Chairman's letter

Safety is the foremost priority at Harmony. Each workforce comprises the people whose skills underpin the success of every operation and our sustainability as an industry.

As an industry, we have made significant progress in improving our safety performance in South Africa. Since 2003, fatalities have declined by almost 60%, with a 25% decrease in 2010 alone. Recording this progress at greater operational depths, in the face of a national skills shortage and a poor national track record of safety, is an exceptional achievement for which all stakeholders must be recognised and thanked.

The ultimate target, however, must be zero fatalities and to significantly reduce injuries. To reach this goal requires all stakeholders to actively work together to share and adopt leading global practices. Harmony willingly accepts this responsibility, as evidenced by the 30% decrease in the fatality rate for the year.

• For our shareholders, we need to operate our mines competitively and profitably, generating the cash flows to pay dividends and finance sustainable organic or acquisitive growth.
• For all stakeholders, our primary responsibility is the sustainable development of our operations for the benefit of all.

The binding thread is profitability. Without profits, we cannot create jobs and contribute to improving the living conditions of our host communities and countries. If our stakeholders do not participate and benefit from our mining operations, then our ability to create competitive long-term returns for our shareholders will be seriously undermined.

Our aim is to continue to build a sustainable company that benefits the widest group of stakeholders.

• The strength of the rand – always a factor for a business that earns revenue in rands based on the US dollar conversion rate – and the gold price. To counter these factors, we use conservative projections in our near-term and long-term planning.
• In South Africa, the administered price of electricity will rise by 25% again next year. Power delivered by Eskom currently accounts for over 15% of our operating costs and alternative sources are impractical. Our focus is on using power efficiently and economically.
• We have to become more productive to compensate for higher wage bills. Although there is a significant degree of cooperation between Harmony and its unions, we are concentrating on improving the understanding that the best interests of the company generally match the best interests of all its stakeholders.

On the environmental side, two of our operations have been certified to ISO 14001 standards, and another two recommended for certification. Most metallurgical plants have been certified compliant to the international cyanide code. The plants at Joel and Kalgold are finalising their adherence to this important code. In Papua New Guinea, our programme for community access to clean water is under way with encouraging results. In addition, an external stakeholder advisory panel was formed to provide independent advice on environmental and related community impacts resulting from the Hidden Valley mine’s operation.

In both South Africa and Papua New Guinea, we have made excellent progress in purchasing from local businesses. In South Africa, we have a programme in place that purchases from historically disadvantaged South Africans and we are making progress with an initiative to buy from local businesses we are developing in Papua New Guinea. In both countries we are meeting the challenges of a lack of facilities, skills and finance among potential suppliers and have contributed to placing local businesses on a sound footing.

We are progressively facilitating community development, ranging from help in providing adequate housing, sanitation and utilities to developing local businesses. As set out in this report on pages 5 to 15 and the online report (www.harmony.co.za/sd), the overarching objective is sustainable development. This means social development that can be sustained during and after the life of individual mines.

In business generally, and mining in particular, good corporate governance is essential. For mining entities in South Africa, good governance is the prerequisite for a mining licence and therefore the continued use and stewardship of the asset for the benefit and reward of all stakeholders.

Harmony is committed to complying with legislation in the countries in which it operates and, in many instances, we exceed compliance to reach good practice standards.

The solid progress made during the year is detailed in the corporate governance report on pages 163 to 178. Harmony has robust systems of internal controls and risk management, subject to ongoing review and refinement.

In March 2011, David Noko and Mavuso Msimang were appointed as independent non-executive directors, further broadening the expertise and experience of the board. Fikile De Buck, who has been a director since 2006, was re-appointed independent non-executive lead director in August 2011. Cheick Diarra resigned on 31 May 2011 due to other commitments. Post year end, John Wetton was appointed as independent non-executive director.

The Harmony board now has 16 directors: three executive directors, three non-executive directors and ten independent non-executive directors.

Cedric Savage will retire on 30 November 2011 and I express our deep appreciation for his valuable contribution over his eight-year tenure.

Harmony’s results for the year reflect the efforts and commitment of its employees and stakeholders at every level. I thank my colleagues on the board for their support and counsel, the chief executive officer Graham Briggs for his sterling leadership of a first-rate management team and all our employees for their commitment and contributions to developing the full potential of this company.

I also thank all our stakeholders for their considerable efforts and contributions in moving forward with us to ensure our shared objectives are achieved.

Harmony is guided by a clear strategy of delivering sustainable, competitive results. Although the gold price, rand/dollar exchange rate and the results delivered by management will always be key determinants of our company’s performance, the board is confident that the appropriate policies, systems and infrastructure are in place to ensure Harmony’s sustainability and profitability well into the future.

Signed

Patrice Motsepe
Chairman
24 October 2011