20-F 1 harmonygold2020-20xf.htm 20-F Document

As filed with the Securities and Exchange Commission on October 29, 2020
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________
FORM 20-F
¨
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended 30 June 2020
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
¨
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from___ to___
Commission file number: 001 — 31545
HARMONY GOLD MINING COMPANY LIMITED
(Exact name of registrant as specified in its charter)
REPUBLIC OF SOUTH AFRICA
(Jurisdiction of incorporation or organization)
RANDFONTEIN OFFICE PARK, CNR WARD AVENUE AND MAIN REEF ROAD,
RANDFONTEIN, SOUTH AFRICA, 1759
(Address of principal executive offices)
Shela Mohatla, Group Company Secretary
Tel: +27 11 411 2359, shela.mohatla@harmony.co.za, fax: +27 11 696 9734,
Randfontein Office Park, CNR Ward Avenue and Main Reef Road, Randfontein, South Africa, 1759
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Ordinary shares, with no par value per share*
n/a*
New York Stock Exchange*
American Depositary Shares (as evidenced by American Depositary Receipts), each representing one ordinary share
HMY
New York Stock Exchange

* 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 registered or to be registered pursuant to Section 12(g) of the Act:
None
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 603,142,706 ordinary shares, with no par value 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 x  NO ¨
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 x  NO ¨
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 x  NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES x  NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “accelerated filer and large accelerated filer” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Emerging growth company ¨
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.   YES x  NO ¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
US GAAP ¨
International Financial Reporting Standards as issued by the International Accounting Standards Board x
Other ¨
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:    Item 17 ¨ Item 18 ¨
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 ¨ NO x
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
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 ¨ NO ¨
 



TABLE OF CONTENTS

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
This document comprises the annual report on Form 20-F for the year ended June 30, 2020 (“Harmony 2020 Form 20-F”) of Harmony Gold Mining Company Limited (“Harmony” or the “Company”). Certain of the information in the Harmony Integrated Annual Report 2020 included in Exhibit 15.1 (“Integrated Annual Report for the 20-F 2020”) is incorporated by reference into the Harmony 2020 Form 20-F, as specified elsewhere in this report, in accordance with Rule 12b-23(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). With the exception of the items so specified, the Integrated Annual Report for the 20-F 2020 is not deemed to be filed as part of the Harmony 2020 Form 20-F.
Only (i) the information included in the Harmony 2020 Form 20-F, (ii) the information in the Integrated Annual Report for the 20-F 2020 that is expressly incorporated by reference in the Harmony 2020 Form 20-F and (iii) the exhibits to the Harmony 2020 Form 20-F that are required to be filed pursuant to the Form 20-F (the “Exhibits”), shall be deemed to be filed with the Securities and Exchange Commission (“SEC”) for any purpose. Any information in the Integrated Annual Report for the 20-F 2020 which is not referenced in the Harmony 2020 Form 20-F or filed as an Exhibit, shall not be deemed to be so incorporated by reference.
Financial and other material information regarding Harmony is routinely posted on and accessible at the Harmony website, www.harmony.co.za. No material referred to in this annual report as being available on our website is incorporated by reference into, or forms any part of, this annual report. References herein to our website shall not be deemed to cause such incorporation.

- i -


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 Harmony 2020 Form 20-F, unless the context otherwise requires, the terms “Harmony” and “Company” refer 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”.
In this annual report, references to “R”, “Rand” and “c”, “cents” are to the South African Rand, the lawful currency of South Africa, “A$” and “Australian dollars” refers to Australian dollars, “K” or “Kina” refers to Papua New Guinean Kina and references to “$”, “US$” and “US dollars” are to United States dollars.
This annual report contains information concerning our gold reserves. While this annual report has been prepared in accordance with the regulations contained in the SEC’s Industry Guide 7, it is based on assumptions which may prove to be incorrect. See Item 3: “Key Information - Risk Factors - Estimations of Harmony’s reserves are based on a number of assumptions, including mining and recovery factors, future cash costs of production, exchange rates, and relevant commodity prices. As a result, metals produced in future may differ from current estimates.”
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 in this annual report. This glossary may assist you in understanding these terms.
All references to websites in this annual report are intended to be inactive textual reference for information only and information contained in or accessible through any such website does not form a part of this annual report.
PRESENTATION OF FINANCIAL INFORMATION
We are a South African company and the majority of our operations are located in our home country. Accordingly, our books of account are maintained in South African Rand and our annual financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). This annual report includes our consolidated financial statements prepared in accordance with IFRS presented in the functional currency of the Company, being South African Rand. All financial information, except as otherwise noted, is stated in accordance with IFRS.
In this annual report, we also present “cash costs”, “cash costs per ounce”, “cash costs per kilogram” “all-in sustaining costs”, “all-in sustaining costs per ounce” and “all-in sustaining costs per kilogram”, which are non-GAAP measures. An investor should not consider these items in isolation or as alternatives to production costs, cost of sales or any other measure of financial performance presented in accordance with IFRS. The calculation of cash costs, cash costs per ounce/kilogram, all-in sustaining costs and all-in sustaining costs per ounce/kilogram may vary significantly among gold mining companies and, by themselves, do not necessarily provide a basis for comparison with other gold mining companies. For further information, see Item 5: “Operating and Financial Review and Prospects - Costs - Reconciliation of Non-GAAP Measures”. We have included the US dollar equivalent amounts of certain information and transactions in Rand, Kina and A$. Unless otherwise stated, we have translated assets and liabilities at the spot rate for the day, while the US$ equivalents of cash costs and all-in sustaining costs have been translated at the average rate for the year (R15.66 per US$1.00 for fiscal 2020, R14.18 per US$1.00 for fiscal 2019 and R12.85 per US$1.00 for fiscal 2018). By including these US dollar equivalents in this annual report, we are not representing that the Rand, Kina and A$ amounts actually represent the US dollar amounts, as the case may be, or that these amounts could be converted at the rates indicated.
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements within the meaning of the safe harbor provided by Section 21E of the Exchange Act and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), with respect to our 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.
These forward-looking statements, including, among others, those relating to our future business prospects, revenues, and the potential benefit of acquisitions (including statements regarding growth and cost savings) wherever they may occur in this annual report and the exhibits to this annual report, are necessarily estimates reflecting the best judgment of our senior management 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, Papua New Guinea, Australia and elsewhere (including as a result of the coronavirus disease ("COVID-19") pandemic);
estimates of future earnings, and the sensitivity of earnings to gold and other metals prices;
estimates of future gold and other metals production and sales;
estimates of future cash costs;
estimates of future cash flows, and the sensitivity of cash flows to gold and other metals prices;
estimates of provision for silicosis settlement and the spread of other contagious diseases, such as COVID-19;
estimates of future tax liabilities under the Carbon Tax Act (as defined below);

- ii -


statements regarding future debt repayments;
estimates of future capital expenditures;
the success of our business strategy, exploration and development activities and other initiatives;
future financial position, plans, strategies, objectives, capital expenditures, projected costs and anticipated cost savings and financing plans;
estimates of reserves statements regarding future exploration results and the replacement of reserves;
the ability to achieve anticipated efficiencies and other cost savings in connection with past and future acquisitions, as well as at existing operations;
fluctuations in the market price of gold;
the occurrence of hazards associated with underground and surface gold mining;
the occurrence of labor disruptions related to industrial action or health and safety incidents;
power cost increases as well as power stoppages, fluctuations and usage constraints;
supply chain shortages and increases in the prices of production imports and the availability, terms and deployment of capital;
our ability to hire and retain senior management, sufficiently technically-skilled employees, as well as our ability to achieve sufficient representation of historically disadvantaged persons in management positions;
our ability to comply with requirements that we operate in a sustainable manner and provide benefits to affected communities;
potential liabilities related to occupational health diseases;
changes in government regulation and the political environment, particularly tax and royalties, mining rights, health, safety, environmental regulation and business ownership including any interpretation thereof; court decisions affecting the mining industry, including, without limitation, regarding the interpretation of mining rights;
our ability to protect our information technology and communication systems and the personal data we retain;
risks related to the failure of internal controls;
the outcome of pending or future litigation or regulatory proceedings;
fluctuations in exchange rates and currency devaluations and other macroeconomic monetary policies;
the adequacy of the Group’s insurance coverage;
any further downgrade of South Africa's credit rating; and
socio-economic or political instability in South Africa, Papua New Guinea and other countries in which we operate.
The foregoing factors and others described under “Risk Factors” should not be construed as exhaustive.
We undertake 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, except as required by law. All subsequent written or oral forward-looking statements attributable to Harmony or any person acting on its behalf are qualified by the cautionary statements herein.

- iii -


PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. 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, set forth beginning on page F-1, and with Item 3: “Key Information - Risk Factors” and Item 5: “Operating and Financial Review and Prospects”. Historical results are not necessarily indicative of results to be expected for any future period.
Selected Historical Consolidated Financial Data
We are a South African company and the majority of our operations are located in our home country. Accordingly, our books of account are maintained in South African Rand and our annual financial statements are prepared in accordance with IFRS. This annual report includes our consolidated financial statements prepared in accordance with IFRS, presented in the functional currency of the Company, being South African Rand. The selected historical consolidated income statement and balance sheet data for the last five fiscal years are, unless otherwise noted, stated in accordance with IFRS, and have been extracted from the more detailed information and financial statements prepared in accordance with IFRS. The financial data as at June 30, 2020 and 2019 and for each of the years in the three-year period ended June 30, 2020 should be read in conjunction with, and is qualified in its entirety by reference to our audited consolidated financial statements set forth beginning on page F-1. Financial data as at June 30, 2018, 2017 and 2016 and for the years ended June 30, 2017 and 2016 have been derived from our consolidated financial statements, which are not included in this document.
On July 1, 2019, IFRS 16 Leases became effective. See note 2 "Accounting Policies" and note 28 "Leases" in our consolidated financial statements beginning on page F-1.

1


 
Fiscal year ended June 30,
 
2020
2019
2018
2017
2016
 
(Rand in millions, except per share amounts, cash costs per kilogram and ounce and all-in sustaining costs per kilogram and ounce)
Income Statement Data
 
 
 
 
 
Revenue
29,245

26,912

20,452

19,494

18,667

(Impairment)/reversal of impairment of assets

(3,898
)
(5,336
)
(1,718
)
43

Operating profit/(loss)
(358
)
(2,538
)
(4,660
)
(944
)
1,592

Gain on bargain purchase



848


Profit/(loss) from associates
94

59

38

(22
)
7

Profit/(loss) before taxation
(595
)
(2,746
)
(4,707
)
(148
)
1,581

Taxation
(255
)
139

234

510

(632
)
Net profit/(loss)
(850
)
(2,607
)
(4,473
)
362

949

Basic earnings/(loss) per share (SA cents)
(164
)
(498
)
(1,003
)
82

218

Diluted earnings/(loss) per share (SA cents)
(166
)
(500
)
(1,004
)
79

213

Weighted average number of shares used in the computation of basic earnings/(loss) per share
535,336,337

523,808,934

445,896,346

438,443,540

435,738,577

Weighted average number of shares used in the computation of diluted earnings/(loss) per share
547,193,989

533,345,964

465,319,405

459,220,318

446,398,380

Dividends per share (SA cents)1


35

100


Other Financial Data
 
 
 
 
 
Total cash costs per kilogram of gold (R/kg)2
553,513

439,722

421,260

436,917

392,026

Total cash costs per ounce of gold ($/oz)2
1,099

965

1,018

1,000

841

All-in sustaining costs per kilogram of gold (R/kg)2
651,356

550,005

508,970

516,687

467,611

All-in sustaining costs per ounce of gold ($/oz)2
1,293

1,207

1,231

1,182

1,003

Balance Sheet Data
 
 
 
 
 
Assets
 
 
 
 
 
Property, plant and equipment
29,186

27,749

30,969

30,044

29,919

Total assets
44,692

36,736

39,521

38,883

37,030

Net assets
23,375

22,614

25,382

29,291

28,179

Equity and liabilities
 
 
 
 
 
Share capital
32,937

29,551

29,340

28,336

28,336

Total equity
23,375

22,614

25,382

29,291

28,179

Borrowings (current and non-current)
7,718

5,915

5,614

2,133

2,339

Other liabilities
13,599

8,207

8,525

7,459

6,512

Total equity and liabilities
44,692

36,736

39,521

38,883

37,030


1 
Dividends per share relates to the dividends recorded and paid during the fiscal year.
2 
Cash costs per ounce and per kilogram and all-in sustaining costs per ounce and per kilogram are non-GAAP measures. Cash costs per ounce/kilogram and all-in sustaining cost per ounce/kilogram have been calculated on a consistent basis for all periods presented. Changes in cash costs per ounce/kilogram and all-in sustaining costs per ounce/kilogram are affected by operational performance, as well as changes in the currency exchange rate between the Rand and the US dollar for the US$/ounce measures. Because cash cost per ounce/kilogram and all-in sustaining costs per ounce/kilogram are non-GAAP measures, these measures should therefore not be considered by investors in isolation or as an alternative to production costs, cost of sales, or any other measure of financial performance calculated in accordance with IFRS. The calculation of cash costs, cash costs per ounce and per kilogram, all-in sustaining costs and all-in sustaining costs per ounce and per kilogram may vary from company to company and may not be comparable to other similarly titled measures of other companies. For further information, see Item 5:“Operating and Financial Review and Prospects-Costs-Reconciliation of Non-GAAP measures”.
B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.

2


C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D. RISK FACTORS
In addition to the other information included in this annual report and the exhibits, you should also carefully consider the following factors related to our ordinary shares and ADSs. There may be additional risks that we do not currently know of or that we currently deem immaterial based on information currently available to us. Although Harmony has a formal risk policy framework in place, the maintenance and development of which is undertaken on an ongoing basis so as to help management address systematic categories of risk associated with its business operations, any of these risks could have a material adverse effect on our business, financial condition or results of operations, leading to a decline in the trading price of our ordinary shares or our ADSs. The risks described below may, in retrospect, turn out to be incomplete 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 (and have therefore not been included), could also adversely affect our business, 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 profitability of our operations, and cash flows generated by those operations, are affected by changes in the price of gold. A fall in the gold price below our cash cost of production and capital expenditure required to sustain production for any sustained period may lead to losses and require Harmony to 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:
demand for gold for industrial uses, jewelry and investment;
international or regional political and economic events and trends;
strength or weakness of the US dollar (the currency in which gold prices generally are quoted) and of other currencies;
monetary policies announced or implemented by central banks, including the US Federal Reserve;
financial market expectations on the rate of inflation;
changes in the supply of gold from production, divestment, scrap and hedging;
interest rates;
speculative activities;
gold hedging or de-hedging by gold producers;
actual or expected purchases and sales of gold bullion held by central banks or other large gold bullion holders or dealers; and
production and cost levels for gold in major gold-producing nations, such as South Africa, China, the United States and Australia.
In addition, current demand and supply 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. However, as gold has historically been used as a hedge against unstable or lower economic performance, improved economic performance may have a negative impact on the price for 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. Uncertainty in global economic conditions has impacted the price of gold significantly since fiscal 2013 and continued to do so in fiscal 2020, and is still relevant as is evidenced by the strategic risk profile of Harmony. COVID-19 has resulted, and may continue to result, in increased volatility.
The volatility of gold prices is illustrated in the table, which shows the annual high, low and average of the afternoon London bullion market fixing price of gold in US dollars for each of the past ten years:

3


Annual gold price: 2010 - 2020
 
Price per ounce (US$)
Calendar year
High

Low

Average

2010
1,421

1,058

1,225

2011
1,895

1,319

1,572

2012
1,792

1,540

1,669

2013
1,694

1,192

1,411

2014
1,385

1,142

1,266

2015
1,296

1,049

1,160

2016
1,366

1,077

1,251

2017
1,346

1,151

1,253

2018
1,355

1,178

1,268

2019
1,546

1,270

1,393

2020
2,067

1,474

1,749

There was a substantial increase in the price of gold following the outbreak of COVID-19. See "- HIV/AIDS, tuberculosis and other contagious diseases, such as COVID-19, pose risks to us in terms of productivity and costs". On October 22, 2020, the afternoon fixing price of gold on the London bullion market was US$1,901/oz.
While the price volatility is difficult to predict, if gold prices should fall below Harmony’s cash cost of production and capital expenditure required to sustain production and remain at these levels for any sustained period, Harmony may record losses and be forced to curtail or suspend some or all of its operations, which could materially adversely affect Harmony’s business, operating results and financial condition.
In addition, Harmony would also have to assess the economic impact of low gold prices on its ability to recover any losses that may be incurred during that period and on its ability to maintain adequate reserves. The use of lower gold prices in reserve calculations and life of mine plans could also result in material impairments of Harmony’s investment in gold mining properties or a reduction in its reserve estimates and corresponding restatements of its reserves and increased amortization, reclamation and closure charges.
The current COVID-19 pandemic has significantly impacted the global economy and markets over the past several months and may continue to do so, which could adversely affect our business or the trading price of our ordinary shares and ADSs
Since the end of 2019, COVID-19, has spread throughout the world, and the World Health Organization declared the COVID-19 outbreak a pandemic in March 2020. No fully effective treatments or vaccines have been developed as of the date of this annual report, and such development of treatments or vaccines may take a significant amount of time. The COVID-19 pandemic and associated governmental responses have adversely affected workforces, consumer sentiment, economies and financial markets. Such adverse effects, along with decreased consumer spending, have led to a global economic downturn. 
The global economy, metal prices, and financial markets have experienced significant volatility and uncertainty due to COVID-19. Our revenue is directly related to the market price of gold and other metals. Metal price volatility causes our revenue to fluctuate from period to period. This price volatility could also cause operators or developers to defer or forgo projects, which could adversely impact our future revenue. Moreover, in the ordinary course of business, we review opportunities to acquire selected precious metal producing companies or assets. Reduced economic and travel activities or illness among our management team as a result of COVID-19 could limit or delay acquisition opportunities or other business activities. In addition, economic volatility, disruptions in the financial markets, or severe price declines for gold or other metals could adversely affect our ability to obtain future debt or equity financing for acquisitions on acceptable terms. Government efforts to counter the economic effects of COVID-19 through liquidity and stimulus programs may be insufficient or ineffective in preventing or reducing the effects of a recession. It is difficult to determine the extent of the economic and market impacts from COVID-19 and the many ways in which they may negatively affect our business and the trading price of our ordinary shares and ADSs.
Foreign exchange fluctuations could have a material adverse effect on Harmony’s operational results and financial condition
Gold is priced throughout the world in US dollars and, as a result, Harmony’s revenue is realized in US dollars, but most of our operating costs are incurred in Rand and other non-US currencies, including the Australian dollar and Kina. From time to time, Harmony may implement currency hedges intended to reduce exposure to changes in the foreign currency exchange, which it started doing in fiscal 2016 and will continue as long as it is strategically viable. Such hedging strategies may not however be successful, and any of Harmony’s unhedged exchange payments will continue to be subject to market fluctuations. 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, which could materially adversely affect Harmony’s operating results and financial condition. See Item 11: "Quantitative and Qualitative Disclosure about Market Risk".

4


Harmony's inability to maintain an effective system of internal control over financial reporting may have an adverse effect on investors' confidence in the reliability of its financial statements
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the company’s financial statements for external purposes in accordance with IFRS as issued by the IASB. Disclosure controls and procedures are designed to ensure that information required to be disclosed by a company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Harmony has invested in resources to facilitate the documentation and assessment of its system of disclosure controls and its internal control over financial reporting. However, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance with respect to the reliability of financial reporting and financial statement preparation. If Harmony were unable to maintain an effective system of internal control over financial reporting, investors may lose confidence in the reliability of its financial statements and this may have an adverse impact on investors’ abilities to make decisions about their investment in Harmony. See Item 15: "Controls and Procedures".
Harmony is exposed to the impact of any significant decreases in the commodity prices on its production. This is mitigated by commodity derivatives and hedging arrangements, but as Harmony has limitations for the volume of forward sales, commodity derivatives or hedging arrangements it may enter into for its future production, it is exposed to the impact of decreases in the commodity prices on the remainder of its unhedged production
As a rule, Harmony sells its gold and silver at the prevailing market price. In fiscal 2017, however, Harmony started a commodity derivative program. These contracts manage variability of cash flows for approximately 20% of the Group’s total production over a two-year period for gold and 50% for silver. These limits can be amended from time to time. Derivative instruments that protect against the market price volatility of gold and silver may prevent us from realizing the full benefit from subsequent decreases in market prices with respect to gold and silver, however, which could cause us to record a mark-to-market loss, thus decreasing our profits. See Item 11: "Quantitative and Qualitative Disclosure about Market Risk".
Harmony’s remaining uncovered future production may realize the benefit of any short-term increase in the commodity prices, but is not protected against decreases; if the gold or silver price should decrease significantly, Harmony’s revenues may be materially adversely affected, which could materially adversely affect Harmony’s operating results and financial condition.
Global economic conditions could adversely affect the profitability of Harmony’s operations
Harmony’s operations and performance depend on global economic conditions. Global economic conditions remain fragile with significant uncertainty regarding recovery prospects, level of recovery and long-term economic growth effects, and have been further adversely impacted by the COVID-19 pandemic. A global economic downturn may have follow-on effects on our business. These could include:
key suppliers or contractors becoming insolvent, resulting in a break-down in the supply chain;
a reduction in the availability of credit which may make it more difficult for Harmony to obtain financing for its operations and capital expenditures or make that financing more costly;
exposure to the liquidity and insolvency risks of Harmony’s lenders and customers; or
the availability of credit being reduced-this may make it more difficult for Harmony to obtain financing for its operations and capital expenditure or make financing more expensive.
Coupled with the volatility of commodity prices as well as the rising trend of input costs, such factors could result in initiatives relating to strategic alignment, portfolio review, restructuring and cost-cutting, temporary or permanent shutdowns and divestments. Further, sudden changes in a life-of-mine plan or the accelerated closure of a mine may result in the recognition of impairments and give rise to the recognition of liabilities that are not anticipated.
In addition to the potentially adverse impact on the profitability of Harmony’s operations, any uncertainty on global economic conditions may also increase volatility or negatively impact the market value of Harmony’s securities. Any of these events could materially adversely affect Harmony’s business, operating results and financial condition.
A further downgrade of South Africa’s credit rating may have an adverse effect on Harmony’s ability to secure financing
The slowing economy, rising sovereign debt, escalating labor disputes and the structural challenges facing the mining industry and other sectors have resulted in the downgrading of South Africa’s sovereign credit ratings. At the beginning of fiscal 2018, two of the three international ratings agencies, Standard & Poor’s and Fitch Ratings, rated South Africa’s long-term sovereign credit rating as non-investment grade at BB+, and the third, Moody’s, maintained an investment grade rating on South Africa's sovereign at Baa3. On November 24, 2017, Standard & Poor's downgraded South Africa's sovereign credit rating to BB with a stable outlook. In July 2019, Fitch Ratings affirmed its BB+ rating, but the outlook was downgraded to negative. In November 2019, Moody’s affirmed its Baa3 rating, but downgraded the outlook to negative. Later that month Standard & Poor’s affirmed its BB rating, but downgraded the outlook to negative. On March 27, 2020, Moody's downgraded South Africa's sovereign credit rating to non-investment grade, Ba1, maintaining a negative outlook, citing the unprecedented deterioration in the global economic outlook caused by the rapid spread of COVID-19, which is expected to exacerbate South Africa’s economic and fiscal challenges and will complicate the emergence of effective policy responses. On April 3, 2020, Fitch Ratings downgraded South Africa's sovereign credit rating to BB-, maintaining a negative outlook. On April 29, 2020 Standard & Poor's downgraded South Africa's sovereign credit rating to BB-, albeit with a stable outlook. Further downgrading of South Africa’s credit ratings by any of these agencies may adversely affect the South African mining industry and Harmony’s business, operating results and financial condition by making it more difficult to obtain external financing or

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could result in any such financing being available only at greater cost or on more restrictive terms than might otherwise be available.
Estimations of Harmony’s reserves are based on a number of assumptions, including mining and recovery factors, future cash costs of production, exchange rates, and the relevant commodity prices. As a result, metals produced in future may differ from current estimates
The mineral reserve estimates in this annual report are estimates of the mill-delivered quantity and grade of metals in Harmony’s deposits and stockpiles. They represent the amount of metals that 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 mineral reserves are estimated based on a number of factors, which have been stated in accordance with the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (“SAMREC Code”) and the SEC's Industry Guide 7. Calculations of Harmony’s mineral reserves are based on estimates of:
future cash costs;
future commodity prices;
future currency exchange rates; and
metallurgical and mining recovery rates.
These factors, which significantly impact mineral reserve estimates, are beyond Harmony’s control. As a result, reserve estimates in this annual report should not be interpreted as assurances of the economic life of Harmony’s gold and other precious metal deposits or the future profitability of operations.
Since these mineral reserves are estimates based on assumptions related to factors detailed above, should there be changes to any of these assumptions, we may in future need to revise these estimates. In particular, if Harmony’s cash operating and production costs increase or the gold price decreases, recovering a portion of Harmony’s mineral reserves may become uneconomical. This will lead, in turn, to a reduction in estimated reserves. Any reduction in our mineral reserves estimate could materially adversely affect Harmony’s business, operating results and financial condition.
Harmony’s operations have limited proved and probable reserves. Exploration for additional resources and reserves is speculative in nature, may be unsuccessful and involves many risks
Harmony’s operations have limited proved and probable reserves, and exploration and discovery of new resources and reserves are necessary to maintain current gold production levels at these operations. Exploration for gold and other precious metals is speculative in nature, may be unsuccessful and involves risks including those related to:
locating orebodies;
geological nature of the 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 resources or proved and probable reserves. To access additional resources and reserves, Harmony will need to complete development projects successfully, including extensions to existing mines and, possibly, establishing new mines. Development projects would also be required to access any new mineralization discovered by exploration activities around the world. Harmony typically uses feasibility studies to determine whether to undertake significant development projects. These studies often require substantial expenditure. 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.
All projects are subject to project study risk. There is no certainty or guarantee that a feasibility study, if undertaken, will be successfully concluded or that the project the subject of the study will satisfy Harmony’s economic, technical, risk and other criteria in order to progress that project to development.
A failure in our ability to discover new resources and reserves, enhance existing resources and reserves or develop new operations in sufficient quantities to maintain or grow the current level of our resources and reserves could negatively affect our results, financial condition and prospects.

