Material issues

Harmony continues to use the principle of integrated reporting for its 2011 annual and sustainability reports. We recognise that integrated reporting combines our financial and non-financial performances to provide a holistic view of the company by explaining the cause and effect of various issues affecting the bottom line.

Our aim is improved communication with all stakeholders, to build up a formal, approved record of our financial and non-financial performance, and to comply with the listings requirements of the various stock exchanges on which Harmony is listed.

The social, environmental, governance and economic aspects of our business, and the opportunities and challenges these present, are detailed throughout the annual report. Because we believe it is important to report in greater detail than feasible in the printed annual report, and given our commitment to report in line with the Global Reporting Initiative (GRI), we have also produced a more detailed sustainable development report 2011, available online at www.harmony.co.za/sd/reports/2011.

Certain key performance indicators have been assured by PwC and the assurance statement appears here.

We have identified our most material issues in this year’s sustainable development report, with a summary below. These issues are the culmination of a thorough process that proceeds, discipline by discipline, through workshops and regular feedback from stakeholders. Harmony’s performance in FY11 and targets for FY12 are tabulated below.

Governance and economic sustainability

The economic dimension of sustainability concerns the impact Harmony has on the economic conditions of its stakeholders and on economic systems at local, national and global levels. The company’s economic imperatives in turn are achieved within a framework of sound corporate governance. Accordingly, we report on these areas in a combined section in the sustainable development report.

Governance

Issue	Performance in FY11	Targets for FY12
Establishment and maintenance of board and management structures	Harmony has a solid governance structure. This is regularly reviewed to ensure we comply with legislation and standards in the countries in which we operate and with the stock exchanges on which Harmony is listed.	Ongoing compliance
Implementation of good practice in governance and reporting	In line with our primary listing on the JSE Limited, disclosure is guided by the new South African Companies Act 2008, JSE regulations and King III. We also comply with the regulations of other exchanges on which Harmony is listed, the US Securities and Exchange Commission (SEC) and the Sarbanes-Oxley Act of 2002. We use an integrated approach that combines financial and non-financial reporting, and our sustainable development report is aligned with GRI and King III.	Continual improvement
Integrity and ethics	A code of ethics aligned with King III governs our behaviour, while an ethics committee meets quarterly to monitor ethical behaviour within Harmony.	Continual improvement
Compliance with legislation	No significant fines were paid by the company in any areas of operation in FY11, and no actions were brought against the company for anti-competitive behaviour, anti-trust or monopoly practices.	Ongoing compliance
Risk management and mitigation	Under a formal risk policy framework and risk management structure, primary risks identified in FY11 are covered in our annual report and in the Form 20-F. These include safety, health, environment and human rights risks. Appropriate levels of due diligence are applied before finalising significant contracts. The precautionary approach is used in planning and developing new projects, in line with relevant legislation and good practice.	Ongoing adoption of best practice and alignment with King III

Economic sustainability

Issue	Performance in FY11	Targets for FY12
Economic context and relevance	Harmony is one of the world’s leading producers of gold, and South Africa’s third-largest. Regionally, Harmony has an even bigger impact, for example in South Africa’s Free State province where mining accounts for a significant portion of provincial GDP. In FY11, the company employed close to 40 000 people.	To play a meaningful role in the regional economies where we operate
Producing safe, profitable ounces	Harmony delivered a satisfactory performance for the year. Total gold production of 1.3Moz (40 535kg) declined, largely due to mine closures, safety stoppages and underperformance at some shafts and shaft closures. Regrettably, there were 16 fatalities – see safety discussion overleaf.	We aim to produce 1.8–2Moz* of gold in FY15. Equally, we aim to achieve this target safely – eliminating all fatal accidents
The gold market	Gold remains a desirable product and we expect the price to be around US$1 850/oz an ounce in our next financial year, especially with continued global uncertainty and a weaker dollar. Harmony remains highly exposed to the R/US$ exchange rate, as most of our operations are in South Africa. While our earnings are in dollars the exchange rate impacts our revenue in rands. The rand strengthened against the dollar throughout FY11, keeping profit margins flat.	We remain positive on gold. However, the gold price and exchange rate are not within our control. Our strategic plans for FY12 are based on a gold price of R280 000/kg (an exchange rate of R7.57/US$ and a gold price of US$1 150/oz)
Investing in the future	In FY11, we continued restructuring our asset base in line with our strategy to deliver 1.8 – 2* million safe, profitable ounces by 2015. We invested R3.1 billion in our mines, and our mineral reserves now stand at 41.6Moz of gold across South African and Papua New Guinea.	Ongoing development of mines: R3.6 billion allocated for capital expenditure and R474 million for exploration in FY12
Economic transformation and empowerment	South Africa: Harmony complies with the Mining Charter through partnerships and the sale to HDSA companies of interests in the company and its underlying operations. To date, approximately 36% of production was attributable to HDSA interests.	Maintain HDSA interests at current levels
	PNG: Contracts are in place with landowner groups for a range of services. We continue to offer business development opportunities to landowners as Hidden Valley moves towards full production and more opportunities become available.	Ensure ongoing dialogue with stakeholders and seek opportunities to enhance community development

