took place, were found to be better than expected. Production at Elandsrand has resumed, and it is anticipated that the

shaft will be back on full production in December 2007. The losses due to the suspended production will be finalized and released at the end of the December 2007 quarter.

An agreement for the implementation of CONOPS at Deelkraal was reached with the respective unions on December 19, 2003. Due to delays, it was only fully operational by April 2004. Despite this, production at the Deelkraal mine was stopped in June 2004 as a result of the reduction in the Rand-denominated price of gold at that time which made mining at the shaft uneconomical. During fiscal 2005 and 2006 the Deelkraal mine was only operating as a service shaft.

Safety: During fiscal 2007, the safety record at the Elandskraal mine in terms of lost time frequency rate 18.49 per million hours worked compared unfavorably with the group average of 15.27. Significant work was done to address the seismic risk described above and the fatality frequency rate (0.08) returned to a more consistent ratio with the group average of 0.22 for underground operations. Safety standards from other Harmony operations are being applied at Elandskraal and receive constant and high-level attention.

Plants: Commissioned in 1978, the Elandsrand Plant has milling in closed circuit with primary and secondary hydrocyclones, secondary ball milling in closed circuit with hydrocyclones, thickening and cyanide leaching in a CIP pump cell carousel circuit. The CIP was commissioned after an upgrade of the facility in 1999. Following post-acquisition capital improvements, loaded carbon milled at the Elandsrand Plant is transported by road to the Central Plant at Virginia 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. Ore from Elandsrand underground operations are delivered to the plant for treatment. Due to a high percentage of freegold a gravity separator is used to extract this gold. The sludge from this concentrator is then transported by air to the Target Plant for extraction and smelting.

The following table sets forth processing capacity and average tons milled during fiscal 2007 for the plant:

				Average Milled for the
		Processing		Fiscal Year
Plant		Capacity		June 30, 2007
		(tons/month)		(tons/month)
Elandsrand Plant		185,000 *			84,783

In fiscal 2007, the Elandsrand Plant recovered approximately 96.31% of the gold contained in the ore delivered for processing.

  Randfontein Operations

Introduction: The Randfontein gold mine is located in the Gauteng Province of South Africa, approximately thirty kilometers west of Johannesburg. The Randfontein mine currently operates under a mining authorization with a total area of 17,753 hectares. The Randfontein mine has both underground and surface mining operations, and has two metallurgical plants. Underground mining is conducted at Randfontein at depths ranging from 500 meters. In fiscal 2007, the Randfontein Operation owns the Cooke, Doornkop and Lindum shafts. Harmony’s Randfontein operations accounted for approximately 13% (13% in fiscal 2006 and 11% in fiscal 2005) of Harmony’s total gold sales.

History: Gold mining began at the Randfontein mine in 1889. Harmony obtained management control of Randfontein in January, 2000 and by June 30, 2000 had acquired 100% of Randfontein’s outstanding ordinary share capital and 96.5% of the warrants to purchase ordinary shares of Randfontein. Since acquiring Randfontein, we have implemented the “Harmony Way” at Randfontein. We have reduced the number of senior managers, sold off non-core assets and implemented management teams.

Geology: The Randfontein mine is 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 50 Rand Syncline. The structural geology in the north section of the Randfontein mine is dominated by a series of northeast trending dextral wrench faults.

The Randfontein mine contains six identified main reef groupings: the Black Reef; the Ventersdorp Contact Reef; the Elsburg Formations; the Kimberleys; the Livingstone Reefs; and the South Reef. Within these, several economic reef horizons have been mined at depths below surface between 600 and 1,260 meters.

The reefs comprise fine to coarse grained pyritic mineralization within well developed thick quartz pebble conglomerates or narrow single pebble lags, which in certain instances are replaced by narrow carbon seams.

Mining Operations: The Randfontein operations are engaged in both underground and waste rock tunneling also takes place underground. These operations are subject to all of the underground and waste rock mining risks detailed in the Risk Factors section, and have historically also been subject to the open pit mining risks. Due to the shallow to moderate depths of the operations, seismicity and pressure related problems are 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 are indicated in the drilling, appropriate preventative action is taken.

The Doornkop South Reef Project was announced on January 22, 2003. The project involves the deepening of the Doornkop main shaft to 1,973 meters to the South Reef, which lies between 1,650 and 2,000 meters below surface, and includes development towards these mining areas. The estimated final capital cost is R1.284 million (US$178.3 million), with R610 million (US$84.72 million) spent as of June 30, 2007. After some initial suspensions, mining commenced at the South Reef at Doornkop in January 2004.

