As filed with the Securities and Exchange Commission on October 24, 2011
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
¨ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended June 30, 2011
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, 1760
(Address of principal executive offices)
Marian van der Walt, Executive: Corporate and Investor Relations
tel: +27 11 411 2037, marian@harmony.co.za , fax: +27 866 140 999,
Randfontein Office Park, CNR Ward Avenue and Main Reef Road, Randfontein, South Africa, 1760
(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:
Ordinary shares, with nominal value Rand 50 cents per share*
(Title of Class)
American Depositary Shares (as evidenced by American Depositary Receipts),
each representing one ordinary share
(Title of Class)
Securities registered or to be registered pursuant to Section 12(g) of the Act:
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 issuers classes of capital or common stock as of the close of the last full fiscal year covered by this Annual Report was:
430,084,628 ordinary shares, with nominal value of Rand 50 cents 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 þ 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 ¨ NO þ
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 þ 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 ¨ NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ |
Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨ |
International Financial Reporting Standards as issued by the International Accounting Standards Board þ |
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 þ
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 þ
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 þ NO ¨
* | Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission. |
1
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 Annual Report on Form 20-F, or this annual report, unless the context otherwise requires, the term Harmony refers 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$ refers to Australian dollars, K or Kina refers to Papua New Guinean Kina and references to $ , US$ and U.S. 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 Securities and Exchange Commission Guide 7, it is based on assumptions which may prove to be incorrect. See Item 3. Key Information Risk Factors Estimations of Harmonys gold reserve figures are based on a number of assumptions, including mining and recovery factors, future cash costs or production and the price of gold. As a result, quantities of gold produced 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 at the end of this annual report. This glossary may assist you in understanding these terms.
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 and interim financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ( IFRS ). Prior to fiscal year ended June 30, 2008, our annual financial statements (translated into U.S. dollars) were prepared and filed with the U.S. Securities and Exchange Commission ( SEC ) in accordance with generally accepted accounting principles in the United States ( U.S. GAAP ). On December 21, 2007, the SEC adopted rules allowing foreign private issuers that file Annual Reports on Form 20-F to file financial statements with the SEC in accordance with IFRS without reconciliation to U.S. GAAP. As per these rules, we include in this annual report our consolidated financial statements prepared in accordance with IFRS, translated into U.S. dollars. All financial information, except as otherwise noted, is stated in accordance with IFRS.
In this annual report, we also present cash operating costs and cash operating costs per ounce, 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 operating costs, and cash operating costs per ounce 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 U.S. dollar equivalent amounts of certain information and transactions in Rand, Kina and A$. Unless otherwise stated, we have translated (i) balance sheet items at the closing rate as reported by Reuters on the last business day of the period (R6.78 per US$1.00 as at June 30, 2011 and R7.63 per US$1.00 as at June 30, 2010), (ii) acquisitions, disposals and specific items included within equity at the rate prevailing at the date the transaction was entered into and (iii) income statement items at the average rate for the year (R6.99 per US$1.00 as at June 30, 2011, R7.58 per US$1.00 as at June 30, 2010 and R9.00 per US$1.00 for fiscal 2009). Capital expenditures for fiscal 2012 have been translated at the rates used for balance sheet items at June 30, 2011. By including these U.S. dollar equivalents in this annual report, we are not representing that the Rand, Kina and A$ amounts actually represent the U.S. dollar amounts, as the case may be, or that these amounts could be converted at the rates indicated. For further information, see Item 3. Key Information Exchange Rates .
2
FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 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 include all statements other than statements of historical fact, including, without limitation, any statements preceded by, followed by, or that include the words targets, believes, expects, aims intends will, may, anticipates, would, could or similar expressions or the negative thereof. In particular, among other statements, certain statements in Item 4. Information on the Company, Item 5. Operating and Financial Review and Prospects and Item 11. Quantitative and Qualitative Disclosures About Market Risk are forward-looking in nature. Statements in this annual report that are not historical facts are forward-looking statements for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act ), and Section 27A of the Securities Act of 1933, as amended.
These forward-looking statements, including, among others, those relating to our future business prospects, revenues and income, 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:
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overall economic and business conditions in South Africa and elsewhere; |
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the ability to achieve anticipated efficiencies and other cost savings in connection with past and future acquisitions; |
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fluctuations in the market price of gold; |
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the occurrence of hazards associated with underground and surface gold mining; |
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the occurrence of labor disruptions; |
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availability, terms and deployment of capital; |
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changes in government regulation, particularly mining rights and environmental regulation; |
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fluctuations in exchange rates; |
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currency devaluations/appreciations and other macroeconomic monetary policies; and |
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socio-economic instability in South Africa and other countries in which we operate. |
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.
Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable.
Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
3
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 and with Item 3. Key Information Risk Factors, Item 5. Operating and Financial Review and Prospects, all included elsewhere in this annual report. 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 and interim financial statements are prepared in accordance with IFRS. Prior to fiscal year ended June 30, 2008, our annual financial statements (translated into U.S. dollars) were prepared and filed with the SEC in accordance with U.S. GAAP. On December 21, 2007, the SEC adopted rules allowing foreign private issuers that file Annual Reports on Form 20-F to file financial statements with the SEC in accordance with IFRS without reconciliation to U.S. GAAP . As per these rules, we have included in this annual report our consolidated financial statements prepared in accordance with IFRS, translated into U.S. dollars.
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 has been extracted from the more detailed information and financial statements prepared in accordance with IFRS, including our audited consolidated financial statements as of June 30, 2011 and 2010 and for each of the years in the three years ended June 30, 2011 and the related notes, which appear elsewhere in this annual report. The historical consolidated financial data at June 30, 2009, 2008 and 2007, and for each of the years in the two years ended June 30, 2008, has been extracted from our audited consolidated financial statements not included in this annual report as adjusted for discontinued operations and the accounting changes described below.
During fiscal 2008, we early adopted IAS 23 (Revised) Borrowing Costs. In accordance with the Revised Standards transitional provisions, we designated July 1, 2000 as the effective date and applied the requirements of the Revised Standard to all qualifying projects for which the commencement date of capitalization was on or after that date. The effect of this change on the 2007 year has been included in the selected consolidated information below.
Discontinued operations for the periods below include our Cooke and Orkney operations in South Africa, as well as our South Kalgoorlie and Mount Magnet operations in Australia, up to the date of their disposal. The assets and liabilities of the Cooke operation were first classified as held for sale in fiscal 2008 and the results of this operation presented as discontinued operations until the time of its disposal to Rand Uranium (Proprietary) Limited ( Rand Uranium ) in November 2008. The assets and liabilities of the Orkney and Australias South Kalgoorlie operations were first classified as held for sale in fiscal 2007, and the results of these operations reflected as discontinued operations in anticipation of their disposal in fiscal 2008. In fiscal 2010, Australias Mount Magnet operations were classified as held for sale and the results of the Mount Magnet operation presented as discontinued operations when an agreement for its disposal to Ramelius Resources Limited ( Ramelius ) was concluded. The reclassifications in respect of discontinued operations were done in terms of IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations. See note 16 of the consolidated financial statements and Item 4 . Information on the Company Business Mount Magnet Operations , Item 4 . Information on the Company Business Cooke Operations .
4
Fiscal year ended June 30, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
($ in millions, except per share amounts and cash operating costs per ounce) | ||||||||||||||||||||
Income Statement Data |
||||||||||||||||||||
Revenue |
1,781 | 1,489 | 1,277 | 1,269 | 1,116 | |||||||||||||||
Operating profit |
4 | 22 | 236 | 73 | 154 | |||||||||||||||
(Loss)/profit from associates |
(7 | ) | 7 | 1 | (11 | ) | (3 | ) | ||||||||||||
Profit from continuing operations before taxation |
14 | 24 | 238 | (39 | ) | 156 | ||||||||||||||
Taxation |
69 | (44 | ) | (22 | ) | (65 | ) | (39 | ) | |||||||||||
Profit/(loss) from continuing operations |
83 | (20 | ) | 216 | (104 | ) | 117 | |||||||||||||
Profit/(loss) from discontinued operations |
3 | (4 | ) | 95 | 74 | (66 | ) | |||||||||||||
Net profit/(loss) |
86 | (24 | ) | 311 | (30 | ) | 51 | |||||||||||||
Basic earnings/(loss) per share from continuing operations ($) |
0.19 | (0.05 | ) | 0.52 | (0.26 | ) | 0.29 | |||||||||||||
Diluted earnings/(loss) per share from continuing operations ($) |
0.19 | (0.05 | ) | 0.51 | (0.26 | ) | 0.29 | |||||||||||||
Basic earnings/(loss) per share ($) |
0.20 | (0.06 | ) | 0.75 | (0.08 | ) | 0.12 | |||||||||||||
Diluted earnings/(loss) per share ($) |
0.20 | (0.06 | ) | 0.74 | (0.08 | ) | 0.12 | |||||||||||||
Weighted average number of shares used in the computation of basic earnings/(loss) per share |
429,310,123 | 426,381,581 | 414,120,732 | 400,750,167 | 397,910,797 | |||||||||||||||
Weighted average number of shares used in the computation of diluted earnings/(loss) per share |
430,420,068 | 427,846,547 | 415,962,899 | 402,894,248 | 402,382,011 | |||||||||||||||
Dividends per share ($) (1) |
0.07 | 0.06 | | | | |||||||||||||||
Dividends per share (R) (1) |
0.50 | 0.50 | | | | |||||||||||||||
Other Financial Data |
||||||||||||||||||||
Cash operating cost per ounce of gold from continuing operations ($/oz) (2) |
1,009 | 801 | 583 | 600 | 484 | |||||||||||||||
Total cash operating cost per ounce of gold ($/oz) (2) |
1,009 | 801 | 586 | 602 | 489 | |||||||||||||||
Balance Sheet Data |
||||||||||||||||||||
Assets |
||||||||||||||||||||
Property, plant and equipment |
4,607 | 3,874 | 3,614 | 3,531 | 3,484 | |||||||||||||||
Assets of disposal groups classified as held for sale |
40 | 32 | | 197 | 182 | |||||||||||||||
Total assets |
5,880 | 5,141 | 4,925 | 4,710 | 5,160 | |||||||||||||||
Net assets |
4,450 | 3,828 | 3,824 | 3,172 | 3,366 | |||||||||||||||
Equity and liabilities |
||||||||||||||||||||
Share capital |
4,033 | 4,027 | 4,004 | 3,787 | 3,752 | |||||||||||||||
Total equity |
4,450 | 3,828 | 3,824 | 3,172 | 3,366 | |||||||||||||||
Borrowings (current and non-current) |
230 | 156 | 47 | 525 | 653 | |||||||||||||||
Liabilities of disposal groups held for sale |
2 | 18 | | 64 | 77 | |||||||||||||||
Other liabilities |
1,198 | 1,139 | 1,054 | 949 | 1,064 | |||||||||||||||
Total equity and liabilities |
5,880 | 5,141 | 4,925 | 4,710 | 5,160 |
(1) |
Dividends per share relates to the dividends recorded and paid during the fiscal year. |
(2) |
Cash operating costs is a non-GAAP measure. We calculate cash operating costs per ounce by dividing total cash operating costs by gold produced which therefore excludes the effect of the movement in the gold inventory from the cash operating cost amount. Cash operating costs, include mine production costs, transport and refinery costs, applicable general and administrative costs, ongoing environmental rehabilitation costs as well as transfers to and from deferred stripping and costs associated with royalties. Ongoing employee termination costs are included; however, employee termination costs associated with major restructuring and shaft closures are excluded. Cash operating costs have been calculated on a consistent basis for all periods presented. Changes in cash operating costs per ounce are affected by operational performance, as well as changes in the currency exchange rate between the Rand and the U.S. dollar. Because cash operating costs is a non-GAAP measure, it 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 operating costs and cash operating cost per ounce may vary from company to company and may not be comparable to other similarly titled measures of other companies. However, we believe that cash operating costs per ounce is a useful indicator to investors and management of a mining companys performance as it provides (1) an indication of the cash generating capacities of the mining operations, (2) the trends in cash operating costs as the companys operations mature, (3) a measure of a companys performance, by comparison of cash operating costs per ounce to the spot price of gold and (4) an internal benchmark of performance to allow for comparison against other companies. For further information, see Item 5. Operating and Financial Review and Prospects Costs Reconciliation of non-GAAP measures. |
EXCHANGE RATES
Unless otherwise stated, balance sheet item amounts are translated from Rand to U.S. dollars at the exchange rate prevailing on the last business day of the period (R6.78 per US$1.00 as at June 30, 2011), except for acquisitions, disposals and specific items included within equity that are converted at the exchange rate prevailing on the date the transaction was entered into, and income statement
5
item amounts that are translated from Rand to U.S. dollars at the average exchange rate for the period (R6.99 per US$1.00 for fiscal 2011). During the year, the Rand/dollar closing exchange rate ranged between R6.57 and R7.75 per US$1.00.
As of October 17, 2011, the exchange rate per US$1.00 was R7.99. (1)
The following table sets forth, for the past five fiscal years, the average and period end rates for Rand expressed in Rand per US$1.00. For periods prior to December 31, 2008, the following tables express the exchange rates in terms of the noon buying rate in New York City for cable transfers in Rand as certified for customs purposes by the Federal Reserve Bank of New York. As of December 31, 2008, the Federal Reserve Bank ceased publication of the noon buying rate and, as such, the exchange rates for fiscal 2009, 2010 and 2011 are sourced from Reuters, being the closing rate at period end.
Fiscal Year Ended June 30, |
Average (1) | Period End | ||
2007 |
7.20 (2) | 7.04 | ||
2008 |
7.26 (2) | 7.80 | ||
2009 |
9.00 (3) | 7.72 | ||
2010 |
7.58 (3) | 7.63 | ||
2011 |
6.99 (3) | 6.78 | ||
Month of |
High | Low | ||
May 2011 |
7.03 | 6.59 | ||
June 2011 |
6.88 | 6.69 | ||
July 2011 |
6.99 | 6.63 | ||
August 2011 |
7.26 | 6.68 | ||
September 2011 |
6.98 | 8.27 | ||
October 2011 (through October 17, 2011) |
8.28 | 7.83 |
(1) | Based on the interbank rate as reported by Reuters. |
(2) | The average of the noon buying rates on the last day of each full month during the relevant period as certified for customs purposes by the Federal Reserve Bank of New York. |
(3) | The daily average of the closing rate during the relevant period as reported by Reuters. |
Fluctuations in the exchange rate between Rand and the U.S. dollar will affect the dollar equivalent of the price of ordinary shares on the Johannesburg Stock Exchange, which may affect the market price of the American Depositary Shares ( ADSs ) on the New York Stock Exchange. These fluctuations will also affect the dollar amounts received by owners of ADSs on the conversion of any dividends on ordinary shares paid in Rand.
6
CAPITALIZATION AND INDEBTEDNESS
Not applicable.
REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
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 businesses, 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 risks described below could occur individually or cumulatively and intensify in case of a cumulative occurrence.
Risks Relating to Our Business and the Gold Mining Industry
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 for any sustained period may lead to losses and require Harmony to curtail or suspend certain operations.
Substantially all Harmonys revenues come from the sale of gold. Although the gold price has increased over the last decade, historically, the market price for gold has fluctuated widely and been affected by numerous factors over which Harmony has no control, including:
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demand for gold for industrial uses, jewellery and investment; |
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international or regional political and economic trends; |
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strength or weakness of the US dollar (the currency in which gold prices generally are quoted) and of other currencies; |
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financial market expectations on the rate of inflation; |
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interest rates; |
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speculative activities; |
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forward sales by gold producers; |
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actual or expected purchases and sales of gold bullion held by central banks or other large gold bullion holders or dealers; and |
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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. 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.
7
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 the past ten years:
Annual gold price: 2001 2011
Price per ounce (US$) | ||||||||||||
Calendar year | High | Low | Average | |||||||||
2001 |
293 | 256 | 271 | |||||||||
2002 |
332 | 278 | 309 | |||||||||
2003 |
412 | 322 | 361 | |||||||||
2004 |
427 | 343 | 389 | |||||||||
2005 |
476 | 411 | 434 | |||||||||
2006 |
725 | 525 | 604 | |||||||||
2007 |
841 | 608 | 695 | |||||||||
2008 |
1,011 | 713 | 872 | |||||||||
2009 |
1,212 | 810 | 972 | |||||||||
2010 |
1,421 | 1,058 | 1,225 | |||||||||
2011 (year to October 17, 2011) |
1,990 | 1,314 | 1,541 |
On October 17, 2011, the afternoon fixing price of gold on the London bullion market was US$1,682/oz.
While the aggregate effect of these factors is impossible to predict, if gold prices should fall below Harmonys 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. 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.
Harmonys average cash cost per ounce of gold produced from continuing operations was US$1,009 in fiscal 2011, US$801 in fiscal 2010 and US$583 in fiscal 2009.
Foreign exchange fluctuations could have a material adverse effect on Harmonys operational results and financial condition.
Gold is priced throughout the world in US dollars and, as a result, Harmonys 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. Any significant and sustained appreciation of the Rand and other non-US currencies against the dollar will materially reduce Harmonys Rand revenues and overall net income.
As Harmony currently does not enter into forward sales, commodity derivatives or hedging arrangements on future gold production, it is exposed to the impact of any significant decreases in the gold price.
As a rule, Harmony sells its gold at the prevailing market price. Currently, the company does not enter into forward sales, commodity derivative or hedging arrangements to establish a price in advance for the sale of future gold production, although Harmony may do so in future. As a result, Harmony may realize the benefit of any short-term increase in the gold price, but is not protected against decreases; if the gold price should decrease significantly, Harmonys revenues may be materially adversely affected.
Global economic conditions could adversely affect the profitability of Harmonys operations.
Harmonys operations and performance depend on global economic conditions. A global economic downturn may have follow-on effects on our business. These could include:
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key suppliers could become insolvent, resulting in a break-down in the supply chain; or |
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the availability of credit may be reduced this may make it more difficult for Harmony to obtain financing for its operations and capital expenditure or make financing more expensive. |
In addition, uncertainty on global economic conditions may also increase volatility or negatively impact the market value of Harmonys securities.
8
Estimations of Harmonys gold reserves are based on a number of assumptions, including mining and recovery factors, future cash costs of production and the price of gold. As a result, quantities of gold produced may differ from current estimates.
The mineral reserve estimates in this annual report are estimates of the mill-delivered quantity and grade of gold in Harmonys deposits and stockpiles. They represent the amount of gold 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. Harmonys mineral reserves are estimated based on a number of factors, which have been stated in accordance with the SAMREC and JORC codes, SEC Industry Guide 7 and Sarbanes-Oxley. Calculations of Harmonys mineral reserves are based on estimates of:
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future cash costs; |
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future gold prices; and |
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future currency exchange rates. |
These factors, which significantly impact mineral reserve estimates, are beyond Harmonys control. As a result, reserve estimates in this annual report should not be interpreted as assurances of the economic life of Harmonys 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 these, we may in future need to revise these estimates. In particular, if Harmonys cash operating and production costs increase or the gold price decreases, recovering a portion of Harmonys mineral reserves may become uneconomical. This will lead, in turn, to a reduction in estimated reserves.
To maintain gold production beyond the expected lives of Harmonys existing mines or to increase production materially above projected levels, Harmony will need to access additional reserves through exploration or discovery.
Harmonys operations have limited proved and probable reserves, and exploration and discovery 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 many risks, including those related to:
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locating orebodies; |
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geological nature of the orebodies; |
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identifying the metallurgical properties of orebodies; |
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estimating the economic feasibility of mining orebodies; |
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developing appropriate metallurgical processes; |
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obtaining necessary governmental permits; and |
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constructing mining and processing facilities at any site chosen for mining. |
Harmonys exploration efforts might not result in the discovery of mineralization, and any mineralization discovered might not result in an increase in proved and probable reserves. To access additional reserves, Harmony will need to successfully complete development projects, including extensions to existing mines and, possibly, 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. Feasibility studies include estimates of expected or anticipated economic returns, which are based on assumptions about:
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future gold and other metal prices; |
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anticipated tonnage, grades and metallurgical characteristics of ore to be mined and processed; |
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anticipated recovery rates of gold and other metals from the ore; and |
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anticipated total costs of the project, including capital expenditure and cash costs. |
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Actual cash costs, capital expenditure, production and economic returns may differ significantly from those anticipated by feasibility studies for new development projects.
It can take a number of years from the initial feasibility study until development 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 any new mine, including:
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availability and timing of necessary environmental and governmental permits; |
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timing and cost of constructing mining and processing facilities, which can be considerable; |
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availability and cost of skilled labor, power, water and other materials; |
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accessibility of transportation and other infrastructure, particularly in remote locations; |
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availability and cost of smelting and refining arrangements; |
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availability of funds to finance construction and development activities; and |
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spot and expected future commodity prices of metals including gold, silver, copper, uranium and molybdenum. |
Harmony currently maintains a range of focused exploration programs, concentrating on areas not too distant from its operational mines, as well as a number of prospective known gold mineralized regions around the world. During fiscal 2010 and fiscal 2011, the bulk of exploration expenditure was allocated to activities in Papua New Guinea ( PNG ) and South Africa. 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.
Costs associated with pumping water inflows from closed mines adjacent to our operations could adversely affect Harmonys 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 would adversely affect any one of our adjacent mining operations.
Fluctuations in input production prices linked to commodities may adversely affect Harmonys operational results and financial condition.
Fuel, energy and consumables, including diesel, heavy fuel oil, chemical reagent, explosives, tyres, 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.
The supply of electricity and increases in the cost of power may adversely affect our results of operations and our financial condition.
In South Africa, each of our mining operations depends on electrical power generated by the state utility, Eskom, which holds a monopoly on the South African market. As a result of increased demand exceeding available generating capacity, South Africa has been subject to disruptions in electrical power supply. In fiscal 2008, electricity supply was interrupted by Eskom, halting production at certain of our mines. This led to management restructuring operating processes to control and reduce our consumption of electricity at all our operations. There have been no further disruptions and we have been able to continue production at a reduced electricity allocation as required by the energy conservation scheme ( ECS ) and interim rules imposed by Eskom. However, an insufficient supply of electricity may affect our operational results and financial condition.
As a result of Eskoms planned capital expansion program to deal with power constraints, an average annual tariff increase of 25% for the three-year multi-year price determination period has been approved by the National Energy Regulator South Africa ( NERSA ). The first increase was implemented on 1 April 2010. These increases will have a negative impact on our results of operations going forward.
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PNG has limited power generation and distribution capacity. This capacity is increasing but, currently, Harmony mines and projects still rely heavily on own power generation using diesel. The cost of this power will fluctuate with changes in the oil price.
Also, see Item 5. Electricity in South Africa.
We may experience problems in identifying, financing and managing new acquisitions and integrating them with our existing operations.
Acquiring new gold mining operations involves a number of risks including:
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our ability to identify appropriate assets for acquisition and/or to negotiate acquisitions on favorable terms; |
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obtaining the financing necessary to complete future acquisitions; |
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difficulties in assimilating the operations of the acquired business; |
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difficulties in maintaining our financial and strategic focus while integrating the acquired business; |
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problems in implementing uniform standards, controls, procedures and policies; |
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increasing pressures on existing management to oversee a rapidly expanding company; and |
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to the extent we acquire mining operations outside South Africa or Australasia, encountering difficulties relating to operating in countries in which we have not previously operated. |
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, financial condition and share price.
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.
Harmony reviews and tests the carrying value of its assets when events or changes in circumstances suggest that this amount may not be recoverable.
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. 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 30 June 2011, Harmony had substantial amounts of property, plant and equipment, goodwill and other assets on its consolidated balance sheets. Impairment charges relating to these assets were recorded and if any one or a combination of these uncertainties should occur, management may be required to recognize further impairment charges, which could affect Harmonys financial results and condition.
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.
The business of gold mining involves significant risks and hazards, including environmental hazards and industrial accidents. In particular, hazards associated with underground mining include:
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rock bursts; |
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seismic events; |
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underground fires; |
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cave-ins or falls of ground; |
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discharges of gases and toxic chemicals; |
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release of radioactive hazards; |
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flooding; |
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pillar mining; |
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accidents; and |
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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:
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flooding of the open-pit; |
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collapse of open-pit walls; |
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accidents associated with operating large open-pit and rock transportation equipment; and |
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accidents associated with preparing and igniting of large-scale open-pit blasting operations. |
Hazards associated with waste-rock mining include:
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accidents associated with operating a waste dump and rock transportation; and |
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production disruptions caused by weather. |
We are at risk from any or all of these environmental and industrial hazards. The occurrence of any of these hazards could delay production, increase cash costs and result in financial liability to Harmony.
The nature of our mining operations presents safety risks.
The environmental and industrial risks identified above also present safety risks for Harmonys operations and its 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 Harmonys operations and production.
See Item 4. Regulation Health and Safety Matters .
Illegal mining, or criminal mining, at our operations could pose a threat to the safety of employees and result in damage to property.
Security issues related to criminal mining came to the fore in fiscal 2009, when criminal mining activities resulted in the deaths of criminal miners. The threat of fire caused by these activities poses a risk to the safety of our employees and could also result in property damage, which in turn could have an adverse impact on production.
See Item 4. Regulation Health and Safety Matters .
Harmonys insurance coverage may prove inadequate to satisfy future claims against it.
Harmony has third-party liability coverage for most potential liabilities, including environmental liabilities. While we believe that our current insurance coverage for the hazards described above is adequate and consistent with industry practice, we may be subject to liability for pollution (excluding sudden and accidental pollution) or other hazards against which we have not insured or cannot insure,
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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, in future, Harmonys insurance coverage may not cover the claims against it for environmental or industrial accidents or pollution.
Harmonys operations may be negatively impacted by inflation.
Harmonys operations have been materially affected by inflation. Inflation in South Africa has fluctuated widely in recent years, reaching 11.6% at the end of fiscal 2008 before decreasing to 6.9% at the end of fiscal 2009 and to 4.2% by the end of fiscal 2010. Levels were flat during fiscal 2011, with the inflation rate increasing slightly to 4.6% at the end of fiscal 2011. However, working costs and wages, especially, have increased in recent years, resulting in significant cost pressures for the mining industry. In addition, electricity prices rose by 25% in fiscal 2010 and fiscal 2011 and are expected to increase by a further 25% in fiscal 2012.
The inflation rate in PNG has been relatively flat in recent years at around 7%, ending fiscal 2011 at 9.6%. Rising fuel and food prices contributed to the result as did the historically low level of the PGK/A$ cross rate which led to imported inflation. While the PNG central bank has implemented measures aimed at addressing inflationary pressure, higher fuel prices, ongoing government spending and rising domestic demand, along with the construction of the LNG plant, are still present and will continue to keep upward pressure on inflation.