* Excludes future acquisitions or disposals.

Social performance

The social dimension of sustainability concerns the impact Harmony has on the social environment in which it operates. The sustainable development report includes comprehensive discussions on safety, occupational health and well-being, labour practices and community issues.

Safety

Issue	Performance in FY11	Targets for FY12
Eliminating accidents by managing risk and ensuring appropriate structures, systems and training are in place	Regrettably, 16 employees lost their lives in mine-related incidents in FY11 (FY10: 22). Fifteen of these were at our South African operations. South Africa: The FIFR improved to 0.17, while the LTIFR deteriorated to 8.32 per million hours worked. A comprehensive programme to prevent falls of ground has reduced fatal injuries from this source by 64% Over 16 300 employees are completing e-learning programmes focused on safety literacy.	FIFR: 0 LTIFR: SA – 5.79 Harmony – 5.57

	PNG: The FIFR deteriorated slightly to 0.22 per million hours worked (FY10: 0.20), while LTIFR improved significantly to 0.20 (FY10: 0.7).	FIFR: 0 LTIFR: 0.45 PNG – 0.20 Harmony – 5.57
Reducing falls of ground	Falls of ground account for a large portion of all lost-time injuries in Harmony. Our new ground control strategy formalises and consolidates efforts to prevent fall-of-ground incidents and accidents, and promotes an even safer and more stable underground environment. The combination of netting in selected spaces with better control and awareness reduced gravity-related falls of ground from 12 in FY10 to three in FY11.	Fall-of-ground injury frequency rate of 1.42 per million hours worked
Addressing the issue of illegal miners in South Africa	Illegal or criminal mining activities endanger the criminals’ own safety as well as that of company employees. Harmony again proactively addressed illegal mining activities in FY11 by liaising with the authorities, unions, private security companies, local businesses and affected communities. In FY11, our focus on communicating the risks and consequences of illegal mining and fraud to our own workforces paid off, with the number of employees dismissed for related offences dropping from 314 in FY10 to 133.	Eliminate illegal mining as far as practically possible

Occupational health and well-being

Issue

Performance in FY11

Targets for FY12

Noise-induced hearing loss (NIHL) and use of protective equipment

South Africa:
In FY11, 420 cases of NIHL were identified (FY10: 442), with 365 cases compensated.

We have achieved a compliance level of 88% for personal protective equipment, one of the highest in the industry
All rock drills and fans exceeding stipulated noise levels have been silenced and good progress made on silencing loaders.

Meeting the industry target to prevent any hearing loss of more than 10% occurring remains a challenge for Harmony

Occupational lung diseases, including silicosis

South Africa:
In FY11, following the implementation of a number of operational controls, 747 suspected cases of silicosis were identified and 392 cases compensated, continuing the gradual downward trend of recent years.

We aim to have no new cases of silicosis among previously unexposed individuals

Heat stress

Extensive refrigeration and ventilation systems are in place at all operations to ensure heat stress management parameters are kept well within limits set by legislation and to continually improve the safety and productivity of persons exposed.