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The risk of unforeseen difficulties, delays or costs in implementing Harmony’s business strategy and projects may lead to Harmony not delivering the anticipated benefits of our strategy and projects. In addition, actual cash costs, capital expenditure, production and economic returns may differ significantly from those anticipated by feasibility studies for new development projects
The successful implementation of Harmony’s business strategy and projects depends upon many factors, including those outside our control. For example, the successful management of costs will depend on prevailing market prices for input costs. The ability to grow our business will depend on the successful implementation of our existing and proposed projects and continued exploration success, as well as on the availability of attractive acquisition opportunities, all of which are subject to the relevant mining and company specific risks as outlined in these risk factors.
It can take a number of years from the initial feasibility study until development of a project is completed and, during that time, the economic feasibility of production may change. In addition, there are a number of inherent uncertainties in developing and constructing an extension to an existing mine or a new mine, including:
availability and timing of necessary environmental and governmental permits;
timing and cost of constructing mining and processing facilities, which can be considerable;
availability and cost of skilled labor, power, water, fuel, mining equipment and other materials;
accessibility of transportation and other infrastructure, particularly in remote locations;
availability and cost of smelting and refining arrangements;
availability of funds to finance construction and development activities; and
spot and expected future commodity prices of metals including gold, silver, copper, uranium and molybdenum.
All of these factors, and others, could result in our actual cash costs, capital expenditures, production and economic returns differing materially from those anticipated by feasibility studies.
Competition with other mining companies and individuals for specialized equipment, components and supplies necessary for exploration and development, for mining claims and leases on exploration properties and for the acquisition of mining assets also impact existing operations and potential new developments. Competitors may have greater financial resources, operational experience and technical capabilities - all of which could negatively affect the anticipated costs, which in turn could have a material adverse effect on our operating results and financial condition.
Harmony currently maintains a range of focused exploration programs, concentrating mainly on a number of prospective known gold and copper mineralized areas in the Independent State of Papua New Guinea (“PNG”) and the Kalgold open pit operation in South Africa.
In order to maintain or expand our operations and reserve base, Harmony has sought, and may continue to seek to enter into joint ventures or to make acquisitions of selected precious metal producing companies or assets. For example, in 2018 Harmony acquired AngloGold Ashanti Limited’s Moab Khotsong and Great Noligwa mines together with other assets and related infrastructure (the "Moab Acquisition"), and in February 2020 we announced that we would acquire the remainder of AngloGold Ashanti Limited's South African business, including the Mponeng mine and Mine Waste Solutions (Pty) Limited (the "Mponeng Acquisition") with an effective date from October 1, 2020. See below under "We may experience problems in identifying, financing and managing new acquisitions or other business combination transactions and integrating them with our existing operations. We may not have full management control over future joint venture partners". However, there is no assurance that any future development projects will extend the life of our existing mining operations or result in any new commercial mining operations. Unforeseen difficulties, delays or costs may adversely affect the successful implementation of our business strategy and projects, and such strategy and projects may not result in the anticipated benefits, which could have a material adverse effect on our results of operations, financial condition and prospects.
Risks associated with pumping water inflows from closed mines adjacent to our operations could adversely affect Harmony’s operational results
Certain of our mining operations are adjacent to the mining operations of other companies. A mine closure can affect continued 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 result in damage to property, operational disruptions and additional pumping costs, which could adversely affect any one of our adjacent mining operations and, in turn could adversely affect our business, operating results and financial condition.
With the Moab Acquisition, Harmony inherited a two-thirds interest in the Margaret Water Company for all pumping and water related infrastructure at its Margaret Water Shaft. The shaft operates for the purpose of de-watering the Klerksdorp, Orkney, Stilfontein, Hartbeesfontein ("KOSH") basin groundwater in order for Moab Khotsong operations and the mine operated by Kopanang Gold Mining Company Proprietary Limited (the mining company holding the remaining one–third interest in Margaret Water Company) (the only other mining company continuing operating) to remain dry and to prevent flooding of operational areas. Therefore, it remains imperative for the shaft to continue pumping water. Flooding in the future resulting from a failure in pumping and water related infrastructure could pose an unpredicted "force majeure" type event, which could result in financial liability for us, and could have an adverse impact on our results of operations and financial condition. For instance, Harmony has also conducted assessments at its Doornkop and Kusasalethu operation and the assessments conclude that there is a risk of decant post closure. Due to the interconnectivity, any long term water management solution would have to be a regional solution. Although, Harmony has installed water treatment plants at both sites for current treatment needs, which could serve as water plants for final decant should the situation arise, there can be no assurance that such plants will be sufficient to address such risks. There is also a flooding risk at operations acquired as

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part of the Mponeng Acquisition requiring the continuous pumping arrangement with Covalent Water Company (Pty) Limited to stay in place.
Infrastructure constraints and aging infrastructure could adversely affect Harmony’s operations
Mining, processing, development and exploration activities depend on adequate infrastructure. Reliable rail, ports, roads, bridges, power sources, power transmission facilities and water supply are critical to the Company’s business operations and affect capital and operating costs. The infrastructure and services are often provided by third parties whose operational activities are outside the control of the Company.
Interference to the maintenance or provision of infrastructure, including by extreme weather conditions, sabotage or social unrest, could impede our ability to deliver products on time and adversely affect our business, results of operations and financial condition.
Once a shaft or a processing plant has reached the end of its intended lifespan, higher than normal maintenance and care is required. Maintaining this infrastructure requires skilled human resources, capital allocation, management and planned maintenance. Although Harmony has implemented a comprehensive maintenance strategy, incidents resulting in production delays, increased costs or industrial accidents may occur. Such incidents may have an adverse effect on Harmony’s operating results and financial condition.
Fluctuations in input production prices linked to commodities may adversely affect Harmony’s operational results and financial condition
Fuel, energy and consumables, including diesel, heavy fuel oil, chemical reagents, explosives, tires, steel and mining equipment consumed in mining operations, form a relatively large part of the operating costs and capital expenditure of a mining company. Harmony has no control over the costs of these consumables, many of which are linked to some degree to the price of oil and steel.
Fluctuations in oil and steel prices have a significant impact on operating cost and capital expenditure estimates and, in the absence of other economic fluctuations, could result in significant changes in the total expenditure estimates for new mining projects or render certain projects non-viable, either of which could have a material adverse effect on our business, operating results and financial condition.
Disruptions to the supply of electricity and increases in the cost of power may adversely affect our results of operations and financial condition
In South Africa, each of our mining operations depends on electrical power generated by the South African state utility, Eskom Limited ("Eskom"), which holds a monopoly in the South African market. Electricity supply in South Africa has been constrained over the past decade and there have been multiple power disruptions. Although during fiscal 2018, the electricity supply in South Africa had seen less pressure than in previous years, Eskom began stage 4 load shedding (the national grid was short of 4,000 MW) again in March 2019. Under Stage 4 load shedding, approximately 80% of the country’s demand is met through scheduled load shedding 12 times over a four-day period for two hours at a time, or twelve times over an eight-day period for four hours at a time. In December 2019, following breakdowns in Eskom’s generating plants, load shedding rose to stage 6 (the national grid was short of 6,000 MW) and load curtailment was elevated to “essential load requirement”, resulting in Harmony having to stop production and withdrawing people from underground. The situation was remedied the following day, but Harmony lost a full day's production as a result of this. Eskom’s inability to fully meet the country’s demand has led and may continue to lead to rolling blackouts, unscheduled power cuts and surveillance programs to ensure non-essential lighting and electricity appliances are powered off. There is no assurance that Eskom’s efforts to protect the national electrical grid will prevent a complete national blackout.
Eskom's aging infrastructure, its need to replace or upgrade its power generation fleet and its deferral of routine maintenance due to financial constraints, may adversely affect electricity supply in South Africa. In addition, Eskom's ability to undertake necessary infrastructure and fleet upgrades, on commercially acceptable terms or otherwise, may be limited by the amount of debt it has outstanding, which has increased from R389 billion in fiscal 2018 to R441 billion on August 1, 2019. Any blackouts or other disruptions to power supply could have a material adverse effect on our business, operating results and financial condition.
Although management has been able to comply with the curtailment requirements in response to the load curtailment events experienced in our 2020 fiscal year and the first quarter of fiscal 2021 without incurring material production losses (the losses suffered were limited to our surface waste rock dump mining volumes), there can be no guarantee that we will be able to comply with such curtailment requirements without incurring material production losses in the future. During the period of load shedding, Eskom used a significant amount of diesel to run its gas turbines and called on large power users to curtail their power demand. In addition, although Eskom applied to the National Energy Regulator of South Africa (“NERSA”), which regulates tariffs, for a 19.9% average increase in electricity tariffs for Eskom’s 2018/2019 financial year, NERSA granted Eskom a 5.2% electricity tariff increase for this period. Eskom has expressed concern that this increase may not be adequate to prevent future electricity interruptions and indicated that it intends to challenge NERSA’s decision not to grant the requested 19.9% tariff increase.
In addition to supply constraints, labor unrest in South Africa has before, and may in future, disrupt the supply of coal to power stations operated by Eskom, or the operation of the power stations directly, and result in curtailed supply. For example, in June 2018, during wage negotiations with the National Union of Mines ("NUM"), workers embarked on an illegal strike which resulted in power constraints and load curtailment. Despite the fact that Eskom has adopted a policy of asking households to reduce usage before asking industrial users to do so in order to reduce the economic impact of such disruptions, Eskom has warned that power constraints will continue.

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In February 2019, the President of South Africa announced the vertical unbundling of Eskom. While full-state ownership will be maintained, the unbundling is expected to result in the separation of the Eskom’s generation, transmission and distribution functions into separate entities, which may require legislative and/or policy reform. It is expected that this process will take time to implement, causing continued poor reliability of the supply of electricity and an instability in prices and a possible tariff increase above inflation, which are expected to continue through the unbundling process. Should Harmony experience further power tariff increases, its business operating results and financial condition may be adversely impacted.
Eskom tariffs are determined through a consultative multi-year price determination application ("MYPD") process, with occasional tariff increase adjustments under the Regulatory Clearing Account ("RCA") mechanism. In the most recent MYPD process, NERSA granted Eskom tariff increases of 9.4% (later adding an additional 4.4%) for the period 2019 to 2020, 8.1% for the period 2020 to 2021 and 5.22% for the period 2021 to 2022. These increases are subject to multiple adjustments and challenge by NERSA, any of which could result in higher tariffs. For instance, in the latest case, NERSA appealed in August 2020 an earlier court ruling requiring R23 billion in revenue to be added to the 2021/2022 increase, and leave to appeal was granted in October 2020. In addition, NERSA also announced the approval of R3.869 billion from the RCA in costs incurred by Eskom over and above the previously regulated costs. The recovery period from the consumer is yet to be determined. On the basis of external economic advice, Harmony planning for 10% increases in both 2022/2023 and 2023/2024, but there can be no assurance that this will be adequate to meet Harmony's obligations under the tariffs as finally approved.
The South African government provided Eskom with an additional R69 billion bailout over a three-year period, from 2019 to 2021. Eskom subsequently challenged the MYPD, RCA and NERSA’s treatment of the bailout as a tariff subsidy in South African court. The South African court dismissed the urgent nature of the Eskom submission, but has not decided on the merits of the case. Should we experience further power tariff increases, our business operating results and financial condition may be adversely impacted.
PNG has limited power generation and distribution capacity, supplied by the state utility, PNG Power. This capacity is increasing but it is subject to disruptions in electrical power supply. Currently, Harmony mines and projects receive 100% of their daily demand from PNG Power, but have the capacity to self-generate by means of own diesel-generated power when required. The cost of this power will fluctuate with changes in the oil price. Disruptions in electrical power supply or substantial increases in the cost of oil could have a material adverse effect on our business, operating results and financial condition.
Also, see Item 5: “Operating and Financial Review and Prospects - Electricity in South Africa.” and “Integrated Annual Report for the 20-F 2020 - Managing our Social and Environmental stewardship - Environmental management and stewardship” on pages 121 to 138.
We may experience problems in identifying, financing and managing new acquisitions or other business combination transactions and integrating them with our existing operations. We may not have full management control over future joint venture partners
In order to maintain or expand our operations and reserve base, Harmony has sought, and may continue to seek to enter into joint ventures or other business combination transactions or to make acquisitions of selected precious metal producing companies or assets. For example, in 2018 Harmony acquired AngloGold Ashanti Limited’s Moab Khotsong and Great Noligwa mines together with other assets and related infrastructure in the Moab Acquisition and in February 2020 announced that it would acquire the remainder of AngloGold Ashanti Limited's South African business, including the Mponeng mine and Mine Waste Solutions (Pty) Limited with effect from October 1, 2020.
Acquiring new gold mining operations or entering into other business combination transactions involves a number of risks including:
our ability to identify appropriate assets for acquisition and/or to negotiate an acquisition or combination on favorable terms;
obtaining the financing necessary to complete future acquisitions;
difficulties in assimilating the operations of the acquired business;
the changing regulatory environment as it relates to the Mining Charter (as defined below) and the general policy uncertainty in South Africa;
difficulties in maintaining our financial and strategic focus while integrating the acquired business;
problems in implementing uniform quality, standards, controls, procedures and policies;
management capacity, and skills to supplement that capacity, to integrate new assets and operations;
increasing pressures on existing management to oversee an expanding company; and
to the extent we acquire mining operations or enter into another business combination transaction outside South Africa, Australia or PNG, encountering difficulties relating to operating in countries in which we have not previously operated.
Any such acquisition or joint venture may change the scale of our business and operations and may expose us to new geographic, geological, political, social, operating, financial, legal, regulatory and contractual risks. 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 our business, operating results and financial condition.
In addition, to the extent that Harmony participates in the development of a project through a joint venture or other multi-party commercial structure, there could be disagreements, legal or otherwise or divergent interests or goals among the

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parties, which could jeopardize the success of the project, particularly if Harmony does not have full management control over the joint venture. There can be no assurance that any joint venture will achieve the results intended and, as such, any joint venture could have a material adverse effect on our revenues, cash and other operating costs. See Item 5. "Operating and Financial Review and Prospects - Liquidity and Capital Resources - Investing."
Certain factors may affect our ability to support the carrying value of our property, plant and equipment, goodwill and other assets on our balance sheet, resulting in impairments
Harmony reviews and tests the carrying value of its assets when events or changes in circumstances suggest that this amount may not be recoverable and impairments may be recorded as a result of testing performed.
Our market capitalization on any reporting date is calculated on the basis of the price of our shares and ADSs on that date. Our shares and ADSs may trade in a wide range through the fiscal year depending on the changes in the market, including trader sentiment on various factors including gold price. Therefore, there may be times where our market capitalization is greater than the value of our net assets, or “book value”, and other times when our market capitalization is less than our book value. Where our market capitalization is less than our net asset or book value, this could indicate a potential impairment and we may be required to record an impairment charge in the relevant period.
At least on an annual basis for goodwill, and when there are indications that impairment of property, plant and equipment and other assets may have occurred, estimates of expected future cash flows for each group of assets are prepared in order to determine the recoverable amounts of each group of assets. These estimates are prepared at the lowest level at which identifiable cash flows are considered as being independent of the cash flows of other mining assets and liabilities. Expected future cash flows are inherently uncertain, and could materially change over time. Such cash flows are significantly affected by reserve and production estimates, together with economic factors such as spot and forward gold prices, discount rates, currency exchange rates, estimates of costs to produce reserves and future capital expenditures.
As at June 30, 2020, Harmony had substantial amounts of property, plant and equipment, goodwill and other assets on its consolidated balance sheets. Impairment charges of R3,898 million relating to property, plant and equipment and other assets were recorded in fiscal 2019. If management is required to recognize further impairment charges, this could have a material adverse effect on Harmony’s results of operations and financial condition. See Item 5: “Operating and Financial Review and Prospects - Critical Accounting Policies and Estimates - Impairment of Property, Plant and Equipment” and “- Carrying Value of Goodwill.”
Given the nature of mining and the type of gold mines we operate, we face a material risk of liability, delays and increased cash costs of production from environmental and industrial accidents and pollution compliance breaches
The business of gold mining involves significant risks and hazards, including environmental hazards and industrial accidents. In particular, hazards associated with underground mining include:
rock bursts;
seismic events;
underground fires;
cave-ins or fall-of-ground;
discharges of gases and toxic chemicals;
release of radioactive hazards;
flooding;
mining of pillars (integrity of shaft support structures may be compromised and cause increased seismicity);
processing plant fire and explosion;
critical equipment failures;
accidents and fatalities; and
other conditions resulting from drilling, blasting and the removal and processing of material from a deep-level mine.
Hazards associated with opencast mining (also known as open-pit mining) include:
flooding of the open-pit;
collapse of open-pit walls or slope failures;
processing plant fire and explosion;
accidents associated with operating large open-pit and rock transportation equipment;
accidents associated with preparing and igniting of large-scale open-pit blasting operations; and
major equipment failures.
Hazards associated with construction and operation of waste rock dumps and tailings storage facilities include:
accidents associated with operating a waste dump and rock transportation;

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production disruptions caused by natural phenomena, such as floods and droughts and weather conditions, potentially exacerbated by climate change;
dam, wall or slope failures; and
contamination of ground or surface water.
We are at risk from any or all of these environmental and industrial hazards. In addition, the nature of our mining operations presents safety risks. Harmony’s operations are subject to health and safety regulations, which could impose additional costs and compliance requirements. Harmony may face claims and liability for breaches, or alleged breaches, of such regulations and other applicable laws. Any legislative changes relating to financial provisions could add to the costs. The occurrence of any of these events could delay production, increase cash costs and result in financial liability to Harmony, which, in turn, may adversely affect our results of operations and our financial condition.
The nature of our mining operations presents safety risks
The environmental and industrial risks identified above also present safety risks for Harmony’s operations and our employees and could lead to the suspension and potential closure of operations for indeterminate periods. Safety risks, even in situations where no injuries occur, can have a material adverse effect on Harmony’s results of operations and financial condition. See Item 4: “Information on the Company - Business Overview - Regulation - Health and Safety - South Africa” and “Integrated Annual Report for the 20-F 2020 - Ensuring stability, employee safety and well-being - Safety and health” on pages 41 to 58.
Illegal and artisanal mining, including theft of gold and copper bearing material, and other criminal activity at our operations could pose a threat to the safety of employees, result in damage to property and could expose the Company to liability
The activities of illegal and artisanal miners, which include theft and shrinkage, could cause damage to Harmony’s properties, including by way of pollution, underground fires, operational disruption, project delays or personal injury or death, for which Harmony could potentially be held responsible. Illegal and artisanal mining could result in the depletion of mineral deposits, potentially making the future mining of such deposits uneconomic.
Illegal and artisanal mining (which may be by employees or third parties) is associated with a number of negative impacts, including environmental degradation and human rights abuse. Effective local government administration is often lacking in the locations where illegal and artisanal miners operate because of rapid population growth and the lack of functioning structures, which can create a complex social and unstable environment.
Criminal activities such as trespass, illegal and artisanal mining, sabotage, theft and vandalism could lead to disruptions at certain of our operations.
Rising gold and copper prices may result in an increase in gold and copper thefts. The occurrence of any of these events could have a material adverse effect on Harmony’s financial condition on results of its operations.
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. Harmony may be subject to liability 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. Harmony also maintains property and liability insurance consistent with industry practice, but this insurance contains exclusions and limitations on coverage. In addition, there can be no assurance that insurance will be available at economically acceptable premiums. As a result, Harmony’s insurance coverage may not cover the claims against it, including for environmental or industrial accidents, pollution or public health emergencies and other events that could disrupt our operations, such as COVID-19, which could have a material adverse effect on Harmony’s financial condition.
Harmony’s operations may be negatively impacted by inflation
Harmony’s operations have been materially affected by inflation. Inflation in South Africa has fluctuated in a narrow band in recent years, remaining within or just outside the inflation range of 3% - 6% set by the South African Reserve Bank. At the end of fiscal 2018, 2019 and fiscal 2020, inflation was 4.6%, 4.5% and 2.2%, respectively. However, working costs, in particular electricity costs and wages have increased at a rate higher than inflation in recent years, resulting in significant cost pressures for the mining industry. See Item 5: "Operating and Financial Review and Prospects - Operating Results - Electricity in South Africa - Tariffs". Should Harmony experience further electricity or wage increases, its business, operating results and financial condition may be adversely impacted.
The inflation rate in PNG ended at 4.7% in fiscal 2018 and at 3.7% in fiscal 2019, while the annualized inflation stood at 4.7% at the end of fiscal 2020.
Harmony’s results of operations, profits and financial condition could be adversely affected to the extent that cost inflation is not offset by devaluation in operating currencies or an increase in the price of gold.
The socio-economic framework in the regions in which Harmony operates may have an adverse effect on its operations and profits
Harmony has operations in South Africa and PNG. As a result, changes to or instability in the economic or political environment in either of these countries or in neighboring countries could affect an investment in Harmony. These risks could include terrorism, civil unrest, nationalization, political instability, change in legislative, regulatory or fiscal frameworks, renegotiation or nullification of existing contracts, leases, permits or other agreements, restrictions on repatriation of earnings or capital and changes in laws and policy, as well as other unforeseeable risks. The impact of COVID-19 may heighten social

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tensions and demands, especially near our mines in South Africa, as individuals look to the mining industry for job creation opportunities and other resources and benefits.
It is difficult to predict the future political, social and economic environment in these countries, or any other country in which Harmony operates, and the impact government decisions may have on our business, results of operations and our financial condition.
Actual and potential shortages of production inputs and supply chain disruptions may affect Harmony’s operations and profits
Harmony’s operational results may be affected by the availability and pricing of consumables such as fuel, chemical reagents, explosives, tires, steel and other essential production inputs. Issues with regards to availability of consumables may result from shortages, long lead times to deliver and supply chain disruptions, which could result in production delays and production shortfalls.
These shortages and delayed deliveries may also be experienced where industrial action affects Harmony’s suppliers. These issues could also affect the pricing of the consumables, especially if shortages are experienced. The price of consumables may be substantially affected by changes in global supply and demand, along with natural disasters such as earthquakes, climate change, extreme weather conditions, governmental controls, industrial action and other factors. A sustained interruption to the supply of any of these consumables would require Harmony to find acceptable substitute suppliers and could require it to pay higher prices for such materials. A sustained interruption might also adversely affect Harmony’s ability to pursue its development projects.
Any significant increase in the prices of these consumables would increase operating costs and adversely affect profitability, which could adversely affect our results of operations and our financial condition.
Harmony’s ability to service its debt will depend on its future financial performance and other factors
Harmony’s ability to service its debt depends on its financial performance, which in turn will be affected by its operating performance as well as by financial and other factors, and in particular the gold price, certain of which are beyond the control of the Company. Various financial and other factors may result in an increase in Harmony’s indebtedness, which could adversely affect the Company in several respects, including:
limiting its ability to access the capital markets;
hindering its flexibility to plan for or react to changing market, industry or economic conditions;
limiting the amount of cash flow available for future operations, acquisitions, dividends, or other uses, making it more vulnerable to economic or industry downturns, including interest rate increases;
increasing the risk that it will need to sell assets, possibly on unfavorable terms, to meet payment obligations; or
increasing the risk that it may not meet the financial covenants contained in its debt agreements or timely make all required debt payments.
The occurrence of any of these events could adversely affect our results of operations and our financial condition.
Harmony’s ability to service its debt also depends on the amount of its indebtedness. In order to fund the Mponeng Acquisition, Harmony completed the a placing (the "Placing") pursuant to which it issued new ordinary shares for cash which had the effect of reducing net debt at year end. After the end of fiscal 2020, on September 30, 2020, the Mponeng Acquisition closed and the purchase price was paid, which increased the net debt level again. While the COVID-19 pandemic has resulted in higher gold prices and improved cash flow as a result, it also disrupted operations and may continue to do so, which could impact on our ability to repay our debts. In order to conclude the Moab Acquisition in 2018, Harmony increased its indebtedness. In August 2019 Harmony entered into a US$400 million syndicated term and revolving credit facility, with a three year term, that was extended by a further year after the end of fiscal 2020. At June 30, 2020, US$350 million was drawn against this facility. See Item 5: "Operating and Financial Review and Prospects - Liquidity and Capital Resources - Financing" and "- Outstanding Credit Facilities and Other Borrowings".
In the near term, Harmony expects to manage its liquidity needs from cash generated by its operations, cash on hand, committed and underutilized facilities, as well as additional funding opportunities. However, if Harmony’s cost of debt were to increase or if it were to encounter difficulties in obtaining financing in the future, its sources of funding may not match its financing needs, which could have a material adverse effect on its business, operating results and financial condition.
Uncertainty relating to the nature and timing of the potential phasing out of LIBOR, and agreement on any new alternative reference rates may adversely impact our borrowing cost
LIBOR, the London Interbank Offered Rate, is widely used as a reference for setting interest rates on loans globally. We have used LIBOR as a reference rate on our US$400 million syndicated term loan and revolving credit facility, as well as our US$24 million four-year loan. Combined we had R6,356 million (US$367 million) outstanding on these facilities at year-end.
On July 27, 2017, the UK Financial Conduct Authority, or FCA, which regulates LIBOR, has announced that it intends to stop encouraging or requiring banks or submit LIBOR rates after the end of 2021. There is therefore no guarantee the LIBOR reference rate will continue in its current form post 2021. Various alternative reference rates are being considered in the financial community. The Secured Overnight Financing Rate, has been proposed by the Alternative Reference Rate Committee, a committee convened by the US Federal Reserve that includes major market participants and on which regulators participate, as an alternative rate to replace US dollar LIBOR.

