Risk table

This risk matrix should be read in conjunction with the detailed risk management section on page 179.


Risk		Comment
	Gold price	Any fall in the gold price below our cash cost of production for any sustained period may lead to losses and require Harmony to curtail or suspend certain operations.
	Foreign exchange fluctuations	Gold is priced globally in US dollars and Harmony’s revenue is thus realised in US dollars, but most operating costs are incurred in rand and other non-US currencies. Any significant and sustained appreciation of the rand and other non-US currencies against the dollar will materially reduce Harmony’s rand revenues and overall net income. As we currently do not enter into forward sales, commodity derivatives or hedging arrangements on future gold production, Harmony is exposed to the impact of any significant decreases in the gold price.
	Global economic conditions	A global economic uncertainty may have follow-on effects on our business, including: Key supplier insolvencies, leading to a break in the supply chain Reduced availability of credit – making it more difficult or expensive to obtain financing for our operations and capital expenditure Global economic uncertainty could affect the market value of Harmony’s securities.
	Actual production differing from estimates	Given the assumptions used to calculate Harmony’s mineral reserves, estimates in this report should not be interpreted as assurances of the economic life of the company’s gold and other metal deposits or future profitability of operations.
	Access to additional reserves through exploration or discovery	Exploring for gold and other metals is speculative, it may be unsuccessful and involves many risks.
	Projected versus actual cash costs of exploration, production and economic returns	It can take a number of years from initial feasibility study until development is completed and, during that time, the economic feasibility of production may change.
	Water inflows from closed mines	Certain of our mining operations are next to those of other companies. Any mine closure can affect operations at an adjacent mine if appropriate preventative steps are not taken. In particular, this could include the ingress of underground water when pumping operations at the closed mine are suspended. This can cause damage to property, operational disruptions and additional pumping costs, affecting our adjacent mining operations.
	Effect of commodity prices on input costs	Changes in cost of consumables linked to commodities such as oil and steel could increase production and capital expenditure.
	Supply and cost of electricity	Given Eskom’s capital expansion programme to deal with power constraints, an average annual tariff increase of 26% was approved by the National Energy Regulator of South Africa (NERSA), starting April 2010. These increases will affect the results of our operations in future. PNG has limited power generation and distribution capacity. While this capacity is increasing, Harmony mines and projects still rely heavily on diesel for power generation. The cost of this power will fluctuate with the oil price.
	Supporting the carrying value of property, plant and equipment, goodwill and other assets on its balance sheet	Harmony reviews and tests the carrying value of its assets annually when events or changes in circumstances suggest that this amount may not be recoverable. If there are indications that impairment may have occurred, estimates of expected future cash flows for each group of assets are prepared and impairments may be recorded.
	Integrating new acquisitions into existing operations	Difficulties or delays in integrating new acquisitions could affect profitability of the operation.
	Liability, delays and increased costs of production from environmental and industrial accidents and pollution	The occurrence of any of these hazards could delay production, increase cash costs and result in financial liability to Harmony.
	Safety risks	The environmental and industrial risks identified above also present safety risks for Harmony operations and employees and could lead to the suspension and potential closure of operations for indeterminate periods.
	Illegal or criminal mining	Among other risks presented by criminal mining, the threat of fire poses a serious risk to the safety of our employees and could cause property damage, which in turn could affect production.
	Inadequate insurance coverage to satisfy future claims	Harmony has third-party liability coverage for most potential liabilities, including environmental liabilities. While we believe our current coverage is adequate and consistent with industry practice, we may be liable for pollution (excluding sudden and accidental pollution) or other hazards against which we have not insured or cannot insure, including those for past mining activities.
	Inflation	Rising working costs (particularly electricity) and wages have resulted in significant cost pressures for the mining industry. Harmony’s profits and financial condition could be affected when cost inflation is not offset by devaluation in operating currencies or an increase in the price of gold.