Currently, the Kimberley Reef is mined on the upper levels of the Doornkop Shaft between 900 and 1,100 meters below surface. Most of this mining is taking place on channel edges, which results in sporadic high, but mostly low recovered grades. Mining from this reef is planned to cease during fiscal 2008 with all focus being directed at the South Reef.

The South Reef on the lower levels is the target of the proposed shaft-deepening project. The most significant achievement for the past year was the completion of the shaft sinking programme. The shaft was sunk from two positions simultaneously, a world first as far as we know. The programme culminated with the removal of the plug between 192 and 197 levels, where a deflector was installed on 197 level — allowing for loading of the rock from 197 level and for other operations to continue below in the shaft on 212 level. Although a very high risk exercise on paper, the programme was engineered and executed on time with few significant problems.

The upper portion of shaft (from 132 level to 192 level) has been equipped on the dual purpose compartment allowing for materials to be transported to the levels as they are equipped. 192 level is currently equipped to provide all the stoping materials required for the mining programme that will commence in July 2007. Sustaining the development programme via the sub shaft infrastructure has been a challenge, as has the development of our people to take on the operation of a new mine.

Key milestones that are expected to be achieved during fiscal 2008 include the Rock Winder commissioning by December 2007 and the main shaft that will be partially equipped by the end of December 2007. The main shaft will be commissioned for 90,000 t/month to be hoisted by end March 2008. The Rock Winder is expected to be hoisting by June 2008.

First gold was produced from the project in July 2007. Full production (135,000 tons) is expected to be reached by March 2010.

Safety: The safety record at the Randfontein operations during fiscal 2007 in terms of lost time frequency rate of 10.04 per million hours worked compared favorably with the group average of 15.27. The fatality frequency rate (0.46) compared unfavorably with the group average of 0.22 for underground operations.

Safety at the operations receives constant and high-level attention and where problems are identified steps are taken to address the situation. The Chief Operating Officer is responsible for leading initiatives to improve workplace health and safety at Harmony’s South African operations.

Plants: The processing facilities at the Randfontein mine presently comprise two operating plants: the Cooke metallurgical plant and the Doornkop metallurgical plant, both of which are serviced by a surface rail network. The Cooke metallurgical plant, commissioned in 1977, is a hybrid CIP/CIL plant, which processes the ore from the dumps from the Randfontein operations. The Doornkop metallurgical plant, commissioned in 1985, is a conventional CIP plant, which is used to treat waste rock and other surface accumulations. It is now treating all ore from underground from the Randfontein operations.

The following table sets forth processing capacity and average tons milled during fiscal 2007 for the Cooke and Doornkop plants:

						Average Milled for the
		Processing				Fiscal Year Ended
Plant		Capacity				June 30, 2007
		(tons/month)				(tons/month)
Cooke			280,000				56,619
Doornkop			220,000				169,613

In fiscal 2007, the Cooke plant recovery has been approximately 81%, while Doornkop plant recovered approximately 95% of the gold contained in the ore delivered for processing. During fiscal 2006, the Doornkop plant was upgraded and all underground tons were moved from Cooke plant to Doornkop plant, Cooke plant was mothballed in January 2006 but was recommissioned during fiscal 2007 to treat surface sources.

Introduction: Harmony’s Free State operations are comprised of the original Harmony mines, the Unisel mine, Saaiplaas shaft 3, the Masimong shaft complex (comprised of Masimong shafts 4 and 5), Brand shafts 2, 3 and 5, and the Vermeulenskraal North mineral rights area. Mining is conducted at Harmony’s Free State operations at depths ranging from 620 meters to 3129 meters. In fiscal 2007 Harmony’s Free State operations accounted for approximately 19% (18% in fiscal 2006 and 15% in fiscal 2005) of Harmony’s total gold sales.

History: Harmony’s Free State operations began with the Harmony mine, which is an amalgamation of the Harmony, Virginia and Merriespruit mines. Beginning in 1996, Harmony began purchasing neighboring mine shafts. The Unisel mine was purchased in September 1996, the Saaiplaas mine shafts 2 and 3 were purchased in April 1997, the Brand mine shafts 2, 3 and 5 were purchased in May 1998 and the Masimong complex (formerly known as Saaiplaas shafts 4 and 5) was purchased in September 1998.

Geology: Harmony’s Free State operations are located in the Free State goldfield on the south-western edge of the Witwatersrand Basin. Within this area, the operations are located on the south-western and south-eastern limb of a synclinal closure, with the Brand, Saaiplaas and Masimong shafts occupying northerly extensions of the same structure. The reefs dip inwardly from their sub-outcrop positions in the east and south of the mine to a position close to the western boundary of the original Harmony mine, where the reefs abut against the De Bron fault. To the west of the De Bron faulted zone, faulting is generally more intense, resulting in structurally more complex mining conditions.