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On August 19, 2019, Harmony and a syndicate of local and international lenders entered into a loan facility agreement, pursuant to which Harmony and the lenders agreed that a new reference rate will be agreed upon by mutual consent. However there is no guarantee that a transition from LIBOR to a new reference rate will not result in market disruptions, and possibly result in increases to our borrowing costs, which could have a material adverse effect on its business, operating results and financial condition. See Item 5: "Operating and Financial Review and Prospects - Liquidity and Capital Resources".
Mining companies face strong competition
The mining industry is competitive in all of its phases. Harmony competes with other mining companies and individuals for specialized equipment, components and supplies necessary for exploration and development, for mining claims and leases on exploration properties and for the acquisition of mining assets. These competitors may have greater financial resources, operational experience and technical capabilities than Harmony. Competition may increase Harmony’s cost of acquiring suitable claims, properties and assets, which could have a material adverse effect on its financial condition.
We also compete with mining and other companies for key human resources
The risk of losing senior management or being unable to hire and retain sufficient technically skilled employees or sufficient representation by Historically Disadvantaged South Africans ("HDSAs") in management positions, may materially impact on Harmony's ability to achieve their objectives.
Harmony competes with mining and other companies globally to attract and retain key human resources at all levels with the appropriate technical skills and operating and managerial experience necessary to continue operating its business. The need to recruit, develop and retain skilled employees is particularly critical with HDSAs and women in mining in South Africa, and the global shortage of key mining specialists, including geologists, mining engineers, mechanical and electrical engineers, metallurgists and skilled artisans has been exacerbated by increased mining activity across the globe. There can be no assurance that Harmony will attract and retain skilled and experienced employees. Should Harmony lose any of its key personnel, its business may be harmed and its operational results and financial condition could be adversely affected. See Item 4. “Information on the Company - Business Overview - Regulation - Labor Relations” and “Integrated Annual Report for the 20-F 2020 - Ensuring stability, employee safety and well-being - employee relations” on pages 58 to 71.
In PNG, the PNG government ("PNG Government") is considering revisions of its local content policy which will severely restrict the utilization of offshore-based "Fly-In, Fly Out" expatriate employees, and prescribe increased levels of participation by locally-owned businesses in the provision of goods and services. If introduced, this will adversely affect the ability of Harmony to engage and retain appropriately skilled human resources, and manage the costs of goods and services to its operations. It will also necessitate the application of additional resources to the construction or provision of housing for residential employees, and the recruiting and training of local landowners and landowner businesses.
Since Harmony’s labor force has substantial trade union participation, Harmony faces the risk of disruption from labor disputes and non-procedural industrial action resulting in loss of production and increased labor costs impacting negatively on production and financial results
Despite a history of constructive engagement with labor unions, there are periods when 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, which is about 93% among our employees, we are at risk of production stoppages for indefinite periods due to strikes and other disputes, especially wildcat strikes. Inter-union rivalry may increase the risk of labor relations instability. In addition, in South Africa, a variety of legacy issues such as housing, migrant labor, education, poor service delivery and youth unemployment can lead to communities and unions working together to create instability in and around mining operations. During 2020, one of our mines based in the Free State, known as Unisel, will reach the end of its economic and operating life which will result in the discontinuation of mining operation on the mine. The mine employs about 850 employees most of whom are expected to be absorbed into other Harmony operations.
In October 2018, Harmony concluded a three year wage agreement with unions representing the majority of the Company’s employees. This agreement was extended to all employees irrespective of union affiliation. The Company has experienced a relatively peaceful labor environment since the conclusion and implementation of the said wage agreement. However we are not able to predict whether we will experience significant labor disputes in future, or what the financial impact of any such disputes may be. See Item 4: “Information on the Company - Business Overview - Regulation - Labor Relations”, “Integrated Annual Report for the 20-F 2020 - Ensuring stability, employee safety and well-being - employee relations” on pages 58 to 71. South African employment law sets out minimum terms and conditions of employment for employees. Although these may be improved by agreements between us and the trade unions, prescribed minimum terms and conditions form the benchmark for all employment contracts. See “Integrated Annual Report for the 20-F 2020 - Our business context - Stakeholder engagement and material issues” on pages 31 to 36.
We are required to submit a report under South African employment law detailing the progress made towards achieving employment equity in the workplace. If this report is not submitted, we could incur substantial penalties.
Developments 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.
In PNG, the workforce is not significantly unionized. However, operations are subject to disruption as a result of actions taken by landowners and occupants of the land within the area of impact of such operations, including the blockading of access routes to the operations. These disruptions generally arise as a result of grievances with regard to the non-distribution

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by the PNG Government to local communities of mine-derived royalties and other benefits, or in relation to the participation of local businesses in the provision of goods and services to the operations.
In the event that Harmony experiences industrial relations related interruptions at any of its operations or in other industries that impact its operations, or increased employment-related costs due to union or employee activity, these may have a material adverse effect on our business, production levels, operating costs, production targets, operating results, financial condition, reputation and future prospects. In addition, mining conditions can deteriorate during extended periods without production, such as during and after strikes; lower levels of mining activity can have a longer term impact on production levels and operating costs, which may affect our mines' operating life, which could have a material adverse effect on its business, operating results and financial condition.
HIV/AIDS, tuberculosis and other contagious diseases, such as COVID-19, pose risks to us in terms of productivity and costs
The prevalence of HIV/AIDS and other contagious diseases, including COVID-19, in South Africa and PNG poses risks to us in terms of potentially reduced productivity, and increased medical and other costs.
The continued spread of COVID-19 could result in serious illness (including incapacity) or quarantine of Harmony’s employees and contractors, which may be exacerbated by employees and contractors working in close proximity to each other in underground and surface mines and living in close quarters. In addition, certain underlying health conditions including conditions which compromise the immune system, such as HIV/AIDS, may worsen the outcomes among the individuals infected with COVID-19. Employee or contractor absences due to COVID-19 or other contagious diseases could lead to labor shortages or instability, which could result in disruptions to Harmony’s production (including potential temporary cessation) and increased operational costs. In addition, any action taken by governments or regulators in response to the spread of contagious diseases such as COVID-19 could have a material impact on our operations and lead to an increase in our costs. For example, many countries, including the countries where we operate, have imposed strict travel-related measures such as travel restrictions and have introduced indefinite border closures, lock-downs, bans on public gatherings, curfews and business shutdowns following the global spread of COVID-19. In response to the outbreak, Harmony has taken steps aimed at protecting employees and contractors, including implementing certain travel restrictions.
In line with the directive by the South African government on March 23, 2020, Harmony implemented measures to place its South African operations under temporary care and maintenance during the resultant 21-day lock-down in South Africa (which has been extended beyond its original end date). On April 16, 2020, the South African government published a notice amending certain regulations previously issued in terms of Section 27(2) of the Disaster Management Act, 57 of 2002 (the "Disaster Management Act"). The amendments allowed South African mining operations to be conducted at a reduced capacity of not more than 50% during the lock-down and at increasing capacity as determined by directives to be issued by the Minister of Mineral Resources and Energy thereafter. Subsequently, Harmony announced a set of risk-based safety measures designed to resume operations to the prescribed 50% production capacity. Such measures included arranging transport for South African-based employees from their homes in remote areas to their respective areas of work, the implementation of rigorous screening and testing programs as employees return to work, the provision of quarantine facilities for employees who may test positive for COVID-19 and the submission of data collected during screening and testing to the relevant authority.
In PNG, the identification of a positive case at the Hidden Valley mine resulted in the quarantine lockdown of the Hidden Valley mine site and the implementation of a revised roster for its workforce to enable the continuation of site operations. In line with directives issued by the Controller under the PNG National Pandemic Act 2020, Harmony implemented a set of risk-based safety measures designed to enable the safe continuation of operations, including the management of the international and local/regional travel of its workforce, the establishment of three "entry point center" quarantine facilities to manage the safe change-over of rostered staff, the implementation of rigorous screening and testing programs, the provision of personal protective equipment, and the submission of data collected during screening and testing to the relevant authorities.
The continuation of existing measures, or the introduction of additional travel-related restrictions, could result in the inability of Harmony’s suppliers to deliver components or raw materials on a timely basis and may limit or prevent Harmony’s management and employees and other important third-parties from traveling to, or visiting, Harmony’s operations. Further, any lock-downs or mandatory business shutdowns could result in a suspension of Harmony’s operations and could bring its business to a standstill. The full extent to which COVID-19 impacts Harmony’s operational and financial performance will depend on future developments, which are highly uncertain and cannot be predicted. Any disruption to production or increased operational costs as a result of the spread of contagious diseases, such as COVID-19, HIV/AIDS or tuberculosis, could have a material adverse effect on Harmony’s business, operating results and financial condition. See “Integrated Annual Report for the 20-F 2020 - Ensuring stability, employee safety and well-being - Safety and health” on pages 41 to 58.
The cost of occupational health care services and the potential liabilities related to occupational health diseases may increase in future and may be substantial
Harmony’s operations are subject to health and safety regulations which could impose significant cost burdens. In South Africa, the present Mine Health and Safety Act, 29 of 1996 ("MHSE") imposes various duties on mines and grants the authorities broad powers to, among others, close mines which are unsafe or hazardous to the health of persons and order corrective action on health and safety matters. Operations in PNG are subject to similar duties and powers, including under the following laws and regulations: PNG Industrial Safety, Health and Welfare Act 1961, PNG Industrial Safety, Health and Welfare Regulations 1965, PNG Mining Act 1992 (the "PNG Mining Act"), PNG Mining (Safety) Act 1977, PNG Mining Safety Regulation 1935 (updated 2006) and PNG Environment Act 2000.

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There is a risk that the cost of providing health services, complying with applicable regulations, including the Compensation for Occupational Injuries and Diseases Act, 130 of 1993 (“COIDA”) and the Occupational Diseases in Mines and Works Act, 78 of 1973 (“ODMWA”), and implementing various programs could increase in future, depending on changes to underlying legislation, legal claims and the profile of our employees. This increased cost, should it transpire, could be substantial, but is currently indeterminate.
Harmony has been subject to numerous claims, including class actions or similar group claims relating to silicosis and other occupational lung diseases, and could be subject to similar claims in the future. For instance, in May 2016, the South Gauteng High Court certified a class action by current and former mineworkers against gold mining companies in South Africa, including Harmony. The action consists of two classes: the silicosis class and the tuberculosis (“TB”) class. Each class includes mineworkers and dependents whose parents died after contracting silicosis and/or TB while working at the mines. The certification of the class means that the claimants were able to sue the mining companies as a class. While issues, such as negligence and causation, need to be proved by the claimant on a case-by-case basis, such a ruling could expose Harmony to claims related to occupational hazards and diseases (including silicosis and TB, which may be in the form of an individual claim, a class action or a similar group claim). The Supreme Court of Appeal granted the mining companies leave to appeal against all aspects of the class May 2016 judgment. The appeal hearing before the Supreme Court of Appeal was scheduled to be heard in March 2018. However, the parties agreed to postpone the matter to conclude settlement negotiations. The matter was subsequently settled in May 2018. The terms of the settlement are available on the Harmony website. The settlement was subject to certain conditions, including that an unconditional order of court, sanctioning the settlement agreement to make the settlement agreement an order of court, is obtained from the High Court. Such an order was obtained on July 26, 2019, subject to certain conditions which were subsequently fulfilled, and the settlement became effective on December 10, 2019. Accordingly, the Tshiamiso Trust was created for purposes of administering the settlement funds, with all trustees having been appointed by February 6, 2020. See Item 8: "Financial Information - Consolidated Statements and Other Financial Information - Legal Proceedings” and “Integrated Annual Report for the 20-F 2020 - Ensuring stability, employee safety and well-being - Safety and health” on pages 41 to 58 for further information. See note 26 “Provision for silicosis settlement” to our consolidated financial statements set forth beginning on page F-1.
The Occupational Lung Disease Working Group ("Working Group"), was formed in fiscal 2014 to address issues relating to compensation and medical care for occupational lung disease in the South African gold mining industry. The Working Group, made up of African Rainbow Minerals Limited, Anglo American SA, AngloGold Ashanti Limited, Gold Fields Limited, Harmony and Sibanye Gold Limited, has had extensive engagements with a wide range of stakeholders since its formation, including government, organized labor, other mining companies and the legal representatives of claimants who have filed legal actions against the companies.
The members of the Working Group are among respondent companies in a number of legal proceedings related to occupational lung disease, including the class action referred to above. The Working Group is however of the view that achieving a comprehensive settlement which is both fair to past, present and future employees and sustainable for the sector, is preferable to protracted litigation. On July 26, 2019, the Johannesburg High Court approved a R5.2 billion settlement of the silicosis and TB class action suit between the Working Group and lawyers representing affected mineworkers and the settlement became effective on December 10, 2019.
As a result of the ongoing work of the Working Group and engagements with affected stakeholders since December 31, 2016, Harmony provided for its share of the estimated cost in relation to the Working Group of a settlement of the class action claims and related costs. At June 30, 2020 the provision in Harmony's statement of financial position was R892 million. Harmony believes that this remains a reasonable estimate of its share of the estimated cost in relation to the Working Group of the settlement of the class action claims and related costs. The final settlement costs and related expenditure may, however, be higher than the recorded provision depending on various factors, such as, among other things, differences in the number and profile of eligible claimants actually compensated compared to current estimates and fluctuations in foreign exchange rates.
If Harmony or any of its subsidiaries were to face a significant number of additional such claims and the claims were suitably established against it, the payments of compensation to the claimants could have a material adverse effect on Harmony’s results of operations and financial condition. In addition, Harmony may incur significant additional costs, including costs relating to the payment of fees, levies or other contributions in respect of compensatory or other funds established (if any), and expenditures arising out of its efforts to resolve any such claims or other potential actions.
Harmony is subject to the imposition of various regulatory costs, such as mining taxes and royalties, changes to which may have a material adverse effect on Harmony’s operations and profits
In recent years, governments, communities, non-government organizations and trade unions in several jurisdictions have sought and, in some cases, have implemented greater cost imposts on the mining industry, including through the imposition of additional taxes and royalties. Such resource nationalism, whether in the form of cost imposts, interference in project management, mandatory social investment requirements, local content requirements or creeping expropriation could impact the global mining industry and Harmony's business, operating results and financial condition.
South Africa
In December 2017, during its national conference, the African National Congress ("ANC") resolved that as a matter of policy, the ANC should pursue the expropriation of land without compensation, provided that such expropriation is carried out without destabilizing the agricultural sector, endangering food security or undermining economic growth and job creation. In February 2018, the National Assembly assigned the Constitutional Review Committee ("CRC"), to review section 25 of South Africa’s Constitution and other relevant clauses to make it possible for the state to expropriate land in the public interest without compensation. On December 4, 2018, South Africa’s Parliament adopted the CRC’s report dated November 15, 2018 in which it recommended that section 25 of South Africa’s Constitution be amended to make explicit

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that expropriation of land without compensation is a legitimate option for land reform. While the CRC’s report recommended that such amendment to South Africa’s Constitution be tabled and passed before the South African general elections in May 2019, the ad hoc committee responsible for preparing the bill to amend South Africa’s Constitution has not yet submitted a timeline for meetings or public hearings. On March 13, 2019, the CRC announced that the work to amend section 25 of South Africa’s Constitution would not be finished before the South African general elections in May 2019 and that consequently the matter would be taken up by Parliament after the elections. In the event that the CRC recommends a Constitutional amendment in favor of expropriation, various procedural milestones would need to occur, including a bill amending section 25 of the Constitution approved by a majority of the National Assembly as well as six of the nine provinces of the National Council of Provinces ("NCOP") and signed by the President, among others. The legislative process to give effect to the proposed Constitutional amendment, has not yet been finalized. The National Assembly agreed to re-establish the Ad-Hoc Committee tasked with initiating and introducing the legislation required to amend Section 25 of the Constitution. The Draft Constitution Eighteenth Amendment Bill was published for comment at the end of 2019. The aim of the Draft Bill is to amend the Constitution of the Republic of South-Africa, 1996 so as to provide that where land and any improvements thereon are expropriated for the purpose of land reform, the amount of compensation payable may be nil. The Ad-Hoc Committee needs to report back to the National Assembly by December 31, 2020.
While the South African government has stated that it does not intend to nationalize mining assets or mining companies, certain political parties have stated publicly and in the media that the government should embark on a program of nationalization. For instance, the ANC has adopted two recommended approaches to interacting with the mining industry. While the ANC has rejected the possibility of mine nationalization for now, the first approach contemplates, among other things, greater state intervention in the mining industry, including the revision of existing royalties, the imposition of new taxes and an increase in the South African government’s holdings in mining companies. The second approach contemplates the South African government taking a more active role in the mining sector, including through the introduction of a state mining company to be involved in new projects either through partnerships or individually.
The proposed amendment to section 25 of South Africa’s Constitution or any legislation resulting in the expropriation of land or greater government intervention could disrupt our operations, which could have a material adverse effect on our business, operating results and financial condition.
The former President, Jacob Zuma, appointed the Davis Tax Committee to look into and review the current South African tax regime, including the mining tax regime. The committee’s first interim report on mining, which was released for public comment on August 13, 2015, proposed no changes to the royalty regime but recommended the discontinuation of the upfront capital expenditure write-off regime in favor of an accelerated capital expenditure depreciation regime. In addition, the report recommended retaining the so called "gold formula" for existing gold mines only, as new gold mines would be unlikely to be established in circumstances where profits are marginal or where gold mines would conduct mining of the type intended to be encouraged by the formula. The committee also recommended the phasing out of additional capital allowances available to gold mines in order to bring the gold mining corporate income tax regime in line with the tax system applicable to all taxpayers. In December 2016, following a period of public comment, the committee issued its second and final report to the Minister of Finance, which largely reaffirmed the committee's initial recommendations. The final reports were published in November 2017. The South African National Treasury will continue to consider the committee’s final recommendations. It is not clear at this stage which, if any, of the recommendations will be adopted as legislation. Such legislation could, however, have a material adverse effect on our business, results of operations and financial condition.
Papua New Guinea
In PNG, Mining Lease holders must pay royalties to the PNG Government based on production (currently 2%). In addition to the PNG Government's entitlement to royalties, PNG exploration licenses each contain a condition that the PNG Government may, at any time prior to the commencement of mining, acquire a participating interest of up to 30% in any mineral discovery at historical exploration cost. This condition confers on the PNG Government or its nominee the option to take up a direct equity participation in a mining project. The PNG Government has indicated that it intends to exercise its option in full in respect of the Wafi-Golpu project.
The mining regime in PNG is the subject of a comprehensive ongoing review involving various PNG Government agencies. The review includes possible increases to the royalty rate, and the PNG Government's right to acquire an interest in a mine discovery, the percentage extent of such right, the consideration payable for it and the contributions to be made pursuant to it. Harmony, via the PNG Chamber of Mines and Petroleum, has submitted comments on aspects of the review.
In 2014, the PNG Government initiated a review of the tax regime, with a final report issued by the PNG Tax Review Committee in October 2015. Pursuant to the tax regime review, certain adverse changes to the fiscal regime were introduced with effect from January 1, 2017, with the main changes being the introduction of an additional profit tax, the cessation of the double deduction allowance for exploration expenditure, and an increase in the rates of interest withholding and dividend withholding taxes. Further changes, including a capital gains tax, were initially proposed to be introduced from January 1, 2020 and draft legislation has been issued for discussion, however, the PNG Treasury has indicated that no capital gains tax will be introduced before 2022. Harmony, via the PNG Chamber of Mines and Petroleum, has submitted comments on aspects of the draft legislation. Any legislation resulting for such review and any changes to the PNG tax regine could have a material adverse effect on our business, results of operations and financial condition.
Laws governing mineral rights affect our business and could impose significant costs and burdens. Mineral rights in the countries in which we operate could be altered, suspended or canceled for a variety of reasons, including breaches in its obligations in respect of such mining rights
Our operations in South Africa and PNG are subject to legislation regulating mineral rights. Certain of the Company’s properties may be subject to the rights or the asserted rights of various community stakeholders, including indigenous

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people. The presence of those stakeholders may therefore have an impact on Harmony’s ability to develop or operate its mining interests.
South Africa
In South Africa, we are governed by the South African Mineral and Petroleum Resources Development Act, 28 of 2002 (“MPRDA”). See Item 4: “Information on the Company - Business Overview - Regulation - Mineral Rights - South Africa - MPRDA” for a description of the principal objectives set out in the MPRDA.
The MPRDA was promulgated as effective legislation on May 1, 2004 and transferred ownership of mineral resources to the South African people, with the South African government acting as custodian in order to, among other things, promote equitable access to the nation’s mineral resources by South Africans, expand opportunities to HSDAs who wish to participate in the South African mining industry and advance socio-economic development. We currently continue to comply with the requirements of the MPRDA. Any failure to comply with the conditions of our mining rights, whether intentional or unintentional, could have a material adverse effect on our operations and financial condition and could result in the cancellation or suspension of our mining rights.
On June 21, 2013, the Minister of Mineral Resources and Energy ("Minister") introduced the Mineral and Petroleum Resources Development Amendment Bill, 2013 (the “MPRDA Bill”) into Parliament. The South African Department of Mineral Resources (as it then was known, but now is referred to as the Department of Mineral Resources and Energy ("DMRE")) briefed the National Assembly's Portfolio Committee on Mineral Resources in July 2013. The MPRDA Bill was passed by both the National Assembly and the NCOP on March 27, 2014. In January 2015, the former President, Jacob Zuma, referred the MPRDA Bill back to Parliament for reconsideration and on November 1, 2016, the Portfolio Committee on Mineral Resources tabled non-substantial revisions to the MPRDA Bill in the National Assembly and a slightly revised version of the MPRDA Bill was passed by the National Assembly and referred to the NCOP. On March 3, 2017, the National Assembly passed certain minor amendments to the MPRDA Bill. The National Assembly has referred the MPRDA Bill to the NCOP where the Select Committee has received comments on the draft legislation. The chairperson of the Select Committee had targeted January or February of 2018 to pass the legislation. On February 16, 2018, the President of South Africa, Cyril Ramaphosa, announced that the MPRDA Bill was at an advanced stage in Parliament. However, in August 2018, the Minister announced that, given certain concerns with the MPRDA Bill, his recommendation would be to withdraw it entirely. The South African Cabinet has subsequently supported its withdrawal. While the MPRDA Bill was not formally withdrawn by Parliament, it lapsed on March 28, 2019. Although Parliament has the ability to revive a lapsed Bill, it seems unlikely that it will revive the MPRDA Bill given both the Minister's and Cabinet's support for its withdrawal.
There is a large degree of uncertainty regarding the changes that will be brought about should the MPRDA Bill be revived and made law. Among other things, the MPRDA Bill provides that applicants will no longer be able to rely on the "first come, first served" principle when submitting an application for a right, it seeks to require the consent of the Minister for the transfer of any interest in an unlisted company or any controlling interest in a listed company where such companies hold a prospecting right or mining right and to give the Minister broad discretionary powers to prescribe the levels of minerals required to be offered to domestic beneficiators for beneficiation. We cannot yet determine the full impact that the MPRDA Bill may have on our business and there can be no assurance that such changes will not have a material adverse effect on our operations and financial condition.
Regulations under the MPRDA

On March 27, 2020 the Minister published for implementation amendments to the regulations promulgated pursuant to the MPRDA in 2004 (the "MPRDA Regulations” and as amended the "Amended Regulations"). The Amended Regulations include the following notable changes:
Mining right applicants must “meaningfully consult” with landowners, lawful occupiers and interested and affected parties in accordance with the procedures contemplated under the Environmental Impact Assessment Regulations, 2014 (the "EIA Regulations”). The office of the Regional Manager is permitted to participate as an observer in these processes.
Mining right holders must, pursuant to their social and labor plans ("SLPs"), contribute to the socio-economic development in the areas in which they operate and labor sending areas (i.e. a local municipality from which a majority of mineworkers are from time to time permanently resident). This requirement may impose obligations on mining right holder to effect measures in communities that are located far away from the mine and / or could give rise to some social issues.
Although most of the provisions regulating environmental matters have been deleted from the Amended Regulations, those sections dealing with mine closure have been retained but have been amended to state that mine closure must be regulated in terms of the NEMA, the EIA Regulations and the Financial Provision Regulations, 2015. It is anticipated that the Financial Provision Regulations, 2015 will be replaced by a revised regulations following further engagement with the mining industry.
The appeal process in the MPRDA Regulations has been replaced with a more comprehensive procedure that includes specific time periods within which appellants, respondents and the competent authority must submit appeals, responses or consider appeals (as the case may be). Although there is no guarantee that the parties will comply with these time periods, the time periods intend to hold the parties accountable and to ensure that appeals are resolved in a timely manner.

Mining Charter
On September 27, 2018, the Minister published the Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2018 ("Mining Charter III"), on which date it also became effective, as amended by the notice

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published in the Government Gazette on December 19, 2018 and read with the Implementation Guidelines for the Broad Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2018 ("Implementation Guidelines") published on the same date. It replaces, in their entirety, the original Mining Charter negotiated in 2002 and gazetted in 2004 (the "Original Charter") and the "amended" Charter gazetted in September 2010 (the "Amended Charter"). Mining Charter III imposes new obligations and increased participation by HSDAs in relation to a mining company's ownership, procurement of goods and services, enterprise and supplier development, human resource development and employment equity requirements. The first annual reporting for compliance with Mining Charter III was on or before March 31, 2020, although on April 11, 2020, the Minister gazetted Directions under the regulations of the Disaster Management Act as part of the measures to address, prevent and combat the spread of COVID-19, which extended the date for submission of the first annual report to June 1, 2020.
While the HDSA ownership requirement in relation to existing mining rights has not increased (provided that Harmony met the 26 percent requirement under the Amended Charter), Harmony may be required to comply with new HDSA ownership requirements in relation to any renewals, consolidations and transfers of its existing rights and any applications for new mining rights. The increased HDSA requirements in relation to employment equity, procurement of goods and services and enterprise and supplier development may result in additional costs being incurred by Harmony, which could have a material adverse effect on our results of operations and financial condition.
While Mining Charter III was effective from September 27, 2018, many of its provisions are vague and untested despite the publication of the Implementation Guidelines. See Item 4: "Information on the Company - Business Overview - Regulation - Mineral Rights - South Africa - The Mining Charter".
On March 26, 2019, the Minerals Council South Africa (previously the Chamber of Mines) ("MCSA") filed an application for the judicial review and setting aside of certain clauses of Mining Charter III. The MCSA had engaged in ongoing attempts to reach a compromise with the Minister on certain provisions that are problematic for the industry, and which would be detrimental to its sustainability.
The application aligns with the MCSA’s previously stated view that most aspects of Mining Charter III represent a reasonable and workable framework. However, the MCSA’s application contends that Mining Charter III does not fully recognize the continuing consequences of previous empowerment transactions, particularly in relation to mining right renewals and transfers of such rights. In August 2020, the current Minister, Gwede Mantashe, withdrew his notice of appeal to the Supreme Court of Appeal in respect of the declaratory order issued in April 2018 by the High Court of South Africa (Gauteng Division). The declaratory order held that black economic empowerment ("BEE") ownership transactions should continue to be recognized for regulatory certainty purposes and for the duration of the mining right – even where the BEE partner has sold or transferred part of or all its equity. Harmony cannot guarantee that it will meet all the targets set out by Mining Charter III. Should Harmony breach its obligations in complying with the MPRDA or Mining Charter III, its existing mining rights in South Africa could be suspended or canceled by the Minister in accordance with the provisions of the MPRDA. It may also influence our ability to obtain any new mining rights. Any such suspension or cancellation could have a material adverse effect on our results of operations and financial condition.
Papua New Guinea
In PNG, mining is governed by the PNG Mining Act. All minerals are owned by the PNG Government, which grants rights to explore for or mine such minerals under a concessionary tenement system. Types of tenement include: exploration license; mining lease; special mining lease; alluvial mining lease; lease for mining purpose; and mining easement.
Since 2009, the mining regime in PNG has been the subject of a comprehensive ongoing review involving various PNG Government agencies. The legislation being reviewed includes the PNG Mining Act, PNG Mining (Safety) Act 1977 and applicable regulations. PNG mineral policy and mining-specific sector policies including biodiversity offsets, offshore mining policy, sustainable development policy, involuntary relocation policy and mine closure policy.
Over that period, various draft revisions of the PNG Mining Act have been circulated and submitted to the PNG Chamber of Mines and Petroleum for its comments, most recently in 2018 and 2020. The most recent draft revisions include an increase in the royalty rate, changes to the terms of the PNG Government's right to acquire an interest in a mine discovery, the introduction of a development levy and a waste fee, the introduction of an obligation to maintain production at minimum prescribed levels, a prohibition on non-local “Fly-In, Fly-Out” employment practices, and the introduction of downstream processing obligations. If introduced, and applied to Harmony's operations and projects in PNG, the changes will potentially affect those operations and projects and could have a material adverse effect on Harmony's business, operating results and financial condition.
In May 2019, the Honourable James Marape was appointed Prime Minister of PNG following a vote of no confidence in the previous Government. He committed his Government to a review and restructuring of resource laws, signaling the possible introduction of a new mining act and associated mining and related policies intended to increase the PNG Government's benefits share in mining.
On June 26, 2020 a Mining (Amendment) Act was enacted to require the real-time provision of production and mineral sales data of the PNG Government. On July 16, 2020 a proposed Organic Law on Ownership and Development of Hydrocarbons and Minerals and the Commercialization of State Businesses (the "PNG Organic Law") was tabled for reading in Parliament. The PNG Organic Law (if adopted) will materially alter the legislative and regulatory regime governing mining in PNG, including the transfer of ownership of minerals from the State to a State-Owned Entity ("SOE") not subject to the PNG Mining Act or the regulation of the Mineral Resources Authority, and the transformation of the methodology of its participation in mining operations from a concessionary to a production sharing regime. The proposed PNG Organic Law is silent on the form and content of the production sharing regime to be entered into, which arrangements it is envisaged will be negotiated by the SOE on a case by case basis.