Harmonys profits and financial condition could be adversely affected when 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 or instability to the economic or political environment in any of these countries or in neighboring countries could affect an investment in Harmony. It is difficult to predict the future political, social and economic direction in these countries, or any other country in which Harmony operates, and the impact government decisions may have on its business.
Actual and potential shortages of production inputs may affect Harmonys operations and profits.
Harmonys operational results may be affected by the availability and pricing of consumables such as fuel, chemical reagents, explosives, steel and other essential production inputs. Issues with regards to availability of consumables may result from shortages as well as long lead times to deliver, which could result in production delays and production shortfalls. These shortages and delayed deliveries may be experienced where industrial action affects Harmonys 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 weather conditions, governmental controls 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. Any significant increase in the prices of these consumables would increase operating costs and affect production considerations.
We compete with mining and other companies for key human resources .
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 historically disadvantaged South Africans ( HDSAs ), women in mining in South Africa, and recruiting and training local landowners in PNG. The global shortage of key mining skills, including geologists, mining engineers, metallurgists and skilled artisans has been exacerbated by increased mining activity across the globe. Despite various initiatives, there can be no assurance that we 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 affected. See Item 6. Employees .
Since our South African labor force has substantial trade union participation, we face the risk of disruption from labor disputes and new South African labor laws.
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 among our employees, we are at risk of production stoppages for indefinite periods due to
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strikes and other disputes. Significant labor disruptions have affected our operations and financial condition before and we are not able to predict whether we will experience significant labor disputes in future.
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 Item 6. Employees .
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.
HIV/AIDS poses risks to us in terms of productivity and costs.
The HIV/AIDS epidemic in South Africa and PNG poses risks to us in terms of potentially reduced productivity, and increased medical and other costs. If there is a significant increase in the incidence of HIV/AIDS infection and related diseases among the workforce over the next several years, this may have an adverse impact on our operations, projects and financial condition.
See Item 4. Regulation Health & Safety Matters .
The cost of occupational healthcare services and the potential liabilities related to occupational health diseases may increase in future.
Harmonys operations in South Africa are subject to health and safety regulations which could impose significant costs and burdens. The present Mine Health and Safety Act 29 of 1996 imposes various duties on mines and grants the authorities broad powers to, among others, close unsafe mines and order corrective action on health and safety matters. Operations in PNG are subject to the following laws and regulations: PNG Mining Act 1992, PNG Mining Safety Act 1997, PNG Mining Safety Regulation 1935 (updated 2006) and PNG Environment Act 2000.
There is a risk that the cost of providing health services and implementing various programs could increase in future, depending on changes to underlying legislation and the profile of its employees. This increased cost, should it transpire, is currently indeterminate.
The Occupational Diseases in Mines and Works Act 78 of 1973 ( ODIMWA ) governs the payment of compensation and medical costs for certain illnesses contracted by people employed in mines or at sites where activities ancillary to mining are conducted. The principles of compensation under ODIMWA are currently being tested in the Mr. Thembekekile Mankayi v AngloGold Ashanti court case. Please see Item 8. Financial Information Legal Proceedings for further information. Should anyone bring similar claims against Harmony in future, those claimants would need to provide evidence proving that silicosis was contracted while in the employment of the Company and that it was contracted due to negligence on the Companys part. The link between the cause (negligence by the Company while in its employ) and the effect (the silicosis) will be an essential part of any case. It is therefore uncertain as to whether the Company will incur any costs related to silicosis claims in the future and due to the limited information available on any claims and potential claims and the uncertainty of the outcome of these claims, no estimation can be made for the possible obligation. Should Harmony be unsuccessful in defending any claims that may be lodged, it would have an adverse impact on the Companys financial condition.
Laws governing mineral rights affect our business.
Our operations in South Africa and PNG are subject to legislation regulating mineral rights and mining those rights. In South Africa, we are governed by the South African Mineral and Petroleum Resources Development Act 2002 ( MPRDA ) and in PNG by the Mining Act of 1992 (PNG). See Item 4. Regulation South Africa for a description of the principal objectives set out in the MPRDA.
Under the MPRDA, tenure over established mining operations is secured for up to 30 years (and then renewable for periods not exceeding 30 years each), provided that mining companies applied for new-order mining rights over existing operations within five years of May 1, 2004 or before the existing right expires, whichever was the earlier date and fulfill requirements specified in the MPRDA and the Broad-Based Socio-Economic Empowerment Charter for the South African mining industry ( Mining Charter ).
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The licenses for all of our South African operations have been granted. We will be eligible to apply for new licenses over existing operations, provided we comply with the MPRDA. Failure to comply with the conditions of the mining licenses could have a material adverse effect on our operations and financial condition.
The Mining Charter was signed by government and stakeholders in October 2002, and contains principles relating to the transfer, over a ten-year period, of 26% of South Africas mining assets (as equity or attributable units of production) to HDSAs as defined in the Mining Charter. An interim target of 15% HDSA participation over five years was also set and the South African mining industry committed to securing financing to fund participation by HDSAs totaling R100 billion in the first five years of the Mining Charters tenure. The Mining Charter provides for the review of the participation process after five years to determine what further steps, if any, are needed to achieve target participation of 26%. In order to measure progress in meeting the requirements of the Mining Charter, companies are required to complete a scorecard, in which the levels of compliance with the objectives of the Mining Charter can be ticked off after five and ten years, respectively. The Mining Charter and Scorecard require programs for black economic empowerment and the promotion of value-added production, such as jewelry-making and other gold fabrication, in South Africa. In particular, targets are set out for broad-based black economic empowerment in the areas of human resources and skills development; employment equity; procurement and beneficiation. In addition, the Mining Charter addresses socio-economic issues, such as migrant labor, mine community and rural development and housing and living conditions.
Following a review of progress made by the mining industry after five years of implementing the provisions of the Mining Charter, the Department of Mineral Resources ( DMR ) released the Revised Mining Charter on September 13, 2010. The requirement under the Mining Charter for mining entities to achieve a 26% HDSA ownership of mining assets by 2014 has been retained. Amendments in the Revised Mining Charter include, inter alia, the requirement by mining companies to:
(i) | facilitate local beneficiation of mineral commodities; |
(ii) | procure a minimum of 40% of capital goods, 70% of services and 50% of consumer goods from HDSA suppliers (i.e. suppliers of which a minimum of 25% + 1 vote of their share capital must be owned by HDSAs) by 2014. These targets will exclude non-discretionary procurement expenditure; |
(iii) | achieve a minimum of 40% HDSA demographic representation by 2014 at executive management (board) level, senior management (executive committee) level, core and critical skills, middle management level and junior management level; |
(iv) | invest up to 5% of annual payroll in essential skills development activities; and |
(v) | 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. |
All these targets must be achieved by 2014.
In addition, mining companies are required to monitor and evaluate their compliance to the Revised Mining Charter, and must submit annual compliance reports to the DMR. The revised scorecard makes provision for a phased-in approach for compliance with the above targets over the five year period ending in 2014. For measurement purposes, the Scorecard allocates various weightings to the different elements of the Revised Mining Charter. Failure to comply with the provisions of the Revised Mining Charter will amount to a breach of the MPRDA and may result in the cancellation or suspension of a mining companys existing mining rights. Harmony obtained all of its licenses three years ago and has no reason to believe that our mining licenses will be cancelled or suspended. Harmony will incur costs in meeting its obligations under the Revised Mining Charter and Scorecard.
The MPRDA also makes reference to royalties payable to the South African state in terms of the Mineral and Petroleum Resources Royalty Act (Act 28 of 2008). The Act provides for the payment of a royalty according to a formula based on earnings before interest, tax and depreciation, after the deduction of capital expenditure. This rate is then applied to revenue to calculate the royalty amount due, with a minimum of 0.5% and a maximum of 5% for gold mining companies. For fiscal 2011, the average royalty rate for our South African operations was 0.63% of gross sales.
The Mining Act of 1992 (PNG) is based on Australian legislation. Accordingly, mineral rights in PNG also belong to the government of PNG which has a statutory right to obtain a participating interest of up to 30% in mining development projects. The
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government then issues and administers mining tenements under the relevant mining legislation, and mining companies must pay royalties to the government based on production. The types of tenements issued include: exploration license; mining lease; special mining lease; alluvial mining lease; lease for mining purpose; and mining easement.
Harmonys PNG mining operation is subject to a 2% royalty payment to the government of PNG. If we want to expand any of our initiatives in PNG into additional areas under exploration, these operations would need to convert the existing exploration licenses prior to the start of mining and that process could require landowner title approval. There can be no assurance that any approval would be received.
Please also see Item 4. Regulation for further information.
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.
The MPRDA, certain other environmental legislation and the administrative policies of the South African government regulate the impact of the Companys prospecting and mining operations on the environment. On the suspension, cancellation, termination or lapsing of a prospecting permit or mining authorization, Harmony will remain liable for compliance with the provisions of various relevant regulations, including any rehabilitation obligations. This liability will continue until the appropriate authorities have certified that the Company has complied with such provisions.
Estimates of ultimate closure and rehabilitation costs are significant and based principally on current legal and regulatory requirements that may change materially. Environmental provisions are accrued when they become known, probable and can be reasonably estimated. In future, Harmony may incur significant costs for compliance with increasingly stringent requirements being imposed under new legislation. This may include the need to increase and accelerate expenditure on environmental rehabilitation and to alter environmental provisions, which could have a material effect on its results and financial condition. Harmony may also face increased environmental costs should other mines in the vicinity fail to meet their obligations on pumping or treatment of water. Also impacting on the financial condition of the Company is the requirement by the DMR for cash collateral or guarantees for Harmonys environmental obligations.
The South African government has reviewed requirements imposed on mining companies to ensure environmental restitution. For example, following the introduction of an environmental rights clause in South Africas constitution, a number of environmental legislative reform processes have been initiated. Legislation passed as a result of these initiatives has tended to be materially more onerous than previous laws in South Africa. Examples of such legislation include the MPRDA, the National Nuclear Regulator Act 1999, the National Water Act of 1998 and the National Environmental Management Act 1998, which include stringent polluter pays provisions. 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.
Harmonys PNG operations are also subject to various laws and regulations relating to protection of the environment, which are similar in scope to those of South Africa. The Environment Act 2000 governs the environmental permitting and regulatory aspects of mining projects. An environmental impact statement is required when projects are likely to have an adverse impact on the environment. This statement must be lodged with the Department of Environmental Conservation where, for large projects, it may be forwarded to Environment Council for review. Public consultation is an integral part of this review.
See Item 4. Regulation Environmental Matters for further discussion on the applicable legislation and our policies on environmental matters.
Mining companies are increasingly required to consider and ensure the sustainable development of, and provide benefits to, 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.
These businesses are under pressure to demonstrate that while they seek a satisfactory return on investment for shareholders, other stakeholders including employees, communities surrounding operations and the countries in which they operate, also benefit from their commercial activities. Such pressures tend to be particularly focused on companies whose activities are perceived to have a high
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impact on their social and physical environment. The potential consequences of these pressures include reputational damage, legal suits and social spending obligations.
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. Specifically at our PNG operations, cognizance of landowner rights may require measures that could include agreed levels of compensation for any adverse impact the mining operation may continue to have on the community. The cost of these measures could increase capital expenditure and operating costs and therefore impact Harmonys 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.
Greenhouse gases ( GHGs ) are emitted directly by Harmonys operations and indirectly as a result of consuming electricity generated by external utilities. Emissions from electricity consumption are indirectly attributable to Harmonys operations. There are currently a number of international and national measures to address or limit GHG emissions, including the Kyoto Protocol and the Copenhagen Accord, in various phases of discussion or implementation. Both South Africa and PNG are non-Annex I countries and therefore do not have emission reduction targets under the Kyoto Protocol in the first commitment period, ending 2012.
After the climate summit in Copenhagen in December 2009, South Africa committed to 30% clean energy by 2025 with the vision that South Africas GHG emissions would peak by 2020-2025 at the latest, plateau for a decade and then decline by 40% by 2050. The South Africa government published a climate change response green paper in November 2010 and a carbon tax discussion paper in December 2010. The policy process, culminating in the publication of a climate change response white paper, is expected later in 2011, with GHG legislation likely to be enacted after that. An emissions trading discussion paper is expected during 2011. It is possible that legislation to cap national emissions, introduce a trading scheme for GHG emission allowances and/or extend the current carbon tax will be enacted, though timing of this is uncertain.
The largest portion of GHG emissions is predominantly electricity related, with electricity expenditure amounting to 15% of Harmonys operational costs in South Africa. While cost management is clearly a strategic issue for Harmony, 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. GHG emissions regulations, which would increase the price of energy, within reason, will not affect Harmony as significantly as regulation that stipulates emission thresholds, or sets technology standards that may result in insecure energy supply. Already certain compliance costs from power suppliers are being passed on to the Group in the form of price increases. For instance, in South Africa since 2009, Harmony has paid a levy of R0.02 per kilowatt hour for electricity generated by fossil fuels. These levies may increase over time and additional levies may be introduced in future in South Africa or PNG, which could result in a significant increase in our costs.
The South African government is exploring implementing a carbon tax to offset carbon emissions in the country. A discussion paper on carbon taxation was published by the South African government in December 2010. This discussion paper mentions a potential carbon tax of R75 R200 per tonne of CO2 emitted.
The aim is to reduce emissions in terms of South Africas commitment made at the Copenhagen conference. The proposed tax follows the undertaking by government to reduce South Africas carbon footprint by an ambitious 34% by 2020.
The South African National Treasury has established a working group comprising a number of different industries to evaluate the impact of this proposed tax on the different sectors of industry. Harmony is participating in this initiative, as is the Chamber of Mines.
As our current mines have a life expectancy of up to 25 years, we are undertaking capital projects to sustain and increase production at Phakisa, Doornkop, Kusasalethu, Tshepong and Hidden Valley operations. These expansions will extend our mining operations by ten years or more, by which time GHG regulations are expected to be a permanent feature of the global economy. Future climate change regulation will therefore need to be considered for all Harmonys extensions and acquisitions. All new greenfields and brownfields projects are required by company policy to consider the impact of climate change in their design and planning.
Harmony is also likely to be exposed to GHG emission regulation thresholds, specifically leakage from refrigerant gas use. Harmony will therefore be required to manage CFC-free refrigerant gas, and will consider using absorption chillers. This could have cost implications for the Company.
In addition, Harmonys operations could be exposed to a number of physical risks from climate change, such as increased rainfall, reduced water availability, higher temperatures and extreme weather events. Events or conditions such as flooding or inadequate water supplies could disrupt Harmonys operations and rehabilitation efforts, and could increase health and safety risks at operations. In
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addition, such events or conditions could have adverse effects, such as increased disease prevalence, on Harmonys workforce and communities close by.
See Item 4. Environmental Matters for disclosure regarding our GHG emissions.
Our operations in South Africa are subject to water use licenses, which could impose significant costs.
Under South African law, Harmonys local operations are subject to water use licenses that govern each operations water use. These licenses require, among other issues, that mining operations achieve and maintain certain water quality limits for all water discharges, where these apply. The majority of our South African operations are lawful users with existing water permits in terms of the Water Act of 1954. Nevertheless, the South African operations have applied to the relevant regional directors for water use licenses in terms of the National Water Act, 1998. Submissions were made as early as 2003 and Harmony has been working closely with the regional directors in the review process; a number of our operations have been issued with licenses or draft licenses.
We anticipate that the conditions of the licenses may require Harmony to consider and implement alternate water management measures that may have a significant cost implication for our business. Any failure on Harmonys part to achieve or maintain compliance with the requirements of these licenses for any of its operations may result in Harmony being subject to penalties, fees and expenses or business interruption due to revoked water licenses. Any of these could have a material effect on our business, operating results and financial condition.
See Item 4. Regulation Environmental Matters for disclosure regarding our water usage and management.
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.
Due to the interconnected nature of mining operations, any proposed solution for potential flooding and decant risk posed by deep groundwater needs to be a combined one supported by all mines located in the goldfields and government in the event of legacy issues. As a result, the DMR 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 this possible obligation, which could be material and have an adverse impact on Harmonys financial condition.
Harmony has initiated analytical assessments to identify, quantify and mitigate impacts, should they arise. Numerous scientific, technical and legal studies are under way to assist in determining the magnitude of possible contamination of groundwater and to find sustainable remediation solutions. Harmony has instituted processes to reduce possible future potential seepage and it has been demonstrated that monitored natural attenuation by the existing environment will contribute to improvement in some instance. The ultimate outcome of the matter cannot presently be determined and no provision for any potential liability has been made in the financial statements. Should these costs be significant, this could have a material impact on Harmonys operational results 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 will be enforced by South African courts provided that:
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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; |
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the judgment is final and conclusive; |
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the judgment has not lapsed; |
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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; |
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the judgment does not involve the enforcement of a penal or revenue law; and |
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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. |
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, 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, 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 markets perception of our business and our stock price. See Item 15 . Disclosure Controls and Procedures for management assessment as of June 30, 2011. In addition to managements 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 Harmonys 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.
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 at any time or from time to time in the future.
Because we have a significant number of outstanding share options, our ordinary shares are subject to dilution.
We have employee share option schemes as well as other share schemes. The employee share option schemes came into effect in 2001, 2003 and 2006. Our board has authorized up to 14% of the issued share capital to be used for these plans. As a result, shareholders equity interests in us are subject to dilution to the extent of the potential future exercises of the options through share schemes.
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We may not pay dividends or make similar payments to our shareholders in the future.
Harmonys 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 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 Articles of Association. Cash dividends or other similar payments may not be paid in the future.
In February 2007, the South African Government announced a proposal to replace Secondary Tax on Companies with a 10% withholding tax on dividends and other distributions payable to shareholders. The amendments will be implemented in phases and are expected to become effective in the near future. Although this 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.
Item 4. INFORMATION ON THE COMPANY
BUSINESS
History and Development
We conduct underground and surface gold mining and related activities, including exploration, processing and smelting. We are currently the third largest producer of gold in South Africa, producing approximately one-fifth of the countrys annual gold output, and we ranked among the largest gold producers in the world, with operations and projects in South Africa and PNG. Our gold sales were approximately 1.3 million ounces of gold in fiscal 2011. As at June 30, 2011, our mining operations reported total proven and probable reserves of 41.6 million ounces, primarily from South African sources. In fiscal 2011, we processed approximately 21.3 million tons of ore.
In fiscal 2011, 92% of our total gold production took place in South Africa. In fiscal 2011, approximately 90% of our South African gold came from underground mines, and approximately 10% came from our surface operations (which include the Kalgold opencast operation and the Phoenix operation). For more detailed information about our activities, see Item 4. Information on the Company Business Harmonys Mining Operations Overview and the notes to the consolidated financial statements included in this annual report. Mining is a highly regulated industry, and we operate under a variety of statutes and regulations. For more detailed information about these statutes and regulations, see Item 4. Information on the Company Regulation and Item 10. Additional Information Memorandum and Articles of Association .
The majority of our exploration and evaluation done during fiscal 2011 has been focused on PNG. Our PNG exploration and evaluation opportunities are handled through the international office in Brisbane, Australia. Exploration in South Africa focused on Joel North and Poplar (north-west of Evander 8).
We were incorporated and registered as a public company in South Africa on August 25, 1950 (under registration number 1950/038232/06). We have expanded from a single lease-bound mining operation into an independent, world-class gold producer. From 1997 to 2004, we acquired additional mineral rights in the Free State, Mpumalanga, Gauteng and North West provinces in South Africa through various mergers and acquisitions. In our most recent transaction in fiscal 2010, we acquired the President Steyn 1 and 2 shafts, Loraine 3 shaft, Freddies 7 and 9 shafts as well as the President Steyn gold plant, collectively known as the Pamodzi Free State assets, from Pamodzi Gold Free State (Proprietary) Limited (In Liquidation) ( Pamodzi FS ). See Item 4. Principal Investments . These shafts have been included in the Bambanani and Target operations. In building our international portfolio, we acquired Hill 50 and New Hampton in Western Australia in 2001 and 2002, respectively, and started our exploration portfolio in PNG with projects in the Morobe province originally through our acquisition of Abelle in 2003. In the past three years, we disposed of several operations in South Africa and Australia, as well as 50% of our interests in gold and copper assets in PNG. See Item 4. Disposals .
Our principal executive offices are located at Randfontein Office Park, Corner of Main Reef Road and Ward Avenue, Randfontein, 1760, South Africa and the telephone number at this location is +27-11-411-2000.
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Business overview
South African Operations
In South Africa, we operate a total of ten underground operations, several surface operations including an opencast mine, and nine processing plants which are located in all of the currently known goldfields in the Witwatersrand basin of South Africa as well as the Kraaipan Greenstone Belt. These operations produced approximately 1.2 million ounces in fiscal 2011, and South Africa represented approximately 94% (or 39.1 million ounces) of our total proven and probable reserves. The deep level gold mines are located in four provinces in this basin, being the Free State province, Mpumalanga, the West Rand Goldfields in Gauteng province and the North West province. Surface operations are located in all these provinces.
Ore from the shafts and surface material are treated at nine metallurgical plants in South Africa, located near the operations (five in the Free State province, two in the North West province, one in Mpumalanga and one in Gauteng). We are currently demolishing three plants in the Free State the Virginia plants demolishment is almost completed, while the process for Steyn plant will continue until fiscal 2012; the demolishment of St Helena Plant has started and will continue until the beginning of fiscal 2014. In addition, Winkelhaak plant at the Evander operations was placed on care and maintenance during fiscal 2010, and the demolishment of the plant is in progress and will be completed in the first half of 2012.
Each operation, consisting anywhere from a single shaft to a group of shafts, is managed by a team headed up by a general manager. See Harmonys Management Structure below.
Operations are classified as Underground or Surface with the reportable segments in South Africa being as follows:
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Bambanani (includes Steyn 1 and 2 shafts), Doornkop, Evander, Joel, Kusasalethu, Masimong, Phakisa, Target (includes Loraine 3, now known as Target 3), Tshepong and the Virginia operations (the Cooke operations have been disclosed under discontinued operations until the time of its disposal in November 2008); and |
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all other shafts and surface operations, including those that treat historic sand dumps, rock dumps and tailings dams, are grouped together under Other Underground and Other Surface. |
International Operations
Our interests internationally are currently located in PNG and represent 6% (or 2.5 million ounces) of our total proven and probable reserves.
PNG operations
In PNG, through our wholly-owned PNG-based subsidiaries, Morobe Consolidated Goldfields Limited ( Morobe Consolidated Goldfields ), Wafi Mining Limited ( Wafi ), Morobe Exploration Limited ( MEL ) and Harmony Gold (PNG) Exploration Limited ( HGEL ) we own development and exploration prospects.
In August 2008, Newcrest Mining Limited ( Newcrest ) acquired a 30.01% interest in our assets and tenements in the Morobe Province through the Morobe Mining Joint Venture ( MMJV ). By the end of fiscal 2009, Newcrest had earned an additional 19.99% in terms of the farm-in agreement, resulting in Newcrest and us each owning a 50% interest in MMJV. Through MMJV, we continued with the process of building the Hidden Valley mine, with partial commissioning of the plant completed by the end of fiscal 2009. The plant was fully commissioned during the June 2010 quarter. The pre-feasibility study at Wafi Golpu commenced during fiscal 2011 and is expected to be completed by June 2012. We are also continuing with exploration at three key project sites which are 100% owned, being Mt Hagen, Amanab and Tari.
Australian operations
During fiscal 2011 we disposed of our interests in Australia, which consisted solely of one site located at Mount Magnet in Western Australia. This site was closed down and the plant placed on care and maintenance in December 2007. During fiscal 2009, we started an intensive drilling program at Mount Magnet and carried out feasibility studies in order to support our decision to either resume mining operations or sell it. A decision was taken by management during May 2010 to sell Mount Magnet, and at June 30, 2010, Mount Magnet was disclosed as held for sale and discontinued operation. We entered into a Share Sales Agreement with Ramelius for a total consideration of A$35.3 million (US$31.6 million) in cash plus replacement environmental bonds of A$4.7 million (US$4.2 million) totaling A$40.0 million (US$35.8 million) consideration. Final settlement of the transaction took place in July 2010.
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Strategy
Our strategy is to deliver long-term value by creating a sustainable company, capable of generating earnings that fund dividends and growth a company with free cash flow. This strategy has as its overall goal the production of 1.8 to 2 million safe and profitable ounces of gold by 2015 (excluding any future acquisitions or disposals).
We have invested significant capital in developing and commissioning gold mining assets in South Africa. Harmony has undertaken a number of strategic initiatives in recent years with the aim of achieving robust and sustainable financial results, with better controlled cash costs and improved grade.
Three key objectives underpin our strategy, namely:
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growth in quality, through our growth assets and geographic diversification; |
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growth through partnerships and exploration; and |
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optimizing our asset portfolio by improving cash costs and productivity. |
Our emphasis is on safe, profitable ounces and important steps have been taken to ensure that these goals are and will be met. To ensure this we have:
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closed high-cost mines to give us a better mix of assets; |
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commissioned gold mines in South Africa and in PNG; |
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tailored each mines business plan to its individual requirements; |
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aimed to address ongoing industry challenges. Please see Item 3. Risk Factors for further information; |
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aimed to improve production and productivity; and |
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increased our exploration exposure. |
Principal Investments
We have concluded several strategic transactions within and outside South Africa in the last three fiscal years, which are summarized below.
During fiscal 2010, we acquired the President Steyn 1 and 2 shafts, Loraine 3 and the Freddies 7 and 9 shafts, along with the President Steyn gold plant, collectively known as the Pamodzi Free State assets, for R405 million (US$53 million). The assets were acquired from Pamodzi FS, a subsidiary of Pamodzi Gold Limited ( Pamodzi ), which is an associate of Harmony and has been placed in liquidation.
During fiscal 2009, we reached an agreement with Africa Vanguard Resources (Doornkop) (Proprietary) Limited ( AVRD ) to re-acquire AVRDs 26% interest in the Doornkop mining right. In March 2010, the condition precedent to the agreement became effective. As a result the 26% interest in the Doornkop mining right was transferred from AVRD to Harmony in exchange for our repayment of the Nedbank loan of R244 million (US$33.4 million) and the issue of 2,162,359 Harmony ordinary shares. Under the terms of the agreement, 975,419 of these shares are to remain in escrow until May 2014.
In August 2009, we acquired 100% interest in two new exploration tenements, the Mount Hagen and Amanab Projects, in PNG.