In FY11 26 948 heat tolerance tests were undertaken (FY10: 22 847) and there were no heat stroke cases.

Ensure continued testing as set out in our Code of Practice for thermal stress

Healthcare

PNG:
The medical centres at Hidden Valley, Wafi and Wau provide full-time primary healthcare and occupational health surveillance to employees, dependants and the local community. Four new community health facilities were built at Babuaf near Wafi and Nauti, Kwembu and Winima near Hidden Valley.

In FY11, 15 216 health contacts were made at all MMJV medical centres (FY10: 19 389) and 1 466 employees treated for malaria
20 water and sanitation projects completed in Watut River and Hidden Valley communities.

Continue ongoing surveillance for potential occupational illnesses

Develop an integrated strategy, aligned with Millennium Development Goals, on TB, malaria and HIV – building on systems already in place

20 water and sanitation projects planned

Pulmonary tuberculosis and other HIV-related illnesses

Harmony’s integrated healthcare approach takes a broader view of the range of chronic diseases managed by the company.

The TB rate is declining, with 1 201 cases diagnosed in FY11. However, more cases of multidrug-resistant TB were diagnosed (63 in FY11 vs 49 in FY10)
Over the last 12 months, 26% of employees were tested for HIV and 48% received counselling; 7 009 individuals were tested (FY10: 7 374); the current uptake rate of VCT has increased to 54%. Over the past three years, 35 617 HIV/Aids tests have been performed in Harmony
In FY11, 2 902 employees participated in the HAART programme (FY10: 3 226).

Continual improvement

Labour practices

Issue	Performance in FY11	Targets for FY12
Hostel de-densification process; accommodation and living conditions	South Africa: Our housing strategy has a dual thrust: promoting home ownership and integrating mining communities into local structures. Core to this is upgrading hostels into single occupancy or family units. Masimong 5 project completed, Tshepong under way and will be completed in FY12 Architect plans being drawn for Doornkop village and Kusasalethu hostel Family units being built at Evander 1 hostel To date, 25% of our employees have moved from hostels to single or family accommodation, while five old hostels are being converted to create 1 700 family units by 2014.	Complete Tshepong hostel upgrade; 15 family units and 50 single rooms at Doornkop Complete 10 family units each at Kusasalethu and Evander Merriespruit 3 and Steyn 2 hostel upgrades planned for FY12 Hostel project will continue until FY15, when 320 units in our North operations will be converted at a total estimated cost of R46.6 million In the Free State, the Unisel and Phakisa hostel upgrades will be completed at an estimated total cost of R12.5 million
Promoting skills development and employment in our communities	In South Africa and PNG, the mining industry is a significant employer. More importantly, given the shortage of sector-specific skills in both regions, the industry is a material source of funding for skills development. South Africa: 120 young people recruited from local communities and trained in mining-related skills. Most have subsequently been absorbed into the workforce 24 tertiary students accommodated for experiential training 20 students selected for Harmony Bridging School 538 employees received portable skills training Over 1 200 employees and community members attended ABET at a cost of R46 million – Harmony literacy rate is up from 25% in FY09 to 72% in FY11 Over 23 000 employees (68%) received some form of training at a cost of R220 million; 94% of those trained were HDSAs and 12% women.	20 learners
	PNG: 10 employees attended ABET classes Training and mentoring benefited 30 locally recruited employees Nearly 50 students from local university engaged to monitor aspects of geology and environmental management.	15 learners
Promoting sound and constructive employee relations	Harmony recognises the right of all employees and contractors to freedom of association and adheres to collective bargaining agreements relevant to the countries of operation. South Africa: 90% of workforce unionised Closure of Merriespruit operations, involving 3 800 people, completed without industrial stoppages. Almost 2 500 employees transferred to other Harmony operations No production days lost to labour action in FY11 Two-year wage agreement signed, including profit sharing, after five-day strike across gold mining sector post year end.	Maintaining and improving relationships with employees and their recognised unions Preventing or minimising production losses due to labour action Promoting profit-share incentive
	PNG: Very low rates of unionisation, no industrial action in FY11 Effective communication ensured through representative committees.	Maintaining and improving relationships with employees and representative committees
Steady progress on employment equity	Harmony’s policy is to recruit local employees where possible and ensure no discrimination against foreign migrant labour. South Africa: At 41.5%, Harmony exceeds the Mining Charter target of HDSAs comprising 40% of management Over 11.5% of the workforce is female.	Mining Charter: Top and senior management: 30% Middle and junior management: 40% Core and critical skills: 30%
	PNG: 91% of workforce represented by internally resourced employees 12% of workforce now women First three-year training plan developed and submitted to Department of Labour for approval.	Local employees comprise 96% of workforce by FY13 17% of workforce to be women by FY13
Projects related to our social and labour plans, and local economic development	Harmony has a number of local economic development (LED) projects (below) in communities around our mining operations and in major labour-sending areas, including: Developing small and medium enterprises School and medical facilities Sustainable human settlement projects such as partnerships in new housing developments and converting hostels into family units.	Remain committed to SLP obligations