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It is presently uncertain if the PNG Organic Law will be adopted, of (if adopted) whether or how the PNG Organic Law will be applied to Harmony's current operations and projects in PNG. Due to this uncertainty, Harmony is unable to express a view on the likely accounting impact of the changes, save to state that, if the PNG Organic Law is adopted and applied, Harmony's operations and projects in PNG will potentially be affected by the changes, which could have a material adverse effect on Harmony's business, operating results and financial condition.
Laws governing health and safety affect our business and could impose significant costs and burdens
In South Africa, the MHSA requires that employers implement various measures to ensure the safety and health of persons working at a mine as far as reasonably practicable. This obligation is extended to any contractor employees that may be working at a mine. These obligations include the identification and assessment of risk, implementation of codes of practice and standards setting out safe work procedures, proper and appropriate training, supervision, medical surveillance and the provision of safe equipment and personal protective equipment. Further, Harmony must ensure compliance with various licenses, permissions or consents that have been issued to it in terms of the various pieces of applicable legislation.
An employer may be subjected to significant penalties and/or administrative fines for non-compliance under the MHSA and other applicable legislation. Depending on the particular circumstances, litigation (criminal and/or civil) may be instituted against the employer in respect of an accident or incident which has resulted in the injury, death or occupational disease contracted by an employee (or contractor employee). In some of the jurisdictions in which Harmony operate, the regulatory authority also issues closure notices for the operation or parts thereof, following the occurrence of an injury or death threat. In the past, certain of our operations have also been temporarily suspended for safety reasons. Such closure notices or suspensions, if of sufficient magnitude, could have a material adverse effect on our business, operating results or financial condition.
Any further changes to the health and safety laws which increase the burden of compliance on the employer and impose higher penalties for non-compliance may result in Harmony incurring further significant costs, which could have a material adverse effect on our business, operating results and financial condition. In addition, our reputation could be damaged by any significant governmental investigation or enforcement of health and safety laws, regulations or standards, which could also have a material adverse effect on our business, operating results and financial condition.
In PNG, the safety of employees and contractors at Harmony’s mining operations is regulated by the PNG Mining (Safety) Act 1977 and the Regulations issued thereunder. In terms of section 6(1)(e)(i) of the Act, the inspector has the power to order the cessation of any part of the operations for such (unlimited) time as he or she considers may be necessary to satisfy the safety provisions of the Act. Such order for cessation can often result in lower or a total stoppage of production resulting in significant financial losses during the cessation.
The mining regime in PNG is the subject of comprehensive ongoing review, including the Mining (Safety) Act and Regulations. Harmony's operations and projects in PNG may be affected by changes to PNG mining safety regime, and the company continues to engage with the PNG Government and relevant regulators on these matters through the offices of the Chamber of Mines and Petroleum, and directly with the PNG Mineral Resources Authority ("MRA") and the Chief Inspector of Mines.
We are subject to extensive 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.
South Africa
In South Africa, the MPRDA and the National Environmental Management Act, 107 of 1998 (the “NEMA”), along with various other environmental statutes, regulations and standards regulate the impact of the Company’s prospecting and mining operations on the environment. These statutes, regulations and standards are regularly updated, amended and supplemented, imposing additional obligations on mining companies to, among other things, minimize emissions, reduce, re-use and recycle waste and improve the quality of effluent and wastewater discharged from the operations.
Under the MPRDA, a mining holder remains responsible for any environmental liability, pollution, ecological degradation, the pumping and treatment of extraneous water and the sustainable closure of mining operations until such time as the Minister issues a closure certificate. Notwithstanding this, the NEMA states that a mining right holder will remain responsible for these obligations even after a closure certificate is issued.
In South Africa, until such time as a closure certificate is issued, a mining right holder is required to assess annually the environmental liabilities associated with the mining operation (including the pumping and treatment of extraneous water) and put up financial provision for the rehabilitation, closure and ongoing post decommissioning management of negative environmental impacts. This financial provision may be released when the Minister issues a closure certificate. However, he or she may retain a portion of the financial provision in perpetuity for any residual and latent environmental liabilities.
The manner in which the amount of the financial provision is calculated will be regulated under the Financial Provision Regulations, 2015. Prior to this, the amount of financial provision has been calculated pursuant to the DMRE's Guideline Document for the Evaluation of the Quantum of Closure-related Financial Provision Provided by a Mine (the “DMRE Guidelines”). The DMRE Guidelines were criticized for undervaluing the costs of environmental rehabilitation thus exposing the DMRE to potential liability in the event that the mining right holder was unable to fulfill its environmental obligations. The proposed Financial Provision Regulations, 2015 place an emphasis on post-closure water pumping and treatment and the need for upfront provision to be set aside for the management of these types of impacts.
The Financial Provision Regulations, 2015 sought to rectify this deficiency by, among other things, including preliminary and general costs in the financial provision calculations, imposing VAT (at 15%) on the total amount, prohibiting the

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withdrawal of trust funds for concurrent rehabilitation (even in circumstances where the financial provision exceeds the evaluated environmental liability) and ceding a portion of the funds the Minister as security for possible latent and residual post-closure environmental impacts.
Compliance with these obligations would result in a significant increase in the required financial provision and, consequently has been strongly opposed by the mining industry. In response to this opposition, the Department of Environment, Forestry and Fisheries (the competent authority for drafting the Financial Provision Regulations, 2015) ("DEFF") undertook to engage further with mining industry and other stakeholders to amend or develop new financial provision regulations. In light of this on-going consultation, the date by which mining companies are required to align their financial provision with the Financial Provision Regulations, 2015 has been extended on three occasions. The most recent extension is until June 2021. As revised draft regulations have not been published in the last year, it is possible that the June 2021 date may be extended further. However, even if new regulations are finalized before that date, it is likely that the financial provision calculation will be more stringent than the calculations under the DMRE Guidelines and the Company will be required to increase its financial provision.
In addition, the Company may also face increased environmental costs should other mines in the vicinity fail to meet their obligations on the pumping or treatment of water. The Company believes that it will realize an additional liability of R37 million for the final closure solution to close the KOSH basin safely and sustainably.
The adoption of these or additional or more comprehensive and stringent requirements, particularly for the management of hazardous waste, pollution of ground and groundwater systems and duty to rehabilitate closed mines, may result in additional costs and liabilities, which could have a material adverse effect on Harmony's business, operating results and financial condition.
Harmony continues to engage with DEFF and the DMRE regarding matters relating to financial provision including the Financial Provision Regulations, 2015, as well as the adjustment of financial provision in respect of the mining operations. There is concern about the ambiguity of the provisions and how they can be operationalized with the prescribed transitional time frames, which may result in misinterpretation, mis-application and potential disputes with DEFF any of which could have a material adverse effect on Harmony's business, operating results and financial condition. See note 25 "Provision for environmental rehabilitation" to our consolidated financial statements set forth beginning on page F-1.
Papua New Guinea
Harmony’s PNG operations are subject to the PNG Environment Act 2000, which governs the environmental permitting and regulatory aspects of mining projects. An environmental impact statement is required when projects are likely to have a significant adverse impact on the environment. This statement must be lodged with the PNG Conservation and Environment Protection Authority where, for large projects, it may be forwarded to the PNG Environment Council for review. Public consultation is an integral part of this review.
Compliance with existing or new environmental legislation, which increases the burden of compliance or the penalties for non-compliance may cause Harmony to incur further significant costs and could have a material adverse effect on our business, operating results and financial condition.
A process of legislative review is underway and a number of environmental matters are under consideration. These include a Mine Closure Policy, which contains a mechanism for the provision of financial assurance for mine closure and rehabilitation costs; a Biodiversity Offsets Policy, which includes a mechanism for biodiversity offsets payments to support biodiversity initiatives; and a National Oceans Policy, which considers issues associated with offshore mining and extractive industries and deep sea tailings placement.
Harmony's operations and projects in PNG will be affected by changes to PNG environmental laws, and the company continues to engage with the PNG Government and relevant regulators on these matters through the offices of the PNG Chamber of Mines and Petroleum, and directly with the Conservation and Environment Protection Authority, any of which could have a material adverse effect on Harmony's business, operating results and financial condition.
See “Integrated Annual Report for the 20-F 2020 - Managing our Social and Environmental Stewardship - Environmental management and stewardship on pages 121 to 138 for further discussion on the applicable legislation and our policies on environmental matters.
We face public scrutiny and are under pressure to demonstrate that we pursue sustainable development that benefits the communities and countries in which they operate
As a result of public concern about the perceived ill effects of economic globalization, businesses in general and large international companies such as Harmony, in particular, face increasing public scrutiny of their activities.
Like other mining companies, Harmony is under pressure to demonstrate that while it seeks a satisfactory return on investment for shareholders, other stakeholders including employees, communities surrounding the operations and the countries in which they operate, also benefit from their commercial activities. Such pressures tend to be particularly focused on companies whose activities are perceived to have a high impact on their social and physical environment. The potential consequences of these pressures include reputational damage, legal suits and social spending obligations and investor withdrawal.
Existing and proposed mining operations are often located at or near existing towns and villages, natural water courses and other infrastructure. Mining operations must therefore be designed to mitigate and/or manage their impact on such communities and the environment. As the impacts of dust generation, waste storage, water quality or shortages may be immediate and directly adverse to those communities, poor environmental management practices, or, in particular, adverse changes in the supply or quality of water can result in community protest, regulatory sanctions or ultimately in the withdrawal

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of community and government support for company operations. Mining operations must therefore be designed to minimize their impact on such communities and the environment, including by changing mining plans, by modifying operations or by relocating the affected people to an agreed location. Responsive measures may also include restoration of the livelihoods of those impacted. In addition, we are obliged to comply with the terms and conditions of all the mining rights we hold.
At our PNG operations, we are required under the PNG Mining Act and PNG Environment Act 2000 to pay landowners regulated levels of compensation for any loss or damage sustained by them arising from our exploration or mining activities. In addition, under a negotiated Memorandum of Agreement ("MOA") with the national and provincial government and landowner organizations in 2005, an agreed share of the royalties paid by us to the PNG Government in respect of our mining operation is allocated among local government and landowner groups. Also, the MOA contains agreed national content, localization and social performance plans, which address various aspects of procurement, business development, employment and training and other community support.
Delays in projects attributable to a lack of community support or community-related disruptions or delays can translate directly into a decrease in the value of a project or into an inability to bring the project to, or maintain, production. The cost of implementing these and other measures to support sustainable development could increase capital expenditure and operating costs and therefore adversely impact Harmony’s reputation, business, operational results and financial condition.
Compliance with emerging climate change regulations could result in significant costs for Harmony, and climate change may present physical risks to our operations
Climate change is expected to have financial and operational impacts on the Company. Increased global awareness that greenhouse gases (“GHG”) contribute to climate change has resulted in legislative mechanisms obliging companies to report GHG emissions and implement measures to reduce GHG emissions, and imposing penalties or taxes on GHG emissions. The manner in which these legislative mechanisms will affect the Company are set out in more detail below.
In addition, the Company’s operations could be exposed to a number of physical risks from climate change, such as changes in rainfall rates, rising sea levels, reduced water availability, higher temperatures and extreme weather events. Events or conditions such as flooding or inadequate water supplies could disrupt the Company’s mining and transport operations, mineral processing and rehabilitation efforts, create resource or energy shortages, damage property or equipment and increase health and safety risks. Such events or conditions could have other adverse effects on our workforce and on the communities around our mines, such as an increased risk of food insecurity, water scarcity and prevalence of disease, all of which could have a material adverse effect on the Company’s operations, financial condition and reputation.
Reporting GHG Emissions
In South Africa, the National Greenhouse Gas Emission Reporting Regulations require that the Company register its operations that involve fuel combustion activities associated with mining and quarrying in excess of 10MW(th) and certain other activities associated with the mineral industry. The Company must report its GHG emissions and activity data in respect of these operations in accordance with the Technical Guidelines for Monitoring, Reporting and Verification of Greenhouse Gas Emissions by Industry for each of the relevant GHGs and the Intergovernmental Panel on Climate Change, or IPCC, emission sources by March 31st of each year.
Reduction in GHG
GHGs are emitted directly by Harmony’s operations and indirectly as a result of consuming electricity generated by external utilities. Emissions from electricity consumption are indirectly attributable to Harmony’s operations.
A number of international measures seeking to mitigate or limit GHG emissions have been ratified by South Africa and PNG, including the Paris Agreement, a treaty negotiated at the Conference of the Parties of the UN Framework Convention on Climate Change in Paris in December 2015 (the "Paris Agreement"), pursuant to which member countries set out the manner and period in which they plan to reduce emissions. This commitment or “nationally-determined contribution” is informed by each member countries’ circumstances.
Pursuant to South Africa’s nationally-determined contribution, GHG emissions will peak in 2020 to 2025, plateau from 2025 to 2035 and decline from 2036 onwards.
PNG’s GHG emissions have historically been negligible. However, according to PNG’s nationally-determined contribution, economic development in PNG will see an increased reliance on fuel. The PNG Government therefore plans to reduce fossil fuel emissions in the electricity generation sector and transition to 100% renewable energy by 2030, provided that funding is available.
The Carbon Tax Act, 15 of 2019 (the “Carbon Tax Act”) was enacted to assist South Africa in meeting its objectives under its nationally-determined contribution.
The Carbon Tax Act came into effect on June 1, 2019 notwithstanding that the regulations required for implementation had not then been promulgated. Pursuant to the Carbon Tax Act, a party is liable to pay a carbon tax if it conducts an activity in South Africa resulting in GHG emissions above the threshold set out in Schedule 2 to the Carbon Tax Act. The tax is charged at a rate of R120 per tonne of GHG emissions generated by burning fossil fuels, unintentionally emitting GHGs during the extraction, processing, delivery and burning of fossil fuels for energy production, including from industrial plant and pipelines, and conducting manufacturing processes that chemically and physically transform materials.
The tonnage of GHG in respect of these activities is determined by multiplying GHG emission factors contained in the Schedules to the Carbon Tax Act by the mass of fossil fuels or raw materials used or product produced, as the case may be. Until December 31, 2022 the tax rate will be increased annually by the consumer price inflation ("CPI") plus 2%. Thereafter, the rate will increase annually by CPI.

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In order to reduce the significant tax that results by multiplying the total tonnage of GHG by R120, the Carbon Tax Act makes provision for various "allowances" which could result in a decrease of the carbon tax payable by up to 95%. These allowances include:
allowance for fossil fuel combustion;
allowance for industrial process emissions;
allowance in respect of fugitive emissions;
a trade exposure allowance;
a performance allowance;
a carbon budget allowance; and
an offset allowance.
These allowances reduce the effective carbon tax rate to between R6 and R48 per tonne of GHG.
Pursuant to section 19 of the Carbon Tax Act, the Minister of Finance must make regulations regarding:
the sub-sector GHG emissions intensity benchmark required in order to calculate the performance allowance;
the manner in which the trade exposure allowance must be determined; and
carbon offsets.
To date, only the carbon offset regulations have been promulgated. The intensity benchmark regulations and trade exposure regulations are still only in draft form. In respect of carbon budgets, the South African government has undertaken to consult with industry to ensure an “optimal combination” of mitigation actions that strike a balance between South Africa’s socio-economic imperatives, especially creating and preserving jobs, as well as the need to manage climate change impacts and contribute to global efforts to stabilize GHG concentrations. The carbon budgeting system under the Carbon Tax Act and the proposed Climate Change Bill published by DEFF on June 8, 2018 (the "2018 Climate Change Bill"), however, are at odds with one another and will need to be resolved before the 2018 Climate Change Bill is finalized.
The first carbon tax payment for the period from June 1, 2019 to December 31, 2019 was originally due on July 31, 2020, but has been extended to October 31, 2020 due to the COVID-19 pandemic.
Harmony’s tax liability due to the carbon tax has been provisionally estimated. However, at this time it is not possible to determine the ultimate impact of the Carbon Tax Act on the Company. Nevertheless, the Company has set its internal carbon price (for the South African operations) to match that of the carbon tax. The Company may also be liable for potential pass through costs from its suppliers in the short term from increased fuel prices. The carbon tax on liquid fuels will be imposed at the source. It is estimated that the increased fuel price would be R0.13/liter. This will have an impact on the Company’s operational expenses.
Currently, the carbon tax poses a relatively low cost to the Company until December 31, 2022 after which it is anticipated that the “allowances” discussed above will be reduced and the tax increased. It is also anticipated that carbon taxes will be imposed on electricity usage generated from fossil fuels. The impact of the carbon tax on the Company arising from electricity usage after December 31, 2022 is currently unknown but it is anticipated that it may be between R100 million to R500 million per year from fiscal year 2023 to fiscal year 2030.
The largest portion of GHG emissions is predominantly electricity-related, with electricity expenditure amounting to approximately 15% of the Company’s cash costs in South Africa. While cost management is clearly a strategic issue for the Company, of even greater importance is that energy supply be constant and reliable, given the implications of loss of energy on both production and health and safety. Additional taxes on energy will affect the Company significantly as will regulation that stipulates may include, among others, emission measurement and reduction, audit processes and human resource costs.
Assessments of the potential impact of future climate change regulation are still uncertain, given the wide scope of potential regulatory change in South Africa. Such regulatory initiatives and related costs could have a material adverse effect on the business, operating results and financial condition.
Climate Change legislation and policy
As mentioned above, DEFF published the 2018 Climate Change Bill for public consultation in response to the international commitments made under the Paris Agreement. It aims to address climate change in the long-term by aiming for a climate resilient and low carbon economy in South Africa. Following substantial comments, the 2018 Climate Change Bill is being revised. It is unclear when a new draft will be made available.
PNG’s national Office of Climate Change and Environmental Sustainability is studying the potential for future economic growth to be driven by renewable energy. PNG has adopted a climate change policy but implementation actions to date have been very limited. The implications of the climate change policy on the Company's operations in PNG have not yet been established and while they are not expected to have significant impacts in the near term, there can be no assurance that they will not have a material adverse effect on our business, operating results and financial condition.
See “Integrated Annual Report for the 20-F 2020 - Managing our Social and Environmental Stewardship - Environmental management and stewardship” on pages 121 to 138 for disclosure regarding our GHG emissions.

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Our operations in South Africa are subject to water use licenses, which could impose significant costs
Under the South African National Water Act, 36 of 1998 (“NWA”), a person may only undertake a "water use" subject to a water use license (and the conditions contained therein) issued under the NWA, a general authorization issued by the Minister of Water and Sanitation or in terms of a prior existing water use, such as a water permit issued under the NWA’s predecessor, Water Act, 54 of 1954 ("Water Act"). Persons undertaking water use under a general authorization or prior existing water use are required to register this use with the Department of Water and Sanitation and are required to comply with the conditions contained in the published general authorization or any conditions contained in any prior existing water use (to the extent there are any).
Our South African operations are predominantly regulated under water permits issued pursuant to the Water Act, with some having been converted to water use licenses under the NWA. Notwithstanding this, the South African operations have elected to convert all prior existing water uses into water use licenses under the NWA to ensure these operations act in accordance with current best practice and water quality standards. Submissions were made as early as 2003 and Harmony has been working closely with the regional directors in the review process.
Some operations have received draft licenses for review and comment before finalization by the regional directors at the Department of Water and Sanitation. Kusasalethu and Kalgold received their final water use licenses. These licenses, however, contain conditions that are impossible to meet and, as a result, we have applied to amend the relevant conditions.
In future, when new water licenses are issued, the Company may need to implement alternate water management measures that may require significant cost implication for our business. We intend to work collaboratively with the regional departments and catchment management agencies to reach a sustainable outcome for both the Company and the water resource.
Failing to comply with the conditions of a water use license may result in the competent authority issuing a compliance notice or directive to the Company instructing it to take measures to correct the non-compliance and, in some instances, to cease operations pending the resolution of the non-compliance. In addition, failing to comply with a water use license is an offense that may result in prosecution. If the Company is successfully prosecuted, the court may impose fines, damages, director and employee liability and imprisonment.
Any of these could have a material effect on our business, operating results and financial condition.
In addition to the licensing requirements mentioned above, the NWA imposes a duty of care on the Company to take reasonable measures to prevent pollution or contamination of water resources. The nature and extent of the reasonable measures will depend on the circumstances of each case. If the Company fails to implement the measures required of it, a directive may be issued by the competent authority instructing the Company to implement certain measures within a prescribed period. Failing to comply with a directive is an offense and may result in prosecution and the penalties contemplated above. In addition, the competent authority could implement the necessary measures and recoup the costs from the Company.
There is a possibility of the South African National Treasury and Department of Water and Sanitation instituting an environmental levy for the management of acid mine drainage (“AMD”) in future. AMD is a common occurrence on the gold mines of the Witwatersrand Basin. AMD is caused by the exposure of sulfide-rich ore to oxygen and water during the processes of mining, crushing, mineral recovery, and storage of the various waste streams. Any such environmental levy could have a material effect on our business, operating results and financial condition. In addition, the occurrence of AMD at any of Harmony’s mines could affect its ability to comply with its water use license requirements.
Obligations in respect of the pumping and treatment of extraneous water must also be addressed in connection with the Company’s final closure plans for each of its operations and the Company is responsible for these liabilities until a closure certificate is issued pursuant to the MPRDA and possibly thereafter under the NEMA. This liability is discussed in more details in Item 4: "Regulation - Law and Regulations Pertaining to Environmental Protections in South Africa - NEMA”.
See “Integrated Annual Report for the 20-F 2020 - Managing our Social and Environmental Stewardship - Environmental management and stewardship” on pages 121 to 138.
We may have exposure to rehabilitate potential groundwater pollution, which may include salination, and radiation contamination that may exist where we have operated or continue to operate; implementation of the financial provision regulations may require us to include provision in our financial statements for rehabilitation
Due to the interconnected nature of mining operations at Doornkop, Kusasalethu and Moab Khotsong, any proposed solution for potential flooding and decant risk posed by deep groundwater needs to comprise a regional solution supported by all mines located in the goldfields and the government in the event of legacy issues. As a result, the DMRE and affected mining companies are involved in developing a regional mine closure strategy. In view of limited current information, no reliable estimate can be made for any possible obligations or liabilities for Harmony, which could be material and have an adverse impact on Harmony’s financial condition.
See above under "We are subject to extensive environmental regulations".
Harmony is implementing the following steps to ensure that funds are available to top up its financial provision, if necessary:
facilitating concurrent rehabilitation;
re-purposing infrastructure; and
accelerated mine closure rehabilitation where operations have reached the end of its geological life.

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Should the regulator require the financial provision regulations be implemented in 2021 and/or should the financial provision regulations, as they may be amended, remain onerous, MCSA has indicated that it will exercise its legal options on these regulations on behalf of the mining industry.
Currently, no provision for any potential liability has been made in our financial statements under the Financial Provision Regulations, 2015. If provision needs to be made, and is substantial, this could have a material adverse effect on our results of operations and financial condition.
See “Integrated Annual Report for the 20-F 2020 - Managing our Social and Environmental Stewardship - Environmental management and stewardship” on pages 121 to 138.
The use of contractors at certain of Harmony's operations may expose Harmony to delays or suspensions in mining activities and increases in mining costs
Harmony uses contractors at certain of its operations to mine and deliver ore to processing plants as well as for other purposes. At mines employing mining contractors, contracting costs represent a significant proportion of the total operating costs of these operations and the Company does not own all of the mining equipment.
Harmony’s operations could be disrupted, resulting in additional costs and liabilities, if the mining contractors at affected mines have financial difficulties, if a dispute arises in renegotiating a contract, or if there is a delay in replacing an existing contractor and its operating equipment to meet business needs at expected cost levels. Increases in contract mining rates, in the absence of associated productivity increases, will also have an adverse impact on the Company’s results of operations and financial condition.
In addition, Harmony’s reduced control over those aspects of operations which are the responsibility of contractors, their failure to comply with applicable legal, human rights and regulatory requirements, or their inability to manage their workforce or provide high quality services or a high level of productivity could adversely affect Harmony’s reputation, results of operations and financial condition, and may result in the Company incurring liability to third parties due to the actions of contractors, which could have a material adverse effect on Harmony's business, operating results and financial condition.
Our jointly-controlled assets may not comply with our standards
Harmony does not have full management control over some of its assets, which are controlled and managed by joint operation participants in accordance with the provisions of their joint arrangements. The control environment of these assets may not align with our management and operating standards, controls and procedures. Failure to adopt equivalent standards, controls and procedures could lead to higher costs and reduced production, which could adversely affect our results of operations and reputation.
Harmony is subject to the risk of litigation, the causes and costs of which are not always known
Harmony is subject to litigation, arbitration and other legal proceedings arising in the normal course of business and may be involved in disputes that may result in litigation. The causes of potential future litigation cannot be known and may arise from, among other things, business activities, environmental and health and safety concerns, share price volatility or failure to comply with disclosure obligations. The results of litigation cannot be predicted with certainty but could include costly damage awards or settlements, fines, and the loss of licenses, concessions, or rights, among other things.
In the event of a dispute, Harmony may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in South Africa. An adverse or arbitrary decision of a foreign court could have a material adverse impact on Harmony's financial performance, cash flow and results of operations.
Harmony is subject to numerous claims, including class actions or similar group claims relating to silicosis and other occupational health diseases, and could be subject to similar claims in the future. A settlement in the silicosis class action claims has been reached and a provision for silicosis has been made. A provision of R892 million has been recognized at June 30, 2020 for Harmony’s potential cost to settle the silicosis and TB class actions that have been instituted against it in South Africa. Significant judgment was applied in estimating the costs that will be incurred to settle the silicosis class action claims and related expenditure and the final costs may differ from current cost estimates. Management believes the assumptions are appropriate, however changes in the assumptions may materially affect the provision and final costs of settlement. There can be no assurance that the ultimate resolution of this matter will not result in losses in excess of the recorded provision and the ultimate settlement may have a material adverse effect on Harmony’s financial position. For further information, see Item 8: "Financial Information - Consolidated Statements and Other Financial Information - Legal Proceedings" and "Integrated Annual Report for the 20-F 2020 - Ensuring stability, employee safety and well-being - Safety and health" on pages 41 to 58 for further information. See note 26 "Provision for silicosis settlement" to our consolidated financial statements set forth beginning on page F-1.
It is possible that additional class actions and/or individual claims relating to silicosis and/or other occupational health diseases will be filed against Harmony in the future. Harmony will defend all and any subsequent claims as filed on their merits. Should Harmony be unsuccessful in defending any such claims, or in otherwise favorably resolving perceived deficiencies in the national occupational disease compensation framework that were identified in the earlier decision by the Constitutional Court, such matters would have an adverse effect on its financial position, which could be material.
Should Harmony be unable to resolve disputes favorably or to enforce its rights, this may have a material adverse impact on our financial performance, cash flow and results of operations.

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Breaches in our information technology security processes and violations of data protection laws may adversely impact the conduct of our business activities (national and international)
Harmony maintains global information technology (“IT”) and communication networks and applications to support our business activities. Our extensive IT infrastructure and network may experience service outages that may adversely impact the conduct of our business activities. This includes potential cybercrime and disruptive technologies. Harmony's vulnerability to such cyber-attacks could also be increased due to a significant proportion of its employees working remotely during the course of the COVID-19 pandemic. The information security management system, or ISMS, protecting Harmony’s IT infrastructure and network may not prevent future malicious action, including denial-of-service attacks, or fraud by individuals, groups or organizations resulting in the corruption of operating systems, theft of commercially sensitive data, including commercial price outlooks, mergers and acquisitions and divestment transactions, misappropriation of funds and disruptions to our business operations, the occurrence of any of which could have a material adverse effect on our business and results of operations.
The interpretation and application of consumer and data protection laws in South Africa, the United States and elsewhere are ambiguous and evolving. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with Harmony’s data practices. Complying with these various laws is difficult and could cause the company to incur substantial costs or require it to change its business practices in a manner adverse to its business.
It was announced that South Africa’s comprehensive privacy law known as the Protection of Personal Information Act, 4 of 2013 (the “POPIA”) has become effective on July 1, 2020. All processing of personal information must conform with the POPIA’s provisions within one year after its commencement - organizations have a 12-month period to be POPIA-compliant by July 1, 2021. Failure to comply with POPIA may lead to penalties and fines between R1 million - R10 million.
On May 25, 2018 the General Data Protection Regulation ("GDPR") came into force. The GDPR is an EU-wide framework for the protection of personal data of EU based individuals. The GDPR enhances existing legal requirements through several new rules, including stronger rights for data subjects and mandatory data breach notification requirements, and increases penalties for non-compliance. Failure to comply with the GDPR may lead to a fine of up to four percent of a company’s worldwide turnover or up to €20 million.
The failure of a tailings storage facility could negatively impact Harmony’s business, reputation, operating results and financial condition
Mining companies face inherent risks in their operation of tailings storage facilities. Tailings storage facilities are engineered structures built for the containment of the uneconomical milled ore residue and water, known as tailings. The use of tailings storage facilities exposes Harmony to certain risks, including the failure of a tailings dam due to events such as high rainfall, overtopping of the dam, piping or seepage failures. The potential occurrence of a dam failure at one of Harmony's tailings storage facilities could lead to the loss of human life and extensive property and environmental damage.
Harmony maintains measures to manage its dams' safety, including compliance with the International Council on Mining and Metals’ Tailings Governance Position Statement, Harmony's Code of Practice and undertakes routine reviews by independent consulting companies. Although Harmony has a tailings storage facility management system, the effectiveness of its designs, construction quality or regular monitoring cannot be guaranteed throughout its operations and it cannot be guaranteed that these measures will prevent the failure of one or more of its tailings dams or that such potential failure will be detected in advance. In addition, although Harmony generally requires its partners to maintain such systems, we cannot guarantee that our partners maintain similar safety precautions or monitoring systems on their tailings storage facilities. There is no assurance that any safety measures implemented will prevent the failure of any tailings storage facility.
The failure of a tailings storage facility will lead to multiple legal proceedings and investigations, which could include securities class actions, criminal proceedings and public civil actions (against Harmony or individuals) for significant amounts of damages. Furthermore, the elimination of the "conventional" practice of storing wet tailings (e.g. alternatively filtering, "dry" stacking and compacting the tailings) could require the research and development of new technologies, which could lead to additional large expenditures. As a result of the dam failure in Brazil in 2015 and 2019, and Canada in 2014 (neither of which are associated with Harmony) or as a result of future dam failures, additional environmental and health and safety laws and regulations may be forthcoming globally, including in jurisdictions where Harmony operates, which may ban the storage of wet tailings completely. In addition, changes in laws and regulations may impose more stringent conditions in connection with the construction of tailings dams, particularly with respect to upstream tailings dams which could also be made illegal, the licensing process of projects and operations and increased criminal and civil liability for companies, officers and contractors.
Furthermore, the unexpected failure of a dam at a tailings storage facility could lead to the need for a large expenditure on contingencies and on recovering the regions and people affected, extensive and permanent environmental damage and the payment of penalties, fines or other money damages. The occurrence of any of such risks could have a material adverse effect on Harmony's business, operating results and financial condition. More information about Harmony's management of tailings and waste generally may be found at https://www.harmony.co.za/responsibility/environment/tailings-management.
The upgrade of an integrated Enterprise Resource Planning (ERP) system and Human Resources (HR) system could have an adverse effect on Harmony’s results of operations and financial condition
The upgrade and operation of an ERP system as well as the upgrade of the HR system are inherently high-risk initiatives due to the potential for cost and time overruns. In addition, if Harmony experiences difficulties with the upgrade and operation of the systems, the company’s ability to pay its employees and to report and manage technical and financial information could be compromised, which could have an adverse effect on the company’s results of operations and financial condition. Harmony is currently in the project initiation phase with go-live planned towards the end of the 2022 calendar year.