On April 17, 2009, we exchanged our interest in Dioro for shares in Avoca Resources Limited ( Avoca ). See Item 4.Disposals . In terms of the offer by Avoca, we received one Avoca share for every three Dioro shares held. The market value of the Avoca shares on the date was US$4.2 million (A$1.50 per share).
On December 1, 2008, we issued 3,364,675 shares to Rio Tinto plc ( Rio Tinto ) for the purchase of Rio Tintos rights to the royalty agreement entered into prior to our acquisition of the Wafi deposits in PNG. The shares were valued at US$23 million on the transaction date. An additional US$10 million in cash will be payable when the decision to mine is made. Of this amount, Harmony is responsible for paying the first US$6 million, with the balance of US$4 million being borne equally by the joint venture partners. The effect of the transaction will be to reduce the cost of any gold produced at Wafi.
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On November 21, 2008, we transferred our Cooke operations to Rand Uranium in exchange for cash of US$209 million and a 40% interest in Rand Uranium. See Item 4. Disposals .
Disposals
During September 2010, Harmony concluded an agreement with Witwatersrand Consolidated Gold Resources Limited ( Wits Gold ) for the cancellation of the Freegold farm-in option in exchange for Wits Gold shares. The conditions precedent were fulfilled on November 5, 2010 and Harmony received 4,376,194 shares in Wits Gold valued at R275 million (US$41 million).
On July 20, 2010, the conditions precedent for the sale of the Mount Magnet operation were fulfilled. A total consideration of A$35.3 million (US$31.6 million) was received from Ramelius in exchange for 100% of the issued share capital in Mount Magnet.
In June 2010, the group sold the Jeanette prospecting rights to Taung Gold Limited ( Taung ) for a total consideration and profit of R75 million (US$10 million).
On January 18, 2010, we disposed of our investment in our Australian subsidiary, Big Bell Operations (Proprietary) Limited to Fulcrum Resources (Proprietary) Limited ( Fulcrum ) for A$3.5 million (US$3.2 million) in cash and replacement environmental bonds of A$3.2 million (US$3.0 million), resulting in total consideration of A$6.7 million (US$6.2 million).
During September and October 2009, we sold our interest in Avoca into the market for a total consideration of R42 million (US$5.8 million).
On April 17, 2009, we disposed of our Dioro shares in exchange for shares in Avoca. On that date, the market value of the Dioro shares was A$0.50 per share, or US$4.2 million.
On November 21, 2008, we transferred our Cooke assets to our wholly-owned, newly formed subsidiary, Rand Uranium, for the consideration of US$328 million, settled with Rand Uranium shares. In a related transaction on the same date, 60% of these shares were sold to Pamodzi Resources Fund 1 LLP ( PRF ) for US$197 million. US$40 million was paid on the effective date and the balance of US$157 million, together with interest at 5% per annum, was paid on April 20, 2009. The conditions precedent for the second part of the Rand Uranium transaction, relating to the sale of the Old Randfontein assets, were fulfilled on April 22, 2009. Additional shares were issued in settlement and 60% of these shares were sold to PRF. PRF paid its portion of the purchase price, amounting to US$12 million, in cash on April 20, 2009. We recognized a gain of US$171 million on these transactions.
During fiscal 2009, we disposed of 50% of our interest in our PNG assets in three tranches to Newcrest. The first tranche of 30.01% was disposed of on July 31, 2008 in exchange for US$229 million in cash, which was received on August 7, 2008. On February 28, 2009, the second tranche of 10% was disposed of in terms of the farm-in agreement. Newcrest earned in a further 9.99% interest by contributing to the capital expenditure at Hidden Valley as well as with a cash payment of US$6 million on June 30, 2009. A net profit of US$112 million was realized for the total disposal.
Description of Mining Business
Exploration
Exploration activities are focused on the extension of existing orebodies and identification of new orebodies, both at existing sites and at undeveloped sites.
Our gold-focused exploration program has two components:
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on-mine exploration, which looks for resources within the economic radius of existing mines; and |
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new mine exploration, which is the global search for early to advanced stage projects. |
Once a potential orebody has been discovered, exploration is extended and intensified in order to enable clearer definition of the orebody and the potential portions to be mined. Geological techniques are constantly refined to improve the economic viability of prospecting and mining activities.
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We conduct exploration activities on our own or with joint venture partners. As at June 30, 2011, our prospecting interest in South Africa measured 69,942 hectares (172,824 acres) and 1,198,400 hectares (2,961,311 acres) in PNG. We spent US$57 million on exploration in PNG and South Africa in fiscal 2011. In fiscal 2012, we intend to carry out exploration in PNG and at Masimong in South Africa.
Mining
The mining process can be divided into two main phases: (i) accessing the orebody; and (ii) mining the orebody. This basic process applies to both underground and surface operations.
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Accessing the orebody. |
In our South African underground mines, access to the orebody is by means of shafts sunk from the surface to the lowest economically and practically mineable level. Horizontal development at various intervals of a shaft (known as levels) extends access to the horizon of the reef to be mined. On-reef development then provides specific mining access. Horizontal development at various intervals of the decline extends access to the horizon of the mineral to be mined. The declines are advanced on a continuous basis to keep ahead of the mining taking place on the levels above. In our open-pit mines, access to the orebody is provided by overburden stripping, which removes the covering layers of topsoil or rock, through a combination of drilling, blasting, loading and hauling, as required.
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Mining the orebody. |
The process of ore removal starts with drilling and blasting the accessible ore. The blasted faces are then cleaned, and the ore is transferred to the transport system. In open-pit mines, gold-bearing material may require drilling and blasting, and is usually collected by bulldozers or shovels to transfer it onto trucks, which transport it to the mill.
In our South African underground mines, once ore has been broken, train systems collect ore from the faces and transfer it to a series of ore passes that gravity feed the ore to hoisting levels at the bottom of the shaft. The ore is then hoisted to the surface in dedicated conveyances and transported either by conveyor belts directly or via surface railway systems or roads to the treatment plants. In addition to ore, waste rock broken to access reef horizons must similarly be hoisted and then placed on waste rock dumps.
Processing
We currently have nine operational metallurgical plants in South Africa. We also have a metallurgical plant at the Hidden Valley project in PNG. The principal gold extraction processes we use are carbon in leach, or CIL, and carbon in pulp, or CIP.
The gold plant circuit consists of the following:
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Comminution. |
Comminution is the process of breaking up the ore to expose and liberate the gold and make it available for treatment. Conventionally, this process occurs in multi-stage crushing and milling circuits, which include the use of jaw and gyratory crushers and rod and tube and ball mills. Our more modern milling circuits include semi- or fully-autogenous milling where the ore itself is used as the grinding medium. Typically, ore must be ground to a minimum size before proceeding to the next stage of treatment.
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Treatment. |
In most of our metallurgical plants, gold is extracted into a leach solution from the host ore by leaching in agitated tanks. Gold is then extracted onto activated carbon from the solution using the CIL or CIP processes. Gold in solution at one of our plants is recovered using zinc precipitation. Recovery of the gold from the loaded carbon takes place by elution and electro-winning. Cathode sludge or dore bars produced from electro-winning are currently sent directly to the Rand Refinery. Most of the South African plants no longer use smelting to produce rough gold bars (dore). Our South African zinc precipitation
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plants continue to smelt precipitate to produce rough gold bars. These bars are then transported to the Rand Refinery, which is responsible for refining the bars to a minimum of good delivery status.
All the production from our South African operations is sent to the Rand Refinery, which is owned by a consortium of the major gold producers in South Africa. The Australian and PNG gold production for fiscal years 2009 to 2011 was refined in Australia at an independent refiner, The Perth Mint Australia.
Harmonys Management Structure
We have a de-centralized management structure that is based on small, empowered management teams led by General Managers at each of our operations. In South Africa, the General Managers report to the Chief Operations Officers, and are responsible for business optimization, mineral reserve optimization, and for developing a business culture at the operations. They also focus on long-term viability and growth of the operations. The General Managers are supported by a Mineral Reserve Manager, a Financial Manager, a Human Resources Manager and a Technical Manager in ensuring the growth and long-term sustainability of the operations
Morobe Mining Joint Venture consists of three unincorporated joint ventures (Hidden Valley Mine Joint Venture ( HVJVM ), Wafi-Golpu Mine Joint Venture ( WGMJV ) and Morobe Exploration Joint Venture ( MEJV ) which are owned 50/50 by respective Harmony and Newcrest 100% owned subsidiaries ( owners ).
The Joint Ventures are managed by a Joint Venture Committee ( JVC ) appointed by the respective owners. The JVC is responsible for the supervision of each of the three Joint Ventures, and implementation of the owners policy and strategy. The members act as owner representatives within the unincorporated joint ventures.
Three legal operator entities ( operator co. ), Hidden Valley Services Proprietary Limited, Wafi Golpu Services Limited and Morobe Exploration Services Limited have been established and appointed as operator of / agent for the respective unincorporated joint ventures (HVMJV, WGMJV and MEJV). Shareholding is held equally by the owners who appoint a board of directors ( board ) for each operator co.
The respective operator co . boards appoint Operational Steering Committees and General Managers who are responsible for implementation of the operating plan as approved by the JVC as well as making recommendation to the JVC for growth and sustainability. The General Managers report to the Operational Steering Committees. The General Managers are supported by functional managers.
Capital Expenditures
Capital expenditures for continuing operations incurred for fiscal 2011 amounted to US$444 million compared with US$442 million in fiscal 2010 and US$487 million for fiscal 2009. During fiscal 2011, capital expenditure at Kusasalethu and Phakisa each accounted for 12% of the total, with expenditure at PNG and Target accounting for 11% and 14% respectively. For fiscal 2010, the capital development at PNG accounted for 16% of the total, with development at Phakisa and Kusasalethu accounting for 14% and 13%, respectively. Capital development also took place at the Doornkop South Reef Project and Tshepong Sub 71 Declines, as well as at the newly acquired President Steyn and Loraine shafts. The capital expenditure, including the non-cash portion, in fiscal 2009 was primarily related to the development of the PNG assets, which accounted for 41% of the project capital expended. The majority of this development was funded by Newcrest in terms of the farm-in agreement. Capital was also expended on the Doornkop South Reef Project, Tshepong Sub 71 Decline, as well as Phakisa and the Kusasalethu New Mine.
The focus of our capital expenditures in recent years has been underground development and plant improvement and upgrades. Construction at these projects has been completed in certain areas, and production, if not yet at full capacity, has started from these areas at all our current growth projects. Capital will still be expended at these projects in the next two to three years to complete construction. During fiscal 2011, the capital expenditure was funded from the Companys cash reserves, as well as by the loan facility from Nedbank.
Capital expenditure for discontinued operations, incurred for fiscal 2011 and 2010 totaled US$nil, compared with US$10 million for fiscal 2009.
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We have budgeted approximately US$537 million for capital expenditures in fiscal 2012. Details regarding the capital expenditures for each operation are found in the individual mine sections under Item 4. Information on the Company Business Harmonys Mining Operations . We currently expect that our planned operating capital expenditures will be financed from operations and new borrowings as needed.
Reserves
As at June 30, 2011, we have declared proven and probable reserves of 41.6 million ounces, broken down as follows: 39.1 million ounces in South Africa and 2.5 million ounces in PNG. Of our 41.6 million ounces of mineral reserves, 6.8 million ounces are classified as below infrastructure (that is, reserves for which capital expenditure has yet to be approved). There has been a 6.5 million ounces year-on-year negative variance in mineral reserves due to the following reasons:
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normal depletion of 1.5 million ounces; |
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mine closures and the exclusion of projects previously included in reserves (Poplar and Libra) resulted in a decrease of 4.7 million ounces; |
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geology and scope changes resulted in an increase of 0.9 million ounces; and |
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a decrease of 1.2 million ounces of mineral reserves from the exclusion of Rand Uranium (attributable interest of 40%) which has been classified as held for sale. |
We use the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves ( 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. Our reporting of the PNG Mineral Reserves complies with the Australian Code for the Reporting of Mineral Resources and Mineral Reserves ( JORC ) of the Australian Institute of Mining and Metallurgy. This code is materially the same as the SAMREC Code. In reporting of reserves, we have complied with Industry Guide 7 of the U.S. Securities and Exchange Commission.
For the reporting of Mineral Reserves at our South African and PNG operations, we use a gold price of US$1,150 per ounce. An exchange rate of R7.57 per U.S. dollar is used for South Africa and for PNG an exchange rate of US$0.75 per Australian dollar is used giving a gold price of R280,000 per kilogram and A$1,133 per ounce, respectively. These gold prices have also been used in mine planning.
In order to define that portion of a measured and indicated mineral resource that can be converted to a proven and probable mineral reserve at our underground operations, we apply the concept of a cut-off grade. 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:
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the database of measured and indicated resource blocks (per operation); |
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an assumed gold price which, for this mineral reserve statement, was taken as R280,000 per kilogram; |
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planned production rates; |
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the mine recovery factor which is equivalent to the mine call factor ( MCF ) multiplied by the plant recovery factor; and |
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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 other cost reduction initiatives which we expect in the aggregate to lead to lower unit costs, and for below-infrastructure ounces, an estimate of capital expenditure.
The block cave reserve at Golpu (PNG) used the PCBC computer program to define the optimal mine plan and sequencing.
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The open pit reserve at Hidden Valley (PNG) is defined by a pit design based on the Whittle open pit optimization program guiding the most efficient mine design given this constraint.
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 mineral flow-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. Because of depth and rock engineering requirements, some shafts 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 unpaid and geological losses.
Our standard for narrow reef sampling with respect to both proven and probable reserve calculations for underground mining operations in South Africa is 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 operations, our standard for sampling with respect to both proven 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 porphyry or related mesothermal geological systems. Data is gained through diamond drilling using PQ down to NQ 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 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. 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 accredited commercial laboratory. Some sample preparation is done at the mine site laboratory. Extensive Quality Assurance/Quality Control work is undertaken and data is stored in an electronic database.
Our mining operations reported total proven and probable reserves as of June 30, 2011 are set out below:
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Mineral Reserves statement (Imperial) as at June 30, 2011
OPERATIONS | PROVEN RESERVES | PROBABLE RESERVES | TOTAL RESERVES | |||||||||||||||||||||||||||||||||
GOLD |
Tons | Grade | Gold oz (1) | Tons | Grade | Gold oz (1) | Tons | Grade | Gold oz (1) | |||||||||||||||||||||||||||
(million) | (oz/ton) | (000) | (million) | (oz/ton) | (000) | (million) | (oz/ton) | (000) | ||||||||||||||||||||||||||||
South Africa Underground |
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Bambanani |
3.6 | 0.333 | 1,195 | 0.1 | 0.212 | 12 | 3.7 | 0.331 | 1,207 | |||||||||||||||||||||||||||
Joel |
1.5 | 0.182 | 268 | 1.8 | 0.146 | 262 | 3.3 | 0.163 | 530 | |||||||||||||||||||||||||||
Masimong |
5.7 | 0.159 | 905 | 1.5 | 0.158 | 245 | 7.2 | 0.159 | 1,150 | |||||||||||||||||||||||||||
Phakisa |
1.9 | 0.221 | 421 | 19.1 | 0.248 | 4,743 | 21.0 | 0.246 | 5,164 | |||||||||||||||||||||||||||
Target |
7.8 | 0.159 | 1,243 | 9.2 | 0.162 | 1,492 | 17.0 | 0.161 | 2,735 | |||||||||||||||||||||||||||
Tshepong |
15.1 | 0.153 | 2,302 | 9.0 | 0.153 | 1,377 | 24.1 | 0.153 | 3,679 | |||||||||||||||||||||||||||
Virginia (Unisel) |
2.0 | 0.139 | 285 | 1.2 | 0.130 | 149 | 3.2 | 0.136 | 434 | |||||||||||||||||||||||||||
Doornkop |
3.1 | 0.099 | 315 | 6.4 | 0.098 | 627 | 9.5 | 0.099 | 942 | |||||||||||||||||||||||||||
Kusasalethu |
13.8 | 0.202 | 2,790 | 23.4 | 0.187 | 4,383 | 37.2 | 0.193 | 7,173 | |||||||||||||||||||||||||||
Evander |
2.6 | 0.219 | 571 | 1.1 | 0.226 | 252 | 3.7 | 0.221 | 823 | |||||||||||||||||||||||||||
Evander (below infrastructure) |
| | | 28.8 | 0.236 | 6,790 | 28.8 | 0.236 | 6,790 | |||||||||||||||||||||||||||
Total South Africa Underground |
57.1 | 0.180 | 10,295 | 101.6 | 0.200 | 20,332 | 158.7 | 0.193 | 30,627 | |||||||||||||||||||||||||||
South Africa Surface |
||||||||||||||||||||||||||||||||||||
Kalgold |
20.5 | 0.024 | 492 | 7.8 | 0.025 | 193 | 28.3 | 0.024 | 685 | |||||||||||||||||||||||||||
Free State Surface |
405.6 | 0.008 | 3,111 | 637.0 | 0.007 | 4,307 | 1,042.6 | 0.007 | 7,418 | |||||||||||||||||||||||||||
Evander Surface |
| | | 43.7 | 0.009 | 409 | 43.7 | 0.009 | 409 | |||||||||||||||||||||||||||
Total South Africa Surface |
426.1 | 0.008 | 3,603 | 688.5 | 0.007 | 4,909 | 1,114.6 | 0.008 | 8,512 | |||||||||||||||||||||||||||
Total South Africa |
483.2 | 13,898 | 790.1 | 25,241 | 1,273.3 | 39,139 | ||||||||||||||||||||||||||||||
Papua New Guinea (2) |
||||||||||||||||||||||||||||||||||||
Hidden Valley |
4.0 | 0.052 | 211 | 29.5 | 0.048 | 1,405 | 33.5 | 0.048 | 1,616 | |||||||||||||||||||||||||||
Hamata |
| | | 2.7 | 0.061 | 166 | 2.7 | 0.061 | 166 | |||||||||||||||||||||||||||
Golpu |
| | | 39.0 | 0.018 | 694 | 39.0 | 0.018 | 694 | |||||||||||||||||||||||||||
Total Papua New Guinea |
4.0 | 0.052 | 211 | 71.2 | 0.032 | 2,265 | 75.2 | 0.033 | 2,476 | |||||||||||||||||||||||||||
GRAND TOTAL |
487.2 | 14,109 | 861.3 | 27,506 | 1,348.5 | 41,615 |
In addition to the gold reserves, we also report our attributable reserves for silver, copper and molybdenum from our PNG operations. Metal prices are assumed at US$24/oz for silver, US$4.45/lb for copper and US$24/lb for molybdenum.
SILVER |
Tons | Grade | Silver oz (1) | Tons | Grade | Silver oz (1) | Tons | Grade | Silver oz (1) | |||||||||||||||||||||||||||
(million) | (oz/ton) | (000) | (million) | (oz/ton) | (000) | (million) | (oz/ton) | (000) | ||||||||||||||||||||||||||||
Papua New Guinea (2) |
||||||||||||||||||||||||||||||||||||
Hidden Valley |
4.0 | 0.853 | 3,447 | 29.5 | 1.032 | 30,457 | 33.5 | 1.010 | 33,904 | |||||||||||||||||||||||||||
COPPER |
Tons | Grade | Cu lb (1) | Tons | Grade | Cu lb (1) | Tons | Grade | Cu lb (1) | |||||||||||||||||||||||||||
(million) | (%) | (million) | (million) | (%) | (million) | (million) | (%) | (million) | ||||||||||||||||||||||||||||
Papua New Guinea (2) |
||||||||||||||||||||||||||||||||||||
Golpu |
| | | 39.0 | 0.998 | 858 | 39.0 | 0.998 | 858 | |||||||||||||||||||||||||||
MOLYBDENUM |
Tons | Grade | Mo lb (1) | Tons | Grade | Mo lb (1) | Tons | Grade | Mo lb (1) | |||||||||||||||||||||||||||
(million) | (lb/ton) | (million) | (million) | (lb/ton) | (million) | (million) | (lb/ton) | (million) | ||||||||||||||||||||||||||||
Papua New Guinea (2) |
||||||||||||||||||||||||||||||||||||
Golpu |
| | | 39.0 | 0.231 | 9 | 39.0 | 0.231 | 9 | |||||||||||||||||||||||||||
URANIUM |
Tons | Grade | U 3 O 8 lb (1) | Tons | Grade | U 3 O 8 lb (1) | Tons | Grade | U 3 O 8 lb (1) | |||||||||||||||||||||||||||
(million) | (lb/ton) | (million) | (million) | (lb/ton) | (million) | (million) | (lb/ton) | (million) | ||||||||||||||||||||||||||||
Masimong |
2.9 | 0.376 | 1 | 3.7 | 0.355 | 1 | 6.6 | 0.364 | 2 | |||||||||||||||||||||||||||
Phakisa |
2.7 | 0.320 | 1 | 18.4 | 0.269 | 5 | 21.1 | 0.276 | 6 | |||||||||||||||||||||||||||
Tshepong |
7.2 | 0.189 | 1 | 14.8 | 0.217 | 3 | 22.0 | 0.208 | 4 | |||||||||||||||||||||||||||
Grand total |
12.8 | 0.259 | 3 | 36.9 | 0.257 | 9 | 49.7 | 0.257 | 12 |
( 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 Harmonys attributable interest of 50% |
Note: 1 ton = 907 kg = 2,000 lbs
28
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 is as follows.
OPERATIONS |
UNDERGROUND
OPERATIONS |
SURFACE AND MASSIVE
MINING |
||||||||||||||
GOLD |
Cut-off | Cut-off | Cut-off | Cut-off | ||||||||||||
grade (cmg/t) | cost (R/Tonne) | grade (g/t) | cost (R/Tonne) | |||||||||||||
South Africa Underground |
||||||||||||||||
Bambanani |
1,600 | 1,640 | | | ||||||||||||
Joel |
748 | 978 | | | ||||||||||||
Masimong |
942 | 1,019 | | | ||||||||||||
Phakisa |
600 | 1,073 | | | ||||||||||||
Target |
701 | 1,102 | 4.85 | 1,095 | ||||||||||||
Tshepong |
650 | 1,069 | | | ||||||||||||
Virginia (Unisel) |
975 | 1,000 | | | ||||||||||||
Doornkop |
676 | 598 | | | ||||||||||||
Kusasalethu |
782 | 1,172 | | | ||||||||||||
Evander |
1,196 | 1,286 | | | ||||||||||||
Evander (below infrastructure) |
600 | 688 | | | ||||||||||||
South Africa Surface |
||||||||||||||||
Kalgold |
| | 0.56 | 173 | ||||||||||||
Free State Surface |
| | 0.125 | 25 | ||||||||||||
Evander Surface |
| | 0.207 | 28 | ||||||||||||
Cut-off | Cut-off cost | Cut-off | Cut-off cost | |||||||||||||
%Cu | (A$/Tonne) | grade (g/t) | (A$/Tonne) | |||||||||||||
Papua New Guinea |
||||||||||||||||
Hidden Valley |
| | 0.800 | 20.4 | ||||||||||||
Hamata |
| | 0.700 | 20.4 | ||||||||||||
Golpu |
0.3 | % | 22.0 | | | |||||||||||
SILVER |
Cut-off | Cut-off cost | Cut-off | Cut-off cost | ||||||||||||
%Cu | (A$/Tonne) | grade (g/t) | (A$/Tonne) | |||||||||||||
Papua New Guinea |
||||||||||||||||
Hidden Valley |
| | 0.800 | 20.4 | ||||||||||||
COPPER |
||||||||||||||||
Papua New Guinea |
||||||||||||||||
Golpu |
0.3 | % | 22.0 | | | |||||||||||
MOLYBDENUM |
||||||||||||||||
Papua New Guinea |
||||||||||||||||
Golpu |
0.3 | % | 22.0 | | |
Notes on Cut-off:
1) | Surface and massive mining are stated in g/t (g/t is grams of metal per tonne of ore). |
2) | All SA underground operations are stated in cmg/t (cmg/t is the Reef Channel width multiplied by the g/t which indicates the gold content within the Reef Channel). |
Notes on Cut-off cost:
Cut-off cost refers to the cost in R/Tonne or A$/Tonne to mine and process a tonne of ore.
Notes on Copper:
Cut-off is stated in % Cu
Notes on Golpu:
Cut-off is based on 0.3% copper : molybdenum and gold mined as by-product.
29
Worldwide Operations
Description of Property
The following is a map of our worldwide operations:
30
Our operational mining areas in South Africa are set forth below:
Hectares | Acres | |||||||
Doornkop |
2,941 | 7,267 | ||||||
Kusasalethu |
5,113 | 12,634 | ||||||
Free State (includes Masimong and Virginia operations) |
22,583 | 55,802 | ||||||
Tshepong and Phakisa |
10,799 | 26,683 | ||||||
Bambanani |
2,356 | 5,821 | ||||||
Joel |
2,162 | 5,342 | ||||||
St Helena |
5,856 | 14,470 | ||||||
Kalgold |
615 | 1,520 | ||||||
Evander |
36,898 | 91,174 | ||||||
Target (includes Loraine) |
7,952 | 19,649 | ||||||
Loraine 3, 7 & 9 |
1,888 | 4,665 | ||||||
Steyn 1 & 2 |
3,087 | 7,628 | ||||||
Total |
102,250 | 252,656 |
In PNG, we hold tenements as set forth below:
Hectares | Acres | |||||||
PNG (50% - JV Interest) |
472,600 | 1,167,820 | ||||||
PNG (Harmony exploration outside of JV) |
725,800 | 1,793,491 | ||||||
Total International Operations |
1,198,400 | 2,961,311 | ||||||
TOTAL |
1,300,650 | 3,213,967 |
We acquired new tenements in PNG for exploration in fiscal 2010.
In line with the rest of the South African mining industry, and in an effort to reduce costs, we have been rationalizing our mineral rights holdings in recent years. Accordingly, over the past three years, we have disposed of our shares and participation rights in areas within and outside of South Africa in which we have not actively pursued mining. However, in some cases we have retained certain participation rights and option clauses in properties and mining rights we have disposed of. We may continue to investigate further disposals.
31
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.
Our Hidden Valley project comprises low sulphidation carbonate-base metal-gold epithermal deposits within the Morobe Goldfield, in the Morobe Province of PNG. In the Hidden Valley project 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 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. The Hidden Valley deposit area is dominated by a series of post Miocene faults controlling the gold mineralization, including an early north trending set and the main northwest faulting.
Our Wafi project comprises the sedimentary/volcaniclastic rocks of the Owen Stanley Formation that surround the Wafi Diatreme and host the gold mineralization. Gold mineralization occurs as extensive high-sulphidation epithermal alteration overprinting porphyry mineralization and epithermal style vein-hosted and replacement gold mineralization with associated wall-rock alteration. The Golpu Copper-Gold project is located about one kilometer northeast of the Wafi gold orebody. It is a porphyry (diorite) copper-gold 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.