Mining Operations: The Free State operations are engaged in both underground and waste rock mining. These operations are subject to all of the underground and waste rock mining risks detailed in the Risk Factors section. Due to the shallow to moderate depths of the underground operations, seismicity and pressure related problems are relatively infrequent with the exception of the Brand shafts where these problems receive constant attention. Harmony regularly revisits its mining strategy and management procedures in connection with its 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 is indicated in the drilling, appropriate preventative action is taken. The principal challenges at the Free State operations of achieving optimal volumes and grades of ore production are addressed by stringent ore reserve management.

In fiscal 2002, Harmony began implementing the Masimong Expansion Project, which includes developing the Basal and B Reef orebodies in the Masimong shaft area and equipping the shaft. The envisaged growth from the project was not realized in 2005 and 2006, and as a result the project was halted in June 2006.

During fiscal 2005, Masimong was affected by three underground fires (one of which stopped production for seven days in the last quarter), machinery break-downs, a go-slow strike in January 2005 and a regional strike in March 2005. CONOPS was implemented in the third quarter of fiscal 2006.

During fiscal 2005, Masimong 4 was placed on care and maintenance.

The Brand 2 and the Brand 5 shafts are currently on care and maintenance. Care and maintenance will remain in place until market conditions are more favorable or more economical parts of the orebody are discovered. All labour has been transferred to other Harmony operations, where they have augmented natural attrition positions or displaced contractor labour.

Safety: The safety record at the Free State operations during fiscal 2007 in terms of lost time frequency rate of 17.82 per million hours worked was higher than the group average of 15.27. The fatality frequency rate (0.22) is equal with the group average for underground operations lost.

Plants: There are two metallurgical plants at the Free State operations, namely Central and Saaiplaas plants. A third plant, Virginia plant, was closed in fiscal 2005 and clean up operations implemented. The Central plant was commissioned in 1986 and employs CIP/CIL hybrid technology. It is currently dedicated to the treatment of underground ore. The Saaiplaas plant, commissioned in the late 1950’s, has been converted from the zinc precipitation filter process to the CIL. It currently processes surface sources and reclaimed slime.

The following table sets forth processing capacity and average tons milled during fiscal 2007 for each of the plants:

						Average Milled
						for the Fiscal Year
		Processing				Ended
Plant		Capacity				June 30, 2007
		(tons/month)				(tons/month)
Central			168,000				162,737
Saaiplaas			250,000				178,646

In fiscal 2007, Harmony’s plants at its Free State operations Central Plant recovered approximately 95% of the gold contained in the ore delivered for processing and approximately 71% at the Saaiplaas plant.

Introduction: Harmony’s Evander operations are located in the province of Mpumalanga in South Africa and are comprised of an amalgamation of the former Kinross, Bracken, Leslie and Winkelhaak mines and 36,898 hectares of mineral rights adjacent to these mines. Mining at Harmony’s Evander operations is conducted at depths ranging from 300 meters to 2,100 meters. In fiscal 2007, Harmony’s Evander operations accounted for approximately 10% (12% in fiscal 2006 and 13% in fiscal 2005) of Harmony’s total gold sales.

History: Gold mining in the Evander Basin began in 1955. Eventually, four mining operations were established at Evander. In 1996, as a result of depletion of ore reserves, all four mining areas were merged to form Evander. In August 1998, Harmony acquired Evander as a wholly-owned subsidiary. Since then, we have implemented the “Harmony Way” management process at Evander.

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 placer unit, 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. The Evander operations also process a limited amount of waste rock as and when necessary to allow the plants to operate efficiently. These operations are subject to all of the underground mining risks detailed in the Risk Factors section. Due to the shallow to moderate depths of the Evander underground operations, seismicity and pressure 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. It has been fully implemented at all shafts at Evander. The implementation resulted in an increase in tons milled and consequently a rise in gold production.

During fiscal 2005, the Evander 2 and 5 shafts were combined and downscaled, while the Evander 9 shaft was closed successfully and placed on care and maintenance. The Evander 9 shaft employees were transferred to other Evander operations. The Evander 7 shaft (Decline No. 3, phase 3) project is currently under review due to geological complexities.

Safety: The safety record at the Evander operations in terms of lost time frequency rate of 18.56 per million hours worked during fiscal 2007 is higher than the group average of 15.27. The fatality frequency rate (0.32) during fiscal 2007 is also higher than the group average of 0.22 for underground operations.

Plants: Evander has one active processing plant, the Kinross-Winkelhaak plant, which is operated as two geographically distinct sections. The bulk of the mine’s ore production is treated at the Kinross plant, which is a CIP/CIL hybrid plant. The Winkelhaak plant mills all of the ore from shafts 2 and 5, and pumps the slurry to the Kinross plant for further processing. .