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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, “conflict minerals” and “responsible” gold, new SEC regulations and other listing regulations applicable to us are subject to change and can create uncertainty for companies like us. 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 on compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards.
In terms of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), we are required to furnish a report by our management on our internal control over financial reporting. The report in this annual report contains, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year, including a statement as to whether or not our internal controls over financial reporting are effective. If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with the Sarbanes-Oxley Act. The requirement to evaluate and report on our internal controls also applies to companies that we may acquire and therefore, this assessment may be complicated by any future acquisitions. While we continue to dedicate resources and management time to ensuring that we have effective controls over financial reporting, failure to achieve and maintain an effective internal control environment could have a material adverse effect on the market’s perception of our business and our stock price. See Item 15: “Controls and Procedures” for management’s assessment as of June 30, 2020. In addition to management’s assessment of internal controls over financial reporting, we are required to have our independent registered public accounting firm publicly disclose their conclusions regarding the effectiveness of Harmony’s internal controls over financial reporting.
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, which could have a material adverse effect on our business, operating results and financial condition.
Failure to comply with laws, regulations, standards, contractual obligations whether following a breach or breaches in governance processes or fraud, bribery and corruption may lead to regulatory penalties, loss of licenses or permits, negative effects on our reported financial results, and adversely affect our reputation
Harmony operates in multiple jurisdictions, including those with less developed political and regulatory environments, and within numerous and complex frameworks. Our governance and compliance processes may not prevent potential breaches of law, accounting principles or other governance practices.
Harmony’s Code of Conduct and Behavioral Code, among other policies, standards and guidance, and training thereon may not prevent instances of unethical or unlawful behavior, including bribery or corruption, nor do they guarantee compliance with legal and regulatory requirements, and breaches may not be detected by management.
Sanctions for failure by the Company or others acting on its behalf to comply with these laws, regulations, standards and contractual obligations could include fines, penalties, imprisonment of officers, litigation, and loss of operating licenses or permits, suspensions of operations, negative effects on Harmony’s reported financial results and may damage the Company’s reputation. Such sanctions could have a material adverse impact on the Company’s financial condition and results of operations.
Compliance with "conflict minerals" and "responsible" legislation and standards could result in significant costs
Stringent standards relating to "conflict minerals" and "responsible" gold that include the US Dodd-Frank Act of 2010, EU Regulation 2017/821 on supply chain due diligence obligations for self-certification for EU importers of gold originating from conflict-affected and high-risk areas, the Organization for Economic Cooperation and Development Due Diligence Guidelines for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, the World Gold Council Conflict Free Gold Standard and the London Bullion Market Association Responsible Gold Guidance have been introduced.
Any such legislation and standards may result in significant costs to ensure and demonstrate compliance (particularly where standards change rapidly or lack certainty due to court challenges), and may complicate the sale of gold emanating from certain areas. The complexities of the gold supply chain, especially as they relate to "scrap" or recycled gold, and the fragmented and often unregulated supply of artisanal and small-scale mined gold are such that there may be significant uncertainties at each stage in the chain as to the provenance of the gold. As a result of the uncertainties in the process, the costs of due diligence and audit, or the reputational risks of defining their product or a constituent part as containing a "conflict mineral" may be too burdensome for the company’s customers. Accordingly, manufacturers may decide to switch supply sources or to substitute gold with other minerals not covered by the initiatives. This could have a material negative impact on the gold industry, including on our results of operations and financial condition.
Investors in the United States may have difficulty bringing actions, and enforcing judgments, against us, our directors and our executive officers based on the civil liabilities provisions of the federal securities laws or other laws of the United States or any state thereof
We are incorporated in South Africa. Each of our directors and executive officers (and our independent registered public accounting firm) resides outside the United States. Substantially all of the assets of these persons and substantially all our assets are located outside the United States. As a result, it may not be possible for investors to enforce a judgment against these persons or ourselves obtained in a court of the United States predicated upon the civil liability provisions of the federal securities or other laws of the United States or any state thereof. A foreign judgment is not directly enforceable in South Africa, but constitutes a cause of action which may be enforced by South African courts provided that:

26


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.
Investors may face liquidity risk in trading our ordinary shares on the JSE Limited
The primary listing of our ordinary shares is on the JSE Limited. Historically, the trading volumes and liquidity of shares listed on the JSE have been low relative to other major markets. The ability of a holder to sell a substantial number of our ordinary shares on the JSE in a timely manner, especially in a large block trade, may be restricted by this limited liquidity. See Item 9: “The Offer and Listing - Markets - The Securities Exchange in South Africa.
Sales of large quantities of our ordinary shares and ADSs, or the perception that these sales may occur, could adversely affect the prevailing market price of such securities
The market price of our ordinary shares or ADSs could fall if large quantities of ordinary shares or ADSs are sold in the public market, or there is a perception in the marketplace that such sales could occur. Subject to applicable securities laws, holders of our ordinary shares or ADSs may decide to sell them at any time. The market price of our ordinary shares or ADSs could also fall as a result of any future offerings it makes of ordinary shares, ADSs or securities exchangeable or exercisable for its ordinary shares or ADSs, or the perception in the marketplace that these sales might occur. We may make such offerings of additional ADS rights, letters of allocation or similar securities from time to time in the future.
Shareholders outside South Africa may not be able to participate in future issues of securities (including ordinary shares) carried out by or on behalf of Harmony
Securities laws of certain jurisdictions may restrict Harmony’s ability to allow participation by certain shareholders in future issues of securities (including ordinary shares) carried out by or on behalf of Harmony. In particular, holders of Harmony securities who are located in the United States (including those who hold ordinary shares or ADSs) may not be able to participate in securities offerings by or on behalf of Harmony unless a registration statement under the Securities Act is effective with respect to such securities or an exemption from the registration requirements of the Securities Act is available. Securities laws of certain other jurisdictions may also restrict Harmony’s ability to allow the participation of all holders in such jurisdictions in future issues of securities carried out by Harmony. Holders who have a registered address or are resident in, or who are citizens of, countries other than South Africa should consult their professional advisors as to whether they require any governmental or other consents or approvals or need to observe any other formalities to enable them to participate in any offering of Harmony securities.
US securities laws do not require Harmony to disclose as much information to investors as a US issuer is required to disclose, and investors may receive less information about the company than they might otherwise receive from a comparable US company
Harmony is subject to the periodic reporting requirements of the SEC and the NYSE that apply to "foreign private issuers". The periodic disclosure required of foreign private issuers under applicable rules is more limited than the periodic disclosure required of US issuers. Investors may receive less timely financial reports than they otherwise might receive from a comparable US company or from certain of the Company’s peers in the industry. This may have an adverse impact on investors’ abilities to make decisions about their investment in Harmony.
As we have a significant number of shares that may be issued in terms of the employee share schemes, our ordinary shares are subject to dilution
We have an active employee share plan that came into effect in 2006. Our shareholders have authorized up to 60,011,669 of the issued share capital to be used for this plan. We have recently approved a Deferred Share Plan as part of our new Total Incentive Plan that came into effect in 2020. Our shareholders have authorized up to 25,000,000 shares of the issued share capital to be used for this plan.
As a result, shareholders’ equity interests in us are subject to dilution to the extent of the potential future exercises of the options through these share plans.
We may not pay dividends or make similar payments to our shareholders in the future
Harmony’s dividend policy is to pay cash dividends only if funds are available for that purpose. Whether funds are available depends on a variety of factors, including the amount of cash available, our capital expenditures and other current or future anticipated cash requirements existing at the time. Under South African law, we are only entitled to pay a dividend or similar payment to shareholders if we meet the solvency and liquidity tests set out in the Companies Act 71 of 2008 (as amended) including its Regulations (the “Companies Act”) and our current Memorandum of Incorporation. Cash dividends or other similar payments may not be paid in the future.

27


On April 1, 2012, a dividends tax (“Dividends Tax”) was introduced at a rate of 15% (increased to 20% effective from February 22, 2017) on dividends declared by South African companies to beneficial shareholders borne by the shareholder receiving the dividend. This replaced Secondary Tax on Companies. Although the substitution of Secondary Tax on Companies with Dividends Tax may reduce the tax payable on our South African operations, thereby increasing distributable earnings, the withholding tax will generally reduce the amount of dividends or other distributions received by shareholders.
In addition, Harmony’s foreign shareholders face investment risk from currency exchange rate fluctuations affecting the market value of any dividends or distributions paid by the Company.

ITEM 4. INFORMATION ON THE COMPANY
A. HISTORY AND DEVELOPMENT OF THE COMPANY
The information set forth under the headings:
“-About this report” on page 4;
“-Corporate profile” on page 6;
“-Business model - how we create value” on page 8;
“-Delivering on our strategy” on page 11;
“-Our business context” on page 25;
“-Delivering profitable ounces - Operational performance” on pages 72 to 103; and
“-Delivering profitable ounces - Exploration and projects” on pages 104 to 107;
of the Integrated Annual Report for the 20-F 2020 is incorporated herein by reference. Also see note 20 “Investments in Associates” and note 21 “Investment in Joint Operations” of our consolidated financial statements, set forth beginning on page F-1.
In the 2020 fiscal year, we did not receive any public takeover offers by third parties or make any public takeover offers in respect of other companies’ shares.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (www.sec.gov). As a foreign private issuer, we are exempt from the rules under the Exchange Act that prescribe the furnishing and content of proxy statements to shareholders. Our corporate website is www.harmony.co.za.
Recent Developments
Developments since June 30, 2020
On July 2, 2020 a payment of US$20 million (R340 million) was made on the US$400 million syndicated term loan and revolving credit facility.
On July 6, 2020 a payment of R300 million was made on the R2 billion four-year syndicated term loan and revolving facility.
On July 6, 2020 Harmony canceled the US$200 million bridge loan facility it had entered into with a syndicate of lenders on June 16, 2020. No draw-down had been made on the facility at the time of its cancellation.
On July 8, 2020 a payment of US$20 million (R339 million) was made on the US$400 million syndicated term loan and revolving credit facility.
During July 2020, the initial three year term of the US$400 million syndicated term loan and revolving credit facility was extended by one year.
On September 14, 2020, the last condition precedent for the Mponeng Acquisition was fulfilled and closing of the Mponeng Acquisition occurred with effect on October 1, 2020.
On October 6, 2020 a payment of R600 million was made on the R2 billion four-year syndicated term loan and revolving facility.
On October 8, 2020 a payment of US$30 million or R497 million was made on the US$400 million syndicated term loan and revolving facility.
B. BUSINESS OVERVIEW
The information set forth under the headings:
“-About this report” on page 4;
"-Business model - how we create value" on page 8;
"-Delivering on our strategy" on page 11;
"-Our business context" on page 25;
"-Stakeholder engagement and material issues" on page 31;

28


“-Ensuring stability, employee safety and well-being - Safety and health” on pages 41 to 58;
“-Ensuring stability, employee safety and well-being - Employee relations” on pages 58 to 71;
“-Managing our Social and Environmental Stewardship- Environmental management and stewardship” on pages 121 to 138;
“-Delivering profitable ounces - Operational performance” on pages 72 to 103; and
“-Delivering profitable ounces - Exploration and projects” on pages 104 to 107;
of the Integrated Annual Report for the 20-F 2020 is incorporated herein by reference.
Covid-19
On March 18, 2020, in response to the COVID-19 pandemic, Harmony announced steps aimed at protecting employees and contractors, including implementing certain travel restrictions. In line with the directive by the South African government on March 23, 2020, Harmony implemented measures to place its South African underground operations under temporary care and maintenance during the resultant 21-day lock-down in South Africa (which has been extended beyond its original end date). On April 16, 2020, the South African government published a notice amending certain regulations previously issued pursuant to Section 27(2) of the Disaster Management Act. The amendments which were effective on May 1, 2020, allowed South African mining operations to be conducted at a reduced capacity of not more than 50% during the lock-down and at increasing capacity as determined by directives to be issued by the Minister thereafter. Subsequently, Harmony announced on April 20, 2020 a set of risk-based standard operation procedure ("SOP") designed to resume operations to the prescribed 50% production capacity. The SOP included arranging transport for South African-based employees from their homes in remote areas to their respective areas of work, the implementation of rigorous screening and testing programs as employees return to work, the provision of quarantine facilities for employees who may test positive for COVID-19 and the submission of data collected during screening and testing to the relevant authority. As of June 1, 2020, operational restrictions were lifted further to allow the South African mining industry to operate at 100% of its labor capacity. Return to work has progressed smoothly albeit slowly, with the return of foreign nationals to South Africa taking longer than anticipated.
In response to the COVID-19 pandemic, the PNG Government initially declared a State of Emergency (subsequently uplifted) and thereafter enacted the PNG National Pandemic Act 2020 on June 12, 2020. The Act amalgamates existing Acts (e.g. the PNG Public Health Act 1973 and the PNG Quarantine Act 1951) into one overarching piece of legislation to contain and prevent the spread of COVID-19 and other future pandemics. Pursuant to the identification of a positive case in March 2020, Harmony’s Hidden Valley mine in Papua New Guinea was temporarily placed in quarantine lockdown, but continued to operate without interruption by the adoption of strict isolation and quarantine control measures at various entry point centers established near the mine. Protocols have been developed to facilitate the safe movement of personnel to and from site during this period.
The future impact of COVID-19 remains uncertain and forecasting Harmony’s operating outlook has been complicated by the uncertainty relating to the extent of the COVID-19-related restrictions and the rates at which production may resume at Harmony’s operations. For more information on the potential impact of COVID-19 on Harmony’s operations, see Item 3: "Key Information - Risk Factors - Risks Relating to Our Business and the Gold Mining Industry - HIV/AIDS, tuberculosis and other contagious diseases, such as COVID-19, pose risks to us in terms of productivity and costs" and "Key Information - Risk Factors -The current COVID-19 pandemic has significantly impacted the global economy and markets over the past several months and may continue to do so, which could adversely affect our business or the trading price of our ordinary shares and ADSs."
Capital Expenditures
Capital expenditures for all operations and capitalized exploration incurred for fiscal 2020 amounted to R3,610 million, compared with R5,037 million in fiscal 2019 and R4,571 million in fiscal 2018. During fiscal 2020, capital at PNG accounted for 28% of the total, with Tshepong operations accounting for 26%, Moab Khotsong for 14%, Target 1 for 10%, Doornkop for 8%, Kusasalethu for 5% and Joel accounting for 4% of the total. During fiscal 2019, capital at PNG accounted for 39% of the total, with Tshepong operations accounting for 22%, Moab Khotsong for 11%, Target 1, Doornkop and Kusasalethu each accounting for 6% and Joel accounting for 4% of the total.
The focus of our capital expenditures in recent years has been underground development and plant improvement and upgrades. During fiscal 2020, the capital expenditure was funded from the Company’s cash generated by operation. See Item 5: “Operating and Financial Review and Prospects - Liquidity and Capital Resources”.
We have budgeted approximately R5,057 million for capital expenditures in fiscal 2021. We currently expect that our planned operating capital expenditures will be financed from operations and new borrowings as needed. Details regarding the capital expenditure for each operation is included in the table below.

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Capital expenditure budgeted for fiscal 2021

 
(R’million)

South Africa
 
Kusasalethu
262

Doornkop
476

Tshepong operations
1,174

Moab Khotsong
746

Masimong
41

Target 1
443

Bambanani
72

Joel
178

Unisel

Other - surface
235

International
 
Hidden Valley1
1,376

Total operational capital expenditure
5,003

Wafi-Golpu
50

Other international
4

Total capital expenditure
5,057

1     Includes R913 million related to capitalized deferred stripping.
Reserves
As at June 30, 2020, we have declared attributable gold equivalent proved and probable reserves of 36.5 million ounces: 17.4 million ounces gold in South Africa and 19.1 million gold and gold equivalent ounces in PNG. In instances where individual deposits may contain multiple valuable commodities with a reasonable expectation of being recovered (for example gold and copper in a single deposit) Harmony computes a gold equivalent to more easily assess the value of the deposit against gold-only mines. Harmony does this by calculating the value of each of the commodity, then dividing the product by the price of gold. For example, the gold equivalent of a gold and copper deposit would be calculated as follows: ((gold ounces x gold price per ounce) + (copper pounds x copper price per pound)) / gold price per ounce. All calculations are done using metal prices as stipulated in the discussion below. Harmony assumes a 100% metallurgical recovery in its calculations unless otherwise stated. The year-on-year negative variance in mineral reserves is due to the following reasons:
normal depletion of 1.3 million ounces; and
a net increase of 0.04 million ounces in reserves.
We use the SAMREC Code, which sets out the internationally recognized procedures and standards for reporting of mineral resources and mineral reserves. We use the term “mineral reserves” herein, which has the same meaning as “ore reserves”, as defined in the SAMREC Code. In reporting of reserves, we have complied with the SEC's Industry Guide 7.
For the reporting of mineral reserves the following parameters were applied:
a gold price of US$1,350per ounce;
an exchange rate of R14.51per US dollar;
the above parameters resulting in a gold price of R630,000/kg for the South African assets;
the Hidden Valley operation and Wafi-Golpu project used prices of US$1,350/oz gold (“Au”), US$17.00/oz silver (“Ag”), US$10.00/lb molybdenum (“Mo”) and US$3.00/lb copper (“Cu”) at an exchange rate of US$0.72 per A$;
gold equivalent ounces are calculated assuming a US$1,350/oz Au, US$ 3.00/lb Cu and US$17.00/oz Ag with 100% recovery for all metals. These assumptions are based on those used in the 2016 feasibility study; and
“gold equivalent” is computed as the value of the Company’s gold, silver and copper from all mineral resources/reserves classifications divided by the price of gold. All calculations are done using metal prices as stipulated.

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In order to define the proved and probable mineral reserve at our underground operations, we apply the concept of a cut-off grade. At our underground operations in South Africa, this is done by defining the optimal cut-off grade 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 our Optimizer computer program which requires the following as input:
the database of measured and indicated resource blocks (per operation);
an assumed gold price which, for this mineral reserve statement, was taken as R630,000 per kilogram (gold price of US$1,350 per ounce and an exchange rate of R14.51 per US dollar);
planned production rates;
the mine recovery factor 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 cost reduction initiatives.
For the block cave reserve at Golpu (PNG), we used our consultants’ proprietary tool called “Block Cave mine optimizing software computer program” to define the optimal mine plan and sequencing.
The open pit reserve at Hidden Valley (PNG) is defined by a pit design based on the optimal output from Whittle open pit optimization software.
See the table below in this section for the cut-off grades and cost per tonne for each operation.
The mineral 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 oreflow-related modifying factors used to convert the mineral resources to mineral reserves through the life-of-mine planning process are stated for each individual operation. For these factors, historical information is used, except if there is a valid reason to do otherwise. Owing to depth and rock engineering requirements at our underground mines, some mines 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 geological losses.
Our standard for narrow reef sampling with respect to both proved and probable reserve calculations for underground mining operations in South Africa is generally 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 1 operation, our standard for sampling with respect to both proved and probable reserves are fan drilling with “B” sized diamond drill holes (43mm core) sited at 50 meter spaced sections along twin access drives. The Kalgold opencast 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 tailing dams (slimes and sand) for which random sampling is used.
The PNG resources are hosted in large mineralized porphyry intrusions or manifest as higher-level deposits that are related to mineralised porphyry intrusions. Data is gained through diamond drilling using PQ (85.0 mm diameter) down to NQ (47.6 mm diameter) sized core. The core is cut in half, one half sampled at a maximum of 2 meter intervals and the other half stored in designated core storage facilities. Drill spacing at our Hidden Valley operations is typically on less than 20 meter centers for measured category, 20 to 40 meter centers for the indicated category and greater than 40 meters for inferred category material. Due to the nature of the Golpu porphyry mineralization, drill spacing is increased to 100 to 200 meters for indicated and greater for inferred. Assaying for gold is by fire assay and various methods are used for copper and other elements. All assays informing the resource calculation are analyzed at a National Association of Testing Authorities (“NATA”) accredited commercial laboratory. Extensive quality assurance/quality control work is undertaken and data is stored in an electronic database.

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Our mining operations’ reported total proved and probable reserves as of June 30, 2020 are set out below:
 
 
Mineral Reserves statement (Metric) as at June 30, 2020
Operations Gold
 
PROVED RESERVES
PROBABLE RESERVES
TOTAL RESERVES
 
 
Tonnes
Grade
Gold1
Tonnes
Grade
Gold1
Tonnes
Grade
Gold1
 
 
(millions)
(g/t)
(000 kg)
(millions)
(g/t)
(000 kg)
(millions)
(g/t)
(000 kg)
South Africa Underground
 
 
 
 
 
 
 
 
 
 
Bambanani
 
0.6

10.99

6




0.6

10.99

6

Joel
 
2.9

4.85

14

1.4

4.68

7

4.3

4.80

21

Masimong
 
0.8

4.26

3

0.0

2.95

0

0.8

4.23

3

Unisel
 


















Target 1
 
3.3

4.31

14

1.9

4.23

8

5.2

4.28

22

Tshepong Operations
 
22.2

5.87

130

4.5

5.48

25

26.7

5.80

155

Doornkop
 
5.2

5.33

28

4.6

5.03

23

9.8

5.19

51

Kusasalethu
 
1.8

6.92

13

1.3

7.68

10

3.1

7.24

23

Moab Khotsong
 
3.1

7.93

25

3.3

8.57

28

6.4

8.26

53

Total South Africa Underground
 
39.9

5.85

233

17.0

5.92

101

56.9

5.88

334

 
 
Mineral Reserves statement (Metric) as at June 30, 2020
Operations Gold
 
PROVED RESERVES
PROBABLE RESERVES
TOTAL RESERVES
 
 
Tons

Grade

Gold1

Tons

Grade

Gold1

Tons

Grade

Gold1

 
 
(millions)
(g/t)
(000 kg)
(millions)
(g/t)
(000 kg)
(millions)
(g/t)
(000 kg)
South Africa Surface
 
 
 
 
 
 
 
 
 
 
Kalgold
 
6.7

0.93

6

13.2

1.14

15

19.9

1.07

21

Free State Surface-Phoenix
 
48.7

0.28

14




48.7

0.28

14

St Helena
 
108.6

0.27

29




108.6

0.27

29

Central Plant
 



55.4

0.27

15

55.4

0.27

15

WRD and Tailings
 



568.5

0.23

128

568.5

0.23

128

Total South Africa Surface
 
164.0

0.30

49

637.1

0.25

158

801.1

0.26

207

Total South Africa
 
203.9

 
282

654.1

 
259

858.0

 
541

Papua New Guinea2
 
 
 
 
 
 
 
 
 
 
Hidden Valley
 
2.3

1.32

3

14.2

1.61

23

16.5

1.57

26

Hamata
 
0.0

2.64

0

0.3

1.65

0

0.3

1.65

0

Golpu
 



200.0

0.86

171

200.0

0.86

171

Total Papua New Guinea
 
2.3

1.32

3

214.5

0.91

194

216.8

0.91

197

Total
 
206.2

 
285

868.6

 
453

1,074.8

 
738

1 
Metal figures are fully inclusive of all mining dilutions and gold losses, and are reported as mill delivered tons and head grades. Metallurgical recovery factors have not been applied to the reserve figures.
2  
Represents Harmony’s attributable interest of 50%.
Note: 1 tonne = 1,000 kg = 2,204 lbs.
In addition to the gold reserves, we also report our gold equivalents for reserves for silver and copper from our PNG operations. Gold equivalent ounces are calculated assuming a US$1,350/oz for gold, US$3.00/lb copper and US$17,00/oz for silver with 100% recovery for all metals.

Gold Equivalents 2 
Silver
 
Proved reserves
Probable reserves
Total reserves
 
 
Tonnes
Gold
Equivalents
Tonnes
Gold
Equivalents
Tonnes
Gold
Equivalents
 
 
(millions)
(kg)1 (000)
(millions)
(kg)1 (000)
(millions)
(kg)1 (000)
Hidden Valley
 
2.3
1
14.2
6
16.5
7

32


Copper
 
Proved reserves
Probable reserves
Total reserves
 
 
Tonnes
Gold
Equivalents
Tonnes
Gold
Equivalents
Tonnes
Gold
Equivalents
 
 
(millions)
(kg)1 (000)
(millions)
(kg)1 (000)
(millions)
(kg)1 (000)
Golpu
 
200.0
390
200.0
390
Total Gold Equivalents
 
2.3
1
214.2
396
216.5
397
Total Harmony including gold equivalents
 
206.2
286
868.6
849
1,074.8
1,135
In addition to the gold reserves, we also report our attributable reserves for silver and copper from our PNG operations. Metal prices are assumed at US$17.00/oz for silver, US$3.00/lb for copper, and molybdenum at US$10.00/lb.