Harmonys Mining Operations
Overview
In South Africa, we conduct underground mining at 10 operations:
|
Bambanani (includes Steyn 1 & 2 Shafts from February 2010); |
|
Doornkop; |
|
Evander (Evander 8 is in operation, with Evander 2 & 5 and 7 having been placed on care and maintenance during fiscal 2010); |
|
Joel; |
|
Kusasalethu; |
|
Masimong; |
|
Phakisa; |
|
Target (consists of Target 1, and as of February 2010 Loraine 3 (now Target 3) and Freddies 7 & 9 shafts); |
|
Tshepong; and |
|
Virginia (at June 30, 2011, Unisel was the only operating shaft. Previously also included Harmony 2, Merriespruit 1 & 3 and Brand 3 & 5). |
32
An effective 60% interest in the Cooke operations (consists of Cooke 1, 2 and 3 Shafts) was sold on November 21, 2008 and the results for the five months up to that date have been included in discontinued operations for fiscal 2009.
We conduct surface mining at five sites (all included in Other Surface):
|
Evander; |
|
Free State (also known as Phoenix); |
|
Freegold; |
|
Kalgold; and |
|
Target. |
Surface mining was conducted at Randfonteins Cooke operations up to the date of sale in fiscal 2009 and the Cooke plant has been classified as discontinued operations along with the Cooke operations.
Surface mining conducted at the 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 tailings dams (slimes and sand). We are conducting studies to determine the feasibility of further retreatment projects in the Free State, including uranium extraction from material.
Internationally, we conduct mining activities in PNG at the Hidden Valley mine, which is a joint venture, known as Morobe Mining Joint Venture, between Harmony and Newcrest in which we each have a 50% interest.
We previously conducted mining at Mount Magnet in Australia which was put on care and maintenance at the end of December 2007. A decision was taken by management during May 2010 to sell the operation and in July 2010 the disposal was finalized.
Underground and surface mining was conducted at the operation, with underground access through two declines and surface access principally through open-pits.
The following discussion is a two-part presentation of our operations:
|
an overview of our South African mining operations with a discussion and production analysis of each of our operating segments; and |
|
an overview of our International (Australian and PNG) operations with a discussion and production analysis for each segment. We have also included a discussion on the exploration projects in the MMJV as well as for the wholly-owned projects. |
Where we have translated the Rand amount budgeted for capital expenditures in fiscal 2012 into U.S. dollars, we have used the closing rate at the balance sheet date.
33
South African Mining Operations
Unless indicated otherwise, the discussions below are for continuing operations.
34
Underground
Bambanani
Introduction: We acquired Bambanani when we, in January 2002, acquired the Freegold operations from AngloGold Ashanti Limited ( Anglogold ) through a 50% joint venture with African Rainbow Minerals Gold Limited ( ARMgold ). In September 2003, we acquired 100% of these operations when ARMgold became a wholly-owned subsidiary. During February 2010, we acquired President Steyn 1 & 2 Shafts in the transaction with Pamodzi FS. These shafts have been incorporated into Bambanani. These operations are located in the Free State province. Production from the operations is processed through Harmony 1 Plant.
History: Exploration, development and production history in the area of the Freegold assets dates from the early 1900s, leading to commercial production by 1932. Subsequent consolidation and restructuring led to the formation of Free State Consolidated Gold Mine (Operations) Limited, which became a wholly-owned subsidiary of Anglogold in June 1998.
In 1998, President Steyn Gold Mine (Free State) (Proprietary) Limited ( PSGM ) was formed after purchasing shafts from various individuals. During 2002, the mine was sold to Thistle Mining Inc, an international company with interests in the Philippines and South Africa. The mine struggled to make operational profits, and Thistle undertook a restructuring program in 2006, which together with an increase in the Rand gold price resulted in positive operational cash flows. In February 2008, PSGM was purchased by Pamodzi FS. The mine was operated from that time until March 2009, when Pamodzi FS was placed into liquidation.
Geology: The operations are located in the Free State Goldfield, which is on the southwestern edge of the Witwatersrand basin. The Free State Goldfield is divided into two sections, cut by the north-south striking De Bron Fault. This major structure has a vertical displacement of about 1,500 meters in the region of Bambanani, as well as a lateral shift of 4 kilometers. Bambanani is to the west of the De Bron Fault. The reefs generally dip towards the east. Mining is conducted in the Basal reef.
Mining Operations: These operations are subject to the underground mining risks detailed in the Risk Factors section. The management teams regularly revisit their mining strategy and management procedures in order to minimize risks.
The Bambanani mine consists of a surface shaft and a sub-shaft. Mining is conducted at depths ranging from 1,911 and 3,680 meters. Activities at the mine include mining the Basal Reef and remnant pillar extraction. The primary mining challenges at these operations are seismic risks, ventilation and fire avoidance. Bambanani is classified as a seismically active operation with seismic activity monitoring systems installed to do active seismic risk evaluation. The seismic activity monitoring systems were upgraded during fiscal 2010.
Volumes in fiscal 2011 were severely affected by refrigeration constraints from September 2010 to January 2011. Following the seismic event in September, which resulted in two fatalities, we conducted a safety risk review on the remnant pillars. Mining on all remnant pillars along the major fault structure was stopped. These were very high-grade pillars, which affected the overall grade of the operation. Bambanani is preparing to mine the shaft pillar in the near future and production in the sub-shaft will therefore stop soon as the orebody in this area of the mine is almost depleted. We anticipate that the shaft pillar will be mined for around eight years from fiscal 2013.
Shaft-pillar preparation has proceeded well, with major equipping in the incline shaft set to begin in December 2011. The incline shaft is alternative infrastructure to replace the main shaft infrastructure which will be destroyed below 60 level during shaft pillar extraction. The only development left at Bambanani is capital waste meters for the shaft pillar project and follow-on development for cleaning purposes.
Mining in the decline area will end in the next six months, after which mining will take place around the high-grade shaft pillar over the next eight to ten years. Backfill will be used to minimize ground control-related risks when mining begins in the shaft pillar in 2013.
Steyn 1 consists of a main shaft and two sub-decline shafts. No mining activities have taken place at the shaft since acquisition due to an underground fire. The shaft has been placed on care and maintenance.
Steyn 2 consists of a main shaft and two sub-decline shafts. Equipping of the Steyn 2 shaft, in build-up phase, continues to improve face length flexibility. Only capital waste meters for the shaft pillar project are still outstanding.
During fiscal 2011, Bambanani accounted for 7% (9% in 2010 and 8% in 2009) of our total gold production.
35
Safety: Regrettably three fatalities occurred at Bambanani during fiscal 2011 (2010: one) and the lost time injury frequency rate ( LTIFR ) was reported as 10.74 per million hours worked (2010: 9.29). This is an unsatisfactory performance and more work is being done to improve safety behavior.
Plants: The ore from Bambanani, along with ore from Tshepong and Phakisa, is sent to Harmony 1 Plant for processing. This plant, which processes underground ore, waste rock and various surface accumulations, was commissioned in 1986 and is a conventional CIP plant processing ore that has been milled by fully-autogenous grinding. Gold is recovered from the eluate solution using zinc precipitation and a precoat vacuum filter. The precipitate recovered from the filter is calcined and smelted to bullion.
The following table sets forth processing capacity and average tons milled during the fiscal 2011 for the Harmony 1 Plant:
Plant |
Processing
Capacity |
Average Milled for the
Fiscal Year Ended June 30, 2011 |
||
(tons/month) | (tons/month) | |||
Harmony 1 |
463,000 | 380,417 |
In fiscal 2011, Harmony 1 Plant recovered approximately 95.9% of the gold contained in the ore delivered for processing. The plant had three consecutive quarters with no lost time injuries during fiscal 2011.
Production analysis:
Fiscal Year Ended June 30, | ||||||||||||
Bambanani | 2011 | 2010 | 2009 | |||||||||
Production |
||||||||||||
Tons (000) |
470 | 582 | 570 | |||||||||
Recovered grade (ounces/ton) (1) |
0.203 | 0.227 | 0.213 | |||||||||
Gold produced (ounces) (1) |
98,092 | 133,007 | 121,530 | |||||||||
Gold sold (ounces) (1) |
99,443 | 134,165 | 119,665 | |||||||||
Results of operations ($) |
||||||||||||
Product sales (000) |
131,753 | 146,971 | 102,645 | |||||||||
Cash cost (000) |
118,442 | 98,289 | 72,343 | |||||||||
Cash profit (000) |
13,311 | 48,682 | 30,302 | |||||||||
Cash costs |
||||||||||||
Per ounce of gold ($) (1) |
1,247 | 723 | 611 | |||||||||
Capex (000) ($) |
45,884 | 27,300 | 5,779 |
(1) |
2,894 ounces (2010: 1,061) were produced by Steyn 2 and sold. The revenue has been credited against capital expenditure as the shaft is not in production yet. The cost of these ounces has not been included in the cash cost per ounce amount. The calculation of grade also excludes these ounces. |
Tons milled from Bambanani increased to 582,000 in fiscal 2010 compared with 570,000 in fiscal 2009. Ounces produced were 133,007 in fiscal 2010 compared with 121,530 in fiscal 2009. This increase was due to better recovered grade, which increased by 0.014 ounces per ton compared to fiscal 2009.
Cash costs per ounce for Bambanani were US$723 in fiscal 2010, compared with US$611 in fiscal 2009. The costs per ounce increased by 18% in fiscal 2010 compared with fiscal 2009, due to increases in the costs of labor and supplies, combined with the increase in power and water costs year on year of 37% (utility costs comprise approximately 22% of cash costs).
Tons milled from Bambanani decreased from 582,000 in fiscal 2010 to 470,000 in fiscal 2011. Ounces produced were 98,092 in fiscal 2011 compared with 133,007 in fiscal 2010. Grade decreased by 11% to 0.203 ounces per ton in fiscal 2011, which together with the production constraints during the first half of the year and the cessation of mining on the remnant pillars contributed to the lower production.
Cash costs per ounce for Bambanani were US$1,247 in fiscal 2011, compared with US$723 in fiscal 2010. The costs per ounce increased by 72% in fiscal 2011 compared with fiscal 2010. This was mainly due to a 26% increase in the cost of electricity, which now constitutes 28% of the total operational cost. Also contributing was an increase in labor cost, which reflects the annual salary increases of 7.5% as well as an increase in the average staff complement of 278.
36
The rock hoisting capacity at Bambanani is 116,000 tons per month. The average tons milled in fiscal 2011 were 39,200 tons per month where we planned 54,500 tons per month for fiscal 2011.
Assuming no additional reserves are identified, at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 3.7 million tons (1.2 million ounces) will be sufficient for Bambanani to maintain underground production until approximately 2020. Any future changes to the assumptions upon which the mineral reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: Bambanani incurred approximately R321 million (US$45.9 million) in capital expenditure in fiscal 2011, primarily to extract the shaft pillar and to equip the Steyn operations (R162 million (US$23.2 million). We budgeted R244 million (US$36.1 million) for capital expenditure in fiscal 2012, primarily for the access development for the shaft pillar extraction and the Steyn operations (R61 million (US$8.9 million)).
Doornkop
Introduction : Doornkop is located in the Gauteng Province of South Africa, approximately thirty kilometers west of Johannesburg. The operation is owned by Randfontein Estates Limited ( Randfontein ). Doornkop currently operates under its own mining authorization of 2,941 hectares. Production is treated at the Doornkop plant.
History : Harmony acquired this operation when it took over Randfontein in 2000.
Geology : These operations are situated in the West Rand Goldfield of the Witwatersrand Basin, the structure of which is dominated by the Witpoortjie and Panvlakte Horst blocks, which are superimposed over broad folding associated with the southeast plunging West Rand Syncline.
The Doornkop operation lease area is bounded by and lies to the south-east of the major north-easterly striking Roodepoort Fault, which dips to the south and constitutes the southern edge of the Witpoortjie Horst Block or Gap. This Horst Block is comprised of the stratigraphically older sediments of the West Rand Group, the overlying Central Rand Group sediments having been removed by erosion. A number of other faults, forming part of and lying southeast of the Roodepoort Fault, including the Saxon Fault, also constitute conspicuous structural breaks. A second major fault, the Doornkop Fault, which trends in an east west direction, occurs towards the southern portion of the lease area. This fault dips to the south and has an up-throw to the north. Nearly the entire upper Witwatersrand section is present in the lease area and therefore all the major zones are present, though due to the distance of the area from the fan head, the number of economic bands and their payability is limited. Eight of the well-known reefs are present in the area, but only the Kimberley Reef and South Reef are considered viable at this stage. The resource is concentrated in the Kimberley and South Reefs. The Kimberley Reef is contained in the Vlakfontein Member of the Westonaria Formation. This reef, also known as the K9 Reef horizon, rests on an unconformity and is a complex multi-pulse conglomerate, which can be separated into four facies or cycles. All four cycles consist on average of an upper conglomerate and a lower quartzite. The characteristics of every cycle are area-dependent and the grades are variable within each cycle. The South Reef is approximately 900 meters below the current Kimberley Reef mining, and between 7.5 and 60 meters above the Main Reef horizon. The hanging wall to the South Reef consists of siliceous quartzites with non-persistent bands of blue-shot grit and thin argillite partings. The footwall to the South Reef is a light colored and fairly siliceous quartzite. Secondary conglomerate bands and stringers in the hanging wall and footwall of the South Reef may contain sporadic gold values. The general strike of the reef is east-west, with a dip from 10 to 20 degrees. The orebody at Doornkop has a strike length of 4km and a width of 4km from west to east.
During fiscal 2011, the gathering of additional geological information from on-reef development and exploration drilling on the South Reef resulted in an increase in confidence to successfully build up maximum production. The geological, depositional, facies & evaluation models receive regular attention and are being expanded as the new data becomes available. A 3-D geological model was developed for the mine. This model incorporates the Kimberley, South & Main Reefs.
Mining Operations: These operations are subject to the underground mining risks detailed in the Risk Factors section. Due to the shallow to moderate depths of the operations, seismicity and high rock stress related problems are infrequent. There is a risk of subterranean water and/or gas intersections in some areas of the mines. However, this risk is mitigated by active and continuous management and monitoring, which includes the drilling of boreholes in advance of faces. Where water and/or gas are indicated in the drilling, appropriate preventative action is taken.
37
The Doornkop South Reef Project was announced on January 22, 2003. The project involved the deepening of the Doornkop main shaft to 1,973 meters to access the South Reef between 1,650 and 2,000 meters below surface, and includes development towards these mining areas. The estimated final capital cost is R1,793 million (US$264.5 million) with R1,606 million (US$236.9 million) spent as of June 30, 2011.
The massive improvement in year-on-year production at Doornkop reflects the production build-up on the South Reef and introduction of new trackless machinery on the Kimberley Reef during the year. The transfer of an additional 13 production crews from the closed Merriespruit 1 shaft in the December 2010 quarter supported build-up on the South Reef and preserved the jobs of employees affected by restructuring.
Tons mined from the South Reef areas accounted for 58% of total tons mined in fiscal 2011 up from 50% the year before while the contribution from the Kimberley Reef declined from 50% to 42%. Overall results were affected by plant constraints in the third quarter, particularly a breakdown in the thickener. A project to optimize equipment availability and the beneficiation process in the plant was launched in the final quarter of fiscal 2011, with phase 1 scheduled for completion by March 2012. The project is focused on installing or replacing equipment to minimize downtime in the plant and optimize gold recovery.
In addition, the surface rock winder was commissioned and fully automated during the year to give the shaft more flexibility to hoist rock available from underground. The conveyor belts on 212 level were commissioned and are now fully automated, and a second settler on 205 level has been commissioned. All locomotives have been fitted with anti-collision systems, enhancing safety and preventing accidents or damage to railbound equipment. The smart rail system on 192 level was installed and fully commissioned, improving ore accounting on that level. This will be rolled out to other levels in fiscal 2012.
Development meters increased by 44% or 3,868 meters from the previous year to ensure build-up in the South Reef project is achieved and targets are met. As more mining takes place on the South Reef, the level of confidence on the geology of this reef improves. Few surprises were encountered during the year in terms of geology. The exploration program to further improve confidence will continue. The conversion of the South Reef resource to reserves continued, with an increase of 236,000 ounces of gold (75%) and 1,198,619 tons (51%).
A business case conducted during the year indicated that the Kimberley Reef can add economic benefit to the operation over the life-of-mine and not only for four years as initially anticipated. The Kimberley Reef has therefore been planned over the total life-of-mine and will contribute 12% of total gold produced over that period.
During fiscal 2011, Doornkop accounted for 6% (5% in 2010 and 3% in 2009) of our total gold production.
Safety : The safety record at Doornkop during fiscal 2011 was as follows: LTFR deteriorated to 8.04 (2010: 5.50) per million hours worked. There were no fatalities at Doornkop during fiscal 2011 (2010: two). The mine achieved 1 million fatality-free shifts and 4 million fall-of-ground/fatality-free shifts during the year. The increased focus on safety has streamlined procedures and improved training, maintenance and behaviour. The fall-of-ground initiative being piloted at Doornkop and Kusasalethu has produced encouraging results, particularly from netting development sections.
Plants : The processing facilities presently comprise one operating plant, the Doornkop metallurgical plant. The Doornkop metallurgical plant, commissioned in 1985, is a conventional CIP plant, which was used to treat waste rock and other surface accumulations. It is now treating all ore from underground mining at the Doornkop and some of the ore from Rand Uraniums Cooke operations. The plant is serviced by a surface rail network from the Cooke shafts and by a conveyor belt configuration system from Doornkop shaft.
The following table sets forth processing capacity and average tons milled during fiscal 2011 for the Doornkop plant:
Plant |
Processing
Capacity |
Average Milled for the
Fiscal Year Ended June 30, 2011 |
||
(tons/month) | (tons/month) | |||
Doornkop |
242,500 | 149,070 |
38
In fiscal 2011, the Doornkop plant recovered approximately 94.2% of the gold contained in the ore delivered for processing. During fiscal 2010 a split-stream configuration that isolates the Doornkop ore from the Rand Uranium ore was adopted to improve the accuracy of gold accounting to the respective companies.
Production analysis:
Fiscal Year Ended June 30, | ||||||||||||
Doornkop | 2011 | 2010 | 2009 | |||||||||
Production |
||||||||||||
Tons (000) |
792 | 595 | 605 | |||||||||
Recovered grade (ounces/ton) |
0.102 | 0.105 | 0.070 | |||||||||
Gold produced (ounces) |
80,763 | 62,694 | 42,150 | |||||||||
Gold sold (ounces) |
81,149 | 62,275 | 43,211 | |||||||||
Results of operations ($) |
||||||||||||
Product sales (000) |
111,759 | 68,169 | 38,128 | |||||||||
Cash cost (000) |
85,999 | 54,042 | 31,253 | |||||||||
Cash profit (000) |
25,760 | 14,127 | 6,875 | |||||||||
Cash costs |
||||||||||||
Per ounce of gold ($) |
1,054 | 822 | 804 | |||||||||
Capex (000) ($) |
41,782 | 45,097 | 43,918 |
Tons milled from Doornkop were 595,000 in fiscal 2010, compared with 605,000 in fiscal 2009. Although throughput remained flat, the higher grade South Reef made up a much larger portion of total ore milled than in fiscal 2009. This change in the mix of milled tons resulted in an increase in recovered grade to 0.105 in fiscal 2010, compared with 0.070 in fiscal 2009. Ounces produced were 62,694 in fiscal 2010, compared with 42,150 in fiscal 2009.
Production from trackless areas in the Kimberley Reef section will continue through the build-up phase of mining from the South Reef project areas.
Cash costs per ounce of gold were US$822 in fiscal 2010, compared with US$804 in fiscal 2009. This increase was mainly from labor, services and consumables costs. Labor costs increased due to an increase in labor to cater for the new South Reef production levels and from annual wage increases. Consumable costs increased as a result of the South Reef production build-up where additional square meters were mined. In addition, significant increases in power cost (35%) were incurred, measured against fiscal 2009.
Tons milled from Doornkop were 792,000 in fiscal 2011, compared with 595,000 in fiscal 2010. This was due to the production build-up in the South Reef and the introduction of new trackless machinery on the Kimberley Reef during the year. Recovered grade deteriorated slightly from 0.105 ounces per ton in fiscal 2010 to 0.102 in fiscal 2011. This was due to the decrease of the grade in the South Reef, which was offset by the increase in grade recovered from the Kimberley Reef. Ounces produced increased from 62, 694 in fiscal 2010 to 80,763 in fiscal 2011, reflecting the production build-up of the South Reef.
Revenue received increased from US$68.2 million in fiscal 2010 to US$111.8 million in fiscal 2011 as a result of the increase in ounce produced and the higher gold price received. Cash costs per ounce were 28% higher at US$1,054/oz, mainly due to the increase in production. Also contributing was the annual increase in labor rates of 7.5% and the 25% increase in electricity costs.
The hoisting capacity of the Doornkop shaft is 185,000 tons per month. The average tons milled in fiscal 2011 were 66,000 tons per month.
On a simplistic basis, assuming no additional resources are identified, at expected production levels, it is foreseen that: the reported proven and probable mineral reserve of 9.5 million tons (0.9 million ounces) will be sufficient for the Doornkop shaft to maintain production until approximately fiscal 2025.
Capital Expenditure: Harmony incurred R292 million (US$41.8 million) in capital expenditure in fiscal 2011 at Doornkop, primarily for the South Reef project (44%) and ongoing capital development (37%). The planned capital expenditure for fiscal 2012 is R291 million (US$42.9 million) for the Doornkop South Reef project and ongoing capital development.
39
Evander Operations
Introduction: The Evander operations are located in the province of Mpumalanga in South Africa and comprise an amalgamation of the former Kinross, Bracken, Leslie and Winkelhaak mines into a mining right of 36,898 hectares, and additional adjacent prospecting rights comprising 19,933 hectares. Ore is treated at the Kinross plant, after the closure of the Winkelhaak plant.
History: Gold mining in the Evander Basin began in 1955. Eventually, four mining operations were established at Evander. In 1996, as a result of the depletion of mineral reserves, all four mining areas were merged to form Evander Gold Mines Limited. In August 1998, Harmony acquired Evander as a wholly-owned subsidiary.
Geology: The area covered by Evanders mining authorization and mineral rights is situated within the Evander basin, a geologically discrete easterly extension of the main Witwatersrand Basin. Only one economic reef type, the Kimberley Reef, is mined at Evander. In addition to the faulting of the reef horizon, there are numerous dykes and sills that complicate the mining layouts, the most significant of which is an extensively developed dolerite footwall sill that occasionally intersects the Kimberley Reef, causing displacements within it.
Mining Operations: The Evander operations are primarily engaged in underground mining but a limited amount of surface material, containing gold, from the surface cleanup operations are also processed. These operations are subject to the underground mining risks detailed in the Risk Factors section. Due to the shallow to moderate depths of the Evander underground operations, seismicity and high rock stress related problems are relatively infrequent. There is a risk of subterranean water and/or gas intersections in some areas of the mine. However, this risk is mitigated by active and continuous management and monitoring, which includes the drilling of boreholes in advance of faces. Where water and/or gas are indicated in the drilling, appropriate preventative action is taken.
A due diligence of the operations during fiscal 2010 led to the conclusion that the only economically viable shaft was Evander 8. Mining operations at Evander 2 and 5 and 7 shafts ceased during the year and Evander 8 was restructured. This restructuring included the cessation of Conops, or continuous operations, in the decline section at Evander 8. The production in this section had been constrained by ventilation issues, which resulted in lower than expected production. This resulted in the decision to stop Conops as the benefit of production did not outweigh the cost of running the shaft for the extended period, as well as the effect of limited time for maintenance work on the shaft. The personnel from this area were redeployed to other areas where positions needed to be filled as a result of natural attrition. The impact on the results has been insignificant. The shaft infrastructure at Evander 7 is being utilised by Evander 8 for the pumping of water and the hoisting of rock as well as being available for use as a second escape. High temperatures underground, caused by ventilation return capacity restrictions at Evander 8 remained problematic and hampered production during the first half of fiscal 2011.
Following the feasibility study that proved the viability of Evander 8, greater attention was given to re-engineering this shaft which involves not just deepening the decline but repositioning within the payshoot for immediate access to the high-grade areas between 24 and 25 levels. The projects parameters include the optimizing of logistics, cooling and ventilation as well as an upgrade of the refrigeration plant. The results of these initiatives started to materialize in the last quarter of fiscal 2011. During the June 2011 quarter, more mining crews were moved into the main payshoot of the decline section, where the grade is higher.
During fiscal 2011, the chilled water project was completed. This now pumps cold water from the 7 shaft refrigeration plant to 8 shaft, significantly reducing the heat load in the decline section and improving underground environmental conditions. In addition, much work went into electricity savings through load control on the compressors, and controlling the Winkelhaak water via 8 shaft. An external belting company was contracted for repairs and maintenance to conveyors on the decline, considerably reducing the number of conveyor belt breakdowns.
Ongoing improvements to ventilation at Evander will include a new raise borehole between 17 and 21 levels, more return airways and the installation of a second refrigeration plant at 18 level. This will improve both temperature and air quality, and enable Evander to operate to 25 level using the same ventilation infrastructure.
Following the closure of the Evander 2 and 5 shafts as well as the Winkelhaak plant, a short-term clean-up program commenced during fiscal 2010 at and in the vicinity of the plant. The aim of this program is to clean up any metal contained in the plant footprints, to process rock from the rock dumps in the vicinity, to rehabilitate the Winkelhaak plant, and to clean the surface rail network. In fiscal 2011, approximately 320,000 tons were treated via this program, yielding 13,889 ounces of gold. Benefits from this program are expected to contribute to Evanders results for another year.