The following table sets forth processing capacity and average tons milled during fiscal 2007 for the operating plant:

						Average Milled for the
		Processing				Fiscal Year Ended
Plant		Capacity				June 30, 2007
		(tons/month)				(tons/month)
Kinross-Winkelhaak			200,000				126,250

In fiscal 2007, the plant at Evander operations recovered approximately 96.5% of the gold contained in the ore delivered for processing.

Introduction: Harmony conducts a surface mining operation at the Kalgold gold mine near Mafikeng in the North West Province of South Africa. Through Kalgold, we also control extensive mineral rights on the Kraaipan Greenstone Belt in the North West Province of South Africa. We purchased Kalgold on July 1, 1999. In fiscal 2007, the Kalgold operations accounted for approximately 2% (3% in fiscal 2006 and 4% in fiscal 2005) of Harmony’s total gold sales.

History: Harmony acquired Kalgold on July 1, 1999 and fully incorporated Kalgold into its operations in October 1999. Prior to our acquisition, the Kalgold mine had operated for more than three years.

Geology: The Kalgold operations are situated on the Kraaipan granite-greenstone belt, which is a typical gold-bearing greenstone formation. It has undergone intense structural deformation that has led to its dislocation into separate units.

Within the mining lease area, six steeply dipping zones of mineralization have been identified. Several additional zones of mineralization have been located within this area and are being evaluated. The first zone to be exploited by open cast mining has been

an area known as the D-Zone. The D-Zone orebody has a strike length of 1,400 meters, varying in width between 40 meters in the south and 15 meters in the north.

Gold mineralization is associated with pyrite and pyrrhotite, which was developed as a replacement mineral within a banded ironstone formation and also within extensional, cross-cutting quartz veins within the ironstone.

Mining Operations: The Kalgold operations are engaged in open pit mining. This operation is subject to all of the open cast mining risks detailed in the Risk Factors section. Small subterranean water intersections in the pit are common and are actively managed and appropriate action is taken when necessary. The primary mining challenges at the Kalgold operations of achieving optimal volumes and grades of ore production are addressed by stringent ore reserve management.

Safety: The Kalgold operations had a lost time injury frequency rate of 6.08 per million hours worked in fiscal 2007, and recorded no fatal accidents in fiscal 2007. There is no reliable industry benchmark for safety at South African surface mining operations.

Plants: Ore is trucked from the pit and is directly tipped into the feed bin to the pre-primary crusher or stockpiled. The ore then undergoes a four phase crushing process before it reaches the Dome stockpile. Three ball mills are used to grind the ore down to between 70-80% less than 75 micron for the leaching process.

The replacement of a pre-aeration tank is in progress and is due for completion in December 2007. The estimated capital cost at completion amounts to R 2.5 million.

The following table sets forth processing capacity and average tons milled during fiscal 2007 for each of the plants:

						Average Milled for the
		Processing				Fiscal Year Ended
Plant		Capacity				June 30, 2007
		(tons/month)				(tons/month)
CIL			135,000				132,485
Heap Leach*			—				—

In fiscal 2007, Harmony’s plants at its Kalgold operations recovered approximately 86% of the gold contained in the ore delivered for processing.

Introduction: On April 23, 2002, Harmony and ARMgold acquired the Freegold operations from AngloGold through a joint venture with ARMgold in which Harmony and ARMgold each had a 50% interest for $206.8 million. Since Harmony acquired ARMgold in September 2003, the Freegold operations have been accounted for as a wholly owned subsidiary. For the year ended June 30, 2007, the Freegold operations accounted for 27% (26% in fiscal 2006 and 27% in fiscal 2005) of Harmony’s total gold sales.

Freegold assets consist of the Joel, Tshepong, Matjhabeng, Bambanani and St. Helena mines, associated infrastructure and other mineral rights in the Free State Province of South Africa. Production from the underground mines and adjacent surface sources is processed through three processing facilities (the Free State 1, or FS1, Plant, Joel Plant and the St. Helena 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. AngloGold also owned the Joel mine, which, although it was not a part of this AngloGold subsidiary, is now included within the Freegold assets owned by Freegold. Freegold also acquired the St. Helena gold mine in October 2002. St. Helena was the first gold mine to be established in the Free State.

Geology: Freegold’s mines are located in the Free State goldfield, which is on the southwestern edge of the Witwatersrand basin. The Bambanani, Tshepong, Matjhabeng and St. Helena mines are located in and around Welkom, while the Joel mine is approximately 30 kilometers south of Welkom. Mining at Bambanani, Tshepong and Matjhabeng is primarily conducted in the Basal reef, with limited exploitation of secondary reefs. Mining at Joel is primarily conducted in the Beatrix-VS5 Composite Reef. The reefs generally dip

towards the east or northeast while most of the major faults strike north-south, with the most intense faulting in evidence at Matjhabeng.