Community

Issue	Performance in FY11	Targets for FY12
Improving employees’ housing and living conditions	In South Africa, Harmony’s housing strategy encompasses promoting home ownership and integrating mining communities into local structures.	Continued compliance with social and labour plan commitments
Affirmative procurement especially promoting business with HDSAs, women and local communities	South Africa: Against the definitions of the revised Mining Charter, black economic empowerment (BEE) procurement expenditure in FY11 of R2 267 million (42% of total discretionary spend) split between: capital above target at 15%; services above target at 31% and consumables above target at 36% Harmony’s enterprise development centres in Welkom and Soweto support affirmative procurement, making it easier for BEE suppliers to conduct business with the company.	Continue affirmative procurement strategies in compliance with Mining Charter targets: 10% for capital 40% for services 15% for consumables
Identifying and implementing sustainable socio-economic development initiatives such as enterprise and community skills development in line with our business philosophy, and our commitments under social and labour plans	South Africa: Harmony’s corporate social responsibility (CSR) and LED activities span four key areas – education; socio-economic development; sports, arts and culture; and BEE support – in its mining and labour-sending communities.	Continue to implement CSR and LED programmes in line with the company’s policy and in compliance with the Mining Charter
	CSR encompasses broader community development and includes national socio-economic development programmes such as mathematics and science development. Some R14 million spent in FY11 (FY10: R23 million) LED initiatives are aligned with the Mining Charter, MPRDA and Codes of Good Practice for the Minerals and Mining Industry. In FY11 Harmony spent almost R70 million (FY10: R58 million) on LED projects.	PNG will develop a more accurate water balance to ensure that water usage and recycling targets are more realistic for the high rainfall environment
	PNG: Harmony’s socio-economic development programmes are aimed at addressing priorities in health, education, agriculture and infrastructure. Clean water facilities provided for 20 villages Health training focused on safe birthing procedures in rural villages, and first aid.	Continue to implement programmes in line with agreements, including: Teacher in-service training support (elementary grades prep-grade 3, primary grades 4-8) including database work Business management training 20 water supply projects for middle Watut villages Collaboration with government, donors and NGOs in HIV, TB, malaria awareness and prevention programmes
Developing and promoting sound and responsive internal and external relationships through effective stakeholder engagement	South Africa: Active and ongoing engagement with stakeholders ensures Harmony’s LED priorities are stakeholder-driven and guided by an engagement process involving municipalities, communities, the DMR, NGOs and governments of the labour-sending countries of Lesotho and Mozambique.	Continue as per SLP strategic plan until 2015
	PNG: Extensive community engagement programmes address concerns on environmental impacts of the mine, particularly Watut River sedimentation issues. Established an external stakeholder advisory panel to advise the Hidden Valley operations team on environmental improvement projects.	Continue to work with the stakeholder advisory panel and PNG regulatory authorities on implementing environmental improvement programmes at Hidden Valley mine