Potential exists at several areas in Evander:
Twistdraai and Shaft 6
|
Joint Venture with the African Precious Minerals ( APM ) was formed to explore these two target areas. |
40
|
APM may earn in a 52% equity stake upon completion of the full bankable feasibility study for each area. |
|
A conceptual study was completed and approval given during fiscal 2010 for the project to proceed to pre-feasibility. |
|
Surface drilling commenced in fiscal 2011. |
|
We entered into an agreement with Taung Gold Mining Limited for the sale of these assets during September 2010. Certain conditions precedent to the agreement still need to be fulfilled. |
Poplar
|
Surface drilling was started in fiscal 2010 and involved drilling 25 holes (19,500 meters). |
|
Results from the drilling were used to update the resource model. |
|
Additional drilling is required, particularly in the south where good grades were returned and the reef is closest to the surface. |
|
New scoping study to commence based on the updated model. |
Rolspruit
|
This is a future mining area on the down-dip extension of the 8 shaft payshoot. |
|
The resource model was updated at the same time as the Poplar model was updated. |
|
A pre-feasibility study has been commissioned and is due for completion in fiscal 2012. |
Project Libra
|
This is a planned surface retreatment project being considered near Evander, based on an extensive drilling program. |
|
Results from drilling conducted on the Kinross, Winkelhaak and Bracken/Leslie tailings dams indicate a viable business case could be made for such a project. |
|
In fiscal 2011, an initial pre-feasibility study was completed on a mini-retreatment (mini-Libra, lower-tonnage option (220,000 tons per month), using the spare capacity at the Kinross plant. Indications are that this option could be implemented at a much lower cost than the larger Libra project. |
|
A feasibility study was completed in June 2011. Results confirmed a project with ten year life (this is constrained to the present Evander underground life-of-mine but could be extended to 18 years on its own) and that would require R152 million (US$22.4 million) in capital funding. If approved, mini-Libra would require a 12-month construction period. |
|
Estimates are that mini-Libra could yield 12,800 ounces per annum at peak production over the ten-year duration of the operation |
In fiscal 2011, the Evander operations accounted for approximately 6% (8% in fiscal 2010 and 12% in fiscal 2009) of Harmonys total gold production.
Safety: The behavior-based safety initiatives at the Evander operations produced significant results in fiscal 2011, with an improvement in terms of LTIFR from 7.41 per million hours worked in fiscal 2010 to 3.72 during fiscal 2011. There were no fatalities at Evander during fiscal 2011 (2010: two fatalities).
41
Plants: Evander has one active processing plant, the Kinross plant. Ore from Evander 8 is hoisted directly to and treated at the Kinross plant, which is a hybrid CIP/CIL plant.
The following table sets forth processing capacity and average tons milled during fiscal 2011 for the operating plant:
Plant |
Processing
Capacity |
Average Milled for the
Fiscal Year Ended June 30, 2011 |
||
(tons/month) | (tons/month) | |||
Kinross |
220,460 | 69,235 |
In fiscal 2011, the Kinross plant recovered approximately 93.5% of the gold contained in the ore delivered for processing.
Production analysis:
Fiscal Year Ended June 30, | ||||||||||||
Evander operations | 2011 | 2010 | 2009 | |||||||||
Production |
||||||||||||
Tons (000) |
596 | 869 | 1,241 | |||||||||
Recovered grade (ounces/ton) |
0.124 | 0.129 | 0.153 | |||||||||
Gold produced (ounces) |
74,011 | 111,724 | 190,075 | |||||||||
Gold sold (ounces) |
74,655 | 111,499 | 195,668 | |||||||||
Results of operations ($) |
||||||||||||
Product sales (000) |
102,611 | 120,092 | 168,180 | |||||||||
Cash cost (000) |
89,009 | 113,327 | 110,869 | |||||||||
Cash profit (000) |
13,602 | 6,765 | 57,311 | |||||||||
Cash costs |
||||||||||||
Per ounce of gold ($) |
1,186 | 1,018 | 572 | |||||||||
Capex (000) ($) |
28,102 | 23,100 | 23,352 |
Tons milled at the Evander operations were 869,000 in fiscal 2010, compared with 1,241,000 in fiscal 2009, and ounces produced 111,724 in fiscal 2010 compared with 190,075 in fiscal 2009. The decrease in tons milled is predominantly attributable to the closure of Evander 2 & 5 and 7 Shafts. Recovered grade was 0.129 ounces per ton in fiscal 2010, compared with 0.153 in fiscal 2009.
The increase in cash costs from US$572 per ounce in fiscal 2009 to US$1,018 per ounce in fiscal 2010 was attributable primarily to the decrease in gold ounces produced in fiscal 2010 compared to fiscal 2009 due to the closure of Evander 2 & 5 and 7.
Tons milled at Evander during fiscal 2011 were 596,000, compared with 869,000 in fiscal 2010. Ounces produced amounted to 74,011 in fiscal 2011, a decrease of 34% from fiscal 2010. These decreases are primarily as a result of the closure of Evander 2 & 5 and 7 shafts during fiscal 2010 and the lower production from Evander 8 due to the ventilation constraints in the decline shaft. A decrease in the grade year on year also contributed to the decrease in ounces produced.
Revenue decreased from US$120.1 million in fiscal 2010 to US$102.6 million in fiscal 2011 as a result of the decrease in ounces produced. This was offset by the higher average gold price received. The increase in cash costs per ounce of 17% is due to the lower production of 34%, annual labor rate increases of 7.5% and the 25% increase in electricity tariffs.
Assuming no additional reserves are identified, at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 3.7 million tons (0.8 million ounces) (excluding the below infrastructure reserves) will be sufficient for the Evander operations to maintain production until approximately fiscal 2022 at Evander 8. Any future changes to the assumptions upon which the reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: Harmony incurred approximately R196 million (US$28.1 million) in capital expenditures at the Evander operations in fiscal 2011. The expenditure was primarily for the re-engineering project at Evander 8 as well as ongoing development. Harmony budgeted R167 million (US$24.6 million) for capital expenditures in fiscal 2012 primarily for the upgrading of major equipment, ongoing development and the 8 shaft deepening project.
42
Joel
Introduction: Joel is located in the Free State province, on the south-western edge of the Witwatersrand basin. The mine comprises of two shafts, North and South shafts. Previously ore mined at Joel was transported to Central Plant, 38 kilometers away, for processing, but since the recommissioning of the Joel plant in November 2009, the ore is now processed on site.
History: Joel was purchased from a subsidiary of AngloGold at the same time as the rest of the Freegold assets in January 2002.
Geology: Joel is mining the shallow flat-dipping Beatrix/VS5 Reef. This varies from a single-pebble lag to a multiple conglomerate, often showing mixing of the reef with some of the overlying lower grade VS5 (mixed pebble conglomerate) material. None of the other reefs are present this far south, having sub-cropped against the Beatrix Reef.
Mining operations: These operations are subject to the underground mining risks detailed in the Risk Factors section.
Scattered mining takes place on the Beatrix Reef, down to a depth of some 1,400 meters. Upgrading of the infrastructure at North Shaft is currently in progress.
While production at Joel has progressively moved to the deeper portions of the mine, some 1,400 meters below surface, the North Shaft, which accesses these areas, was never fully equipped for this and adjustments to the shaft spillage arrangements are now being made retrospectively. The modifications being made include:
|
changing the winder from sinking to production mode; |
|
installing larger skips; |
|
ensuring that emergency egress is available; |
|
raise boring the lift shaft from 121 to 129 level; and |
|
improving cleaning arrangements at the shaft bottom. |
After excessive spillage at the bottom of North shaft at the end of the prior year, which cost Joel 43 production days in the first quarter of fiscal 2011, the shaft bottom rehabilitation process was completed in 50 days (rather than the planned 59 days) with production resuming in September 2010. A permanent spillage arrangement (spillage skip) was installed by December 2010.
Performance was hampered mid-year as the higher grades on 129 level could not be accessed until the lift shaft was commissioned. The lift shaft is an integral part of the logistics of mining at Joel, and was only equipped to 121 level. To facilitate future production for mining below 121 level, we decided to ream and equip the lift shaft to 129 level. A sub-level was developed on 121 level for access to the conveyance only, giving us time to equip the raise bore shaft to 129 level. Equipping of the lift shaft was completed at the end of June 2011.
The mining support design has changed with the shaft changing from shallow to intermediate depth. This will impact on the face advance as well as the costs per square meter. The face time and tramming time will decrease in fiscal 2012 with the completion of the lift shaft and mining raises being concentrated closer to the lift shaft.
To ensure production targets are met, plans are in place to ensure the operability of North shaft through a planned maintenance program to minimize breakdowns, maintain blast advances and assess the feasibility of mining below 129 level. Supported by a successful drilling program in 2009 and pre-feasibility study in 2010, a feasibility study on possible mining of 137 level and testing the upside potential of 145 level was completed by the end of the fiscal 2011.
During fiscal 2011, Joel accounted for 4% of our total gold production (5% in fiscal 2010 and 4% in fiscal 2009).
Safety: Safety at Joel improved during fiscal 2011 with the LTIFR at Joel improving from 4.26 per million hours worked in fiscal 2010 to 2.05 in fiscal 2011. There was tragically one fatality during fiscal 2011 (2010: one).
Plants: The Joel plant is a hybrid CIP/CIL plant and was commissioned in 1987. During fiscal 2005, it was decided to close the Joel Plant and place the plant under care and maintenance. Joel Plant was re-commissioned in November 2009 and during fiscal 2011 the plant processed an average of 72,282 tons per month with two mills. This comprised 53% surface sources (which included waste and Virginia plant clean-up) and 47% reef. The current monthly capacity is 88,185 tons of rock.
43
The following table sets forth processing capacity and average tons milled during fiscal 2011 for the operating plant:
Plant |
Processing
Capacity |
Average Milled for the
Fiscal Year Ended June 30, 2011 |
||
(tons/month) | (tons/month) | |||
Joel Plant |
88,185 | 72,282 |
In fiscal 2011, the Joel Plant operations recovered approximately 90.5% of the gold ore delivered for processing.
Production analysis:
Fiscal Year Ended June 30, | ||||||||||||
Joel | 2011 | 2010 | 2009 | |||||||||
Production |
||||||||||||
Tons (000) |
448 | 484 | 566 | |||||||||
Recovered grade (ounces/ton) |
0.104 | 0.133 | 0.116 | |||||||||
Gold produced (ounces) |
46,586 | 64,495 | 65,684 | |||||||||
Gold sold (ounces) |
46,618 | 63,788 | 64,784 | |||||||||
Results of operations ($) |
||||||||||||
Product sales (000) |
64,928 | 69,150 | 55,862 | |||||||||
Cash cost (000) |
59,690 | 50,017 | 40,649 | |||||||||
Cash profit (000) |
5,238 | 19,133 | 15,213 | |||||||||
Cash costs |
||||||||||||
Per ounce of gold ($) |
1,297 | 792 | 636 | |||||||||
Capex (000) ($) |
10,461 | 11,587 | 6,183 |
The decrease in tons milled from 566,000 in fiscal 2009 to 484,000 in fiscal 2010 is mainly due to the lift shaft between 110 level and 121 level being stopped as a project was initiated to deepen this shaft from 121 level down to 129 level to enable the mining of 129 level. This entailed raising a borehole from 129 level to 121 level. This extension was then equipped, resulting in all men and material having to travel down raise lines, which slowed the delivery of material to the working places and also impacted on stoping and development crews face time. This also resulted in a decrease in square meters from 83,413 in fiscal 2009 to 78,229 in fiscal 2010.
The increase in cash costs for Joel from US$40.6 million in fiscal 2009 to US$50.0 million in fiscal 2010 is due to wage and salary increases granted. Development labor also increased as development meters increased from 3,554 meters in 2009 to 4,537 meters in 2010. Development costs were also severely impacted by costs to contain excessive fissure water encountered during development of level 129. Also impacting on costs was a substantial increase of 32% in electricity rates.
Cash costs per ounce were US$792 in fiscal 2010, compared with US$636 in fiscal 2009. This decrease was primarily attributable to the increase in costs as discussed above, and the reduction in ounces recovered due to the drop in tonnage due to closure of the lift shaft.
Tons decreased from 484,000 in fiscal 2010 to 448,000 in fiscal 2011. Grade decreased by 22% to 0.104 ounces per ton and ounces produced decreased from 64,495 to 46,586 in fiscal 2011. The decreases in production were as a result of the shaft stoppage in July and August 2010 and the process of equipping the lift shaft, which was completed by the end of fiscal 2011.
Revenue decreased by 6% to US$64.9 million in fiscal 2011, despite the increase in the gold price year on year. Cash costs per ounce increased by 64% in fiscal 2011, primarily as a result of the decrease in ounce produced. Also contributing was the increase in electricity tariffs of 25%.
The rock hoisting capacity at Joel is 50,000 tons per month. The average tons milled in fiscal 2011 was 37,333 tons per month.
Assuming no additional reserves are identified, at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 3.3 million tons (0.5 million ounces) will be sufficient for Joel to maintain underground production until
44
approximately 2018. Any future changes to the assumptions upon which the mineral reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: We incurred R73 million (US$10.5 million) in capital expenditures at Joel in fiscal 2011 on deepening the lift shaft from 121 level to 129, to enable mining on 129 level and to equip it and the spillage skip at North Shaft. Capital budgeted for fiscal 2012 is R52 million (US$7.7 million), primarily for ongoing capital development.
Kusasalethu
Introduction: Kusasalethu is located near Carletonville on the Gauteng/North West border in South Africa. The assets and associated liabilities were purchased during fiscal 2001 for approximately R1 billion (US$128.4 million) from Anglogold. Ore from the operation is treated at the Kusasalethu plant.
History: Gold mining began at Kusasalethu in 1978 following approval of the project in 1974 by Elandsrand Gold Mining Company. Two surface shafts and two adjoining sub-vertical shafts were sunk at Elandsrand. The sub-vertical shafts at Elandsrand, which accessed the deeper part of the VCR reef in the lease area, were completed in 1984. The deepening of the sub-vertical shafts to approximately 3,600 meters below surface has been completed after the deepening project was commissioned in 1991. Activities are currently focused on accessing and opening up areas of the new mine and on the development and construction of support infrastructure.
Geology: At Kusasalethu we primarily exploit the Ventersdorp Contact Reef, or VCR, the Carbon Leader Reef, or CLR and the Elsburg Reef. Only the VCR is economic to mine and has been mined at depths below surface between 1,600 and 3,400 meters with future production to take place up to 3,600 meters below surface at the Kusasalethu operations. The VCR consists of a narrow (20 centimeters to 2 meters) tabular orebody of quartz pebble conglomerates hosting gold, with extreme lateral continuity. The VCR strikes east-northeast and has a regional dip of 21 degrees to the south-southeast. Local variations in dip are largely due to the terrace-and-slope palaeotopography surface developed during VCR deposition.
Mining Operations: The Kusasalethu mine is subject to the underground mining risks detailed in the Risk Factors section.
The Kusasalethu mine has the challenge of developing a new mine underneath the original mine after the shaft was deepened to access the deeper part of the VCR orebody. The operation is still hampered by the lack of flexibility, an issue that will be addressed by the full commissioning of the new mine. Due to the operating depths of the Kusasalethu underground operations, seismicity and high rock stress are significant risks at the mine. Steps were taken during fiscal 2010 to improve the quality of the pre-conditioning at the stope face and seismic management systems so as to reduce the possibility of face ejection during small, volatile seismic events.
Planned build-up at Kusasalethu during fiscal 2011 was hampered by an accident that caused one fatality, damaged the hoisting shaft and therefore constrained hoisting ore to surface. The subsequent implementation of more stringent controls improved production in the remainder of the year.
The largely completed deepening project has extended the sub-vertical shafts, accessing the Ventersdorp Contact Reef up to 3,388 meters below collar. Remaining project work is focused on extending the service shaft to 113 level, completing the refrigeration complex at 100 level and commissioning the 92 level turbine complex.
In terms of grades, Kusasalethu has now reached an area of localized enrichment although the higher grade was diluted by waste being hoisted with reef and delivered to the plant. A decision to rehabilitate the shaft orepass system after major scaling took place inside these excavations resulted in only one orepass system being available for production. Estimates are that the rehabilitation work will take around two years to complete.
The sub-station for the 100-level refrigeration complex and 98-level complex was commissioned early in the year, and mechanical construction work on the refrigeration plants was completed by year end. Sinking was completed to 113 level from 109 level during the year. The mechanical installation of the turbine on 92 level was completed in March 2011.
Other engineering initiatives include greater use of thermal scanning to detect potential hot connections on electrical panels, protection relays to prevent power outages and a central monitoring system for all pumps. Rotational dam cleaning has eliminated the
45
risk of silting, which has compromised dam capacity in the past and constrained pumping. Additional instrumentation has been installed on all large dams to monitor their levels and prevent mud from being drawn into the valves, causing production delays.
These and other initiatives are expected to improve productivity. Currently, 70% of production at Kusasalethu is from production areas below 100 level (the new mine expansion project) and 30% from production areas in the old mine, above 100 level.
In fiscal 2011, our Kusasalethu operations accounted for approximately 14% (12% in 2010 and 11% in fiscal 2009) of our total gold production.
Safety: The focus on creating a safe working environment at Kusasalethu continued to add value, with the mine recording 1 million fatality-free shifts during fiscal 2011. Regrettably there were two fatalities after this achievement (2010: two). The LTIFR regressed to 7.74 per million hours worked (2010: 6.88).
Seismicity remains a risk and management continues to focus on improving the quality of pre-conditioning at the stope face to reduce the risk presented by small, but damaging, seismic events.
Plants: Commissioned in 1978, the Kusasalethu Plant consist of milling in closed circuit with primary and secondary hydrocyclones, thickening and cyanide leaching in a CIP pump cell carousel circuit. The CIP was commissioned after an upgrade of the facility in 1999. Ore from Kusasalethu underground operations is delivered to the plant for treatment via conveyor belt after being hoisted from underground. Loaded carbon from the Kusasalethu Plant is transported by road to the Kinross Plant for elution, electro-winning and smelting to produce gold. Residues from the CIP are pumped either to a backfill plant or directly to the tailings facility.
The following table sets forth processing capacity and average tons milled during fiscal 2011 for the plant:
Plant |
Processing
Capacity |
Average Milled for the
Fiscal Year June 30, 2011 |
||
(tons/month) | (tons/month) | |||
Kusasalethu Plant |
203,925 (1) | 103,174 |
(1) |
Processing capacity will reach its optimal capacity upon completion of the Kusasalethu New Mine Project. |
In fiscal 2011, the Kusasalethu Plant recovered approximately 96.0% of the gold contained in the ore delivered for processing.
Production analysis:
Fiscal Year Ended June 30, | ||||||||||||
Kusasalethu | 2011 | 2010 | 2009 | |||||||||
Production |
||||||||||||
Tons (000) |
1,212 | 1,141 | 1,061 | |||||||||
Recovered grade (ounces/ton) |
0.149 | 0.153 | 0.164 | |||||||||
Gold produced (ounces) |
180,334 | 175,029 | 174,321 | |||||||||
Gold sold (ounces) |
185,510 | 168,244 | 183,676 | |||||||||
Results of operations ($) |
||||||||||||
Product sales (000) |
253,812 | 183,603 | 157,956 | |||||||||
Cash cost (000) |
189,090 | 143,985 | 117,321 | |||||||||
Cash profit (000) |
64,722 | 39,618 | 40,635 | |||||||||
Cash costs |
||||||||||||
Per ounce of gold ($) |
1,008 | 857 | 660 | |||||||||
Capex (000) ($) |
54,335 | 56,687 | 46,915 |
Tons milled from Kusasalethu were 1,141,000 in fiscal 2010, compared with 1,061,000 in fiscal 2009. Ounces produced increased to 175,029 in fiscal 2010, compared with 174,321 in fiscal 2009 as a result of the increased volumes in production. Mining continues in the old, upper areas of the mine, while the new mine project is completed. Recovered grades decreased during fiscal 2010, resulting in an average of 0.153 ounces per ton in fiscal 2010, compared to the average of 0.164 ounces per ton in fiscal 2009.
46
The increase in labor rates and the higher than normal electricity increases approved by NERSA were the main contributors to the increased cash cost. Electricity rates are expected to continue rising by an estimated 25% annually for the next two years. Potable water previously received from Rand Water Board was increased by 32% for fiscal 2010 by the Merafong Local Council due to a change in legislation allowing local councils to take over this service from Rand Water Board. The increase in electricity costs, labor rates and inflation were the main contributors to the increase in cash cost from US$660 per ounce in fiscal 2009 to US$857 per ounce in fiscal 2010.
Tons milled from Kusasalethu increased from 1,141,000 in fiscal 2010 to 1,212,000 in fiscal 2011. Ounces produced increased by 3% in fiscal 2011 to 180,344, despite a 3% decline in recovered grade. The increases in production reflects the build-up of the new mine, although the planned build-up was hampered by the accident which damaged the hoisting shaft.
Revenue was 38% higher at US$253.8 million in fiscal 2011, mainly due to the higher average gold price and the increase in ounces sold. Cash costs per ounce increased by 18% to US$1,008/oz as a result of the annual labor increases of 7.5% and the 25% increase in the electricity tariffs.
Kusasalethu has a hoisting capacity of 209,440 tons per month. The average tons milled in fiscal 2011 was 101,000 tons per month.
Assuming no additional reserves are identified, at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 37.2 million tons, or 7.2 million ounces, will be sufficient for the Kusasalethu shaft to maintain underground production until approximately calendar year 2036. Any future changes to the assumptions upon which the mineral reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: Harmony incurred R380 million (US$54.3 million) in capital expenditure at the Kusasalethu operations in fiscal 2011, mainly for ongoing development (70%), equipment maintenance (17%) and development of the new mine (13%). Harmony budgeted R400 million (US$59.0 million), for capital expenditure at the Kusasalethu operations in fiscal 2012, primarily for ongoing development expenditure.
Masimong
Introduction: Masimong is located in the Free State province, near Riebeeckstad. The Masimong complex comprises an operating shaft, 5 shaft and 4 shaft which, although closed, is used for ventilation, pumping and as a second outlet. Mining is conducted at depths ranging from 1,518 meters to 2,300 meters. Ore is treated at the Harmony 1 Plant, approximately 23 kilometers away.
History: Masimong is located in the Free State Goldfield on the south-western edge of the Witwatersrand Basin. The Company purchased the Masimong complex (formerly know as Saaiplaas Shafts 4 and 5) during September 1998.
Geology: The operation exploits the Basal Reef, which varies from a single pebble lag to channels on more than 2m thick (although the thicker channels greater than 1m were only seen on Masimong 4 in the Steyn facies). It is commonly overlain by shale, which thickens northwards and completely disappears again north of the North dyke. Masimong is also mining secondary reefs, most notably the B Reef (140m above Basal). The B Reef is a highly channelized orebody. Within the channels, grades are excellent, but this falls away to nothing outside of the channels. Consequently, the operation has undertaken extensive exploration to locate these pay channels.
Mining Operations: The operations are subject to the underground mining risks detailed in the Risk Factors section. Due to the shallow to moderate depths of the underground operations, seismicity related problems are relatively infrequent. We regularly revisit our mining strategy and management procedures in connection with our efforts to mitigate risks of these problems. There is a risk of subterranean water and/or gas intersections in some areas of the mine. However, this risk is mitigated by active and continuous management and monitoring, which includes the drilling of boreholes in advance of faces. Where water and/or gas are indicated in the drilling, appropriate preventative action is taken.
In line with Masimongs mine plan, grade declined by 8%, mainly on lower grades from the B Reef. Maintaining grades on the B reef is challenging as mining moves out of the high-grade channels. Grades mined on the Basal reef were consistently good, but
47
started to decline towards the end of the year, due to an underlying sill in the north-east area, and completion of mining in the high-grade south-west 7 line.
The infrastructural upgrade completed in fiscal 2010 is producing the expected improvements in productivity, efficiencies and output, facilitated by the process of cycle mining in which specific tasks are performed on specific days. However, results for the period were affected by an underground lock-up of tons at the interim stage, caused by a ventilation change-over process and unwarranted stoppages by the Department of Mineral Resources. To address Masimongs historical ventilation issues, the whole ventilation circuit was changed from a booster fan system which itself generated heat. The process was completed in three days and improved ventilation conditions are already evident. A new refrigeration plant will be installed by September 2011.
Following the upgrade program, production face advances are planned to increase and every effort made to ensure that panels are well equipped and crews motivated. In addition, steps have been taken to overcome the erratic grade of the B Reef.
In fiscal 2011, Masimong accounted for approximately 11% (11% in fiscal 2010 and 10% in fiscal 2009) of our total gold production.
Safety: Overall safety performance at Masimong improved in 2011, with the mine achieving one million fatality-free shifts at the interim stage. Regrettably, there was a subsequent fatality (2010: one). The LTIFR deteriorated to 13.13 per million hours worked (2010: 7.37).
Plants: The ore from the operation is sent to Harmony 1 Plant for processing. See Item 4. Information of the Company Business Bambanani for a discussion on the plant.
48
Production analysis:
Fiscal Year Ended June 30, | ||||||||||||
Masimong Shaft Complex | 2011 | 2010 | 2009 | |||||||||
Production |
||||||||||||
Tons (000) |
957 | 991 | 981 | |||||||||
Recovered grade (ounces/ton) |
0.144 | 0.157 | 0.157 | |||||||||
Gold produced (ounces) |
137,605 | 155,609 | 154,034 | |||||||||
Gold sold (ounces) |
139,437 | 153,937 | 154,581 | |||||||||
Results of operations ($) |
||||||||||||
Product sales (000) |
189,716 | 168,439 | 135,025 | |||||||||
Cash cost (000) |
108,172 | 92,571 | 73,494 | |||||||||
Cash profit (000) |
81,544 | 75,868 | 61,531 | |||||||||
Cash costs |
||||||||||||
Per ounce of gold ($) |
788 | 602 | 476 | |||||||||
Capex (000) ($) |
25,446 | 23,407 | 14,479 |
Tons milled from Masimong were 991,000 in fiscal 2010, compared with 981,000 in fiscal 2009, and ounces produced were 155,609 in fiscal 2010, compared with 154,034 in fiscal 2009. Year-on-year gold production increased due to an increase in tons.
Cash costs were US$92.6 million in fiscal 2010 compared with US$73.5 million in fiscal 2009 with cash costs per ounce at US$602 in fiscal 2010 compared with US$476 in fiscal 2009. This increase in cash cost is mainly attributable to a 16% lower R/US$ exchange rate and annual cost increases. The biggest cost increase contributors were annual labor cost and electricity cost increases.
Recovered grade remained unchanged in fiscal 2010 compared to fiscal 2009.
Tons milled decreased by 3% in fiscal 2011 to 957,000 tons. Recovered grade decreased in line with the mine plan to 0.144 ounces per ton. Ounces produced decreased by 12% to 137,605 in fiscal 2011.
Revenue increased from US$168.4 million in fiscal 2010 to US$189.7 million in fiscal 2011. This was due to the higher average gold price received. Cash costs per ounce increased by 31%, due to increases in labor costs (the annual labor rate increases of 7.5%) and the 25% increase in electricity tariffs.