Mining Operations: Freegold is engaged in both underground and waste rock mining. These operations are subject to all of the underground and waste rock mining risks detailed in the Risk Factors section. Freegold regularly revisits its mining strategy and management procedures at the Freegold operations in connection with its effort to minimize risks. Mining depths range from shallow-intermediate at the Joel mine to deep at the Bambanani mine. The primary mining challenges at the Freegold operations are seismic risks, ventilation and fire avoidance. Both the Bambanani mine and the Matjhabeng mine (consisting of Kudu/ Sable, Eland and Nyala shafts) are classified as seismically active operations with seismic monitoring systems installed to do active seismic risk evaluation, generally located in the vicinity of remnant operations and/or geological structures. Seismic systems are managed by external specialists. Current ventilation and refrigeration systems were evaluated and improved at take-over which Harmony believes will improve productivity and safety. Plans to this effect are being implemented by Freegold. Refrigeration plants are installed at the Bambanani and Tshepong Mines. Following underground fires during the second half of 1999 at the Bambanani mine, mine management reviewed and modified working practices and the efficiency of the overall fire management system.

Mining is conducted at depths ranging from 1,200 and 3,000 meters at Bambanani, at an average depth of approximately 1,925 meters at Tshepong, at an average depth of approximately 1,700 meters at Matjhabeng, at an average depth of approximately 1,000 meters at Joel and at an average depth of 1,489 meters at St. Helena. Production at Matjhabeng, which is a mature mine nearing closure, is currently focused on the extraction of remnant pillars and shaft pillars, specifically at the Eland shaft. Due to the increased operating costs in dollar terms, in fiscal 2005 the loss making shafts Nyala and Eland were placed on care and maintenance, while production at St. Helena was scaled down and Kudu/Sable was closed down.

Freegold is conducting a development program at the Bambanani shaft, which is nearing completion. Harmony expects this program to allow access to additional mining areas, which would reduce overall grade but increase overall production and life of mine.

CONOPS was introduced at the shafts during the quarter ended December 31, 2003. During a significant period of fiscal 2005, CONOPS was stopped due to a dispute between management and the unions.

The Tshepong Decline project, which started in April 2003, has accessed an additional two levels (69 and 71) of the Tshepong North Shaft. At fiscal 2007 year end, R254.7 million (US$ 35.4 million calculated at the closing rate at balance sheet date) has been spent. A further R25.6 million (US$ 3.6 million calculated at the closing rate at balance sheet date) has been budgeted to complete the project. Except for two rock passes, the development portion of the project work has been completed. Freegold estimates that the project work will be completed by June 2008 and is expected to make available an additional 43,481 kilos Au (1.4 million ounces)

The Phakisa Shaft Project is also proceeding on schedule. Phakisa shaft, a surface shaft, sunk to 75 level elevations and a planned decline shaft to 85 levels will access the ore reserves to a depth of 2,662 meters below surface. It is estimated that the area will yield 22.0 million tons, recovering 185.2 tons of gold over a project life of 22 years. Project completion requires sinking of a decline shaft, equipping and commissioning of the shaft with access development and stoping to maximum production build-up at a capital cost of R934 million (US$130 million calculated at the closing rate at balance sheet date). To date, R614 million (US$85 million calculated at the closing rate at balance sheet date) has already been spent. The project is expected to be in full production in 2010. The average production rate over the peak period of life of mine is 281,693 ounces per annum.

Shaft 2 at St.Helena mine was closed during the quarter ended December 31, 2003. CONOPS was introduced on November 2003. During a significant period of fiscal 2005, CONOPS was stopped due to a dispute between management and the unions.

Nyala shaft was placed on care and maintenance during March 2005. During June 2005, the decision was made to place the remaining shafts at Matjhabeng, being Kudu/Sable and Eland, on care and maintenance.

Safety: During fiscal 2007, the lost time frequency rate at the Freegold operations of 18.08 per million hours worked compared unfavorably with the group average of 15.27 while the fatality frequency rate of 0.23 nearly equalled the group average of 0.22.

Safety standards receive constant and high-level attention at Freegold.

Plants: Freegold operates one plant: the Free State One (FS1) Plant. 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 semi-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 FS2 Plant was largely dedicated to the treatment of surface

sources but due to the past low gold price in rand terms the plant became uneconomical and since the Free State plants have extra capacity, it was decided to stop treatment at the plant and to start a total clean up operation in fiscal 2005. It was commissioned in the early 1950’s and employs conventional crushing and filtration technology. 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 implement clean up operations. St. Helena operates a conventional zinc precipitation filter plant supported by two mills. Treatment at St. Helena plant was stopped in the latter part of the year and the plant was placed on care and maintenance.