Papua New Guinea: Other2 
Silver
 
Proved Reserves
Probable Reserves
Total Reserves
 
 
Tonnes
Grade
Gold1
Tonnes
Grade
Gold1
Tonnes
Grade
Gold1
 
 
(millions)
(g/t)
(000 kg)
(millions)
(g/t)
(000 kg)
(millions)
(g/t)
(000 kg)
Hidden Valley
 
2.3

27.37

63

14.2

24.83

352

16.5

25.18

415

 
 
Tonnes
Grade
Cu1
Tonnes
Grade
Cu1
Tonnes
Grade
Cu1
Copper
 
(millions)
(%)
(000 t)
(millions)
(%)
(000 t)
(millions)
(%)
(000 t)
Golpu2
 


200.0

1.23
2,450

200.0

1.23
2,450

South Africa: Other
 
 
Tonnes
Grade
U3082
Tonnes
Grade
U3082
Tonnes
Grade
U3082
Uranium
 
(millions)
(kg/t)
(Mkg)
(millions)
(kg/t)
(Mkg)
(millions)
(kg/t)
(Mkg)
Moab Khotsong Underground
 


6.5

0.23
1

6.5

0.23
1

1 
Metal figures are fully inclusive of all mining dilutions and gold losses, and are reported as mill delivered tons and head grades. Metallurgical recovery factors have not been applied to the reserve figures.
2 
Represents Harmony’s attributable interest of 50%.
Note: 1 tonne = 1,000 kg = 2,204 lbs.
Our methodology for determining our reserves is subject to change and is based upon estimates and assumptions made by management regarding a number of factors as noted above in this section. Cost per tonne and cut-off grade per operation are as follows.
Operations gold
 
Underground Operations
Surface and Massive Mining
 
 
Cut-off grade

Cut-off cost

Cut-off grade

Cut-off cost

 
 
(cmg/t)

(R/Tonne)

(g/t)

(R/Tonne)

South Africa Underground
 
 
 
 
 
Bambanani
 
2,303

5,047



Joel
 
898

2,500



Masimong
 
1,021

2,309



Phakisa
 
790

3,114



Target 1
 


3.80

2,250

Tshepong
 
650

2,826



Unisel
 
1,163

2,483



Doornkop
 
800

2,408



Kusasalethu
 
1,100

3,265



Moab Khotsong
 
1,801

4,234



South Africa Surface
 
 
 

 
 
Kalgold
 


0.58

479

Free State Surface
 


0.15

48

 
 
Cut-off grade

Cut-off cost

Cut-off grade

Cut-off cost

 
 
(%Cu) 

(A$/Tonne) 

(g/t) 

(A$/Tonne)

Papua New Guinea
 
 
 
 
 
Hidden Valley
 


0.65

34.08

Hamata
 


0.65

34.08

Golpu
 
0.3

26




33


Operations silver and copper
 
Underground Operations
Surface and Massive Mining
 
 
 
 
 
 
 
 
Cut-off grade
Cut-off cost

Cut-off grade

Cut-off cost

 
 
(%Cu)
(A$/Tonne)

(g/t)

(A$/Tonne)

SILVER
 
 
 
 
 
Papua New Guinea
 
 
 
 
 
Hidden Valley
 

0.65

44.18

COPPER
 
 
 
 
 
Papua New Guinea
 
 
 
 
 
Golpu
 
0.3
26



Notes on Cut-off:
1)
Surface and massive mining are stated in g/t (g/t is grams of metal per tonne of ore).
2)
All SA underground operations are stated in cmg/t (cmg/t is the Reef Channel width multiplied by the g/t which indicates the gold content within the Reef Channel).
Notes on Cut-off cost:
1)
Cut-off cost refers to the cost in R/Tonne or A$/Tonne to mine and process a tonne of ore.
Notes on Copper:
1)
Cut-off is stated in % Cu.
Notes on Golpu:
1)
Cut-off is based on 0.2% copper; molybdenum and gold mined as by-product.

The plant recovery factors for our operations and projects are stated below:
 
Plant Recovery Factor (%)

Gold
 
Operations
 
South Africa Undergound
 
Bambanani
95

Joel
95

Masimong
95

Target 1
95

Tshepong Operations
95

Doornkop
96

Kusasalethu
93

Moab Khotsong
97

 
 
South Africa Surface
 
Kalgold
84

Free State Surface - Phoenix
45

St Helena
45

Central Plant
52

WRD and Tailings
51

 
 
Papua New Guinea


Hidden Valley
88

Hamata
88

Golpu
61

 
 
Silver
 
Papua New Guinea
 
Hidden Valley
61

 
 
Copper
 
Papua New Guinea
 
Golpu
92



34


Worldwide Operations
The following is a map of our worldwide operations.
sa2020.jpg


35


papuanewguinea2020.jpg
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.
During fiscal 2018 a feasibility study was completed for Target 3, which remains under care and maintenance. The study will be used in conjunction with our other projects for future decision making on capital allocation and prioritization in Harmony.
Our Papua New Guinean gold production is derived exclusively from our Hidden Valley operation in the Morobe Province of PNG. The Hidden Valley deposit comprises low sulphidation carbonate-base metal-gold epithermal deposits within the Morobe Goldfield. In the mine 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

36


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. Gold and silver mineralization is contained within carbonate-adularia-quartz sulphide veins, which occur typically as steeply to moderately dipping sheeted vein swarms associated with an underlying thrust in the host .
Our Wafi-Golpu project (also in the Morobe Province of PNG) encompasses the Wafi epithermal gold and the Nambonga and Golpu deposits. The Wafi gold deposit is largely hosted in sedimentary/volcaniclastic rocks of the Owen Stanley Formation adjacent to the Wafi Diatreme. Gold mineralization occurs associated with an extensive zone of pervasive high-sulphidation epithermal alteration distributed around the margin of the Wafi Diatreme. The Nambonga deposit is a mineralized gold-copper quartz vein array and is located approximately one kilometer north of the Golpu deposit. The Golpu deposit is a porphyry (diorite) copper-gold deposit, and is located about one kilometer northeast of the Wafi deposit. The host lithology is a diorite that exhibits a typical zoned porphyry copper alteration halo together with mineralization in the surrounding metasediment. The mineralized body can be described as a porphyry copper-gold “pipe”. The Wafi gold mineralization and alteration partially overprints the upper levels of the Golpu porphyry copper-gold mineralization.
Our Kili Teke deposit is an advanced exploration proposition located in the Hela Province of PNG. The Kili Teke deposit comprises porphyry style copper-gold mineralization hosted in a multiphase calc-alkaline dioritic to monzonitic intrusive complex. Host rocks comprise interbedded siliciclastics and limestone of the Papuan Fold Belt. Uranium-lead zircon age dating highlight Pliocene age dates in the range of 3.5 ± 0.04 Ma (million year) to 3.59 ± 0.07 Ma for emplacement of the mineralized porphyry phases. Late-mineral porphyry phases have been identified in the drilling and impact grade continuity within the deposit, where they intrude and stope out the earlier more mineralized phases. Overall the geometry of the deposit reflects a relatively steeply plunging, pipe like body, with mineralization decreasing away from the central high grade stockwork zones of copper gold mineralization. Intense marbleization and copper-gold skarn mineralization is developed around the peripheral contact with the host sequence, and variably developed skarn mineralization also occurs along internal structural and contact zones within the complex.
Mining and Exploration - Papua New Guinea
Harmony's wholly-owned subsidiary, Morobe Consolidated Goldfields Limited, is the 100% owner of the Hidden Valley mine in Morobe Province. Morobe Consolidated Goldfields Limited has obligations under compensation agreements with landowners, and various employment and training, local business development and supply and procurement obligations under the Hidden Valley MOA entered into with the PNG Government, provincial and local governments and the landowner association in August 2005.
Harmony’s wholly-owned subsidiary, Wafi Mining Limited, holds a 50% interest in the Wafi-Golpu project, through its equal share in various exploration licenses, held together with its co-participant in the WGJV, Newcrest PNG 2 Limited. Both of these companies have obligations under compensation agreements with landowners.
As at June 30, 2020, Harmony’s tenement portfolio in PNG totaled 752.5 square kilometers (all titles excluding mining easements and ancillary mining purpose leases). The tenements form three main project areas: (i) Kili Teke in the Hela Province (Harmony 100% owned), (ii) a package of tenements encompassing the Hidden Valley District in the Morobe Province (Harmony 100% owned) and (iii) a contiguous package of Exploration Portfolio Joint Venture tenure (Harmony 50% owned) in the vicinity of the Wafi and Golpu deposits, also in the Morobe Province.
Harmony, through its wholly-owned subsidiary, Harmony Gold (PNG) Exploration Limited, manages the exploration activities on the tenement holdings mentioned above. Prior to commencement of exploration work programs, the relevant exploration tenement holder(s) enter(s) into compensation agreements with landowners on the relevant exploration licenses, in accordance with the PNG Mining Act.
Permitting the Wafi-Golpu Project
On August 25, 2016, the WGJV submitted an application for a Special Mining Lease (SML 10) under section 35 of the PNG Mining Act, and various other associated mining tenements. A feasibility study update and revised proposals for development was lodged with the MRA on March 20, 2018, and on June 25, 2018 an Environment Impact Study was submitted to the Conservation and Protection Authority under the PNG Environment Act 2000. The feasibility study update provides greater clarity around the infrastructure which will be associated with development of the Wafi-Golpu project, including the recommended use of deep sea tailings placement as the preferred tailings management solution and the construction of a modular designed power plant.
The WGJV continue to engage with the PNG Government to take forward the permitting and approvals process for SML 10 and its other associated tenements in accordance with PNG law. In December 2018, the WGJV participants entered into a Memorandum of Understanding (the "Wafi-Golpu MOU") with the State of PNG outlining a negotiation framework, but further e engagement was delayed by an injunction arising from an application for judicial review of the MOU instituted by the Governor of the Morobe Province in which the Wafi-Golpu project is situated. In January 2020, the PNG Government withdrew from the Wafi-Golpu MOU,and consequently the judicial review proceedings brought by the Governor of Morobe Province were dismissed by the PNG National Court and the injunction lifted.
In June 2020, the Prime Minister, the Minister for Mining and the Governor of the Morobe Province publicly announced their commitment to a recommenced permitting process. Since this time, the MRA has convened a development forum between State and Morobe Provincial Government representatives and landowners and local communities, but there has been no engagement with the WGJV. The WGJV participants remain ready to engage with the PNG Government and the relevant regulators. However, at this stage the permitting time line and road map are still to be redefined.


37


Regulation
Mineral Rights - South Africa
MPRDA
The MPRDA was promulgated as effective legislation on May 1, 2004 and is the primary legislation regulating the mining industry in South Africa. Pursuant to the MPRDA, the South African government is the custodian of South Africa’s mineral and petroleum resources and has a duty to administer these resources for the benefit of all South Africans. As a consequence, an owner of the surface rights has no claim to the minerals found in, on or under the surface of his or her land. The MPRDA extinguished private ownership of minerals. The DMRE (previously the Department of Mineral Resources) is the government body which, through its regional offices, implements and administers the MPRDA.
Any person (including the owner of the surface rights) who wishes to exploit mineral resources in South Africa is required to first apply for and obtain the appropriate right under the MPRDA. The Minister is authorized to grant or refuse applications for rights under the MPRDA. Provided that an applicant meets all the requirements relating to the right for which the applicant has applied, the Minister is obliged to grant the right. Once the right is granted in terms of the MPRDA and registered in terms of the Mining Titles Registration Act, 16 of 1967, the holder holds a limited real right in respect of the mineral and the land to which such right relates.
In accordance with the MPRDA, the holder of a mining right must comply with the terms of the right, the provisions of the MPRDA, the environmental authorization (issued under the NEMA), the mining work program and the SLP approved as part of the right. The SLP relates to the obligations placed on the mining right holder to, among other things, train employees of the mine in accordance with prescribed training methodologies, achieve employment equity and human resource development in the mining company, improve housing and living conditions of employees and set up local economic development projects. Compliance with each of the provisions of the MPRDA, environmental authorization, mining work program and SLP is monitored by submission of monthly, bi-annual and annual returns and reports by the holder of the right to the DMRE in accordance with the provisions of the MPRDA and the right. A prospecting or mining right can be suspended or canceled if the holder conducts mining operations in breach of the MPRDA, a term or condition of the right or an environmental management plan, or if the holder of the right submits false, incorrect or misleading information to the DMRE. The MPRDA sets out a process which must be followed before the Minister is entitled to suspend or cancel the prospecting or mining right.
We have been working on our program of licensing since 2004, which involved the compilation of a mineral assets register and the identification of all of our economic, mineral and mining rights. We actively carry out mining and exploration activities in all of our material mineral rights areas in South Africa. In the period following the MPRDA taking effect, we applied for and were granted conversion of all of our "old order" mining rights into "new order" mining rights in terms of the MPRDA.
Our strategy has been to secure all strategic mining rights on a region-by-region basis, which we have achieved as we have secured all “old order" mining rights and validated existing mining authorizations. All mining operations have valid mining rights in terms of the MPRDA and we now have to continue complying with the required monthly, annual and bi-annual reporting obligation to the DMRE.
On June 21, 2013, the Minister introduced the MPRDA Bill into Parliament. The DMRE briefed the National Assembly's Portfolio Committee on Mineral Resources in July 2013. The MPRDA Bill was passed by both the National Assembly and the NCOP on March 27, 2014. In January 2015, the former President, Jacob Zuma, referred the MPRDA Bill back to Parliament for reconsideration and on November 1, 2016, the Portfolio Committee on Mineral Resources tabled non-substantial revisions to the MPRDA Bill in the National Assembly and a slightly revised version of the MPRDA Bill was passed by the National Assembly and referred to the NCOP. On March 3, 2017, the National Assembly passed certain minor amendments to the MPRDA Bill. The National Assembly referred the MPRDA Bill to the NCOP where the Select Committee received comments on the draft legislation. The chairperson of the Select Committee had targeted January or February of 2018 to pass the legislation. On February 16, 2018, the current President of South Africa, Cyril Ramaphosa, announced that the MPRDA Bill was at an advanced stage in Parliament. However, in August 2018, the Minister announced that, given certain concerns with the MPRDA Bill, his recommendation would be to withdraw it entirely. The South African Cabinet subsequently supported the Minister's proposal to withdraw the MPRDA Bill. While the MPRDA Bill was not formally withdrawn by Parliament, it lapsed on March 28, 2019. Although Parliament has the ability to revive a lapsed Bill, it seems unlikely that it will revive the MPRDA Bill given both the Minister's and Cabinet's support for its withdrawal.
Among other things, the MPRDA Bill would:
Concentration of rights
The MPRDA Bill seeks to introduce a system whereby the Minister invites applications for prospecting rights, exploration rights, mining rights, technical co-operation permit, production rights and mining permits in respect of any area of land. Applicants for rights will no longer be able to rely on the "first come, first served" principle when submitting an application.
Ownership of tailings created before May 1, 2004
The MPRDA provides that historic tailings are not regulated in terms of the MPRDA; however, the MPRDA Bill purports to amend the MPRDA so as to render historic tailings subject to regulation under the MPRDA, resulting in the South African government gaining custodianship of historic tailings.

38


Transfers in interests in companies
The MPRDA Bill seeks to require the consent of the Minister for the transfer of any interest in an unlisted company or any controlling interest in a listed company where such companies hold a prospecting right or mining right.
Mineral beneficiation
A key change is that the MPRDA Bill seeks to make it mandatory for the Minister to “initiate or promote the beneficiation of minerals and petroleum resources in the Republic of South Africa”. The MPRDA Bill affords the broad discretion over beneficiation, without providing any criteria under which such discretion should be exercised.
Issue of a closure certificate
The MPRDA Bill envisages that a rights holder will remain liable for any latent or residual environmental and associated damage caused by prospecting and mining operations, even after (and notwithstanding) the issue of a closure certificate by the Minister. This means that a rights holder will no longer be indemnified from liability after the issue of a closure certificate.
There is a large degree of uncertainty regarding the changes that will be brought about in the unlikely event that the MPRDA Bill is revived and made law.
The Mining Charter
The South African government has identified the South African mining industry as a sector in which significant participation by HDSAs is required. One of the objects of the MPRDA is to substantially and meaningfully encourage HDSAs to enter the mineral and petroleum industries and to benefit from the exploitation of the nation’s mineral and petroleum resources. In terms of section 100 of the MPRDA, the Minister was empowered to develop a broad-based socio-economic charter in order to set the framework for targets and time periods for giving effect to these objectives.
Among other things, the Original Charter stated that mining companies agreed to achieve 26% HDSA ownership of South African mining industry assets within 10 years (i.e. by the end of 2014). Ownership could comprise active involvement, through HDSA-controlled companies (where HDSAs own at least 50% plus one share of the company and have management control), strategic joint ventures or partnerships (where HDSAs own at least 25% plus one vote of the joint venture or partnership interest and there is joint management and control) or collective investment vehicles, the majority ownership of which is HDSA based, or passive involvement, particularly through broad-based vehicles such as employee stock option plans.
The Original Charter was subsequently amended by the Amended Charter which included targets and timelines for HDSA participation in procurement and enterprise development, beneficiation, employment equity, human resources development, mine community development, housing and living conditions, sustainable development and growth of the mining industry and reporting (monitoring and evaluation). It required mining companies to achieve the following, among others, by no later than December 31, 2014:
have a minimum effective HDSA ownership of 26%;
procure a minimum of 40% of capital goods, 70% of services and 50% of consumer goods from HDSA suppliers (i.e. suppliers in which a minimum of 25% + one vote of their share capital must be owned by HDSAs) by 2014 (exclusive of non-discretionary procurement expenditure);
ensure that multinational suppliers of capital goods contribute a minimum of 0.5% of their annual income generated from South African mining companies into a social development fund from 2010 towards the socio-economic development of South African communities;
achieve a minimum of 40% HDSA demographic representation at executive management (board) level, senior management (executive committee) level, core and critical skills, middle management level and junior management level;
invest up to 5% of annual payroll in essential skills development activities; and
implement measures to improve the standards of housing and living conditions for mineworkers by converting or upgrading mineworkers’ hostels into family units, attaining an occupancy rate of one person per room and facilitating home ownership options for all mineworkers in consultation with organized labor.
In addition, mining companies were required to monitor and evaluate their compliance with the Amended Charter and submit annual compliance reports to the DMRE. The "scorecard" attached to the Amended Charter made provision for a phased-in approach for compliance with the above targets over the five year period ending on December 31, 2014. For measurement purposes, the scorecard allocated various weightings to the different elements of the Amended Charter. Failure to comply with the provisions of the Amended Charter would, according to its provisions, ostensibly amount to a breach of the MPRDA and could have resulted in the cancellation or suspension of a mining company’s mining rights.
Harmony believes that it had complied with the requirements of the Amended Charter by the December 31, 2014 deadline. See “Integrated Annual Report for the 20-F 2020 - Managing Our Social and Environmental Stewardship - Mining Charter III Compliance Scorecard” on pages 138 to 141.
In March 2015, the DMRE prepared an interim report of consolidated results of the self-assessment by reporting companies of compliance with the Amended Charter, reporting relatively broad compliance with the non-ownership

39


requirements of the Amended Charter. However, the DMRE did not report the results of compliance with the HDSA ownership guidelines of the Amended Charter and noted that there was no consensus on certain principles applicable to the interpretation of the ownership element.
On March 31, 2015, the MCSA and the DMRE jointly agreed to approach the North Gauteng High Court to seek a declaratory order that would provide a ruling on the relevant legislation and the status of the Original Charter and the Amended Mining Charter, including clarity on the status of previous empowerment (i.e., HDSA ownership) transactions concluded by mining companies and a determination on whether the ownership element of the Original Charter and the Amended Charter should be a continuous compliance requirement for the duration of the mining right as argued by the DMRE, or a once-off requirement as argued by the MSCA, on the “once empowered always empowered” principle. The MCSA and the DMRE filed papers in court (the "Main Application") and the matter was placed on the roll to be heard on March 15, 2016. On February 16, 2017, the High Court postponed the hearing of the application indefinitely to allow the MCSA and the South African government to engage in further discussion on this matter.
The Minister published the Broad-Based Black Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry, 2017 ("2017 Mining Charter") which came into effect on June 15, 2017. The MCSA launched an urgent application in the High Court of South Africa, Gauteng Division, Pretoria to interdict the implementation of the 2017 Mining Charter (the "Interdict Application") pending a judicial review application on the basis that it was unilaterally developed and imposed on the industry and that the process that was followed by the DMRE in developing the 2017 Mining Charter had been seriously flawed (the "2017 Review Application"). However, the Minister and the MCSA reached an agreement on September 13, 2017 under which the Interdict Application did not proceed as the Minister undertook to suspend the 2017 Mining Charter pending the outcome of the 2017 Review Application by the MCSA. The 2017 Review Application was subsequently indefinitely postponed by agreement between the DMRE and the MCSA on the basis that the MCSA had entered into a new round of discussions with the President of South Africa, Cyril Ramaphosa, and the Minister. On February 19, 2018, the Gauteng Division High Court ordered that the DMRE and the MCSA also involve communities affected by mining activities in these new discussions relating to the 2017 Mining Charter.
When the 2017 Mining Charter was published, the MCSA re-enrolled the Main Application for hearing and the High Court hearing was held in December 2017.
On April 4, 2018, the North Gauteng High Court delivered the 2018 Judgement. The effect of the 2018 Judgment is that mining companies are not required to re-empower themselves after their HDSA shareholders have sold out and that the DMRE cannot rely on the provisions of the MPRDA to enforce compliance with the Amended Charter, unless the provisions which the DMRE seeks to enforce were made a term or condition of the mining right. The Court also held that the Minister's promulgation of the Amended Charter did not occur in terms of or in compliance with the duty imposed in terms of section 100(2) of the MPRDA and, as such, the terms of the Amended Charter can have legal consequences or significance only insofar as they are, by any means, reflected in the terms of conditions subject to which the Minister grants a mining right. It also brings the validity and enforceability of any subsequent mining charter into question unless it is legislatively authorized. On April 19, 2018, the DMRE filed a notice of intention to appeal the Gauteng Division High Court’s Judgment but later withdrew its appeal during August 2020.
On September 27, 2018, the Minister published the Mining Charter III on which date it also became effective, as amended by the notice published in the Government Gazette on December 19, 2018 and read with the Implementation Guidelines. It replaces, in their entirety, the Original Charter and the Amended Charter. Mining Charter III imposes new obligations and increased participation by HDSAs in relation to a mining company's ownership, procurement of goods and services, enterprise and supplier development, human resource development and employment equity requirements. The first annual reporting for compliance with Mining Charter III is on or before March 31, 2020, although on April 11, 2020, the Minister gazetted Directions under the regulations of the Disaster Management Act as part of the measures to address, prevent and combat the spread of COVID-19, which extended the date for submission of the first annual report to June 1, 2020.
Some of the material changes introduced by Mining Charter III include:
in relation to existing mining rights, the continuing consequences of historical black economic empowerment transactions will be recognized and existing right holders will not be required to increase their HDSA shareholding for the duration of their mining right in circumstances where they either achieved and maintained 26% HDSA ownership or where they achieved the 26% HDSA ownership but their HDSA shareholder has since exited;
in relation to the renewal and transfer of existing mining rights, historical BEE credentials will not be recognized and mining companies will be required to comply with the ownership requirements in relation to new mining rights (see below);
in relation to new mining rights (granted after September 27, 2018) mining companies must have a minimum of 30% BEE shareholding distributed as follows: a minimum of 5% non-transferable carried interest to qualifying employees; a minimum of 5% non-transferable carried interest to host communities, or a minimum 5% equity equivalent benefit; and a minimum of 20% to a BEE entrepreneur, 5% of which must preferably be for women; "carried interest" is defined as "shares issued to qualifying employees and host communities at no cost to them and free of any encumbrances. The cost for the carried interest shall be recovered by a right holder from the development of the asset";
applications for mining rights lodged and accepted prior to September 27, 2018, will be processed in terms of the Amended Charter (i.e. with a 26% HDSA ownership requirement) but with a further obligation to increase their HDSA shareholding to 30% within five years of the granting of the right;

40


BEE shareholding may be concluded at holding company level, mining right level, on units of production, shares or assets and where is concluded at any level other than mining right level, the flow-through principle will apply;
the permitted beneficiation off-set of up to 11% against the HDSA ownership requirement contained in the Original Charter and Amended Charter has been reduced to 5% unless it was "claimed" prior to September 27, 2018;
a minimum of 70% of total mining goods procurement spend (including non-discretionary expenditure) must be on South African manufactured goods, allocated amongst HDSA owned and controlled companies, women and youth owned and controlled companies and BEE compliant companies;
a minimum of 80% of the total spend on services (including non-discretionary expenditure) must be sourced from South African companies, allocated among HDSA owned and controlled companies, women and youth owned and controlled companies and BEE compliant companies;
mining companies must achieve a minimum representation of HDSAs in the following management positions: 50% on the Board of directors (20% of which must be women), 50% in executive (20% of which must be women), 60% in senior management (25% of which must be women); 60% in middle level (25% of which must be women); 70% in junior level (30% of which must be women) and 60% in core and critical skills. In addition; HDSAs with disabilities must constitute 1.5% of all employees.
the Minister may, by notice in the Government Gazette, review Mining Charter III;
the ownership and mine community development elements are ring-fenced and require 100% compliance at all times; and
a mining right holder that has not complied with the ownership element and falls between levels 6 and 8 of the Mining Charter scorecard shall be in breach of the MPRDA and its mining right may be suspended or canceled in accordance with the provisions of the MPRDA.
While Mining Charter III is now effective, there are transitional arrangements in relation to compliance with the procurement and the employment equity element targets.
On March 26, 2019, the MCSA instituted judicial review proceedings in High Court of South Africa for an order reviewing and setting aside certain provisions of Mining Charter III. The provisions challenged by the MCSA relate to those which, among other things:
provide that mining right holders must at all times comply with the ownership requirements imposed under Mining Charter III;
stipulate that the continuing consequences of historic empowerment transactions will not be recognized if existing mining rights are renewed or transferred to third parties;
impose the procurement thresholds for goods and services; and
indicate that the Minister may invoke the sanctions prescribed under the MPRDA, if a mineral right holder fails to comply with the threshold requirements imposed under the Charter.
The application aligns with the MCSA’s previously stated view that most aspects of the Mining Charter III represent a reasonable and workable framework. However, the MCSA’s application contends that Mining Charter III does not fully recognize the continuing consequences of previous empowerment transactions, particularly in relation to mining right renewals and transfers of such rights. According to the MCSA, this constitutes a breach of the declaratory order on the matter issued by the North Gauteng High Court in April 2018. On June 30, 2020, the Court ordered that various mine-affected communities and trade unions are joined as parties to the MCSA's application. This is likely to further delay a decision in the matter, the outcome of which remains uncertain.
On March 27, 2020 the Minister published for implementation the Amended Regulations. The Amended Regulations include the following notable changes:
Mining right applicants must "meaningfully consult" with landowners, lawful occupiers and interested and affected parties in accordance with the procedures contemplated under the EIA Regulations). The office of the Regional Manager is permitted to participate as an observer in these processes.
Mining right holders must pursuant to their SLPs contribute to the socio-economic development in the areas in which they operate and labor sending areas (i.e. a local municipality from which a majority of mineworkers are from time to time permanently resident). This requirement may impose obligations on mining right holder to effect measures in communities that are located far away from the mine and / or could give rise to some social issues.
Although most of the provisions regulating environmental matters have been deleted from the Regulations, those sections dealing with mine closure have been retained but have been amended to state that mine closure must be regulated in terms of the NEMA, the EIA Regulations and the Financial Provision Regulations, 2015. It is anticipated that the Financial Provision Regulations, 2015 will be replaced by a revised regulations following further engagement with the mining industry.
The appeal process in the MPRDA Regulations has been replaced with a more comprehensive procedure that includes specific time periods within which appellants, respondents and the competent authority must submit appeals, responses or consider appeals (as the case may be). Although there is no guarantee that the parties will comply with these time periods, the time periods intend to hold the parties accountable and to ensure that appeals are resolved in a timely manner.