Assuming no additional reserves are identified, at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 7.2 million tons (1.2 million ounces) will be sufficient for the Masimong shaft complex to maintain underground production until approximately fiscal 2023. Any future changes to the assumptions upon which the reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: Masimong incurred approximately R178 million (US$25.5 million) in capital expenditures in fiscal 2011, largely spent on the refrigerator plant, Masimong 4 plug, e-learning and the infrastructure upgrade. We have budgeted a total of R220 million (US$32.4 million) for capital expenditures at Masimong in fiscal 2012, primarily for ongoing capital development.
Phakisa
Introduction: We acquired Phakisa when we, in January 2002, acquired the Freegold operations from Anglogold through a 50% joint venture with ARMgold. In September 2003, we acquired 100% of these operations when ARMgold became a wholly-owned subsidiary. The operation is located in the Free State province. Production from the operations is processed through Harmony 1 Plant.
History: Exploration, development and production history in the area of the Freegold assets dates from the early 1900s, leading to commercial production by 1932. Subsequent consolidation and restructuring led to the formation of Free State Consolidated Gold Mine (Operations) Limited, which became a wholly-owned subsidiary of Anglogold in June 1998.
Geology: The operation is located in the Free State Goldfield, which is on the southwestern edge of the Witwatersrand basin. The Goldfield is divided into two sections, cut by the north-south striking De Bron Fault. The Phakisa mine is located to the west of the De Bron Fault. Mining is conducted in the Basal Reef. The reefs generally dip towards the east.
49
Mining Operations: These operations are subject to the underground mining risks detailed in the Risk Factors section. The management teams regularly revisit their mining strategy and management procedures in order to minimize risks.
The start of the review period was tragically marred for Phakisa after an explosion, caused by an underground fire, in which five mine rescue team members died while manning a fresh-air base. This event also resulted in the loss of 13 production days, exacerbated by an ice-pipe failure in the shaft and fire in the 66-63 stope.
The production build-up was affected by geological issues, illegal mining activities and down-time on the new infrastructure. Pleasingly, Phakisa set a record of 1,943 tons of ice per day, resulting in water temperatures of <6°C which in turn improved both ventilation and productivity. Some remaining issues with the ice plant as well as settler failure at Nyala are being addressed. Equipment salvaged from the closed Merriespruit 1 shaft early in fiscal 2011 reduced the need for capital spent on equipment. Most of phase 1 infrastructure was completed before the interim stage and modifications to loading boxes on 77 level by the new year.
Since it is still a new mine, development at Phakisa is currently centered close to the shaft in the lower-grade areas. The major drive is on developing the area to the north to access higher-grade zones and move closer to the average reserve grade. Grades will improve further as development progresses towards the north and more reef is exposed in the major north-west to south-east trending Basal Reef payshoot.
During fiscal 2011, Phakisa accounted for 4% (3% in 2010 and 1.4% in 2009) of our total gold production.
Safety: As reported in 2010, an explosion underground shortly after year end tragically resulted in five fatalities (2010: three). There were no further fatalities in the review period. The LTIFR for 2011 was 10.27 per million hours worked (2010: 8.40).
Plants: The ore from the operation is sent to Harmony 1 Plant for processing. See Item 4. Information of the Company Business Bambanani for a discussion on the plant.
Fiscal Year Ended June 30, | ||||||||||||
Phakisa | 2011 | 2010 | 2009 | |||||||||
Production |
||||||||||||
Tons (000) |
427 | 374 | 204 | |||||||||
Recovered grade (ounces/ton) |
0.133 | 0.118 | 0.109 | |||||||||
Gold produced (ounces) |
56,649 | 44,079 | 22,216 | |||||||||
Gold sold (ounces) |
57,227 | 44,496 | 21,477 | |||||||||
Results of operations ($) |
||||||||||||
Product sales (000) |
78,831 | 49,458 | 19,009 | |||||||||
Cash cost (000) |
67,658 | 43,040 | 11,903 | |||||||||
Cash profit (000) |
11,173 | 6,418 | 7,106 | |||||||||
Cash costs |
||||||||||||
Per ounce of gold ($) |
1,200 | 953 | 555 | |||||||||
Capex (000) ($) |
52,866 | 64,106 | 51,210 |
Tons milled increased from 204,000 tons in fiscal 2009 to 374,000 tons in fiscal 2010, with gold production increasing from 22,216 ounces to 44,079 ounces. This was as a result of the planned ramp up in production during the year. Grade was higher in fiscal 2010 at 0.118 ounces per ton, compared to 0.109 in fiscal 2009.
Cash costs per ounce for Phakisa were US$953 per ounce in fiscal 2010, compared with $555 per ounce in fiscal 2009. This increase is primarily attributable to the increase in tons mined, as well as the cost of employees transferred to Phakisa from shafts that were closed during fiscal 2010.
Tons milled in fiscal 2011 were 427,000, compared with 374,000 tons in fiscal 2010. Gold produced increased by 29% to 56,649 ounces in fiscal 2011. These increases reflect the production build-up at Phakisa. Recovered grade was 0.133 ounces per ton in fiscal 2011, compared with 0.118 in fiscal 2010.
Revenue was 59% higher at US$78.8 million in fiscal 2011 as a result of the higher average gold price received and the increase in production. Cash costs per ounce for Phakisa was US$1,200/oz in fiscal 2011, compared with US$953/oz in fiscal 2010. Costs increased as a result of the production build-up and the cost of employees transferred from closed shafts to Phakisa.
50
The expected capacity of Phakisa will be 73,000 reef tons per month. Phakisa has no rock hoisting facilities and all rock will be transported via a rail system on 55 level to the Nyala shaft for hoisting to surface. First production took place during September 2007, with a build up to full production expected by fiscal 2013.
On a simplistic basis reported proven and probable underground mineral reserves of 21.0 million tons (5.2 million ounces) will be sufficient for the Phakisa shaft to, once production commences, maintain production until approximately fiscal 2033. Any future changes to the assumptions upon which the reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: We incurred approximately R369 million (US$52.9 million) in capital expenditures at the Phakisa operations in the fiscal year ended June 30, 2011, mainly for the expansion project and ongoing development. We have budgeted R320 million (US$47.2 million) for capital expenditures in fiscal 2012, primarily for ongoing capital development.
Target operation
Introduction: The Target operation consists of Target 1, Target 3 and Freddies 7 & 9 shafts. We acquired Target 1 when Avgold became a wholly-owned subsidiary in fiscal 2004. Target 3, previously Loraine 3, and Freddies 7 & 9 shafts were acquired from Pamodzi FS in February 2010. They have been incorporated into our Target operation. Target is situated near the town of Allanridge in the Free State Province, some 270 kilometers southwest of Johannesburg. Located on the northern limit of the Welkom Goldfields, the site is accessed via the R30 motorway situated between the towns of Bothaville and Welkom.
History: Target 1 was initially explored through surface drilling in the late 1980s with further exploration being undertaken from a 5.6 kilometers long decline, commenced in 1995, driven from 203L at Loraine No. 1 Shaft. A positive feasibility study into the development of a 105 ktpm operation was produced in May 1998 resulting in the decision to develop Target 1. A detailed mine design was produced in 2000 and the mine officially opened in May 2002. Upon closure of the Loraine mine in August 1998, the Loraine No. 1 and No. 2 Shafts were transferred to the Target mine, becoming Target No. 1 and No. 2 Shafts, respectively. No 5 Shaft being the up-cast Ventilation Shaft.
Numerous corporate actions since the 1940s until the 1990s saw the Loraine 3 and Freddies 7 & 9 shafts change ownership a number of times. Previous owners include the Free State Development and Investment Corporation, Johannesburg Consolidated Investment, Avgold and Anglogold. In 1998, PSGM was formed after purchasing Loraine 3 and Freddies 7 & 9 shafts from various individuals. During 2002, the mine was sold to Thistle Mining Inc, an international company with interests in the Philippines and South Africa. The mine struggled to make operational profits, and Thistle undertook a restructuring program in 2006, which together with an increase in the Rand gold price resulted in positive operational cash flows. In February 2008, PSGM was purchased by Pamodzi FS. The mine was operated from that time until March 2009, when Pamodzi FS was placed into liquidation.
Geology: The gold mineralization currently exploited by Target 1 is contained within a succession of Elsburg and Dreyerskuil quartz pebble conglomerate reefs hosted by the Van Heeverrust and Dreyerskuil Members of the Eldorado Formation, respectively. Additional mineral resources have been delineated in the Big Pebble Reefs of the Kimberley Formation but these are not planned to be exploited in the current life-of-mine plan.
The majority of the mineral reserves at Target 1 are contained within the Eldorado fan, a structure with dimensions of some 135 meters vertically, 450 meters down-dip and 500 meters along strike. The Eldorado fan is connected to the subsidiary Zuurbron fan by a thinner and lower grade sequence of Elsburg reefs termed the Interfan area. To the north of the Eldorado fan, a number of fans have been intersected by surface drilling of which the Siberia and Mariasdal fans are the most significant. These fans are subject to ongoing technical studies and do not form part of the current Target 1 life-of-mine mineral reserve.
A number of faults that displace the reefs of Target 1 have been identified, of which the most prominent are the north-south trending Eldorado fault and the east-west trending Dam and Blast faults. The Eldorado uplifts the more distal portions of the Elsburg and Dreyerskuil Reefs while the Blast fault forms the northern border of Target 1.
Target North is sub-divided into the Paradise, Siberia and Mariasdal areas by the east-west trending Siberia and Mariasdal faults. To the north of the Siberia fault, the Eldorado fault continues trending more to the northwest and an additional north-south trending
51
fault, the Twin fault has uplifted the distal portions of the reefs. North of the Maraisdal fault, the reef horizons are at a depth greater than 2,500 meters below surface. Resources have been delineated on strike up to 15 kilometers north of Target 1 mine.
Approximately 40 kilometers north of Target 1, surface boreholes have intersected gold bearing reefs in the Oribi area close to the town of Bothaville. Resources have been delineated at Oribi on the VCR and Elsburg at depths of approximately 2,750 meters below surface.
At Target 3 Shaft there remains a mix of remnant ore blocks including shaft pillar blocks where scattered mining can be exploited, and a number of areas of virgin ground where conventional mining can take place, with the potential to exploit zone 3 in the Freddies 9 Shaft area.
The Target 3 Shaft ore body has characteristics that suit massive mining techniques in the Eldorados which enable design to be centered on a mechanized operation, utilizing employees from Target 1 skilled in this type of mining, to produce gold at low cash costs.
Mining operations: Target is subject to the risks associated with underground mining detailed in the Risk Factors section.
Mining operations at Target 1 comprise one primary underground mine commissioned in May 2002, making use of information systems and mechanization, combined with process-driven organizational design that relies on a multi-skilled workforce. The majority of the production is derived from mechanized mining; however, conventional stoping is still employed primarily to de-stress areas ahead of the mechanized mining.
At Target 1, the benefits of improved planning and design in the prior year resulted in greater availability of the massive stopes during fiscal 2011. In addition, with ventilation and cooling issues resolved, all ten narrow-reef, conventional mining panels were in production during the review period, supported by a clean-mining initiative. Collectively, this has enabled Target to manage its ore reserves better, which is crucial to the mines success. Unplanned stoppages caused by problems with the decline belt and delayed delivery of the new belt affected production in the third and fourth quarters, which in turn affected tonnages and grade.
At Target 3, the focus during the year was on continued shaft build-up and infrastructural improvements. In September 2010 we decided to abandon the shaft below 71 level after the collapse of orepasses, and create a new belt level on 71 level. Commendably, the new belt was designed, manufactured and installed in four weeks. This has greatly assisted in the build-up of the sub-shaft on Basal Reef, which offers better grades. Several challenges remain in improving sub-shaft conditions. After protracted delays, the fridge plant was commissioned by year end, which will enable access to more panels in the sub-shaft, contributing in turn to higher grades. Good progress has been made in cleaning sub-shaft infrastructure to access the higher-grade Basal Reef mining area. Once all infrastructural improvements have been completed, we expect further improvements in gold production.
In fiscal 2011, Targets operations accounted for 10% of our total gold production, compared to 8% in fiscal 2010 and 6% in fiscal 2009.
Safety: The concerted effort in recent years to improve safety at Target paid off during the review period when the mine reached one million fatality-free shifts for a fatality-free year (2010: two). The LTIFR, however, regressed to 7.71 per million hours worked (2010: 3.73).
Plants: Target Plant was commissioned in November 2001 and currently treats both underground ore and surface sources, which include both waste rock dump and plant clean up material. The process route comprise of a closed circuit SAG mill as well as a closed circuit ROM mill. Both these mills are in closed circuit with hydro-cyclones. The milling circuit is followed by thickening, cyanide leaching, CIP adsorption, elution, electro-winning, smelting and tailings disposal. Both the milling circuits are incorporated in the gravity concentration circuit and the concentrates from this circuit are processed via intensive cyanidation and electro-winning.
The following table sets forth processing capacity and average tons milled during fiscal 2011:
Plant |
Processing
Capacity |
Average Milled For the
Fiscal Year Ended June 30, 2011 |
||
(tons/month) | (tons/month) | |||
Target Plant |
105,000 | 102,917 |
52
In fiscal 2011, the Target Plant recovered approximately 95.0% of the gold contained in the ore delivered for processing.
Production analysis:
Fiscal Year Ended June 30, | ||||||||||||
Target (includes Target 1 and 3) | 2011 | 2010 | 2009 | |||||||||
Production |
||||||||||||
Tons (000) |
888 | 857 | 710 | |||||||||
Recovered grade (ounces/ton) (1) |
0.125 | 0.128 | 0.123 | |||||||||
Gold produced (ounces) (1) |
127,992 | 113,782 | 87,225 | |||||||||
Gold sold (ounces) (1) |
129,312 | 110,598 | 87,611 | |||||||||
Results of operations ($) |
||||||||||||
Product sales (000) |
154,483 | 115,772 | 76,435 | |||||||||
Cash cost (000) |
116,679 | 87,563 | 59,599 | |||||||||
Cash profit (000) |
37,804 | 28,209 | 16,836 | |||||||||
Cash costs |
||||||||||||
Per ounce of gold ($) (1) |
1,011 | 783 | 645 | |||||||||
Capex (000) ($) |
62,792 | 50,446 | 37,994 |
(1) |
17,073 (2010: 3,762) ounces were produced by Target 3 prior to it being considered to be in production. The revenue has been credited against capital expenditure for the period that the shaft was not in production. The costs and ounces were not used in the cash cost per ounce calculation. The ounces were also excluded from the grade calculation. |
Ounces produced were 113,782 in fiscal 2010, compared with 87,225 in fiscal 2009. The increase in ounces produced was due to higher milled tonnages and improved recovered grade.
Continued upgrading of infrastructure, resulting improved environmental conditions and higher availability of the mechanized fleet have led to increasing and consistent production levels. Tonnages milled from the Target 1 Shaft increased significantly from 710,000 in fiscal 2009 to 857,000 in fiscal 2010.
Maintenance of the average mining grades, and continuing focus on clean-up and clean mining resulted in an improved recovery grade which increased marginally from 0.123 ounces per ton in fiscal 2009 to 0.128 ounces per ton in fiscal 2010.
Cash costs for Target were US$87.6 million in fiscal 2010, compared with US$59.6 million in fiscal 2009. This increase was primarily attributed to increased tonnages produced, increase in total employees costed and inflationary cost increases, as well as the effect of the appreciation of the Rand against the US$ dollar. Cash costs per ounce were US$783 in fiscal 2010, compared with US$645 in fiscal 2009. This increase was due to higher production levels and the appreciation of the Rand against the US$ exchange rate.
Ounces produced increased by 12% to 127,992 in fiscal 2011, primarily as a result of Target 3 increased production.
Revenue increased to US$154.5 million in fiscal 2011 as a result of the higher average gold price and the increase in ounces produced. Cash costs per ounce increased from US$783/oz to US$1,011/oz in fiscal 2011. This was mainly due to the delayed start-up of the sub shaft at Target 3 and labor transfers earlier than planned from other Harmony operations to avoid retrenchments.
Assuming no additional reserves are identified, at expected production levels and, at the current planned gold price, it is foreseen that the reported proven and probable mineral reserves of 17.0 million tons (2.7 million ounces) will be sufficient for Target to maintain underground production until approximately 2026. Any future changes to the assumptions upon which the mineral reserves are based, as well as any unforeseen events affecting production levels, could have an effect on the expected period of future operations.
Capital Expenditure: Target incurred approximately R439 million (US$62.8 million) in capital expenditures in fiscal 2011, principally for ongoing capital development (R199 million (US$28.5 million)), development of Block 3 at Target 1 (R62 million (US$8.9 million) and development at Target 3 (R102 million (US$14.6 million)). We have budgeted R415 million (US$61.2 million) in fiscal 2012, principally for ongoing capital development and the continuation of Block 3 development and infrastructure at Target 1.
53
Tshepong
Introduction: We acquired Tshepong when we, in January 2002, acquired the Freegold operations from Anglogold through a 50% joint venture with ARMgold. In September 2003, we acquired 100% of these operations when ARMgold became a wholly-owned subsidiary. These operations are located in the Free State province. Production from the operations is processed through Harmony 1 Plant.
History: Exploration, development and production history in the area of the Freegold assets dates from the early 1900s, leading to commercial production by 1932. Subsequent consolidation and restructuring led to the formation of Free State Consolidated Gold Mine (Operations) Limited, which became a wholly-owned subsidiary of Anglogold in June 1998.
Geology: The operations are located in the Free State Goldfield, which is on the southwestern edge of the Witwatersrand basin. The Tshepong mine is located to the north and west of Welkom. Mining is primarily conducted in the Basal Reef, with limited exploitation of the B Reef. The reefs generally dip towards the east or northeast while most of the major faults strike north-south.
Mining Operations: These operations are subject to the underground mining risks detailed in the Risk Factors section. The management teams regularly revisit their mining strategy and management procedures in order to minimize risks.
Mining is conducted at depths ranging from 1,671 and 2,245 meters at Tshepong. Tshepong is one of Harmonys lowest-cost producers, although its grade remains sensitive to stoping width. This is rigorously controlled by the under-cut mining method used at this mine. Development of sub-71 decline progressed well during fiscal 2011, despite the area being directly affected by the fire at neighbouring Phakisa in the first quarter. After commissioning the belt and completing the temporary tip on 73 level, the development rate improved for the rest of the period. The sub-71 project, which will connect Tshepong with Phakisa, remains on track for completion in May 2012. This project extends the existing double decline from 71 to 76 level to enable mining on both 73 and 75 levels. The projects goal is to sink the decline to 76 level by May 2012.
During fiscal 2011, Tshepong accounted for 16% (15% in 2009 and 2010) of our total gold production.
Safety: Despite achieving 750,000 fatality-free shifts during fiscal 2011, overall safety performance deteriorated slightly with LTIFR at 12.60 (2010: 12.22) per million hours. There were regrettably two fatalities during the year (2010: two).
Plants: The ore from these operations are sent to Harmony 1 Plant for processing. See Item 4. Information on the Company Business Bambanani for a discussion on the plant.
Production analysis:
Fiscal Year Ended June 30, | ||||||||||||
Tshepong | 2011 | 2010 | 2009 | |||||||||
Production |
||||||||||||
Tons (000) |
1,481 | 1,674 | 1,516 | |||||||||
Recovered grade (ounces/ton) |
0.140 | 0.130 | 0.152 | |||||||||
Gold produced (ounces) |
207,950 | 216,986 | 230,778 | |||||||||
Gold sold (ounces) |
209,976 | 219,332 | 227,113 | |||||||||
Results of operations ($) |
||||||||||||
Product sales (000) |
287,257 | 240,473 | 197,726 | |||||||||
Cash cost (000) |
167,742 | 151,382 | 108,605 | |||||||||
Cash profit (000) |
119,515 | 89,091 | 89,121 | |||||||||
Cash costs |
||||||||||||
Per ounce of gold ($) |
810 | 677 | 483 | |||||||||
Capex (000)($) |
39,030 | 34,402 | 27,711 |
Tons milled during fiscal 2010 increased year on year by 10% (1,516,000 tons in fiscal 2009 compared with 1,674,000 tons in fiscal 2010), with gold production decreasing by 6% from 230,778 ounces in fiscal 2009 to 216,986 ounces in fiscal 2010. The decrease was attributable to the decrease in the recovery grade to 0.130 in fiscal 2010 compared with 0.152 in fiscal 2009. The decrease in recovery grade was primarily due to a decrease in the average mining grade, which was 1039 cmg/t in fiscal 2010 compared with 1153 cmg/t in fiscal 2009. The drop in the average mining grade is in line with the Life-of-mine profile. During fiscal 2009 the mining in the east south block was on the edge of the main high grade pay shoot and as mining continued south during fiscal
54
2010 mining has moved out of this high grade channel. The continuation of this channel will be mined in the decline area once Sub 71 decline reaches full production.
Cash costs for Tshepong were US$151.4 million in fiscal 2010, compared with US$108.6 million in fiscal 2009. Cash costs per ounce were US$677 in fiscal 2010, compared with US$483 in fiscal 2009. The increase in unit cost is attributable primarily to the decrease in the number of ounces of gold produced. The increase in cash costs were primarily due to increases in the costs of labor and abnormal tariff increases in electrical power rates as well as the effect of inflation on costs of materials and supply contracts. In addition, the cost of medical separation was included in operational cost. This was historically not included in operational cost. Also, the effect of the appreciation of the Rand against the US dollar had a negative impact in US$ dollar terms.
Tons milled decreased from 1,674,000 to 1,481,000 in fiscal 2011. Production output was disrupted by two fatal accidents during the year, as well as production stoppages imposed by the DMR. Gold produced was 4% lower in fiscal 2011 at 207,950 ounces. This decrease was due to the lower tons mined, but was offset by the 8% increase in recovered grade, from 0.130 ounces per ton in fiscal 2010 to 0.140 in fiscal 2011.
Despite the decrease in ounces produced, revenue increased by 19% to US$287.3 million in fiscal 2011 as a result of the higher gold price received. Cash costs increased by 11% from US$151.4 million to US$167.7 million, while cash costs per ounce increased by 20% to US$810/oz in fiscal 2011. This was due to annual labor rates increases of 7.5% and the 25% increase in electricity tariffs. Cash costs per ounce were also negatively affected by the decrease in ounces produced.
Assuming no additional reserves are identified, at expected production levels and, at the current planned gold price, it is foreseen that the reported proven and probable mineral reserves of 24.1 million tons (3.7 million ounces) will be sufficient for Tshepong to maintain underground production until approximately 2027. Any future changes to the assumptions upon which the mineral reserves are based, as well as any unforeseen events affecting production levels, could have an effect on the expected period of future operations.
Capital Expenditure: Tshepong incurred approximately R273 million (US$39.0 million) in capital expenditure during fiscal 2011. The expenditure was primarily for the decline project and ongoing development. For fiscal 2012 capital expenditure of R285 million (US$42.0 million) is planned, primarily for ongoing capital development.
Virginia operations
Introduction: The Virginia operations are located in the Free State province, near Virginia and Welkom. The Virginia operations consist of the original Harmony mines, the Unisel mine and Brand shafts 1 and 3. By end of fiscal 2011, only Unisel was still in operation, following the closure of Merriespruit 1 during the year. Mining is conducted at Unisel at depths ranging from 1,000 meters to 2,000 meters. Ore is treated at the Harmony 1 Plant.
History: Our operations in the Free State began with the Harmony mine, which is an amalgamation of the Harmony, Virginia and Merriespruit mines. Beginning in 1996, we began purchasing neighboring mine shafts. The Unisel mine was purchased in September 1996, the Saaiplaas mine Shafts 2 and 3 were purchased in April 1997, the Brand mine Shafts 1, 2, 3 and 5 were purchased in May 1998.
Geology: These operations are located in the Free State Goldfield on the south-western edge of the Witwatersrand Basin. The basin, situated on the Kaapvaal Craton, has been filled by a 6 kilometer thick succession of sedimentary rocks, which extends laterally for hundreds of kilometers. The Free State goldfield is divided into two sections, cut by the north-south striking De Bron Fault.
Unisel is situated to the west of the De Bron Fault. Dips are mostly towards the east, averaging 30 degrees but become steeper approaching the De Bron Fault. The western margin area is bound by synclines and reverse thrusts faults and is structurally complex. Towards the south and east, reefs sub-crop against overlying strata, eventually cutting out against the Karoo to the east of the lease area.
Most of the Mineral Resource tends to be concentrated in reef bands located on one or two distinct unconformities. A minority of the Mineral Resource is located on other unconformities. Mining that has taken place is mostly deep-level underground mining, exploiting the narrow, generally shallow dipping tabular reefs.
55
The Basal Reef is the most common reef horizon. It varies from a single pebble lag to channels on more than 2m thick. It is commonly overlain by shale, which thickens northwards.
The second major reef is the Leader Reef, located 15-20m above the Basal Reef. Further north, it becomes poorly developed with erratic grades. The reef consists of multiple conglomerate units, separated by thin quartzitic zones, often totaling up to 4 meters thick. A selected mining cut on the most economic horizon is often undertaken.
The Middle Reef, a secondary reef, is mined at Unisel where it comprises approximately 5% of the shaft production. The Middle Reef is a localized channel deposit and lies at irregular elevations between the Basal and the Leader reef.
Mining Operations: The operations are subject to the underground mining risks detailed in the Risk Factors section. Due to the shallow to moderate depths of the underground operations, seismicity related problems are relatively infrequent with the exception of Unisel and Harmony shafts and Merriespruit 1 shaft pillar, where these problems receive constant attention. We regularly revisit our mining strategy and management procedures in connection with our efforts to mitigate risks of these problems. There is a risk of subterranean water locally at Merriespruit 1, referred to as water pillar area, and/or gas intersections in some areas of the mine. However, this risk is mitigated by active and continuous management and monitoring, which includes the drilling of boreholes in advance of faces. Where water and/or gas are indicated in the drilling, appropriate preventative action is taken. The principal challenges at the operations of achieving optimal volumes and grades of ore production are addressed by stringent mineral reserve management.
The fiscal 2010 review of Harmonys asset portfolio included the economic viability of the Virginia operations, characterised by depleted orebodies, mature infrastructure and low grades. Accordingly, Brand 3, Harmony 2 and Merriespruit 3 were closed. After careful review, the Company announced in October 2010 that it would also close Merriespruit 1 shaft. Earlier in fiscal 2011, a productivity-linked deal with trade unions was reached allowing Merriespruit 1 to continue operations, provided it did not make a loss (on a total cost basis, including capital expenditure) for two consecutive months and total costs remained under R250 000/kg. Despite the best endeavours of the operational team, Merriespruit 1 failed to meet these conditions and closure procedures started. After formal consultation with employees on alternatives to retrenchment, 1 200 of the 1 470 employees affected by closure were transferred to our growth operations, resulting in minimal and mainly voluntary retrenchments. The company also successfully renegotiated mortgage conditions for affected employees to preserve their homes.
