48 AFRICAN RAINBOW MINERALS 2006 Annual Report

Underground at Harmony’s Target gold mine in the Free State province • the Hidden the Valley and Wafi-Golpu projects inPapua New Guinea(PNG). • theMtMagnetandSouthKal mineopen-pitandunderground operations and in Western Australia; • IN AUSTRALASIA includingKalgold. there are several surface operations, In addition, the Tshepong declineproject andthe Elandsrand new mine, namely theDoornkop SouthReef, Growth Projects, • Brand Unisel, Merriespruit 1and3, Harmony 2, StHelena, West, Joel, includingBambanani, theLeveraged Assets, • Evander andRandfontein Masimong5, Tshepong, which includethe Target, thecompany's Quality Assets, • IN Welkom and Orkney, TheseVirginia) are outlinedbelow. and Australia. (Carletonville, Harmony's operations are locatedinthemajorgold-producing areas ofSouth Africa gold producer intheworld. which isthefifthlargest ARM holdsa16percent interest inHarmony GoldMiningCompany Limited(Harmony), ABOUT HARMONY Harmony Gold Phakisa shaftprojects. and 2and7operations inNorth West Province; andOrkney 1, 3 intheFree State, operations; Cape Town NAMIBIA location ofoperations HARMONY Western Cape SOUTH AFRICA BOTSWANA North WestNorth Eastern Cape Free State Target Phakisa Joel Bambanani Masimong 5 Tshepong Limpopo Merriespruit 1, 3 Harmony 2 Unisel Brand 3 St. Helena Welkom Natal KwaZulu Durban Perth Orkney 2, 4 Doornkop Evander Kalgold Randfontein Elandsrand Mt Magnet South Kal Darwin AUSTRALIA Adelaide Melbourne PNG AFRICAN RAINBOWAFRICAN MINERALS Hidden Valley Wafi Golpu Cairns Port Moresby Sydney 2006 Annual Report 2006 Annual Brisbane Wafi 49

5 HARMONY – GOLD 50 AFRICAN RAINBOW MINERALS 2006 Annual Report

Harmony Gold continued

MANAGEMENT Harmony is managed independently of ARM, although the executive chairman of ARM is also the non-executive chairman of Harmony. ARM’s financial director, Frank Abbott, also serves on the Harmony board as a non-executive director.

HARMONY AT A GLANCE FY2006 FY2005 % Increase/(decrease) Total gold production kg 74 242 92 230 (20) 000oz 2 386 2 965 (20) Revenue R/kg 108 268 84 799 28 $/oz 529 427 24 Cash operating costs R/kg 88 629 75 388 (18) $/oz 433 380 (14) Cash operating profit Rm 1 459 869 68 Headline loss per share cents (269) (342) 21 Capital expenditure Rm 1 688 1 417 19 $ 266 229 16

REVIEW OF THE MARKET Renewed investor and speculative interest in the gold market over the past 12 months has resulted in the gold price rising to levels not seen in at least 25 years – it peaked at $730 per ounce in mid-May 2006. Gold has frequently been regarded as an inflationary hedge and the rise in the gold price, especially since January 2006, has been largely driven by fears of rising global inflation as a result of a rising oil price and a global economic downturn. The conflict in the Middle East, initially Iraq and more recently Israel and Lebanon, has helped to fuel speculative demand. However, South African producers have seen the price in rands soar to above R140 000 per kilogram, supported by the recent softening of the rand against the US dollar.

Fabrication demand for gold, which had reacted positively to the upturn in global economies in recent years, has fallen off in response to the higher price. On the supply side, production from South Africa has declined significantly over the years, but the country is still the largest gold producer in the world. Current price levels have led to a surge in exploration and expansion projects around the world.