Environment

Issue	Performance in FY11	Targets for FY12
Water management	South Africa: As our operations use extensive amounts of water, a group-wide campaign is under way to reduce consumption of fresh water and optimise re-use of process water. Total water used for primary activities decreased over 18% to 36 074 000m³ Potable water used declined by 2% Of the total volume of water used, around 29% was recycled.	Working from FY08 baseline, by 2013 we aim to: Reduce fresh water consumption by 2% Improve use of affected water by 5% Increase recycled water by up to 5%
	PNG: Water is the most significant resource used by MMJV. Every effort is being made to reduce the amount of fresh water used, and increase the quantum of treated recycled water. In FY10, modifications to the Hidden Valley processing plant produced encouraging results. Community clean water programme has established wells in 20 villages Significant progress in reducing mine-related sediment in Watut River.


Land-use: concurrent rehabilitation and financial provision	As a responsible mining company, we are committed to enhancing rehabilitation at our operations and continuously identify land for rehabilitation to a sustainable alternative use. South Africa: Total rehabilitation liability estimated at R2.23 billion in June 2011 while funding and guarantees amount to R2.22 billion. The rehabilitation liability coverage is 99.1% Closure plan for Deelkraal approved, with concurrent rehabilitation under way at this operation and Evander Winkelhaak plant, Virginia 2 and Kalgold waste rock dumps.	Next rehabilitation liability assessment will be done in June 2013 Rehabilitation plan and strategy developed for decommissioned operations in Free State, to be implemented in FY12
	PNG: Under a strategy of progressive rehabilitation, another 84 hectares of disturbed land were restored High-capacity nursery on site was hardening 21 000 seedlings at year end, with 30 000 planted in the first half of 2011.	60 hectares to be rehabilitated
Legal compliance	In line with our strategy of meeting and exceeding legislative compliance, we are implementing appropriate environmental management systems at all operations. These will also ensure environmental management is addressed in a formal, systematic approach. South Africa: To date, environmental management systems have been implemented at all our North operations, with Doornkop plant and shaft, and Kusasalethu already certified. In the Free State, systems are being developed and implemented In FY11, self-assessment tools and standards were developed and will be implemented at all operations in FY12 No environmental fines or sanctions were received in FY11.	Implementation of environmental management systems continues at remaining operations and action plans to address all high-risk impact are under way. Certification is scheduled for Harmony 1 plant in December 2011
	PNG: Environmental section of new integrated sustainable business management system implemented at Hidden Valley. When fully implemented, this will meet requirements of ISO 14001 and other relevant international safety and community standards.	Roll out integrated sustainable business management system across MMJV operations
Carbon legislation and footprint	Harmony is focused on reducing the use of fossil fuels and developing initiatives to mitigate and absorb greenhouse gases (GHGs) to reduce its carbon footprint. Our expansion projects will extend the lives of our mines into a period when GHG emissions are regulated. Accordingly, our policy dictates that all greenfields and brownfields projects consider the impact of climate change in their design and planning. Fourth response to Carbon Disclosure Project (CDP) submitted. Encouraging year-on-year progress: in FY10 Harmony scored 74% to rank 17th among 71 companies on the JSE Limited. South Africa: Total scope 1 and 2 emissions were 3 570 469 tonnes CO₂e (FY10*: 4 402 675 tonnes CO₂e), a significant decrease of 19%, with a 6% improvement attributed to scaling down and efficiency initiatives; the remainder of the saving a result of the scope 1 correction.	Harmony will review its strategy to adjust objectives and targets against 2013 benchmarks
	PNG: Total scope 1 and 2 emissions were 145 533 tonnes CO₂e (FY10: scope 1 only 128 381 tonnes CO₂e), an increase of 12% as the operation ramps up.	Develop a carbon footprint register
Radiation	Radiation is a potential risk at certain sites in South Africa. Radiation is well controlled at our sites through systematic, systemic, and operational controls and barriers. Regional public health assessments completed at Evander and Doornkop. These will help prioritise remedial initiatives.	Reduction of surface radiation exposures by removing infrastructure in line with the rehabilitation programme.

* Scope 1 data in FY10 was over-estimated due to a unit discrepancy.