	Socio-economic framework in operating regions	Harmony has operations in South Africa and PNG. Changes or instability in the economic or political environment in these countries or neighbouring territories could affect Harmony’s results and an investment in the company.
	Shortages of production inputs	Harmony’s operational results may be affected by the availability and pricing of consumables such as fuel, chemical reagents, explosives, steel and other essential production inputs.
	Competition for key human resources	Harmony competes with mining and other companies globally for key human resources with the appropriate technical skills and operating and managerial experience to operate its business. The need to recruit, develop and retain skilled employees is particularly critical with historically disadvantaged South Africans (HDSAs), women in mining in South Africa, and recruiting and training local landowners in PNG.
	Disruption from labour disputes and new South African labour laws	Given the high level of union membership among our employees, Harmony faces production stoppages for indefinite periods due to strikes and other disputes.
	HIV/Aids	The incidence of HIV/Aids in South Africa and PNG poses potential risks in terms of reduced productivity and increased medical and other costs.
	Potential liability for occupational health diseases	There may be claims in the future with regard to occupational health diseases, including silicosis, which we would need to defend.
	Laws governing mineral rights	Harmony’s operations in South Africa and PNG are subject to legislation regulating mineral rights and mining those rights. All Harmony’s South African operations have been granted new-order mining licences. If we want to expand any of our initiatives in PNG into additional areas under exploration, these operations would need to convert their existing exploration licences prior to the start of mining. That process could require landowner title approval, and there can be no assurance that approval would be received.
	Environmental regulations	As a gold mining company, Harmony is subject to extensive environmental regulation. We expect the trend of rising production costs due to compliance with South African and PNG environmental laws and regulations to continue.
	Sustainable community development	Companies in general are under pressure to demonstrate that while they seek a satisfactory return on investment for shareholders, other stakeholders including employees, communities surrounding operations and the countries in which they operate, also benefit from their commercial activities.
	Climate change regulations and physical risks	A number of international and national measures are being developed to address or limit GHG emissions. As our current mines have a life expectancy of over 20 years, future climate change regulation will therefore need to be considered for all Harmony’s extensions and acquisitions. All new greenfields and brownfields projects are required to consider the impact of climate change in their design and planning. Our operations could face a number of physical risks from climate change, such as increased rainfall, reduced water availability, higher temperatures and extreme weather events. Events such as flooding or inadequate water supplies could disrupt our operations and rehabilitation efforts, and could increase health and safety risks.
	Water use licences in South Africa	The majority of our South African operations are lawful users with existing water permits in terms of the Water Act of 1954. These operations have applied for water use licences in terms of the National Water Act, 1998, some as early as 2003. Harmony is working closely with regional directors in the review process and a number of our operations have been issued with integrated water use licences or draft licences.
	Rehabilitate potential groundwater pollution	Due to the interconnected nature of mining operations, any proposed solution for potential flooding and decant risk posed by deep groundwater needs to be a combined one supported by all mines in the goldfields and government in the event of legacy issues. The Department of Mineral Resources and affected mining companies are involved in developing a regional mine closure strategy.
	United States investors	Investors in the United States may have difficulty bringing actions and enforcing judgments against Harmony, which is incorporated in South Africa.
	Compliance with corporate governance and public disclosure requirements	Harmony is committed to maintaining high standards of corporate governance and public disclosure, and its efforts to comply with evolving laws, regulations and standards will continue to increase general and administrative expenses.
	Market price of shares	The market price of our shares could fall if large quantities are sold in the public market, or if there is a perception in the marketplace that such sales could occur.
	Share dilution	Harmony has employee share option schemes as well as other share schemes. The Harmony board has authorised up to 14% of the issued share capital to be used for these plans. As a result, shareholders’ equity interests in Harmony are subject to dilution to the extent of the future exercises of options through share schemes.
	Continued dividends	While Harmony intends to declare and pay cash dividends, it is the company’s intention to only do so if profits and funds are available for that purpose.