REVIEW OF THE YEAR The 2006 financial year continued to be one of consolidation for Harmony. The radical restructuring of operations embarked on in the 2004 financial year – closure of loss-making and marginal shafts, mining lower volumes at higher grades and the introduction of continuous operations at a number of shafts – was largely completed by year end, although the effects have yet to be felt on operating performance. In the 2006 financial year, gold produced declined by 20 percent to 74 242 kilograms (2 386 925 ounces). The average gold price received was R108 268 per kilogram ($529 per ounce), an increase of 28 percent over the previous year. The average rand/dollar exchange rate was R6.36/$ compared with R6.18/$ the previous year, reaching R7.17/$ at year end. Fields shares. to acquire allitsshares in Western includingHarmony, Areas inexchange for Gold offer tominorities, an GoldFields hasincreased itsholdingin Western Areas andmade Furthermore, GoldFields Limited. to GoldCorporation Barrick agreed tosellitsinterest inSouthDeep Subsequent tothefinancialyear-end, which represents oneofthebiggest highqualitygold ore bodiesglobally. resource of67millionounces, The SouthDeepgold minecontainsareserve of29.2millionouncesanda and BarrickGoldCorporation. which isa50:50jointventure between Western exposure of14.6percent toSouthDeepgold mine, Areas The acquisitionofthissignificantshareholding in Western Areas provides Harmony withastrategic representing a29.2percent stake inthecompany. Limited, Harmony hasacquired during theyear underreview atotalof44.99millionshares in Western Areas resulting inaprofit ofR307million. of R2135million, investment equivalent was toanaverage acquired atacost price ofR93.228pershare.The 442million, R2 Harmony disposedofitsremaining 26.5millionGoldFields Limitedshares for On 16November 2005, commensurate increase inthefigure for capitalexpenditure. a $103million)decrease inoperating costsand there was asignificant(R659million: development, Inlinewiththecompany's policyofaccountingfor the capitalisationofmine project pipeline. $88million)was allocatedtothefive growth ofthecompany’s projects in support robust million; (R561 ofwhich33percent Capital expenditure inFY2006amountedtoR1688million($266million), andare highly illustrative ofHarmony's gearing. weakening rand, bothhaving felt theimpactofrising gold price andtheslightly million($229million), 459 R1 Operating profit margin increased to18percent while cashoperating profit rose by 68percent to following thetwo-year wage agreement reachedwiththeunionsin August 2005. affected by anincrease inwages ofbetween 6percent and7percent witheffect from 1July 2005 increase waswhich isacreditable performance also when considering thedecrease ingold production.This Cash operating costswere upby 18percent toR88629perkilogram (orby 14percent to$433perounce) OA 8 88629 85694 2386 231 TOTAL AUSTRALIA UFC PRTOS1687090 116 SURFACE OPERATIONS SOUTH AFRICA PRODUCTION OPERATINGAND CASH COSTSBYREGION rwhPoet 1 108437 779 100 78382 214 683 1141 Growth Projects Leveraged Assets Quality Assets rdcini Y06(0o)Cashoperating costs(R/kg) Production inFY2006(000oz) AFRICAN RAINBOWAFRICAN MINERALS 9mHidden Valley,PNG Phakisashaft R95m Tshepong Decline North R147m Elandsrand New Mine R53m Doornkop SouthReef R119m R147m PROJECT CAPEX 2006 Annual Report 2006 Annual 51

5 HARMONY – GOLD 52 AFRICAN RAINBOW MINERALS 2006 Annual Report

Harmony’s Phakisa shaft, in the Free State province The information inthissectionisasummaryofinformation thatappears intheHarmony Annual Report. four years withacorresponding declineincashoperating costs. Production isplannedtoincrease to3.5millionouncesover thenext production over thenext few years. Harmony’s continued investment initsmajorprojects shouldsoonbearfruit astheseprojects comeinto GROWTH OUTLOOK AND of thecompany's significantprojects (Seetablebelow). withgood progress beingmadeonallfive Harmony's focus onprojects hasalsocontinued during theyear, Harmony Gold seogFe tt Dvlpeto eln oacs 7 eray13 February 172 Development ofadeclinetoaccess Free State Tshepong idnMrb eeomn fanwmn n 8 etme 10 September 285 22 11 December Development ofanew mine in Morobe June 445 Hidden at Development ofa ‘new mine’ 340 Gauteng, South Elandsrand Reef DeepeningoftheDoornkop main Gauteng Doornkop rjc oainDsrpinEpce ekPoetLife ofmine Project Expected peak Description Location Project alyPoic,topae 2007 two phases Province, Valley eln rvne oe eevsfo otmo h 2008 lower reserves from bottomofthe Province, Decline hf rvne hf o246mte eo ufc;2009 21 February 282 shaftto2426metres below surface; Province, Sinkingandequippingofprimary Free State Shaft Phakisa ot Poic,satt 7 ers2010 2010 depthsbetween 3000and600 Province, new mine shaftto1973metres Province, South HARMONY’S GROWTH PROJECTS –SUMMARY OFKEYSTATISTICS ot existing Tshepong shaft vertical South ot andthedevelopment ofa South PNG infrastructure Africa Africa 1500 metre twindecline Africa Africa ot metres below theexisting mine South continued rdcincmlto (years) completion production 00z date (000oz) AFRICAN RAINBOWAFRICAN MINERALS 2006 Annual Report 2006 Annual 53

5 HARMONY – GOLD