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The Royalty Act
The Mineral and Petroleum Royalty Act 28 of 2008 and the Mineral and Petroleum Royalty Administration Act 29 of 2008 were assented to on November 21, 2008 with the commencement date set as May 1, 2009. However, the date on which royalties became payable was deferred to March 1, 2010. Royalties are payable by the holders of mining rights to the government according to formula based on a defined earnings before interest and tax. This rate is then applied to a defined gross sales leviable amount to calculate the royalty amount due, with a minimum of 0.5% and a maximum of 5% for gold. For 2020, the average royalty rate for our South African operations was 0.97% of the gross sales leviable amount.
The BBBEE Act and the BBBEE Amendment Act
The BBBEE Act, 53 of 2003 (the "BBBEE Act"), which came into effect on April 21, 2004, established a national policy on broad-based black economic empowerment with the objective to (i) remedy historical racial imbalances in the South Africa economy and (ii) achieve economic transformation, by increasing the number of black people who participate in the mainstream South African economy. The BBBEE Act provides for various measures to promote BEE participation, including empowering the Minister of Trade and Industry to issue Codes of Good Practice (the "BBBEE Codes"), with which organs of state and public entities and parties interacting with them or obtaining rights and licenses from them would be required to comply. The BBBEE Codes were first published in 2007, and were revised in 2013 (although the revisions only came into effect in 2015). The BBBEE Codes sought to provide a standard framework, in the form of a "generic scorecard", for the measurement of BBBEE across all sectors and industries operating within the South African economy and sought to regularize such sectors and industries by providing clear and comprehensive criteria for the measurement of BBBEE.
On October 24, 2014, the BBBEE Amendment Act, 46 of 2013 (the “BBBEE Amendment Act”) came into effect. The BBBEE Amendment Act inserted a new provision in the BBBEE Act, whereby the BBBEE Act would trump the provisions of any other law in South Africa which conflicts with the provisions of the BBBEE Act, provided such conflicting law was in force immediately prior to the effective date of the BBBEE Amendment Act. The BBBEE Amendment Act also stipulates that this provision would only be effective one year after the BBBEE Amendment Act is brought into effect, on October 24, 2015. On October 27, 2015, the Minister of Trade and Industry published a government gazette notice declaring an exemption in favor of the DMRE from applying the requirements contained in section 10(1) of the BBBEE Act for a period of 12 months.
There has been some debate as to whether or to what extent the mining industry was subject to the BBBEE Act and the policies and codes provided for thereunder. The BBBEE Codes apply in the absence of sector specific codes which have been agreed to by interested and affected parties active within a specific sector. By way of background, various sectors within the South African economy may negotiate and agree Codes of Good Practice which would govern transformation in that specific sector. In addition, certain codes fall outside of the regulatory framework established by the BBBEE Act and BBBEE Codes promulgated by the Minister of Trade and Industry thereunder. One such sector is the mining industry, where the Original Mining Charter, the Amended Mining Charter and Mining Charter III, which we refer to generally in this section as the "Mining Charter")) govern the implementation of BBBEE, among other things, within the mining industry.
For purposes of the BBBEE Act, the Mining Charter is not a "sector code". It is not clear at this stage how the Mining Charter and BBBEE Codes relate to each other. The government may designate the Mining Charter as a sector code, in which case it will be under the auspices of the BBBEE Act. On the other hand, the Mining Charter may remain a stand-alone document under the auspices of the MPRDA and may be subject to the trumping provision, discussed above, to the extent that there is a conflict between the two. This uncertainty may be resolved through either government clarification or judicial attention. The exemption by the Minister of Trade and Industry can be read as confirmation that the Department of Trade and Industry regards the BBBEE Codes as “applicable” to the Mining Industry after the exemption is lifted on October 27, 2016.
On February 17, 2016, the Minister of Trade and Industry published a gazette notice which repealed and confirmed the validity of a number of sector codes. The omission of the Mining Charter from the notice can be interpreted as confirmation that the Mining Charter is not contemplated as a sector code. This supports the interpretation BBBEE Act did not intend to trump the Mining Charter. While it remains to be seen how this will be interpreted, it appears that the BBBEE Act and the BEE Codes will not overrule the Mining Charter in the future and, in any event, our view is that the DMRE is likely to continue implementing the Mining Charter and it is unlikely that the DMRE will begin applying the BBBEE Act and BBBEE Codes in administering the MPRDA, since in order to do so will potentially require an amendment of the MPRDA.
Housing and Living Standards
On December 11, 2019 the Minister published the Housing and Living Conditions Standard for the Minerals Industry (the "Standard"). The purpose of the Standard is to ensure that mine employees are provided with adequate housing, healthcare services, balanced nutrition and water. The Standard repeals the previous iteration of the Standard from 2009 and applies to existing and new mining right holders. The underlying purpose of the Standard is to develop decent single and family housing units for mine employees and their families.
Mining right holders are required to develop a housing and living conditions plan taking into account various principles in giving effect to the above objectives including, engaging with all relevant stakeholders, ensuring equity in the implementation and administration of the housing of employees, providing employees with a range of housing options (such as subsidized rental, private ownership, living out allowances and government subsidized ownership) and ensuring that all housing facilities are developed or redeveloped with access to electricity, water and ablutions in accordance with the requisite norms and standards.
Mining right holders have twelve months in which to engage with organized labor, relevant municipalities and the Department of Water and Sanitation regarding mine employee housing and the living conditions that need to be addressed.

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Draft Resettlement Guidelines
The Minister published the Draft Mine Community Resettlement Guidelines, 2019 ("Resettlement Guidelines") for public comment on December 4, 2019. The Resettlement Guidelines apply to applicants and holders of mining rights, prospecting rights and mining permits pursuant to the MPRDA, which result in the displacement of parties. Resettlement is guided by several fundamental principles including meaningful consultation, gender equality, the avoidance of resettlement, where possible, rules concerning meetings and the protection of existing rights.
Applicants and holders will need to make provision for a Resettlement Plan, Resettlement Action Plan and a Resettlement Agreement. The Resettlement Plan sets out the nature of the project, its expected impacts, the manner in which consultation will be implemented and the various cost implications for the resettlement. The Resettlement Action Plan sets out the specific steps that the holder will need to meet to implement the Resettlement Plan and the Resettlement Agreement records the commitments made by the holder. There are no specific requirements in the Resettlement Guidelines regarding the content of these agreements. However, all stakeholders should be engaged and commit to their respective obligations.
No mining activities may commence until such time as the Resettlement Agreement has been concluded. This includes agreement on the compensation that should be paid to affected parties. Any disputes between the parties regarding the Resettlement Agreement or associated plans, should be resolved between the parties. To the extent that the parties are unable to reach an amicable solution, only then should the Regional Manager-led process in section 54 of the MPRDA be invoked.
Mineral Rights - Papua New Guinea
Mining in PNG is governed by the PNG Mining Act. The Act stipulates that all minerals are the property of the State of PNG and, subject to the Act, all land is available for exploration and mining. The issuance and administration of mining tenements under the PNG Mining Act is effected through the offices of the MRA established under the PNG Mineral Resources Authority Act 2018, and mining operations are administered by the Chief Inspector of Mines under the PNG Mining (Safety) Act 1977. Mineral policy is administered by the Department of Mineral Policy and Geohazards Management, all three branches falling within the PNG Department of Mining.The permitting process can be very time consuming, and (subject to the applicable legislation) there is no assurance that a mining tenement will be granted or extended.
Mining tenements include:
exploration licenses, issued for a term not exceeding two years, renewable on application for further two year terms subject to compliance with expenditure and other conditions. Each license contains a condition conferring on the PNG Government the right to make a single purchase up to 30% equitable interest in any mineral discovery under the license at a price pro rata to the accumulated exploration expenditure;
mining leases, issued for a term not exceeding 20 years, renewable on application for up to ten years at the discretion of the PNG Minister for Mining after considering PNG Mining Advisory Board recommendations;
special mining leases, issued for a term not exceeding 40 years, renewable on application for up to twenty years at the discretion of the PNG Minister for Mining after considering PNG Mining Advisory Board recommendations and subject to the provisions of any mining development contract which may have been entered into between the PNG Government and the tenement holder;
mining easements; and
leases for mining purposes.
These tenements generally confer exclusive rights on the holder to exercise their rights thereunder. However, in PNG, citizens have the right to carry out non-mechanized mining of alluvial minerals on land owned by them, provided that an alluvial mining lease is obtained and provided there is not already a mining lease or special mining lease over the subject land.
Almost all land in PNG is owned by a person or group of persons under customary ownership, and is not generally overlaid by landowner title. The customary owners of the land have in some instances been formally identified through the work of the Land Titles Commission. However, there is often considerable difficulty in identifying landowners of a particular area of land because land ownership may arise from both contract and inheritance, and because of the absence of a formal written registration system.
Along with standard corporate and other taxes and levies, mining companies must pay royalties to the State and a levy to the MRA, based on production. Prior to commencing exploration, compensation for loss or damage must be agreed with the landowners. Prior to commencing mining, written agreements must be entered into with landowners dealing with compensation and, in company with the PNG Government as a party, a memorandum of agreement dealing with such other matters as the sharing of royalties and other mining benefits among and between landowner groups and Provincial and local government entities.
Potential Changes to PNG Mining Laws
Since 2009, the mining regime in PNG has been the subject of a comprehensive ongoing review involving various PNG Government agencies. The legislation being reviewed includes the PNG Mining Act, PNG Mining (Safety) Act 1977 and applicable regulations. Mineral Policy and mining-specific sector policies including biodiversity offsets, offshore mining policy, sustainable development policy, involuntary relocation policy and mine closure policy.
Over that period, various draft revisions of the PNG Mining Act have been circulated and submitted to the PNG Chamber of Mines and Petroleum for its comments, most recently in 2018 and 2020. The most recent draft revisions include

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an increase in the royalty rate, changes to the terms of the PNG Government's right to acquire an interest in a mine discovery, the introduction of a development levy and a waste fee, the introduction of an obligation to maintain production at minimum prescribed levels, a prohibition on non-local “Fly-In, Fly-Out” employment practices, and the introduction of downstream processing obligations. If introduced, these changes will potentially affect Harmony's operations and projects in PNG, in the form of additional restrictions, obligations, operational costs, taxes, levies, fees and royalty payments, and could have a material adverse effect on Harmony's business, operating results and financial condition.
On June 26, 2020 a Mining (Amendment) Act was enacted to require the real-time provision of production and mineral sales data to the State. On July 16, 2020 the proposed PNG Organic Law was tabled for reading in Parliament. The Organic Law (if adopted) will materially alter the legislative and regulatory regime governing mining in PNG, including the transfer of ownership of minerals from the PNG Government to a SOE not subject to the PNG Mining Act of the regulation of the Mineral Resources Authority and the transformation of the methodology of its participation in mining operations from a concessionary to a production sharing regime.The proposed PNG Organic Law is silent on the form and content of the production sharing regime to be entered into, which arrangements it is envisaged will be negotiated by the SOE on a case by case basis.
It is presently uncertain if the PNG Organic Law will be adopted, or (if adopted) whether or how the PNG Organic Law will be applied to Harmony's current operations and projects in PNG. Due to this uncertainty, Harmony is unable to express a view on the likely impact of the changes at the present time. See Item 3. "Key Information - Risk Factors - Laws governing mineral rights affect our business and could impose significant costs and burdens. Mineral rights in the countries in which we operate could be altered, suspended or canceled for a variety of reasons, including breaches in its obligations in respect of such mining rights".
The PNG Chamber of Mines and Petroleum, as the representative industry body, has been collating information from industry participants and engaging with the PNG Government as part of the industry’s response to the review proposals. Harmony is a member of the PNG Chamber of Mines and Petroleum and is represented on the sub-committee of the Chamber.
Health and Safety - South Africa
For many years, the safety of persons working in South African mines and quarries was controlled by the Mines and Works Act, 27 of 1956 and then by the Minerals Act, 50 of 1991, which was replaced by the MHSA. The objectives of the MHSA are:
to protect the health and safety of persons at mines;
to require employers and employees to identify hazards and eliminate, control and minimize the risks relating to health and safety at mines;
to give effect to the public international law obligations of South Africa that concern health and safety at mines;
to provide for employee participation in matters of health and safety through health and safety representatives and the health and safety committees at mines;
to provide effective monitoring of health and safety measures at mines;
to provide for enforcement of health and safety conditions at mines;
to provide for investigations and inquiries to improve health and safety at mines;
to promote a culture of health and safety in the mining industry;
to promote training in health and safety in the mining industry; and
to promote co-operation and consultation on health and safety matters between the South African, employers, employees and their representatives.
One of the most important objectives of the MHSA is to protect the health and safety of all persons at mines and not merely the health and safety of employees. An employer is obliged, in terms of the MHSA and the regulations binding in terms thereof, to protect, as far as reasonably practicable, the health and safety of non-employees (such as visitors to a mine and the public who live in close proximity to the mine) and employees (which includes employees of independent contractors) performing work at a mine. The word “employer” in section 102 of the MHSA is defined as the owner of the mine. In turn, an “owner” of a mine is defined to include: (i) the holder of the prospecting permit or mining authorization issued under the MPRDA; (ii) if a prospecting permit or mining authorization does not exist, the person for whom the activities in connection with the winning of a mineral are undertaken, but excluding an independent contractor; or (iii) the last person who worked the mine or that person’s successor in title.
The aforesaid subsection was amended by section 30(f) of the Mine Health and Safety Amendment Act, 74 of 2008 by substituting the term “Mineral and Petroleum Resources Development Act” for the term “Minerals Act.” Under the new system, mining authorizations do not exist. However, taking into account section 12 of the Interpretation Act 33 of 1957, the word “authorisation” must be substituted by the words “mining right or mining permit.” Accordingly, the holder of the “mining right or mining permit” is regarded as the employer for the purposes of the MHSA and the regulations binding thereunder. The employer therefore remains responsible to ensure that applicable provisions of the MHSA and the regulations binding in terms thereof, are complied with to ensure the health and safety of persons, as far as reasonably practicable and to prevent damage to property.
The MHSA prescribes general and specific duties for employers and others, determines penalties and a system of administrative fines, and provides for employee participation by requiring the appointment of health and safety

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representatives and the establishment of health and safety committees. It also entrenches the right of employees to refuse to work in dangerous conditions.
See “Integrated Annual Report for the 20-F 2020 - Ensuring stability, employee safety and well-being - Safety and health” on pages 41 to 58.
The Mine Health and Safety Inspectorate ("MHSI") within the DMRE is responsible for the enforcement of the MHSA and the regulations binding in terms thereof and it also plays an important role in the promotion of health and safety at mines. The MHSI comprises of a Chief Inspector of Mines, Principal Inspectors of Mines for each region and various Inspectors of Mines for each region. Should employers or employees fail to comply with their obligations under the MHSA, the MHSI may take a number of enforcement measures which include the following:
the issuing of statutory instructions (for example notices in terms of section 54 or section 55 of the MHSA) if an Inspector of Mines has reason to believe that any occurrence, practice or condition at a mine endangers the health and safety of any person at a mine, or alternatively if an Inspector of Mines has reason to believe that a provision of the MHSA has not been complied with. A notice in terms of section 54 of the MHSA may halt all mining operations undertaken at a mine or part thereof. If a mine receives notices in terms of section 54 of the MHSA regularly, the production stoppages and the additional costs incurred as a result thereof, will not only affect the production results of a mine but also the reputation and business of a mine. If, however, a notice in terms of section 54 of the MHSA has been issued unlawfully, the mine may appeal the said notice to the Chief Inspector of Mines. It must be noted that the aforesaid appeal does not suspend the operation of the notice issued in terms of section 54 of the MHSA. To suspend the operation of the notice in the above instance, a mine must lodge an urgent application to the Labour Court (being the court with jurisdiction) requesting the suspension of the operation of the notice issued in terms of section 54 of the MHSA pending the outcome of the appeal to the Chief Inspector of Mines;
the Chief Inspector of Mines may suspend or cancel certificates of competency issued in terms of the MHSA if the holder of that certificate is guilty of gross negligence or misconduct or has not complied with the MHSA or the regulations binding thereunder;
a Principal Inspector of Mines may recommend prosecution to the National Director of Public Prosecutions if satisfied that there is sufficient admissible evidence that an offense has been committed. Any person convicted of an offense in terms of the MHSA may be sentenced to a fine or imprisonment as may be prescribed; and
a Principal Inspector of Mines may, after considering the recommendation of an Inspector of Mines and the written representations of the employer, impose an administrative fine for the failure to comply with, amongst others, the provisions of the MHSA and the regulations binding thereunder. In terms of Table 2 of Schedule 8 to the MHSA, the maximum administrative fine which may be imposed on an employer is one million Rand per transgression. The MHSA does not make provision for any internal appeal against an administrative fine which has been issued unlawfully. However, if a mine receives an administrative fine which has been issued unlawfully, the mine may lodge an application in the Labour Court (being the court with jurisdiction) to review the decision of the Chief Inspector of Mines to impose an administrative fine.
Over and above the aforesaid, investigation and/or inquiry proceedings in terms of the MHSA are instituted by the MHSI following an accident or occurrence at a mine, which results in the death of any person.
In South Africa the COIDA and ODMWA established two statutory systems for the payment of compensation for occupationally related injuries and certain occupationally related diseases. COIDA applies to the compensation of all occupational injuries (including payment of compensation in the event of the death of the injured employee), whether or not it occurs in or outside the mining industry. ODMWA applies to diseases which are defined as “compensatable diseases”, being primarily occupationally related lung diseases like silicosis. COIDA indemnifies the employer against claims by the employee or his/her dependents for damages incurred as a result of occupational injuries and diseases. However, the Constitutional Court held in Mankayi v AngloGold Ashanti Limited 2011 (3) SA 237 (CC) that although COIDA applies to occupational diseases in general, COIDA does not apply in instances where the disease in question is a compensatable disease in terms of ODMWA and which was contracted as a result of the performance of “risk work” at a “controlled mine”. The Court further held that if an employee contracts a compensatable disease as defined in ODMWA, the employee would still be entitled to claim common law damages from the employer.
Health and Safety - Papua New Guinea
PNG has a significant mining industry, and a developing system of occupational health and safety. The PNG Mining (Safety) Act 1977 is the principal legislation, which addresses a range of issues such as working hours, minimum safety and reporting requirements. Other legislation and regulations also apply.
The PNG Mining (Safety) Act 1977 and the Regulations issued thereunder are currently under review as part of the overall review of mining legislation in PNG. See above under "- Regulation - Mineral Rights - Papua New Guinea". Harmony continues to engage with the PNG Government through the offices of the Chamber of Mines and Petroleum of PNG, and directly with the PNG Minister for Mining and the Managing Director of the MRA.
See “Integrated Annual Report for the 20-F 2020 - Ensuring stability, employee safety and well-being - Safety and health” on pages 41 to 58.
Laws and Regulations pertaining to Environmental Protection - South Africa
In South Africa, environmental matters are regulated by national, provincial and municipal laws based on the competencies afforded to each of these spheres of government under South Africa's Constitution and relevant legislation. As

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a result, there are many statutes and by-laws that are applicable to construction, operation, decommissioning and closure of mining operations. The key legislation includes the NEMA, the NWA, the National Environmental Management: Air Quality Act, 39 of 2004, the National Environmental Management: Waste Act, 59 of 2008 (the "Waste Act"), the National Nuclear Regulator Act, 47 of 1999, the National Environmental Management: Biodiversity Act, 10 of 2004, the National Heritage Resources Act, 25 of 1999, the Carbon Tax Act and the MPRDA.
This legislation commonly requires businesses whose operations may have an impact on the environment to obtain permits, authorizations and other approvals for those operations. The rationale behind this is to ensure that companies with activities that are reasonably expected to have environmental impacts, can initially assess the extent of the environmental impacts from such activities, as well as to put reasonable and practicable mitigation measures in place to manage these impacts. In addition, businesses and authorities must monitor compliance to ensure that the requirements under the relevant permits, authorization and other approvals are achieved. In addition, the legislation may require compliance with standards or levels for which authorization is not required and impose a duty of care on businesses to ensure that reasonable measures are implemented to prevent pollution or environmental degradation from occurring, continuing or recurring.
NEMA
Section 24 of South Africa's Constitution is the cornerstone of South African environmental law. It affords every person the right to an environment that promotes their health and well-being and places an obligation on the state to create legislation and other instruments to give effect to this right taking into consideration the principles of sustainable development.
In accordance with this obligation, the Minister of Environmental Affairs and Tourism (as he was then) introduced the NEMA. The NEMA is “framework legislation”, that is, it provides the core principles and structures in terms of which all environmental legislation and decisions are interpreted, administered and applied. These principles include (but not limited to) the principles of inter-generational equity, the polluter pays principles, the cradle to grave principle and the principle of sustainable development (the “Section 2 Principles”).
The NEMA introduces environmental management tools aimed at ensuring that the Section 2 Principles are incorporated into all decisions that have an effect on the environment. Chief among these tools is the environmental authorization process. Under section 24(1) of the NEMA, the Minister of Environment, Forestry and Fisheries may identify activities that may not commence without an environmental authorization (the “Listed Activities”).
The Minister of Environmental Affairs published the EIA Regulations and three lists of Listed Activities (the "Listing Notices"). The EIA Regulations contemplate two application processes for an environmental authorization: a "basic assessment" process and a "scoping and environmental impact assessment". The basic assessment is an abridged assessment process that considers the impacts of the proposed activity on the environment, while the scoping and environmental impact assessment is a much more detailed assessment that is reserved for those activities that are expected to have a greater impact on the environment. The activities listed in Listing Notices 1 and 3 trigger a basic assessment process and the activities contained in Listing Notice 2 require the applicant to complete a scoping and environmental impact assessment. The period from the date of application until the granting or refusal of an environmental authorization should take no more than 300 days, excluding any appeal processes that suspends the environmental authorization for the duration of the appeal.
The most recent iteration of EIA Regulations and Listing Notices was published with effect from December 8, 2014, along with various amendments to the NEMA and the MPRDA pursuant to an agreement (referred to as the "One Environmental System”) concluded between the Minister of Environmental Affairs, the Minister of Mineral Resources and the Minister of Water and Sanitation (as such ministries were then called). In terms of the One Environment System, the DEFF is responsible for the creation of all legislation and regulation relating to the environment. The DMRE however, will be the competent authority responsible with implementing and enforcing this legislation as far as it directly relates to prospecting and mining activities, including the granting of environmental authorization for these activities.
Prior to the One Environmental System, the powers and responsibilities of the DEFF and DMRE overlapped. Any person applying for a prospecting right, mining permit or mining right was required under the MPRDA to conduct an environmental impact assessment and obtain approval (referred to as an Environmental Management Programme or "EMPr") from the DMRE. To the extent that the proposed prospecting or mining activities also triggered any listed activities under NEMA and prior versions of the EIA Regulations, an environmental authorization was required from the provincial environmental authorities. In practice, applicants for an EMPr and environmental authorization would conduct one environmental impact assessment and submit the final report to both the DMRE and provincial authority for their respective approvals. This dual system resulted in conflicting conditions with which the applicants were required to comply.
With effect from December 8, 2014, the DMRE became the competent authority in relation to all environmental matters directly related to prospecting, extraction and primary processing of mineral resources, including those ancillary listed activities associated with prospecting and mining operations previously governed by the provincial environmental authorities. Today, any person that seeks to obtain a prospecting right, mining permit or mining right must apply for an environmental authorization from the DMRE. This environmental authorization must be granted before a prospecting right, mining permit or mining right may be granted.
While the One Environmental System has streamlined the environmental authorization process, uncertainty exists (in limited instances) as to whether the DMRE or the environmental authorities are the competent to consider and grant environmental authorizations.
The NEMA requires applicants for environmental authorizations in respect of prospecting and mining to assess the environmental liabilities arising from their mining operations and to put up financial provision (in the form of cash, guarantees or certain insurance policies) to the satisfaction of the Minister. The amount of financial provision is assessed annually and, to the extent necessary, the financial provision is adjusted to the satisfaction of the Minister. If, at any point, the holder of

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environmental authorization fails to fulfill its obligations under the authorization or in terms of environmental laws, the Minister may call upon the financial provision to implement any necessary measures.
Prior to September 2, 2014, financial provision was regulated under section 41 of the MPRDA read with regulation 53 and 54 of the Mineral and Petroleum Resources Development Regulations (the “MPRDA Regulations”). These sections and regulations required that a mining right applicant make financial provision for the rehabilitation of negative environmental impact arising from their mining activities. The initial amount and subsequent increases thereof were determined in accordance with the DMRE Guidelines. Pursuant to the DMRE Guidelines and the MPRDA Regulations, the selected financial provision must cater for the actual costs associated with the premature closing, decommissioning and final closure and post closure management of residual and latent environmental impacts.
With effect from September 2, 2014, section 41 of the MPRDA was deleted and replaced with section 24P of the NEMA. Like section 41 of the MPRDA, section 24P of the NEMA states that the prospecting / mining right holder must annually assess their environmental liability in the prescribed manner and increase the financial provision to the satisfaction of the Minister. The only material difference between section 41 of the MPRDA and section 24P of NEMA is that, in terms of the latter, the prospecting or mining right holder is required to maintain financial provision notwithstanding the issuing of a closure certificate by the Minister, while the former stated that the holder would be absolved of environmental liability once a closure certificate is used.
From September 2, 2014 until November 20, 2015, the amount of financial provision was calculated in accordance with the DMRE Guidelines as the Minister of Environmental Affairs (as she was then) had not published regulations in support of section 24P. The DMRE Guidelines were criticized for undervaluing the costs of environmental rehabilitation thus exposing the DMRE to potential liability in the event that the mining right holder was unable to fulfill its environmental obligations.
On November 20, 2015, the Minister of Environmental Affairs published the Financial Provision Regulations, 2015. The Financial Provision Regulations, 2015 sought to rectify the inadequacies of the DMRE Guidelines by, among other things, including preliminary and general costs in the financial provision calculations, imposing VAT (at 15%) on the total amount, prohibiting the withdrawal of trust funds for concurrent rehabilitation (even in circumstances where the financial provision exceeds the evaluated environmental liability) and ceding a portion of the funds the Minister as security for possible latent and residual post-closure environmental impacts.
Compliance with these obligations would have resulted in a significant increase in the required financial provision and, consequently were strongly opposed by the mining industry. In response to this opposition, the DEFF undertook to engage further with mining industry and other stakeholders to amend or develop new financial provision regulations. In light of this on-going consultation, the date by which mining companies are required to align their financial provision with the Financial Provision Regulations, 2015 has been extended on three occasions. The most recent extension is until June 2021. As revised draft regulations have not been published in the last year, it is possible that the June 2021 date may be extended further. However, even if new regulations are finalized before that date, it is likely that the financial provision calculation will be more stringent than the calculations under the DMRE Guidelines and the Company will be required to increase its financial provision.
Upon the suspension, cancellation, termination or lapsing of a prospecting or mining right, Harmony will have to comply with various regulatory requirements including applying for a closure certificate and will remain liable for compliance with the provisions of various relevant regulations, including any latent significant environmental impacts manifesting post-closure, notwithstanding the issuance of a closure certificate by the DMRE.
Until a closure certificate is granted, the Company is required to obtain and maintain financial provision for rehabilitation. The financial provision quantum is currently determined in accordance with a legal framework that may change materially. Upon the issuing of a closure certificate, the Minister may retain a portion of the financial provision for future latent and residual environmental liabilities.
The commencement of a listed activity without an environmental authorization is an offense but could possibly be corrected by submitting an application in terms of section 24G of the NEMA. There is no guarantee that the competent authority will grant an environmental authorization in terms of this process. They may instruct the applicant to rehabilitate the environment or take any other measures to rectify the unlawful conduct. Even if the authority agrees to grant an environmental authorization, it may only do so after the applicant has paid and an administrative fine. The granting of an environmental authorization under section 24G does not absolve the applicant of potential criminal liability for commencing with an activity without the requisite authorization.
NEMA imposes a statutory obligation on every person who has caused or is likely to cause significant contamination to take reasonable measures in relation thereto. This duty applies retrospectively to contamination caused prior to 1998.
A failure to comply with this duty failing to obtain or comply with an environmental authorization and other offenses may, upon successful prosecution result in significant fines of up to R10 million and/or 10 years imprisonment being imposed. In addition, it may result in damages claims, obligations to rehabilitate the environment, paying the costs of the prosecution and even direction and employee liability.
Waste management
Pursuant to section 19 of the Water Act, the Minister is authorized to publish a list of waste management activities that are likely to have detrimental effect on the environment. No one may commence or undertake a waste management activity except in accordance with the norms and standards created in terms of section 19(3) of the Water Act or a waste management license. The list of waste management activities that have, or are likely to have, a detrimental effect on the environment set out the various activities for which a waste management license is required. A basic assessment is required in respect of those activities listed in Category A and a scoping and environmental impact assessment is required in respect of Category B listed activities.