The following table sets forth processing capacity and average tons milled during the fiscal year ended June 30, 2007 for the FS1 plant:

						Average Milled for
		Processing				the Fiscal Year
Plant		Capacity				Ended June 30, 2007
		(tons/month)				(tons/month)
FS 1			420,000				404,167

In fiscal 2007, Harmony’s plants at its Free State One Plant recovered approximately 96% of the gold contained in the ore delivered for processing.

Introduction: On September 22, 2003, Harmony and ARMgold completed a merger via a share exchange which resulted in ARMgold becoming a wholly owned subsidiary of Harmony. For accounting purposes, the merger was accounted for as a purchase by Harmony of ARMgold for a purchase consideration of $697 million. For fiscal 2005, 2006 and fiscal 2007, the ARMgold operations accounted for approximately 5% of Harmony’s total gold sales. In September 2007, Harmony announced it had entered into formal agreements with Pamodzi Gold for the sale of the Orkney Shafts. See Item 8. - “Recent Developments” below.

History: The ARMgold operations consist of the Welkom shafts in the Free State Province and the Orkney shafts in the North West Province. Due to the distance, they are operated as separate business units. Exploration, development and production in the Welkom area dates back to the 1940s leading to production by 1947. Exploration and development at Orkney started from 1886 and following dormant periods, large-scale production commenced during the 1940s with the formation of Vaal Reefs Gold Mining and Exploration Company Limited in 1944.

Geology: The Welkom operations are centrally located within the Free State goldfield, which lies some 270 kilometers southwest of Johannesburg on the southwest rim of the Witwatersrand Basin, in an area containing several other mature operations. The Basal Reef is the main reef exploited here. It strikes north to north-northwest and generally dips to the east between 20 degrees and 40 degrees. Other reefs that are exploited are the Leader Reef, the Saaiplaas Reef and the Middle Reef. There are a number of faults in this area, including Rheedersdam and De Bron.

At the Orkney operations, the Vaal Reef is the most significant reef mined. The reef strikes northeast, dipping southeast and is heavily faulted to form a series of graben structures. The dip is generally less than 30 degrees but can vary locally in direction and magnitude to exceed 45 degrees. The VCR is also exploited, as well as the Elsburg Reef. There are several major faults in the lease area, being Nooitgedacht, Buffelsdoorn, Witkop, WK2, No 3 BU, No 5 BU and No 2 BU Fault. These faults typically have throws of tens of meters and further divide the reef into blocks of up to 100 meters in width.

Mining operations: ARMgold is engaged in underground mining at all of its operations. These operations are subject to all of the underground mining risks detailed in the Risk Factors section. ARMgold regularly revisits its mining strategy and management procedures at both its operations in connection with its effort to minimize risks. Mining depths range from 1,000 meters to 1,200 meters below the surface at the Welkom operations and from 1,600 meters to 2,000 meters below the surface at the Orkney operations.

Cost control was one of the major challenges faced at the ARMgold operations. Since the merger, management has implemented the “Harmony Way” in an effort to cut costs and increase productivity.

During fiscal 2005, Welkom 1 and Orkney 6 were placed on care and maintenance. Harmony approved the re-opening of the Orkney 7 shaft during fiscal 2006 and production commenced during the first quarter of fiscal 2007.

Safety: During fiscal 2007, the safety record at ARMgold mines in terms of lost time frequency rate of 22.54 million hours worked compared unfavorably with the group average of 15.27. The fatality frequency rate of 0.26 compared less than favorable with the group average of 0.22 . Significant work is being done to address this.

Plants: ARMgold does not own any plants. Ore from the Orkney operations is treated at Vaal River Operations’ (“VRO”) No. 1 Gold Plant (of Anglo Gold Ashanti). Various agreements between Harmony and VRO govern the supply and quality of the ore and gold apportionment.

Introduction: Avgold’s operations consist of the Target mine, Target North and Extensions and Oribi Exploration Property situated near the town of Allanridge in the Free State Province, some 270 kilometers southwest of Johannesburg. Located at approximately latitude 28 (LOGO) 00’S and longitude 26 (LOGO) 30’E on the northern limit of the Welkom Goldfields, the site is accessed via the R30 motorway situated between the towns of Bothaville and Welkom.

On July 15, 2003, Harmony acquired 11.5% in Avgold from Anglo South Africa Capital (Pty) Ltd and later that year acquired ARM Limited’s 42% share in Avgold. Through a scheme of arrangement, Harmony acquired the minority shareholding and Avgold became a wholly owned subsidiary. In fiscal 2006 and 2007 Avgold’s operations accounted for 6% of Harmony’s total gold sales (7% in fiscal 2005).