As a result of restructuring the Virginia operations, production for the year was down 65% to 636,000 tons milled. However grade improved markedly, validating the decision to close the lossmaking shafts. Gold production decreased 58% to 71,149 ounces.
At Unisel, both Basal and Leader Reef development produced good results after environmental constraints in the E block were removed by the completion of the cooling project. Middle Reef development focused on the decline area pillars and was affected by seismicity and poor ground conditions. No development was undertaken on the A or B Reefs. Overall, the shaft produced reserves on the Basal and Leader Reefs. Future development will continue to focus more on the better-grade E block and portions of the Brand 5 shaft pillar.
In fiscal 2011, Virginia operations accounted for approximately 5% (12% in fiscal 2010 and 17% in fiscal 2009) of Harmonys total gold production. This reduction is attributable to the closures of Brand 1, Harmony 2 and Merriespruit 3 during fiscal 2010 and Merriespruit 1 during fiscal 2011.
Safety: The safety record during fiscal 2011 for LTIFR was 11.57 (2010: 12.86) per million hours worked. Regrettably there was one fatality during fiscal 2011 (2010: five).
Plants: The ore from the operation is sent to Harmony 1 Plant for processing. See Item 4.Information of the Company Business Bambanani for further information on the plant. Central plant is no longer used for the processing of ore from Unisel, the last remaining producing shaft in the Virginia operations.
56
Production analysis:
Fiscal Year Ended June 30, | ||||||||||||
Virginia operations | 2011 | 2010 | 2009 | |||||||||
Production |
||||||||||||
Tons (000) |
636 | 1,826 | 2,493 | |||||||||
Recovered grade (ounces/ton) |
0.112 | 0.093 | 0.104 | |||||||||
Gold produced (ounces) |
71,149 | 170,013 | 258,170 | |||||||||
Gold sold (ounces) |
72,017 | 173,035 | 259,070 | |||||||||
Results of operations ($) |
||||||||||||
Product sales (000) |
97,542 | 186,649 | 225,897 | |||||||||
Cash cost (000) |
80,371 | 176,774 | 165,274 | |||||||||
Cash profit (000) |
17,171 | 9,875 | 60,623 | |||||||||
Cash costs |
||||||||||||
Per ounce of gold ($) |
1,114 | 1,036 | 638 | |||||||||
Capex (000) ($) |
11,373 | 23,744 | 22,133 |
Tons milled from the Virginia operations decreased to 1,826,000 in fiscal 2010, compared with 2,493,000 in fiscal 2009. This is mainly attributable to the closure of Brand 3 during November 2009, and Harmony 2 and Merriespruit 3 during April 2010. Merriespruit 1 has downscaled production from February 2010.
Ounces produced were 170,013 in fiscal 2010, compared with 258,170 in fiscal 2009. The decrease in ounces produced was as a result of volumes that decreased due to the closure of the three shafts as mentioned above during fiscal 2010, while Merriespruit 1 has downscaled production from February 2010.
Cash costs were US$176.8 million in fiscal 2010, compared with US$165.3 million in fiscal 2009. Cash costs per ounce were US$1,036 in fiscal 2010, compared with US$638 in fiscal 2009. This increase was attributable primarily to lower tons produced resulting in lower ounces as well as an increase in our cash costs and the effect of the appreciation of the Rand against the US dollar.
Tons milled and ounces produced decreased to 636,000 tons and 71,149 ounces, respectively, in fiscal 2011. This was due to the shaft closures during fiscal 2010 and 2011. Grade increased from 0.093 ounces per ton in fiscal 2010 to 0.112 in fiscal 2011. Cash costs decreased by 55% as a result of the shaft closures. This increased the operations profitability by 74%. Cash costs per ounce increased by 8% to US$1,114/oz in fiscal 2011.
Assuming no additional reserves are identified, at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 3.2 million tons (0.4 million ounces) will be sufficient for the Virginia operations to maintain production until approximately 2017. However, any future changes to the assumptions upon which the reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of the future operations.
Capital Expenditure : Virginia incurred approximately R79 million (US$11.3 million) in capital expenditures at the Virginia operations in fiscal 2011, principally for ongoing capital development. We have budgeted R89 million (US$13.1 million) for ongoing capital development in fiscal 2012. 75% of this capital will be spent on the ongoing development capital and 11% on major equipment repairs/replacements.
Other Surface
Introduction : Other Surface consists of Kalgold, Phoenix and the surface operations owned by the Freegold, Avgold and Evander companies. As the results of operations for Other Surface consist primarily of the results from Kalgold and Phoenix, these two operations are discussed separately.
Kalgold
Introduction: Harmonys only opencast mining operation in South Africa is the Kalgold gold mine that is situated 60 kilometers south of Mahikeng in the North West Province of South Africa.
History: Harmony acquired Kalgold on July 1, 1999 and fully incorporated Kalgold into its existing operations in October 1999. Prior to Harmonys acquisition of the Kalgold mine, the mine had already been in operation for three years.
57
Geology: The Kalgold operation is located within the Kraaipan Greenstone Belt. This is part of the larger Amalia-Kraaipan Greenstone terrain, consisting of north trending linear belts of Archaean meta-volcanic and metasedimentary rocks, separated by granitoid units. Mineralization occurs in shallow dipping quartz veins, which occur in clusters or swarms, within the steeply dipping magnetite-chert banded iron formation. Disseminated sulphide mineralization, dominated mostly by pyrite, occurs around and between the shallow dipping quartz vein swarms. The D Zone is the largest orebody encountered and has been extensively mined within a single open-pit operation, along a strike length of 1,300m. Mineralization has also been found in the Mielie Field Zone (adjacent to the D Zone), the A Zone and A Zone West (along strike to the north of the D Zone), and the Watertank and Windmill areas to the north of the A Zone.
Mining Operations: The Kalgold operation is engaged in open-pit mining. This operation is subject to the opencast mining risks detailed in the Risk Factors section. Small subterranean water intersections in the pit are common and are actively managed and appropriate action is taken when necessary. The primary mining challenges at the Kalgold operations of achieving optimal volumes and grades of ore production are addressed by stringent mineral reserve management. The processing design capacity of the Kalgold operation is 165,345 tons per month. The average tons in fiscal 2011 were 147,917 tons per month.
Volumes at Kalgold declined 5% over the year, largely due to several mechanical breakdowns in the mill section of the metallurgical plant. Gold produced declined by 18% to 40,285 ounces. The Watertank pit will be mined out within nine months in fiscal 2012 and mining in the A zone is planned to start in the latter part of 2012. A project to replace the carbon in-leach tanks in the plant will start in fiscal 2012. Harmony continued with brownfields exploration in areas surrounding the Kalgold operation.
In fiscal 2011, the Kalgold operations accounted for approximately 3% (3% in fiscal 2010 and 4% in fiscal 2009) of our total gold production.
Safety: The Kalgold operations had a LTIFR of 5.43 (2010: 1.49) per million hours worked in fiscal 2011, and recorded no fatal accidents in fiscal 2011. During fiscal 2011, Kalgold plant achieved one million fatality free shifts over a 16-year period.
Plants: Ore is trucked from the pit and is directly tipped into the feed bin of the pre-primary crusher or stockpiled. The ore then undergoes a four phase crushing process before it reaches the Dome stockpile. Three ball mills are used to grind the ore down to between 70-80% less than 75 micron for the leaching process.
The following table sets forth processing capacity and average tons milled during fiscal 2011 for the plant:
Plant |
Processing
Capacity |
Average Milled for the
Fiscal Year Ended June 30, 2011 |
||
(tons/month) | (tons/month) | |||
CIL |
165,345 | 134,187 | ||
Heap Leach (1) |
| |
(1) |
Active use of heap leaching was discontinued in July 2001. |
In fiscal 2011, the plant at our Kalgold operations recovered approximately 78.3% of the gold contained in the ore delivered for processing.
Production analysis:
Fiscal Year Ended June 30, | ||||||||||||
Kalgold | 2011 | 2010 | 2009 | |||||||||
Production |
||||||||||||
Tons (000) |
1,775 | 1,873 | 1,700 | |||||||||
Recovered grade (ounces/ton) |
0.023 | 0.026 | 0.038 | |||||||||
Gold produced (ounces) |
40,285 | 49,063 | 64,784 | |||||||||
Gold sold (ounces) |
41,828 | 48,097 | 66,841 | |||||||||
Results of operations ($) |
||||||||||||
Product sales ($) (000) |
57,064 | 51,437 | 56,915 | |||||||||
Cash cost ($) (000) |
45,473 | 36,162 | 32,390 | |||||||||
Cash profit ($) (000) |
11,591 | 15,275 | 24,525 | |||||||||
Cash costs |
||||||||||||
Per ounce of gold ($) |
1,135 | 748 | 506 | |||||||||
Capex ($) (000) |
2,631 | 1,389 | 1,090 |
58
Tons milled increased from 1,700,000 in fiscal 2009 to 1,873,000 in fiscal 2010. Ounces produced decreased to 49,063 in fiscal 2010, compared with 64,784 in fiscal 2009, due to the lower recovered grade.
Cash costs increased from US$32.4 million in fiscal 2009 to US$36.2 million in 2011, mainly due to an increase in plant costs in lieu of engineering breakdowns.
Volumes mined decreased from 1,873,000 tons in fiscal 2010 to 1,775,000 in fiscal 2011. Gold produced decreased by 18% in fiscal 2011 to 40,285 ounces. This decrease was due to mechanical breakdowns in the mill section of the plant.
Revenue increased by 11% to US$57.1 million in fiscal 2011, due to the higher average gold price received. Cash costs per ounce increased by 52% to US$1,135/oz, mainly due to the lower ounces produced.
The processing design capacity of the Kalgold operation is 165,345 tons per month. The average tons milled in fiscal 2011 were 147,900 tons per month.
Assuming no additional reserves are identified and at expected production levels, it is foreseen that the reported proven and probable mineral reserves of 28.3 million tons (0.7 million ounces) will be sufficient for the Kalgold operations to maintain production until approximately fiscal 2024. However, any future changes to the assumptions upon which the reserves are based, as well as any unforeseen events affecting production levels, could have a material effect on the expected period of future operations.
Capital Expenditure: Harmony incurred approximately R18 million (US$2.6 million) in capital expenditures at the Kalgold operations in the fiscal 2011. Harmony budgeted R65 million (US$9.6 million) for capital expenditures in fiscal 2012, primarily for CIL tank farm replacement and replacing some of the plant structures.
Phoenix
Introduction : Phoenix is a tailings retreatment operation, located at Virginia and adjacent to our current and historical mining operations in the Free State province. The Saaiplaas plant is used for the treatment of the material from this project.
History : The project commenced during fiscal 2007 and is aimed at treating the surface sources from our operations in the Free State province.
Safety: Safety at the Phoenix operations deteriorated year-on-year in fiscal 2011 with LTIFR declining to 2.89 per million hours worked from 1.46 in fiscal 2010. There were no fatalities during fiscal 2011.
Plant: The Saaiplaas plant, commissioned in the late 1950s, has been converted from the zinc precipitation filter process to the CIL. During 2007, the ROM mills were de-commissioned and the plant started treating slime from Dam 22 and Brand A tailings storage facilities. The plant currently processes reclaimed slime at 6 million tons per annum.
The following table sets forth processing capacity and average tons milled during fiscal 2011 for the Saaiplaas plant:
Plant |
Processing
Capacity |
Average Milled for the
Fiscal Year Ended June 30, 2011 |
||
(tons/month) | (tons/month) | |||
Saaiplaas |
551,155 | 444,128 |
In fiscal 2011, Saaiplaas plant recovered approximately 35.1% of the gold contained in the ore delivered for processing.
Mining operations : Phoenix, which began four years ago, involves retreating around 6 million tons annually (551,155tpm) at plant capacity. Phoenix operations were severely hampered by exceptionally high rainfall, the depletion of the H1 feed source with delayed completion and commissioning of the replacement source Dam 21, severe increases in plant intrusions and cable theft activities. Dam 21 was fully commissioned and teething problems resolved early in May 2011 and tonnage production has since reached target levels. The Dam 21 source proved problematic with plant recovery requiring process modifications. Plans to increase processed volumes up
59
to 992,000 tons per month, at which rate the life of the project is around 12 years, have been placed on hold pending performance in fiscal 2012 to reestablish confidence in performance and profitability.
During fiscal 2011, Phoenix accounted for 1.5% of our total gold production (1.5% in fiscal 2010 and 1.4% in fiscal 2009).
Production analysis:
Fiscal Year Ended June 30, | ||||||||||||
Free State (Phoenix) | 2011 | 2010 | 2009 | |||||||||
Production |
||||||||||||
Tons (000) |
5,846 | 6,083 | 6,578 | |||||||||
Recovered grade (ounces/ton) |
0.003 | 0.003 | 0.003 | |||||||||
Gold produced (ounces) |
18,937 | 20,801 | 22,345 | |||||||||
Gold sold (ounces) |
18,873 | 20,801 | 22,345 | |||||||||
Results of operations ($) |
||||||||||||
Product sales (000) |
25,847 | 22,723 | 19,448 | |||||||||
Cash cost (000) |
20,761 | 15,856 | 11,924 | |||||||||
Cash profit (000) |
5,086 | 6,867 | 7,524 | |||||||||
Cash costs |
||||||||||||
Per ounce of gold ($) |
1,141 | 762 | 534 | |||||||||
Capex (000) ($) |
3,108 | 0.660 | 0.279 |
Tons treated from Phoenix were 6,083,000 in fiscal 2010, compared with 6,578,000 in fiscal 2009. Ounces produced dropped to 20,801 in fiscal 2010, compared with 22,345 in fiscal 2009, primarily due to the decrease in tons treated. The recovered grade remained at 0.003 ounces/ton in fiscal 2010. The grade of the tons treated is dependent on the waste grade at the time at which the original deposition was done.
Cash costs were US$15.9 million in fiscal 2010, compared with US$11.9 million in fiscal 2009, primarily due to the decrease in volumes as well as the higher costs of reagents. Cash costs per ounce increased during fiscal 2010 to US$762 per ounce, compared with US$534 in fiscal 2009 due to the decrease in volume and increase in transport rates and the price of consumables and electricity.
Volumes decreased by 4% year on year to 5,846,000 tons, due to the issues experienced (as discussed above in Mining Operations ) during fiscal 2011. This affected the ounces produced, which decreased from 20,801 ounces in fiscal 2010 to 18,937 in fiscal 2011.
Despite the lower ounces produced, revenue increased by 14% to US$25.8 million in fiscal 2011 as a result of the higher average gold price received. Cash costs per ounce in fiscal 2011 were US$1,141/oz, compared with US$762/oz in fiscal 2010 due to the lower production as well as the 25% increase in electricity and the increase in the cost of consumables.
Capital Expenditure: We incurred approximately R22 million (US$3.1 million) in capital expenditures at the Phoenix operation in fiscal 2011. For 2012, R12 million (US$1.8 million) is planned for various minor plant upgrades.
Discontinued operations Cooke operations
Introduction : The Cooke operations are located in the Gauteng Province of South Africa, approximately thirty kilometers west of Johannesburg.
During fiscal 2008, an agreement was entered into for the sale of the Cooke operations, together with the associated surface assets. As a result, the assets and related liabilities were classified as held for sale and the results from operations have been included under Discontinued Operations in the income statement. On November 21, 2008, the conditions precedent were fulfilled and the sale of an effective 60% interest in the operations was recognized. The discussion below relates to the period up to the effective date of the sale.
Geology : These operations are situated in the West Rand Goldfield of the Witwatersrand Basin, the structure of which is dominated by the Witpoortjie and Panvlakte Horst blocks, which are superimposed over broad folding associated with the southeast plunging West Rand Syncline. At the Cooke operations, two major fault trends are present. The first is parallel to the Panvlakte Fault and strikes north to north-east, having small throws and no lateral shift. The second trend, which runs north-west to west, has small throws, but significant lateral shift, resulting in the payshoots becoming displaced.
60
There are six identified main reef groupings in the area of these operations: the Black Reef; the Ventersdorp Contact Reef; the Elsburg Formations; the Kimberleys; the Livingstone Reefs; and the South Reef. Within these, several economic reef horizons have been mined at depths below surface between 600 and 1,260 meters.
The reefs comprise fine to coarse grained pyritic mineralization within well developed thick quartz pebble conglomerates or narrow single pebble lags, which in certain instances are replaced by narrow carbon seams.
Mining Operations: The Cooke assets and related liabilities were classified as a disposal group and held-for-sale during fiscal 2008.
The Cooke operations accounted for 5% in fiscal 2009 of our total gold production.
Plants: The processing facilities at the operations presently comprises of the Cooke metallurgical plant, which is serviced by a surface rail network. The Cooke metallurgical plant, commissioned in 1977, is a hybrid CIP/CIL plant, which processes the tailings from the surface sands dumps around Randfontein.
Feasibility studies are being done for a proposed Uranium Plant of an approximate capacity of 500,000 tons per month. It is envisaged that the plant will be completed in approximately three years once approved, when it will treat uranium ore from the Cooke dumps as well as from the Cooke 3 underground operations.
Production analysis:
Fiscal Year Ended June 30, | ||||||||||||
Cooke operations | 2011 | 2010 | 2009 (1) | |||||||||
Production |
||||||||||||
Tons (000) |
| | 1,419 | |||||||||
Underground |
| | 514 | |||||||||
Surface |
| | 905 | |||||||||
Recovered grade (ounces/ton) |
| | 0.057 | |||||||||
Underground |
| | 0.137 | |||||||||
Surface |
| | 0.011 | |||||||||
Gold produced (ounces) |
| | 80,377 | |||||||||
Underground |
| | 70,378 | |||||||||
Surface |
| | 9,999 | |||||||||
Gold sold (ounces) |
| | 85,746 | |||||||||
Underground |
| | 75,747 | |||||||||
Surface |
| | 9,999 | |||||||||
Results of operations ($) |
||||||||||||
Product sales (000) |
| | 68,204 | |||||||||
Cash cost (000) |
| | 49,625 | |||||||||
Cash profit (000) |
| | 18,579 | |||||||||
Cash costs |
||||||||||||
Per ounce of gold ($) |
| | 644 | |||||||||
Underground |
| | 613 | |||||||||
Surface |
| | 868 | |||||||||
Capex (000 ) ($) |
| | 9,655 |
(1) |
The operations were sold on November 21, 2008 and the results are for the five months then ended. |
International Mining Operations
Western Australia Operations
Corporate Action Mount Magnet and Big Bell Operations
As indicated previously in various applications Harmony has been pursuing an exit strategy from its Western Australian assets. This led to an agreement by Harmony to sell Mount Magnet and Big Bell Gold Operations ( BBGO ) to Monarch Gold Mining Company Limited ( Monarch ).
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However, the transaction fell through as Monarch was subsequently liquidated in July 2008. Still in pursuant of the Western Australia exit strategy, Harmony opened a competitive bidding process with three Australian companies for the disposal and sale of Mount Magnet and BBGO.
The highest and most attractive offer for the purchase of Mount Magnet was received from Ramelius in July 2010. Harmony entered into a Share Sales Agreement with Ramelius for a total consideration of A$35.3 million in cash plus replacement environmental bonds of A$4.7 million totaling A$40.0 million consideration. Final settlement of the transaction took place in July 2010.
In accordance with IFRS requirements, the Mount Magnet disposal group was classified as a held-for-sale and discontinued operation at 30 June 2010.
The highest and most attractive offer for the purchase of BBGO was received from Fulcrum in November 2009. Harmony entered into a Share Sales Agreement with Fulcrum for a total consideration of A$3.5 million in cash plus replacement environmental bonds of A$3.2 million totaling A$6.7 million consideration. The sale effective on January 18, 2010 and final settlement of the transaction took place in May 2010.
No gold was produced at our Australian operations in fiscal 2011, 2010 and 2009.
Mount Magnet Operations
Introduction: In 2002, we acquired Mount Magnet as part of the Hill 50 transaction. The site was placed on care and maintenance as from December 31, 2007. The operation was sold to Ramelius during July 2010.
History: Mining at Mount Magnet began after the discovery of gold in 1896. From that time to June 30, 2009, the Mount Magnet area has produced approximately 6 million ounces. The most recent Mount Magnet operations commenced production in the late 1980s on the Hill 50 and Star underground mines and nearby open-pits, and the processing of low grade ore from previously accumulated stockpiles. Production ceased at the Star underground mine in June 2005. The Star underground mine was subsequently replaced by St. George, a new underground mine. The Mount Magnet site was put on care and maintenance as from December 31, 2007.
Geology: The Mount Magnet operations are located near the town of Mount Magnet in the Murchison region, some 600 kilometers northeast of Perth. The geology consists of folded basaltic and komatiitic greenstones with intercalated banded iron formations and volcaniclastic units. In addition to having been intensely folded, the area has undergone substantial faulting and later intrusion by felsic intrusives. Mineralization within the Murchison belt consists of sulphide replacement style (characteristic of the Hill 50 mine) and quartz lode and shear-hosted hydrothermally emplaced bodies proximal to fault conduits. Smaller stockwork bodies within felsic intrusives are also common. As is typical of the Archaean Shield, the deep weathering profile at Mount Magnet has resulted in supergene enrichment and hypogene dispersion of gold in the oxidizing environments. These effects lend themselves well to the process of small scale open-pit mining. Historically underground mining of primary lodes was the largest contributor to Mount Magnets gold production.
Mining Operations: The Mount Magnet operations were engaged in underground, open-pit and waste rock mining prior to site closure. These operations are subject to the underground, open-pit, and waste rock mining risks detailed in the Risk Factors section.
Underground operations at Mount Magnet consisted of the Hill 50 and St. George mines, each of which operated a decline. The Hill 50 mine, which approached 1,525 meters in depth, was one of Australias deepest underground mines. The St. George Mine was approximately 300 meters in depth. Underground mining was conducted by decline tunnel access. The principal challenges confronted by the Hill 50 underground mine related to its continuing depth and the geotechnical, ventilation and cost impediments that increased depth imposes, including increased ground stress and potential increased seismic activity. A decision was made in May 2007 which placed the Hill 50 mines decline development on hold due to significant seismic activity, and effectively put the mine in harvest mode at that time.
With the closure of Star, the development of the new underground mine at the St. George open-pit provided additional underground tonnage for the Mount Magnet operations. Underground development at St. George started in December 2005. The first stope was mined in the second quarter of fiscal 2006. Underground mining continued at this mine during fiscal 2007. This mine reached its economic depth limit during fiscal 2007, and was put in harvest mode, with mining operations ceasing in October 2007.
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Open-pit production was hindered by the delay in the start up of the Cue open-pits until the last quarter of fiscal 2005 as a result of delayed mining approvals and extended contractor negotiations, although these were subsequently resolved and mining commenced in fiscal 2006. Open-pit mining mainly took place around Mount Magnet during fiscal years 2007 and 2008.
Surface operations at Mount Magnet exploited several medium-sized open-pits, as well as numerous smaller open-pits. Surface materials from areas previously involved in production, including waste rock dumps and tailings dams, are also processed at Mount Magnet. The principal challenge faced by the Mount Magnet operations involved the short mine lives which result from the open-pits being situated on small orebodies. The Mount Magnet site was put on care and maintenance as from December 31, 2007.
Plant : The Mount Magnet operations include one metallurgical plant which was built in 1989 as a CIL plant and upgraded in 1999 to a CIP plant. Actual throughputs of the Mount Magnet plant varies based upon the blend of oxide and sulphide ores in their feed. Processing capacity is an estimate of nominal throughput based on a 70% hard (sulphide) and 30% oxide (soft) blend.
Throughput rates at Mount Magnet were at zero in fiscal 2009 and 2010 due to the site being closed and the plant being placed on care and maintenance.
Papua New Guinean Operations and Exploration
Overview
Introduction: Fiscal 2011 was the third year of the Morobe Mining Joint Venture between Harmony and Newcrest. The Morobe Mining Joint Venture is a 50:50 Joint Venture encompassing:
1. | the Hidden Valley Operation; |
2. | the Wafi-Golpu Project; and |
3. | an Exploration Joint Venture on the surrounding tenement package. |
Outside of the Morobe province Harmony has expanded the PNG exploration portfolio with three key projects that are 100% owned:
1. | Mount Hagen in the Western Highlands |
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2. | Amanab in the Sandaun Province |
3. | Tari in the Southern Highlands Province |
In terms of regional geological setting, Harmonys tenement interests are all located within the New Guinea mobile belt. The mobile belt comprises tracts of metamorphosed Lower Jurassic and Cretaceous sediments and oceanic crust. These rocks have undergone deformation in the collision zone between the Australian and Pacific Plates and multiple intrusive events including Tertiary granodiorite and younger mineralized porphyries.
Exploration expenditure in PNG for fiscal 2011 was US$48.9 million. This breaks down into US$41.4 million as Harmonys 50% contribution to the Morobe Mining Joint Venture exploration program and US$7.5 million for Harmony 100% projects. Results from exploration work have been highly encouraging, with a major Resource expansion achieved at the Wafi-Golpu Project, and a number of targets with the potential for major stand-alone gold and copper/gold deposits identified and advanced to the drill testing phase.
Hidden Valley Operation
Introduction: The Hidden Valley project is an open pit gold-silver mine and processing plant. Two separate open pits are in operation, being Hidden Valley-Kaveroi ( HVK ) pit, and Hamata pit. The mill has been constructed to process a nominal 4.2 million tonnes (dry metric) of ore per year from the two pits, with de-bottlenecking of the plant planned up to 4.7 million tonnes per year. The mine was officially opened on September 30, 2010.
Newcrest purchased an initial 30.01% interest in the project on June 30, 2008, and provided sole funding of the project to June 30, 2009 to earn a further 19.99%. On June 30, 2009 Newcrest formally achieved 50% ownership in the project, such that the project is now a 50:50 joint venture between Newcrest and Harmony.
The mine is located in a highly prospective exploration lease area and it is envisaged that, as active exploration continues, the life of the process facility may be extended as it is fed from a number of sources.
The project comprises a number of mining and exploration licenses in the Wau District of Morobe Province, PNG and is located 210 kilometers north-northwest of Port Moresby and 90 kilometers south-southwest of Lae, the two largest cities in PNG. Access to the project is presently by sealed road from the deepwater port of Lae to Bulolo. Harmony constructed an all-weather gravel road from Bulolo to the Hidden Valley mine site to access the site.