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In respect of those activities listed in Category C, an waste management license is not required but the person seeking to undertake those activities must comply with published norms and standards.
Regulatory uncertainty exists regarding the management and re-processing of residue stockpiles and residue deposits created prior to May 1, 2004. These residue deposits and residue stockpiles fall outside the scope of the MPRDA (and therefore outside the jurisdiction of the DMRE) and, as such, it is not possible to obtain a mining right or a mining permit over such residue stockpiles or deposits. Amendments were included in 2014 that sought to incorporate the reclamation of residue stockpiles and residue deposits within the scope of the Waste Act and within the jurisdiction of the DMRE. The amendments, however, are unclear and it rendering it uncertain whether the DMRE or the DEFF is the competent authority in respect of these residue stockpiles and deposits. This may lead to possible legal challenge in circumstances where waste management licenses are obtained from the incorrect authority.
Other waste management facilities constructed and/or operated by our operations may also be subject to licensing requirements, including hazardous waste disposal sites and central salvage yards.
In addition to licensing, mines must also comply with the management measures prescribed for residue stockpiles and deposits in the Regulations for Residue Stockpiles and Residue Deposits from a Prospecting, Mining, Exploration or Production Operation in GNR 632 of July 24, 2015. These regulations do not retrospectively apply to the management of existing stockpiles and deposits, so long as they are in an approved EMPR. These regulations have notable cost implications for new residue stockpiles and deposits established after this date as they impose certain liner/barrier requirements for them.
The Waste Act also regulates contaminated land, whether or not the contamination occurred before the commencement of the Waste Act or at a different time from the actual activity that caused the contamination. Consequently, historic, as well as present or future arising, contaminated land which is identified as an investigation area by the environmental authorities or which is notified as being contaminated by the landowner must be assessed and reported on. The direction of taking monitoring and management measures, or of undertaking site remediation, may follow depending on the level of risk associated with the contamination.
Failure to comply with the provisions of the Waste Act may result in penalties similar to those discussed under the NEMA above.
Water use and pollution
The NWA regulates the management and water quality of water resources, including watercourses, surface water, estuaries and aquifers to ensure the sustainability of all water resources in the interests of all water users.
The NWA defines a water use as:
taking water from a water resource;
storing water;
impeding or diverting the flow of water in a watercourse;
engaging in a stream flow activities contemplated in the NWA;
engaging in a controlled activity identified in terms of s37(1) of the NWA or declared in terms of s38(1);
discharging waste or water containing waste into a water resource through a pipe, canal, sewer, sea outfall or other conduit;
disposing of waste in a manner which may detrimentally impact on a water resource;
disposing in any manner of water which contains waste from, or which has been heated in, any industrial or power generation process;
altering the bed, banks, course or characteristics of a watercourse;
removing, discharging or disposing of water found underground if it is necessary for the efficient continuation of an activity or for the safety of people; and
using water for recreational purposes.
From a permitting perspective, water resources are regulated through the issuing of water use licenses, publishing of general authorizations and / or permitting persons to continue undertaking water uses that they were undertaking when the NWA came into effect.
Most mining operations require a water use license in order to conduct their operations, particularly for activities relating to water abstraction, storage, effluent discharge, diversions, and facilities which have the potential to pollute groundwater resources. Water use licenses are difficult to obtain and usually involve a lengthy and delayed application process. Mines are also required to comply with the regulations which were specifically published for the use of water for mining and related activities in GN 704 of June 4, 1999. These regulations provide for limitations on the location of mining infrastructure and requirements for separation of dirty and clean water systems and the design of certain water management infrastructure.
In addition to the permitting requirements, the NWA includes a duty of care similar to that discussed in the section above in respect of NEMA. Failure to comply with the NWA will result in penalties similar to those set out above in respect of NEMA.

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Emissions
See Item 3: “Key Information - Risk Factors - Compliance with emerging climate change regulations could result in significant costs for Harmony, and climate change may present physical risks to our operations” for a discussion regarding the laws governing GHG emissions.
Laws and Regulations pertaining to Environmental Protection - Papua New Guinea
The PNG Environment Act 2000 regulates the impact of industry and other activities on the environment and sets out the environmental permitting requirements for developments, including mining projects. An environmental impact statement is required when projects are likely to have a significant adverse impact on the environment and other social or cultural heritage aspects. This statement must be lodged with the PNG Conservation and Environment Protection Authority (previously the Department of Environment and Conservation) for assessment, which includes a public review and referral phase. For large projects, the review process may also involve an independent peer review.
The ultimate grant of an environmental permit occurs after the endorsement of the environment impact statement by the PNG Environment Council and approval of the proposed activities by the PNG Minister for Environment, Conservation and Climate Change.
Potential Changes to PNG Environment Laws
A process of legislative review is underway and a number of environmental matters are under consideration. This includes a mine closure policy, which contains a mechanism for the provision of financial assurance for mine closure and rehabilitation costs; a biodiversity offset policy, which includes a mechanism for biodiversity offset payments to support biodiversity incentives; and a national oceans policy, which considers issues associated with offshore mining and extractive industries and deep sea tailings placement.
Harmony's operations and projects in PNG will be affected by any changes to PNG environmental laws, and the Company continues to engage with the PNG Government on these matters through the offices of the Chamber of Mines and Petroleum of PNG, and directly with the PNG Conservation and Environment Protection Authority and relevant PNG ministers.
Labor Relations
South Africa
Employee relations in South Africa are guided by the Labour Relations Act 66 of 1995 as well as by the Employee Relations Framework Policy and mine-based recognition agreements. In South Africa, Harmony recognizes four labor unions (save for the Moab Khotsong and Target Operations where the National Union of Metalworkers of South Africa ("NUMSA") is also recognized). As at financial year-end, these unions and their corresponding representation were as follows, namely the National Union of Mineworkers (at 58%); the Association of Mineworkers and Construction Union (at 23%); the United Association of South Africa (at 5%) National Union of Metalworkers of South Africa (5%) and Solidarity (at 2%). About 94% of our South African workforce is unionized, with the balance not belonging to a union. See “Integrated Annual Report for the 20-F 2020 - Ensuring stability, employee safety and well-being - Employee relations” on pages 58 to 71.
Australia
Employee relations in Australia are regulated by a combination of federal and state statutes that stipulate minimum standards and provide for collective bargaining and action. All employment contracts are based on the Australian Fair Work Act, 28 of 2009 and the National Employment Standards. Our Australian workforce is not unionized.
Papua New Guinea
Employee relations in PNG are regulated by the PNG Employment Act of 1978 and the PNG Employment of Non-Citizens Act 1978. Individual contracts are entered into, and the workforce is not unionized.
In PNG, wages are guided by independent market research that compares mining, oil and gas companies in the region. Industrial relations at Hidden Valley have been established through regular dialogue between management and employees via the Employee Relations Committee.
In addition, Hidden Valley mine employment is guided by the Employment and Training Plan appended to the Memorandum of Agreement (“MOA”) dated August 2005 between the company, the PNG Government, provincial and local governments and the Landowner Association. The MOA requires that, as far as is reasonably possible, preference in training and employment is given to local and landowner candidates before individuals from other provinces or countries. Compliance with this agreement is a critical issue in maintaining Hidden Valley mine’s license to operate.
C. ORGANIZATIONAL STRUCTURE
The information set forth under the heading:
“-Corporate profile” on page 6
of the Integrated Annual Report for the 20-F 2020 is incorporated herein by reference. Also see note 2.1 “Consolidation” of our consolidated financial statements, set forth beginning on page F-1.
D. PROPERTY, PLANT AND EQUIPMENT
The information set forth under the headings:

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“- Managing our Social and Environmental Stewardship - Environmental management and stewardship” on pages 121 to 138;
“- Delivering profitable ounces - Operational performance” on pages 72 to 103;
of the Integrated Annual Report for the 20-F 2020 is incorporated herein by reference. Also see note 13 “Property, Plant and Equipment” and note 31 “Cash Generated by Operations” of our consolidated financial statements, set forth beginning on page F-1.
Also see Item 4: “Information on the Company - Business Overview -- Reserves”, “- Geology” and “- Capital Expenditures” and Item 5: “Operating and Financial Review and Prospects - Tabular Disclosure of Contractual Obligations”.

ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis together with our consolidated financial statements, including the related notes, set forth beginning on page F-1.
A discussion of the changes in our financial condition and results of operations for the fiscal years ended June 30, 2019 and 2018, has been omitted from this Harmony 2020 Form 20-F, but may be found in Item 5, Operating and Financial Review, of the Harmony 2019 Form 20-F for the year ended June 30, 2019, filed with the SEC on October 24, 2019, which is available free of charge on the SEC’s website at www.sec.gov and our website at www.harmony.co.za.
A. OPERATING RESULTS
Overview
Harmony is currently the largest producer of gold in South Africa and is furthermore an important producer in PNG. Our gold sales for fiscal 2020 were 38,481 kilograms of gold (1.24 million ounces of gold) and in fiscal 2020 we processed approximately 25.4 million tonnes of ore. As at June 30, 2020, our mining operations and projects reported total proved and probable reserves of approximately 36.5 million gold equivalent ounces.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (“CODM”). The CODM has been identified as the CEO's office consisting of the chief executive officer, financial director, executive director: new business development, executive director: corporate affairs, chief operating officer: new business development, corporate strategy and projects, chief executive officer: South-east Asia and chief operating officer: South Africa operations. During 2020, the executive: business development was added to the CEO's office, following the appointment of a new financial director.

For segment purposes, management distinguishes between “Underground” and “Surface”, with each shaft or group of shafts or open-pit mine managed by a team (headed by a single general manager) being considered to be an operating segment.
Our reportable segments are as follows:
Bambanani, Doornkop, Joel, Kusasalethu, Masimong, Moab Khotsong, Target 1, Tshepong Operations, Unisel and Hidden Valley; and
all other shafts and surface operations, including those that treat historic sand dumps, waste rock dumps and tailings dams, are grouped together under “All other surface operations”.
Recent Accounting Pronouncements
Recently adopted accounting policies, as well as recent accounting pronouncements with the potential for impact on the consolidated financial statements, are described in note 2 “Accounting Policies” to our consolidated financial statements set forth beginning on page F-1.
COVID-19
On March 27, 2020, South Africa was placed under national lockdown, to curb the spread of COVID-19 and allow the country time in which to prepare for the demands the pandemic would have on its health care system. All of Harmony’s underground operations were placed on care and maintenance, with the surface operations permitted to continue working at close to full capacity.
On May 1, 2020, South African underground operations were granted concessions to start producing at a maximum capacity of 50% and as of June 1, 2020, operational restrictions were lifted further to allow the mining industry to operate at 100% of its labor capacity. Harmony’s SOP was adopted and rolled out, ensuring a safe return to work for each of its employees. Harmony’s SOP was informed by guidelines provided by the DMRE, the National Council for Infectious Diseases and the World Health Organization.
The SOP included the transport of South African employees from remote labor-sending areas back to the Company's mines. All requisite staffing, facilities and equipment were put in place to ensure rigorous screening as employees return to work and when at work, as well as isolate or quarantine employees infected by or exposed to COVID-19, with subsequent testing and treatment. Return to work has progressed smoothly albeit slowly, with the return of foreign nationals to South Africa taking longer than anticipated.
The effects of COVID-19 and other macro developments have increased financial risks such as exchange rate, interest rate and commodity price volatility, while also impacting on liquidity and credit risk. Management has put various measures in place to mitigate and/or manage the risks and continues monitoring the situation closely. See Item 3: "Key - Information - Risk Factors -The current COVID-19 pandemic has significantly impacted the global economy and markets over the past several months and may continue to do so, which could adversely affect our business or the trading price of our ordinary shares and ADSs", and Note 4 "COVID-19 Impact" and Note 37 "Financial Risk Management" of our consolidated financial statements for further details.
Critical Accounting Policies and Estimates
The preparation of our financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported results of our operations. Actual results may differ from those estimates. We have identified the most critical accounting policies upon which our financial results depend. Some of our accounting policies require the application of significant judgment and estimates by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty and are

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based on our historical experience, terms of existing contracts, management’s view on trends in the gold mining industry and information from outside sources.
Our significant accounting policies and critical accounting estimates and judgments are described in more detail in note 2 “Accounting Policies” and note 3 “Critical Accounting Estimates and Judgments”, respectively, to our consolidated financial statements set forth beginning on page F-1. This discussion and analysis should be read in conjunction with such consolidated financial statements and the relevant notes. Management has identified the following as critical accounting policies because estimates used in applying these policies are subject to material risks and uncertainties. Management believes the following critical accounting policies, together with the other significant accounting policies discussed in the notes to our consolidated financial statements, affect its more significant judgments and estimates used in the preparation of our consolidated financial statements and could potentially impact our financial results and future financial performance.
Gold Mineral Reserves
Gold mineral reserves are estimates of the amount of ounces that can be economically and legally extracted from the Group’s properties. In order to calculate the gold mineral reserves, estimates and assumptions are required about a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, commodity prices and exchange rates.
Estimating the quantities and/or grade of the reserves requires the size, shape and depth of the orebodies to be determined by analyzing geological data such as the logging and assaying of drill samples. This process may require complex and difficult geological judgments and calculations to interpret the data. These reserves are determined in accordance with the SAMREC Code and SEC Industry Guide 7.
Because the economic assumptions used to estimate the gold mineral reserves change from year to year, and because additional geological data is generated during the course of operations, estimates of the mineral reserves may change from year to year. Changes in the proved and probable reserves may affect the Group’s financial results and financial position in a number of ways, for example, depreciation and amortization charged in the income statement may change as they are calculated on the units-of-production method.
The estimate of the total expected future lives of our mines could be materially different from the actual amount of gold mined in the future. See Item 3: “Key Information - Risk Factors - Estimations of Harmony’s reserves are based on a number of assumptions, including mining and recovery factors, future cash costs of production, exchange rates, and the relevant commodity prices. As a result, metals produced in future may differ from current estimates”.
Depreciation of Mining Assets
Depreciation of mining assets is computed principally by the units-of-production method over the life of mine, based on estimated quantities of economically recoverable proved and probable reserves, which can be recovered in future from known mineral deposits.
The preparation of consolidated financial statements in compliance with IFRS requires management to assess the useful life of each of its operations separately based on the characteristics of each deposit and select the reserve/resource base that best reflects the useful life of the operation. In most instances, management considers the use of proved and probable reserves for the calculation of depreciation and amortization expense to be the best estimate of the life of the respective mining operation. Therefore, for most of the Company’s operations, we use proved and probable reserves only, excluding all inferred resources as well as any indicated and measured resources that have not yet been deemed economically recoverable.
In some instances, proved and probable reserves alone may not provide a realistic indication of the useful life of mine and related assets. In these instances, management may be confident that certain inferred resources will eventually be classified as measured and indicated resources, and if economically recoverable, they will be included in proved and probable reserves. Management is approaching economic decisions affecting the mine on this basis, but has not yet done the necessary development and geological drill work to improve the confidence to the required levels to designate them formally as reserves. In these cases, management, in addition to proved and probable reserves, may also include certain, but not all, of the inferred resources associated with these properties as the best estimate of the pattern in which the asset’s future economic benefits are expected to be consumed by the entity.

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resoucesv2a02.jpg
Management only includes the proved and probable reserves and the inferred resources that have been included in the life-of-mine plan. To be included in the life-of-mine plan, resources need to be above the cut-off grade set by management, which means that the resource can be economically mined and is therefore commercially viable. This consistent systematic method for inclusion in the life-of-mine plan takes management’s view of the gold price, exchange rates as well as cost inflation into account. The board of directors and management approach economic decisions affecting these operations based on the life-of-mine plans that include such resources. In declaring the resource, management would have had to obtain a specified level of confidence of the existence of the resource through drilling as required by the SAMREC Code. For further discussion on mineral reserves, see “- Gold Mineral Reserves” above.
In fiscal 2020, 2019 and 2018, the Company added the inferred resources that were included in the life-of-mine plans at Doornkop to the proved and probable reserves in order to calculate the depreciation expense. The depreciation calculation for all other operations was done using only the proved and probable reserves.
At Doornkop, there has been a steady conversion of the inferred mineral resources included in the life-of-mine plan into indicated and measured mineral resources that are classified as proven and probable reserves if economically viable. In addition, there have been no instances during the period presented where subsequent geological drilling or underground development indicated instances of inappropriate inclusion of inferred mineral resources in the life-of-mine plan. As such, management is confident that the inclusion of the inferred mineral resources in the life-of-mine plan when calculating the depreciation charge is a more realistic reflection of the pattern of consumption of the future economic benefits of these assets than would be achieved by excluding them.

Management’s confidence in the economical recovery of these inferred mineral resources is based on historical experience and available geological information. The surface drilling spread (surface boreholes) and underground Long Inclined Borehole ("LIB") drilling at Doornkop has indicated that the portion of the inferred mineral resources included in the life-of-mine plan exist and can be economically mined with a high level of confidence for the South Reef ore body. The surface boreholes and LIB drilling have been used to determine the existence and mineralogy of the South Reef as well as the location of major geological structures. However, further geological drilling and underground development is required to upgrade the confidence classification from inferred mineral resources to indicated and measured mineral resource. Underground geological LIB drilling is currently being done and planned to continue as and when the underground infrastructure is in place

Additional confidence in existence and commercial viability is obtained from the fact that the South Reef at the surrounding operations have already been mined over many years in the past. Doornkop mines the continuation of the South Reef that these mined-out operations exploited. At Doornkop the geological setting of the South Reef ore body is such that there is an fairly even distribution of the mineralized content within the identified channels, and reliance can be placed on the comparable results of the surrounding mines. As these results are already known, extrapolations of the expected mineable channels can be done with a reasonable degree of accuracy. Although the current information does not allow the classification of inferred mineral resources as indicated or measured mineral resources, it does provide management with valuable information and increases the level of confidence in the existence and grade expectation of the South Reef at Doornkop.

Future capital expenditure necessary to access these inferred resources, such as costs to complete a decline or a level, has also been included in the cash flow projections for the life-of-mine plan and have been taken into account when determining the pattern of depreciation charge for these operations.
Due to the fact that the economic assumptions used to estimate the proved and probable reserves and resources change from year to year, and because additional geological data is generated during the course of operations, estimates of the resources and proved and probable reserves may change from year to year. Changes in the proved and probable reserves and the inferred resource base used in the life-of-mine plan may affect the calculation of depreciation and amortization. The change is recognized prospectively.

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The relevant statistics for Doornkop have been included below.
 
 
Applicable to the Fiscal Year Ended June 30,
Doornkop
2020
2019
2018
A
Years (life-of-mine plan)
16

16

18

B
Reserves (Tonnes million)
9.8

7.0

4.6

B
Resources (Tonnes million)
12.8

12.0

16.9

D
Total inferred resources (Tonnes million)
4.3

5.2

10.6

E
Inferred resources included in life-of-mine plan (Tonnes million)
4.6

5.6

9.5

F
Future development costs (Rand million)
1,034

519

494

G
Depreciation expense for the fiscal year
 
 
 
 
As reported (Rand million)
175

258

185

 
Excluding inferred resources (Rand million)
200

320

336

Doornkop’s inferred resources included in the life-of-mine plan is based on the tonnage milled which includes all dilution factors. The tonnes included in life-of-mine plan exceeds the declared inferred resource values as the mineral resource tons does not include any dilution and only reflects the in situ on reef tons.
Impairment of Property, Plant and Equipment
We review and evaluate our mining assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Each operating shaft, along with allocated common assets such as plants and administrative offices, is considered to be a cash generating unit as each shaft is largely independent of the cash flows of other shafts and assets.
Future cash flows are estimated based on estimated quantities of recoverable minerals, expected commodity prices (considering current and historical prices, price trends and related factors), production levels and cash costs of production, capital and reclamation costs, all based on detailed life-of-mine plans. The significant assumptions in determining the future cash flows for each individual operating mine at June 30, 2020, apart from production cost and capitalized expenditure assumptions unique to each operation, included gold price, silver price and exchange rate assumptions. These are as follows:

Fiscal year ended June 30, 2020
 
Year 1
Year 2
Year 3
Long Term
US$ gold price per ounce
1,610

1,558

1,469

1,350

US$ silver price per ounce
17.00

17.00

17.00

17.00

Rand/gold price (R/kg)
865,000

775,000

722,000

630,000

Rand/US$ exchange rate
16.72

15.47

15.29

14.51

US$/Kina exchange rate
3.45

3.45

3.45

3.45

 
South Africa
Hidden Valley
US dollar per ounce
2020

2019

2018

2020

2019

2018

 
 
 
 
 
 
 
Measured
25.00

25.00

25.00

n/a

n/a

n/a

Indicated
8.00

8.00

8.00

8.00

8.00

5.84

Inferred
2.80

2.80

2.80

n/a

n/a

5.84

 
 
 
 
 
 
 

The term “recoverable minerals” refers to the estimated amount of gold that will be obtained from proved and probable reserves and related exploration stage mineral interests, except for other mine-related exploration potential and greenfields exploration potential discussed separately below, after taking into account losses during ore processing and treatment. Estimates of recoverable minerals from such exploration stage mineral interests are risk adjusted based on management’s relative confidence in such materials. With the exception of other mine-related exploration potential and greenfields exploration potential, estimates of future undiscounted cash flows are included on an "area of interest" basis, which generally represents an individual operating mine, even if the mines are included in a larger mine complex. In the case of mineral interests associated with other mine-related exploration potential and greenfields exploration potential, cash flows and fair values are individually evaluated based primarily on recent exploration results and recent transactions involving sales of similar properties.

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As discussed above under “- Gold Mineral Reserves”, various factors could impact our ability to achieve our forecasted production schedules from proved and probable reserves. Additionally, commodity prices, capital expenditure requirements and reclamation costs could differ from the assumptions used in the cash flow models used to assess impairment. The ability to achieve the estimated quantities of recoverable minerals from exploration stage mineral interests involves further risks in addition to those factors applicable to mineral interests where proved and probable reserves have been identified, due to the lower level of confidence that the identified mineralized material can ultimately be mined economically. Assets classified as other mine-related exploration potential and greenfields exploration potential have the highest level of risk that the carrying value of the asset can be ultimately realized, due to the still lower level of geological confidence and economic modeling. 
Management performed an assessment for impairment triggers as well as indications of reversal of previously recorded impairment losses at June 30, 2020. Due to the uncertainty of the impact of the COVID-19 pandemic and the South African national lockdown would have on the South African underground operations, as well as the increase in the short-term gold price, the recoverable amounts for these cash-generating units ("CGUs") were calculated.
Due to the volatilities experienced in the markets and the uncertainty in forecasting future cash flows due to the impact of the COVID-19 pandemic, management has used various probability scenarios in determining the recoverable amounts for the CGUs at June 30, 2020.

The following were factored into management's judgments:
infection rates and the timing of the expected peaks in the provinces that Harmony's operations are situated in, based on models prepared by the South African government;
expected disruptions to production together with the mitigation strategies management has in place;
potential duration of the impact of the virus and the related restrictions in operations; and
potential changes of the timing of various cash flows due to shortened production breaks.

Management included estimates of the staffing costs for screening and monitoring employees at work as well as those that are in quarantine. The cost estimates also include the accommodation expenses for employees in quarantine or isolation as well as the treatment cost for those with mild symptoms and those with severe symptoms that need to be hospitalized. These estimates were based on actual costs incurred for the period March to June 2020.

In preparing the various scenarios, management considered and varied:
the potential impact on production and therefore on the revenue cash flows, based on historical trends that have been extrapolated to account for varying disruption levels;
the duration of potential disruptions to production, ranging from 12 months to 24 months; and
the infection rates and associated costs. Where infections were assumed to continue into Year 2, the rate was dependent on the assumed infections in Year 1, with a higher rate in Year 1 resulting in a lower rate in Year 2, and vice versa.
Management assumed that the production costs would be largely unaffected as employees would either be at work or on sick leave, while the strategy of moving crews around would ensure production carried on without undue disruption and therefore would not impact on costs such as consumables and electricity.

The calculated cash flows were then weighted based on management's expectation of each of the scenarios occurring. The resulting amounts were discounted using the specific discount rate for each operation in order to determine the recoverable amount.

Based on the impairment tests performed, no impairments were recorded in fiscal 2020. Where CGUs had previously been impaired, management considered whether the impairment loss (or the contributors to the previously recognized impairment loss) no longer exists or might have decreased. Management considered general and specific factors for each CGU and concluded that although overall the gold price had improved from the time that the impairment losses had been recognized, the specific circumstances that led to the original impairments had not reversed.  Management also considered the level of uncertainty of the impact of COVID-19 on production and therefore on the cash flows. Due to the volatility embedded in the potential upside driven by the higher gold prices in the short to medium term, coupled with the fact that the factors resulting in the previously recognized impairment losses had not reversed, management resolved it to be appropriate for no reversal of previously recognized impairment losses to be recorded for the period under review.

During fiscal 2019 we recorded an impairment of R3.9 billion as well as an impairment of R5.3 billion in 2018. Material changes to any of these factors or assumptions discussed above could result in future impairment charges, particularly around future commodity price assumptions. A 10% decrease in commodity price assumptions at June 30, 2020 would have resulted in impairments as follows:

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(R millions)

Tshepong Operations
3,352

Target 1
804

Joel
716

Kusasalethu
441

Bambanani*
94

Other Freegold assets
20

Moab Khotsong*
15

Unisel
6

*The goodwill balance attributed to this cash generating unit would be reduced first. See “- Carrying Value of Goodwill” below.
A 10% increase would result in no impairment being recorded. This analysis assumes that all other variables remain constant.
Carrying Value of Goodwill
We evaluate, at least on an annual basis, the carrying amount of goodwill to determine whether current events and circumstances indicate that such carrying amount may no longer be recoverable. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Each operating shaft, along with allocated common assets such as plants and administrative offices, is considered to be a cash generating unit as each shaft is largely independent of the cash flows of other shafts and assets. To accomplish this, we compare the recoverable amounts of our cash generating units to their carrying amounts. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. If the carrying value of a cash generating unit were to exceed its recoverable amount at the time of the evaluation, an impairment loss is recognized by first reducing goodwill, and then the other assets in the cash generating unit on a pro rata basis. Assumptions underlying fair value estimates are subject to risks and uncertainties. If these assumptions change in the future, we may need to record impairment charges on goodwill not previously recorded.
As at June 30, 2020 our goodwill related to the Moab Khotsong and Bambanani cash generating units. No impairment on goodwill was recorded in fiscal 2020 as the recoverable amounts exceeded the carrying values.
As at June 30, 2019, our goodwill related to the Moab Khotsong and Bambanani cash generating units. Goodwill of R302 million was recognized on acquisition of the Moab Khotsong operations during fiscal 2018. Refer to note 12 "Acquisitions and Business Combinations" of our consolidated financial statements for further details. An impairment of R6 million on goodwill relating to Bambanani, was recorded in fiscal 2019. Impairment on goodwill of R367 million was recorded during fiscal 2018 of which the Tshepong Operations amounted to R326 million and R41 million related to Joel.
Derivatives and Hedging Activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The difference between the fair value of the derivative at initial recognition and expected forward transaction price is deferred and recognized as a day one gain or loss. The day one gain or loss is amortized over the derivative contract period and recognized in profit or loss in gains/losses on derivatives.
The full fair value of a derivative is classified as a non-current asset or liability when the remaining maturity is more than 12 months; it is classified as a current asset or liability when the remaining maturity is less than 12 months.
Cash flow hedge
The Group designates, as cash flow hedges, certain derivatives as hedges of a particular risk associated with the cash flows of highly probable forecast transactions. The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in cash flows of hedged items.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss within gains/losses on derivatives.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the forecast sale that is hedged takes place and affects profit or loss. The gain or loss relating to the effective portion of the Rand gold forward sales contracts is recognized in profit or loss within revenue.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction that was hedged is ultimately recognized in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to profit or loss.

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Derivatives not designated for hedge accounting purposes
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value as well as gains and losses on expiry, disposal or termination of any derivative instrument that does not qualify for hedge accounting are recognized immediately in profit or loss and are included in gains/losses on derivatives.
Provision for Environmental Rehabilitation
Our mining and exploration activities are subject to various laws and regulations governing the protection of the environment. Estimated long term environmental obligations, comprising pollution control, rehabilitation and mine closure, are based on the Group’s environmental management plans. Annual changes in the provision consist of finance costs relating to the change in the present value of the provision and inflationary increases in the provision estimate, as well as changes in estimates. The present value of environmental disturbances created is capitalized to mining assets against an increase in the rehabilitation provision. The mining asset is depreciated as discussed above. Rehabilitation projects undertaken, included in the estimates are charged to the provision as incurred. The cost of ongoing current program