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

Geology: The gold mineralization currently exploited by Target mine is contained within a succession of Elsburg and Dreyerskuil quartz pebble conglomerate reefs hosted by the Van Heeverrust and Dreyerskuil Members of the Eldorado Formation, respectively. Additional mineral resources have been delineated in the Big Pebble Reefs of the Kimberley Formation but these are not planned to be exploited in the current life of mine plan.

The majority of the mineral reserves at Target mine are contained within the Eldorado fan, a structure with dimensions of some 135 meters vertically, 450 meters down-dip and 500 meters along strike. The Eldorado fan is connected to the subsidiary Zuurbron fan, located between the Target mine and Lorraine, by a thinner and lower grade sequence of Elsburg reefs termed the Interfan area. To the north of the Eldorado fan, a number of fans have been intersected by surface drilling of which the Siberia and Mariasdal fans are the most significant. These fans are subject to ongoing technical studies and do not form part of the current Target mine life of mine mineral reserve.

A number of faults that displace the reefs of the Target mine have been identified of which the most prominent are the north-south trending Eldorado fault and the east-west trending Dam and Blast faults. The Eldorado uplifts the more distal portions of the Elsburg and Dreyerskuil Reefs while the Blast fault forms the northern border of the Target mine.

Target North is sub-divided into the Paradise, Siberia and Mariasdal areas by the east-west trending Siberia and Mariasdal faults. To the north of the Siberia fault, the Eldorado fault continues trending more to the northwest and an additional north-south trending fault, the Twin fault has uplifted the distal portions of the reefs. North of the Maraisdal fault, the reef horizons are at a depth greater than 2,500 meters below surface. Resources have been delineated on strike up to 15 kilometers north of the Target mine

Approximately 40 kilometers north of Target mine, surface boreholes have intersected gold bearing reefs in the Oribi area close to the town of Bothaville. Resources have been delineated at Oribi on the VCR and Elsburg at depths of approximately 2,750 meters below surface.

Mining operations: The Avgold operations are engaged in underground and surface mining. Mining operations comprise one primary underground mine commissioned in May 2002, making use of information systems and mechanization, combined with process-driven organizational design that relies on a multi-skilled workforce. The majority of the production is derived from mechanized mining; however, conventional stoping is still employed primarily to de-stress areas ahead of the mechanized mining. The Avgold operations have been managed by Harmony since May 2004. The Harmony Way has been successfully implemented resulting in a decrease of cash costs.

During fiscal 2005, Target struggled with flexibility problems and a lack of access points to the orebody, despite a good start to the year. There were also several operational disruptions, including low availability of the mechanized fleet and consequently, low development rates. Critical machines have been replaced with new and refurbished equipment in an attempt to improve the availability of the fleet. CONOPS was also implemented in the conventional mining section which allowed the mine to step up the rate of over-stoping the massives.

Safety: The safety record at the Avgold operations during fiscal 2007 in terms of lost time frequency rate of 9.81 per million hours worked compared favorably with the group average of 15.27 while the fatality frequency rate of 0.0 compared favorably with the group average of 0.22 for underground operations.

Safety at the operations receives constant and high-level attention and where problems are identified steps are taken to address the situation. The Chief Operating Officer is responsible for leading initiatives to improve workplace health and safety at Harmony’s South African operations

Plants: Target Plant was commissioned towards the end of 2001 and currently treats only underground ore. The process route comprise primary crushing, open circuit primary SAG milling, secondary ball milling closed with hydrocyclones, thickening, cyanide leaching, CIP adsorption, elution, electrowinning, smelting and tailings disposal. The milling circuit incorporates gravity concentration, the concentrates from which are processed via intensive cyanidation and electrowinning. Gold bullion is dispatched to the Rand refinery.

The installation of a ROM mill to enable the mill to run autogenously is progressing well. The objective is to save R 1.2 million on grinding media monthly. To date, a total of R14.8 million ($2.0 million) has been spent. Capital cost still to be incurred is expected to be R7. 0 million ($0.9 million).

The following table sets forth processing capacity and average tons milled during the year ended June 30, 2007:

						Average Milled For the
		Processing				Fiscal Year Ended
Plant		Capacity				June 30, 2007
		(tons/month)				(tons/month)
Target Plant			105,000				101,217

In fiscal 2007, the Target Plant recovered approximately 96% of the gold contained in the ore delivered for processing.

South African Operations — Production Analysis

We manage our operations on a shaft-by-shaft basis. Since fiscal 2006, we categorized the South African operations as follows: Quality assets, Leveraged assets and Growth assets. Surface operations are managed separately.

Quality assets are typically those shafts with a larger reserve base and longer life, which form the core of our production. The Quality assets are Target, Tshepong, Masimong complex, and Evander 2, which was downscaled and combined with Evander 5 during fiscal 2005, Evander 7, Evander 8 and Cooke 1, 2 and 3 shafts.

Leveraged assets are those shafts that supplement production and provide the upside in the event of an increase in the rand gold price. The leveraged operations consist of shafts that are either in the process of being restructured, downscaled in line with available ore reserves or mothballed. These include the currently operating Bambanani, Joel, West Shaft, Harmony 2, Merriespruit 1 and 3, Unisel, Brand 3 and Orkney 2, 4 and 7 shafts, as well as St. Helena which was scaled down significantly and Brand 5, Welkom 1, Kudu/Sable, Nyala and Eland that were placed on care and maintenance or closed down during fiscal 2005. West shaft was placed on care and maintenance in March 2007. The following shafts that were closed during fiscal 2004 were also Leveraged assets: Evander 9, Deelkraal, Saaiplaas 3, Welkom 1, 4, 6 and 7, as was Harmony 4 and Virginia, which was closed during fiscal 2003. In September 2007, Harmony announced the sale of the Orkney shafts to Pamodzi Gold, this transaction is expected to be concluded by the first half of 2008.

Growth assets comprise the expansion projects established through existing infrastructure, as well as the three new mines being built in South Africa. These operations include the Elandsrand and Doornkop mines and the Phakisa project. The Growth assets represent the future of our South African operations and, once completed, will result in a substantial improvement in the quality of our production profile.

In addition, surface operations comprise the Kalgold opencast mine, all previously mined rock, introducing waste or reef and any clean-up operations at plants and other infrastructure. Therefore, the surface operations at Freegold, the Free State and Randfontein and, for the first time in fiscal 2005, Target’s surface operations are also included under surface operations as well as the surface operations from Elandsrand and Evander, which were discontinued in fiscal 2004.

Quality assets

The charts set out on the pages that follow detail the operating and production results from underground operations for all identified Quality assets for fiscal 2007, 2006, and 2005:

		Fiscal Year Ended June 30,
		2007				2006				2005
Production
Tons (‘000)			6,901				6,814				7,464
Recovered grade (ounces/ton)			0.155				0.167				0.185
Gold sold (ounces)			1,068,902				1,141,166				1,378,167
Results of operations ($)
Product sales (‘000)			682,029				606,435				588,360
Cash cost (‘000)			472,749				437,193				436,018
Cash profit (‘000)			209,280				169,242				152,342
Cash costs
Per ounce of gold ($)			442				383				316
Capex (‘000) ($)			105,578				89,587				81,615

     Tons milled from Quality Assets decreased to 6,814,000 in fiscal 2006, compared with 7,464,000 in fiscal 2005. Volumes were negatively affected, mainly as a result of days lost to the industry through the wage strike in the first quarter and the Cosatu strike in the fourth quarter (See “Board of Directors, Senior Management and Employees — Unionized Labor”), the influence of the CONOPS agreement that were only concluded in October 2005 in the Freegold operations and lower underground volumes. Recovered grade decreased from 0.185 in fiscal 2005 to 0.167 in fiscal 2006. The decrease in ounces sold from 1,378,165 in fiscal 2005 to 1,141,166 is attributable primarily to the decrease in the tons produced and the recovered grade.

Tons milled from Quality assets increased to 6,901,000 in fiscal 2007, compared with 6,814,000 in fiscal 2006. Recovered grade decreased from 0.167 in fiscal 2006 to 0.155 in fiscal 2007. The decrease in ounces sold from 1,141,166 in fiscal 2006 to 1,068,902 is attributable primarily to a decrease in the recovered grade.

Gold sales increased to $682.0 million in fiscal 2007, compared with $606.4 million in fiscal 2006 and $588.4 million in fiscal 2005. Cash costs for the Quality assets were $442 per ounce of gold in fiscal 2007, compared with $383 per ounce of gold in fiscal 2006. This increase was mainly as a result of the lower grade and higher cash costs.

Refer to the charts set out on the following pages for detail on the operating and production results of individual Quality assets for fiscal 2007, 2006 and 2005:

		Fiscal Year Ended June 30,
Target		2007				2006				2005
Production
Tons (‘000)			904				813				1,178
Recovered grade (ounces/ton)			0.158				0.185				0.178
Gold sold (ounces)			142,433				150,196				209,847
Results of operations ($)
Product sales (‘000)			91,228				81,178				89,233
Cash cost (‘000)			52,730				51,904				54,391
Cash profit (‘000)			38,498				29,274				34,842
Cash costs
Per ounce of gold ($)			370				346				259
Capex (‘000 )($)			16,745				9,644				10,818