History: Alluvial gold was first discovered at Hidden Valley in 1928 but it was not until the early 1980s that the area was investigated by CRA Exploration using modern exploration techniques that resulted in the discovery of the Hidden Valley and Kaveroi gold deposits on EL 677. A number of feasibility studies have been prepared for the Hidden Valley Project by the various owners, including one by Abelle in 2003. Harmony extensively reviewed and updated the Abelle feasibility study during fiscal 2006 in order to: (a) reflect changes in the projects ore body interpretation; (b) incorporate increases in capital and operating costs as a result of energy prices and scarce resources in the mining industry as well; and (c) resolve technical aspects that were outstanding from the previous study. The updated feasibility study was presented to the board during June 2006 with subsequent approval given for construction of the project. In late 2007, Harmony began a search for a partner to partake in all of our PNG mining and exploration activities, culminating in the selection of Newcrest as a partner.
Mining operations: Currently ramping up to full production, the Hidden Valley Mine is expected to initially process 4.6 million tons (short) of ore per annum from ore mined at two open-pits, The HVK pit and the Hamata pit. Currently planned de-bottlenecking is expected to increase the processing rate to 5.2 million tons (short) of ore per annum by year three of operations.
The HVK pit, at an elevation of between 2,500 meters and 2,700 meters above sea level, is the larger pit supplying the majority of the ore. The HVK pit is located some 5 to 6 kilometers from the processing plant. The smaller Hamata pit is directly adjacent to the processing plant on the northern side of the processing plant and is at an elevation of between 1,850 meters and 2,040 meters above sea level. The resources will be mined in a sequence that sees the low silver, high gold Hamata ore mined first, with plant and infrastructure development for the project developed in close proximity to the Hamata deposit. The next ore mined will be the Hidden Valley/Kaveroi oxide/transition ores (high silver) followed by the Hidden Valley/Kaveroi primary ores.
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The planned ramp-up throughput rates were interrupted in the third quarter when a conveyor belt splice failed on the Hidden Valley conveying circuit. The work required to reinstate and recommission the belt is scheduled to be completed by the end of quarter 1 in the fiscal 2012. Much of the production impact of this event was mitigated via rapid mobilization of additional contractor haulage trucks, which were used to haul ore from the Hidden Valley stockpile to the process plant. As a result of this unexpected situation annual production came in at the lower end of management guidance, with gold recoveries reaching nameplate levels and a significant increase in silver recoveries compared to 2010 levels.
A program to systematically identify constraints in the process plant and to optimize plant capacity and performance is under way. This will facilitate plant throughput rates achieving nameplate in the second quarter of fiscal 2012, after reinstatement of the Hidden Valley overland conveyor.
Hidden Valley mine was connected to the national electricity grid in the third quarter, and is receiving up to 10MW of grid power (50 60% of total requirements). This has already reduced operational costs in terms of trucking diesel to site, with concomitant environmental benefits, and lessened demand on the sites diesel-fired power station. In terms of the offtake agreement in place, the national utility benefits from securing a large customer which, in turn, will support its infrastructural development and rural electrification program.
In fiscal 2011, additional waste dump capacity was created as part of a long-term strategy to match waste dump capacity to the target mining rate. This ensures that all waste rock mined at Hidden Valley is retained on site and that the potential for impacts on the Watut River is minimised and managed effectively. Innovative waste dump designs that require less rock are successfully addressing this requirement and have allowed a steady ramp-up in the open-pit mining rate in fiscal 2011.
Implementation of Hidden Valleys policy of community engagement and local employment, as well as training local employees, continued throughout the year.
Geology: The major gold-silver deposits of the Morobe Goldfield, and the Hidden Valley project are hosted in the Wau Graben. The Wau Graben developed as a back-arc rift basin in the southern extension of the New Guinea Mobile Belt (Owen Stanley Foreland Thrust Belt) covering an area of approximately 850 square kilometers in which the Morobe Goldfield, including the Hidden Valley and Hamata deposits are developed.
The Hidden Valley Deposit is interpreted as a low-sulphidation or adularia-sericite-type epithermal gold-silver system. The Hidden Valley deposit further forms part of the carbonate-base-metal-gold subgroup, with abundant carbonate vein-gangue. Other gold-silver deposits around the Pacific Rim in this sub-group are Kelian (Indonesia), Woodlark (PNG) and Gold Ridge (Solomon Islands).
Discrete zones of intense stockwork fracture and mineralized veining comprise individual lodes. At the Hidden Valley deposit, gold and silver are related to steeply dipping (Hidden Valley Zone, HVZ ) and flat-lying (Kaveroi Creek Zone, KCZ ) sheeted vein swarms associated with an underlying shallow thrust.
Safety: As production ramps up at Hidden Valley, the implementation of a comprehensive risk management strategy is evident in the excellent safety performance for the year, with no fatalities (2010: one) and only one lost-time injury, resulting in an LTIFR of 0.2 (2010: 0.7). A key aspect of the risk management strategy is ensuring that each work function is undertaken within a risk management framework, and that hazards are identified and managed to maintain this safety performance.
Plant: The processing plant production rate is 4.6 million tons of ore per annum and operates using process routes that complement the metallurgical characteristics of the ore types mined. The processing plant operates as:
(a) | a primary crushing plant for the low silver Hamata ores; |
(b) | a primary and secondary crushing plant for Hidden Valley / Kaveroi ore; and |
(c) | a combined treatment of all ore through grinding, gravity gold recovery, flotation, concentrate regrind, flotation concentrate leaching and counter-current decantation circuit ( CCD ) with Merrill-Crowe zinc precipitation, CIL of flotation and CCD tailings, goldroom and tailings detoxification via the INCO process. |
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The circuit is designed to enable discard of flotation tailings when treating primary ore only from Hidden Valley / Kaveroi orebodies. Tailings from the CCD circuit would still be subject to final treatment through the CIL circuit.
The gravity gold recovered is processed through an intensive cyanide leach followed by electro-winning circuit to produce a high quality dore product.
Gold and silver rich carbon is processed in an elution plant and precious metals are recovered in the gold room via Merrill-Crowe zinc precipitation stream independent of the CCD circuit.
All tailings are stored in a tailings storage facility, and all water recovered is subjected to detoxification prior to being recycled or released to the environment.
The processing plant and tailings storage facility was built to meet the requirements of the International Cyanide Management Code. Gold production commenced in August 2009 and the plant is currently ramping up to nameplate production.
Production analysis:
Fiscal Year Ended June 30, | ||||||||||||
Hidden Valley | 2011 | 2010 (1) | 2009 | |||||||||
Production |
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Tons (000) |
1,852 | 335 | | |||||||||
Recovered grade (ounces/ton) |
||||||||||||
Gold |
0.054 | 0.045 | | |||||||||
Silver |
0.401 | 0.233 | | |||||||||
Gold produced (ounces) |
100,246 | 61,173 | | |||||||||
Silver produced (ounces) |
673,032 | 222,717 | | |||||||||
Gold sold (ounces) |
101,017 | 53,274 | | |||||||||
Results of operations ($) |
| |||||||||||
Product sales (000) |
139,688 | 10,422 | | |||||||||
Cash cost (000) |
102,294 | 8,357 | | |||||||||
Cash profit (000) |
37,394 | 2,065 | | |||||||||
Cash costs |
| |||||||||||
Per ounce of gold ($) |
993 | 1,003 | | |||||||||
Capex (000) ($) |
41,376 | 71,420 | |
(1) |
Production for fiscal 2010 was only for three months and is therefore not comparable to fiscal 2011. |
Capital Expenditure: Attributable capital expenditure by Harmony during the year was R289 million (US$41.3 million), which included work on approved mine development (sustaining capital) projects, process plant debottlenecking, new mobile equipment and mine expansion feasibility studies. Harmonys portion of the capital budgeted for fiscal 2012 is US$46.3 million).
Exploration in PNG
The Morobe JV land holding comprises some 4,726 km 2 of tenure. The tenements sit in a broader strategic alliance area where both Harmony and Newcrest operate as JV partners. The tenement package encompasses the Wafi-Golpu and Hidden Valley projects and is a key strategic holding in the Morobe goldfields district. Although prospecting and mining activities date back to the early 1900s, the true potential of the district is only now beginning to crystallise. Fiscal 2011 exploration expenditure for the Morobe JV totaled A$31.9 million and has been hugely successful.
By far the highlight of the 2011 work program was the expansion of the Golpu copper-gold deposit. However, greenfields exploration continued with work programs undertaken on 24 separate prospects in the Morobe JV area. Exploration statistics for fiscal 2011 include:
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92,097m diamond drilling; and |
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12,654 surface samples (soils, rock chips, trenches). |
The underlying strategy of the Morobe JV exploration program is threefold:
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|
Wafi-Golpu |
Near-mine project work and brownfields exploration to develop Wafi-Golpu into a second mining operation for the Morobe JV
Wafi transfer greenfields exploration targeting discovery of additional resources to expand Wafi-Golpu into a mineral district
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Hidden Valley district brownfields exploration in a 10km radius of the Hidden Valley plant to develop resources to replace mining depletion and support expansion |
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Regional greenfields exploration develop a project pipeline capable of delivering additional quality resources and sustaining future growth and operations in the province. |
Work programs and results for these activities are detailed below.
The drilling success highlights the fact that the region is under-explored and still has significant potential for the discovery of additional multimillion-ounce gold deposits. Accordingly, the Morobe exploration JV proposes to spend A$70 million on exploration in fiscal 2012, of which A$35 million will be Harmonys share.
Wafi-Golpu Project
Introduction: The Wafi prospect is a 50:50 joint venture with Newcrest of Australia. Harmonys ownership is through its wholly-owned subsidiary, Wafi Mining Limited. The first exploration at Wafi dates back to the nationwide porphyry copper search by CRA Exploration Ltd in the late 1960s. Elders Resources farmed-in to the project from 1989-1991, and AGF subsequently farmed-in to the project for a short period in 1997 prior to going into administration in 1998. Aurora subsequently acquired the project from Rio Tinto (CRA) in 1999, with ownership passing to Abelle when it merged with Aurora in 2002. We assumed control of the Wafi Project by way of the acquisition of Abelle in 2003. The project is held under 2 contiguous exploration licenses (EL 440, and EL 1105), totaling 130.5 square kilometers. The Wafi Golpu Project comprises a porphyry and epithermal copper and gold systems within a 2.5km x 2.5km area and contains numerous lodes including the Golpu copper gold porphyry, the Nambonga gold copper porpyryr and the Wafi epithermal gold lodes. The Wafi gold mineralization is hosted by sedimentary/volcanoclastic rocks of the Owen Stanley Formation which surrounds the intrusive Wafi Diatreme. Gold mineralization occurs in the form of extensive high-sulphidation epithermal alteration overprinting porphyry mineralization and epithermal style vein-hosted and replacement gold mineralization with associated wall-rock alteration.
Geography: The Wafi prospect is located near Mount Watut in the Morobe Province of PNG, approximately 60 kilometers southwest of Lae and about 60 kilometers northwest of Wau. The Wafi camp is located at an elevation of approximately 400 meters above sea level in terrain that is mountainous and forested in most areas. The site is accessed by sealed road (Lae to Bulolo) which comes within 5 kilometers of the eastern edge of the tenements and 15 kilometers from the Wafi camp. From the sealed road, a 38 kilometer dirt-base access track to the prospect is accessible during most weather conditions. The site is serviced by helicopter when the road access is cut due to extreme wet weather. Watut Valley is located immediately west of the project, and the foothills of Watut Valley provide an option for placement of ore processing and mine infrastructure. Alternatively, the processing plant may be located in the Markham River valley closer to Lae.
Project Status: The discovery of extensive zones of additional high-grade mineralization at Wafi-Golpu has been one of the most significant in the world this year. The Wafi-Golpu resource has world-class credentials compared with other similar projects: in size, it is substantial, and it has the highest copper and gold grade among its peers. This is phenomenal growth in an already-large system and we have not yet defined the full extent of the resource. Golpu itself is open to the north and at depth, which is being tested with the ongoing drilling program.
The Golpu copper-gold deposit is a nested porphyry system that comprises at least three separate mineralized intrusions. There is strong potential for additional mineralised intrusives along strike from Golpu, at Nambonga, and for additional feeder zones around the margins and at depth below the diatreme. In overall assessment, the area remains hugely prospective and under-explored.
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The Wafi epithermal gold system is also expanding, with new zones of gold mineralization discovered off the northern margin of the diatreme. We have identified additional Wafi-style gold mineralization adjacent to the Golpu porphyry in drill holes designed to target the latter deposit.
The exploration strategy for the Wafi-Golpu system is to expand the known resource through step-out drilling while exploring for more Wafi- and Golpu-style mineralization via brownfields exploration strategies inside the 2.5km2 project zone and greenfield exploration programs along the Wafi transfer structure outside the project zone.
To help realize the potential of this world-class mineral province, the MMJV is increasing the drill fleet at Wafi-Golpu from five drills to eight. The budget for drilling this year is A$46 million. Some of this drilling will specifically target areas of the existing resources requiring additional geotechnical, hydrological and metallurgical information. The majority will focus on resource extension and discovery.
Pre-feasibility study: Technical and economic evaluation of the Wafi gold and Golpu copper-gold deposits progressed this year into pre-feasibility study. This process is under the control of a joint-venture project team and studies group comprizing mainly seconded technical and projects staff from Harmony and Newcrest.
The study is well under way, with most major study elements advancing and specialised work contracted out to expert consultants and engineering firms. The spectacular success of the exploration program has meant that much of the detailed mine design work done in earlier phases of study has been superseded by the growth of the Wafi resource. This work is being updated to consider the impact on current concepts for mine development.
The work to date does confirm the findings of earlier iterations of concept and pre-feasibility studies that the Golpu deposit will be the initial economic driver for exploitation of the Wafi mineral province. The primary objective of the pre-feasibility study is to identify the optimal development sequence and scale for the Golpu copper-gold orebody, together with a staged underground access. The intent is to recommend a development approach that can bring forward mine development without sacrificing strategic optionality and flexibility to accommodate the outcomes of ongoing feasibility studies and the resource drill-out program that will be happening concurrently.
The study scope also includes consideration of potential scenarios for economic development of the Wafi gold deposits, using synergies with the adjacent Golpu deposit, but without detracting from the timing or operability of solutions for bringing Golpu into production. The Wafi gold deposits include both refractory and non-refractory mineralization, with much of the resource at depths suitable for open-pit mining. Additionally, options are being considered to exploit the higher-grade deeper zones by underground mining.
Additional elements of the projects include social and environmental programs, statutory permitting and licensing, and community agreements; all necessary to advance the project to development. These aspects are being progressed within the scope of the project execution plan by dedicated in-country staff who are closely engaged with the relevant stakeholders and government agencies. Defining the pathway to an approval to mine, including plans for managing environmental and social impacts, a basis of agreement with government and community stakeholders and gaining adequate security of tenure are critical in any development.
Wafi Transfer Structure & Regional Targets
Introduction: The Wafi Transfer structure comprises approximately 17km of strike and includes the Wafi-Golpu Project area. The area has seen little exploration and remains highly prospective for gold and porphyry copper gold resources similar to those at Wafi Golpu.
Geology: The Wafi Transfer structure separates the Tertiary Babwaf conglomerate in the west from Jurassic and Cretaceous metasedimentary rocks of the Owen Stanley Metamorphic group in the east. Regional magnetics show the contact is intruded by a number of magnetic intrusive bodies similar to those at the Wafi-Golpu project and suggest excellent potential for additional mineralized porphyry copper-gold and related gold deposits.
Project Status: Work in fiscal 2011 was focused on prospect development with 2,329 surface samples completed over three prospects: Mt Tonn, Bavaga and Zimake. First-pass drilling (498 meters) was also undertaken at the Pekumbe prospect, with additional testing of ranked targets to continue in fiscal 2012.
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Bavaga is located approximately 5 km north of Wafi-Golpu. Results for stream sediment reconnaissance sampling over the area has been particularly encouraging with a large high tenor Au anomaly defined from first pass sampling. A program of follow-up ridge and spur soils and reconnaissance mapping and sampling is underway.
At Pekumbe prospect, which lies around 5.5 kilometers south-west of Golpu, grid based soil sampling defined a high tenor, coherent, coincident copper, gold, molybdenum anomaly. Two drill holes were completed during fiscal 2011, with a third hole started but abandoned short of target due to drilling difficulties. Follow-up drilling is planned for fiscal 2012.
At Mt Tonn, grid-based surface soil sampling has defined a significant Au anomaly associated with a magnetic intrusive complex on the Wafi Transfer structure. The anomaly remains open to the south off the grid and has distinctly elevated copper assays. Additional surface sampling and drill testing is planned for fiscal 2012.
The Zimake target is a circular magnetic anomaly of about 5km x 6km. Historical pan concentrate samples from the target area contain anomalous gold grades. Initial observations from reconnaissance mapping and rock-chip sampling have been encouraging, with alluvial gold working mapped in association with both propylitic and phyllitc altered sedimentary rocks, adjacent a granodioritic contact. Fieldwork is continuing to the north where alteration intensity appears to become more intense.
Hidden Valley ML Exploration
Project Status: Work in fiscal 2011 on the Hidden Valley mining lease and surrounding tenure included over 10,000 meters of diamond drilling (excludes resource definition drilling) and an extensive program of reconnaissance mapping and surface sampling (500 samples). Development of a district-scale mineralization model for the Hidden Valley Wau district also started and will be completed in fiscal 2012. The work program is being undertaken to provide additional new resources to extend mine life or support expansion of the operation. There is also potential in the district for high-grade satellite resources to supplement ore feed to the plant. Although drilling undertaken at Waterfall and Tais Creek downgraded the prospectivity of these targets, results from the Mungowe and Kulang-Kerimenge prospect areas have been particularly encouraging.
Mungowe: The Mungowe prospect is roughly 6 kilometers northwest of Hidden Valley, and was highlighted by historical stream sediment results with anomalous values over a 4 kilometer zone. Follow-up reconnaissance mapping and rock-chip sampling (203 samples) have outlined a high-grade zone of outcropping mineralization. High grades are localised at the intersection of several fault zones, but this sits within a broader envelope of carbonate-base metal mineralization and alteration covering an area of some 3 kilometers by 1.5 kilometers. Results may represent leakage of mineralization through a sediment cap in a structural-geological setting similar to that at Hidden Valley. The first-pass reconnaissance results are highly encouraging and drill testing is planned for fiscal 2012.
Kulang-Kerimenge: The Kulang-Kerimenge trend is 7-10 kilometers west of the Hidden Valley processing facility and comprises a 5 kilometer zone of clay-pyrite (argillic) alteration. The alteration zone encompasses a number of historical prospect areas including the high-sulphidation gold mineralization at Kerimenge, and outcropping base metal carbonate veins at Kulang. The zone is interpreted as alteration and mineralization in the lithocap above a major porphyry copper-gold system. First-pass drilling at Kulang prospect (4 kilometers north-north-east of Kerimenge) comprised six holes (2 686 meters). Although no ore grade intercepts were obtained, gold results indicate widespread Au anomalism associated with colloform-banded quartz, rhodochrosite and base metal sulphide veins. These anomalous gold zones carry elevated Ag assays, suggesting they formed at a high level in the system. Trenching and detailed alteration mapping continues along the trend to identify vectors to the porphyry source at depth.
Other Morobe regional exploration
Regional greenfields exploration work continued to develop the project pipeline over the broader tenement package. This work included over 1,200 soil, rock-chip and stream sediment samples, predominantly focused at the Morobe coast, following up on magnetic targets generated in fiscal 2011.
Mount Hagen Project (Harmony 100%)
Introduction: Located some 20 kilometers from Mt Hagen, the Mt Hagen project forms a contiguous block of tenure covering 994 square kilometers. It consists of two granted exploration licences (EL1596 and EL1611) and several tenement application areas (ELA
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1864-1867). Regional stream sediment samplinghas obtained copper and gold anomalies up to 4.08g/t Au and 1 200ppm Cu. It is one of the highest-tenor copper-gold anomalies in the belt of rocks extending between the Frieda River and Yandera Cu-Au-Mo projects.
Project Status: Work in fiscal 2011 has focused on the Kurunga intrusive complex and comprised over 3 386 soil and rock-chip samples. Results from this work have defined a number of high-tenor Cu-Au anomalies in close proximity, centered on the Kurunga intrusive complex. The scale and tenor of the anomalies indicate excellent prospectivity for a major porphyry copper system and drill testing has commenced.
Amanab Project (Harmony 100%)
Introduction: Located in Sandaun Province of western PNG, some 160 kilometers north of the Ok Tedi copper-gold mine, this project encompasses a significant alluvial goldfield which has never seen drill testing. The Amanab project (EL1708) comprises 932 square kilometers of tenure and encompasses one of the 17 recognised alluvial goldfields in PNG. Major PNG deposits at Porgera, Bougainville and Morobe (includes Hidden Valley, Wau and Edie Creek) all had similar alluvial gold occurrences established prior to discovery.
Project Status: Fieldwork at Amanab comprised first-pass ridge and spur soil sampling and reconnaissance rock-chip sampling at Yup River East and West prospects. A total of 700 surface samples were collected. Results received to date indicate potential for a major gold system with a footprint over 5 kilometers of strike. Outcrop sampling at the Yup River East target area in Amanab returned anomalous gold values from chlorite-quartz-pyrite altered shale in Galemu Creek close to the alluvial gold workings.
Follow-up work is planned for the first quarter of fiscal 2012.
Tari Project (Harmony 100%)
Introduction: Located in the Southern Highlands Province around 50 kilometers south-west of Porgera where new exploration licence applications encompass several magnetic targets with excellent potential for porphyry copper-gold mineralization and Porgera-style epithermal gold.
Project Status: The Tari project applications (EL1785 and 1786) in the Southern Highlands Province comprise some 2,800 square kilometers of tenure. The tenements cover the south-west extension of the Porgera transfer structure, and are in the Papuan fold belt with the same host stratigraphy as Ok Tedi and Grasberg deposits. Data compilation has highlighted the Lake Kopiago area where previous explorers mapped outcropping skarn mineralization with high grade rock-chip gold assays. This will be the focus of the fiscal 2012 exploration program.
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REGULATION
Mineral Rights
South Africa
South African law no longer provides for the separate ownership of surface and mineral rights. Prior to the promulgation of the MPRDA on May 1, 2004, it was therefore possible for one person to own the surface of a property, another to own rights to precious metals, and yet another to own rights to base minerals. In terms of the MPRDA, all mineral rights in South Africa are now vested in the South African State. The principal objectives of the Act are:
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to recognize the internationally accepted right of the state of South Africa to exercise full and permanent sovereignty over all the mineral and petroleum resources within South Africa; |
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to give effect to the principle of South Africas custodianship of its mineral and petroleum resources; |
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to promote equitable access to South Africas mineral and petroleum resources to all the people of South Africa; |
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to substantially and meaningfully expand opportunities for HDSAs including women, to enter the mineral and petroleum industry and to benefit from the exploitation of South Africas mineral and petroleum resources; |
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to promote economic growth and mineral and petroleum resources development in South Africa; |
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to promote employment and advance the social and economic welfare of all South Africans; |
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to provide security of tenure in respect of prospecting, exploration, mining and production operations; |
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to give effect to Section 24 of the South African Constitution by ensuring that South Africas mineral and petroleum resources are developed in an orderly and ecologically sustainable manner while promoting justifiable social and economic development; and |
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to ensure that holders of mining and production rights contribute towards socio-economic development of the areas in which they are operating. |
Under the MPRDA, tenure over established mining operations is secured for up to 30 years (and renewable for periods not exceeding 30 years each thereafter), provided that mining companies apply for new-order mining rights over existing operations within five years of May 1, 2004, or before the existing right expires, whichever is the earlier date and fulfill requirements specified in the MPRDA, its Regulations and the Mining Charter.
The Mining Charter was signed by government and stakeholders in October 2002 and contains principles relating to the transfer, over a ten-year period, of 26% of South Africas mining assets (as equity or attributable units of production) to HDSAs, as defined in the Mining Charter. An interim target of 15% HDSA participation over five years was set and to this end, the South African mining industry committed to securing financing to fund participation of HDSAs in an amount of R100.0 billion within the first five years of the Mining Charters tenure. The Mining Charter provides for the review of the participation process after five years to determine what further steps, if any, are needed to achieve the 26% target participation. In order to measure progress in meeting the requirements of the Mining Charter, companies are required to complete a scorecard, in which the levels of compliance with the Mining Charter can be ticked-off after five and ten years respectively. The Mining Charter and Scorecard require programs for black economic empowerment and the promotion of value-added production (mineral beneficiation), such as jewelry-making and other gold fabrication, in South Africa. In particular, targets are set out for broad-based black economic empowerment in the areas of human resource and skills development; employment equity; procurement beneficiation and direct ownership. In addition, the Mining Charter addresses socio-economic issues such as migrant labor, mine community and rural development, and housing and living conditions.
Following a review of the progress made by the mining industry after five years of implementing the provisions of the Mining Charter, the DMR recently amended the Mining Charter and the Revised Mining Charter was released on September 13, 2010. The requirement under the Mining Charter for mining entities to achieve a 26% HDSA ownership of mining assets by the year 2014 has
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been retained. Amendments to the Mining Charter in the Revised Mining Charter include, inter alia, the requirement by mining companies to:
(i) | facilitate local beneficiation of mineral commodities; |
(ii) | procure a minimum of 40% of capital goods, 70% of services and 50% of consumer goods from HDSA suppliers (i.e. suppliers of which a minimum of 25% + 1 vote of their share capital must be owned by HDSAs) by 2014. These targets will however be exclusive of non-discretionary procurement expenditure; |
(iii) | achieve a minimum of 40% HDSA demographic representation by 2014 at executive management (board) level, senior management (EXCO) level, core and critical skills, middle management level and junior management level; |
(iv) | invest up to 5% per cent of annual payroll in essential skills development activities; and |
(v) | 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 organised labor. |
All targets must be achieved by 2014.
In addition, mining companies are required to monitor and evaluate their compliance to the Revised Mining Charter, and must submit annual compliance reports to the DMR. The Scorecard makes provision for a phased-in approach for compliance with the above targets over the five year period ending in 2014. For measurement purposes, the Scorecard allocates various weightings to the different elements of the Revised Mining Charter. Failure to comply with the provisions of the Revised Mining Charter will amount to a breach of the MPRDA and may result in the cancellation or suspension of a mining companys existing mining rights.
We actively carry out mining and exploration activities in all of our material mineral rights areas. Accordingly, the MPRDA has not had a significant impact on these mining and exploration activities because we applied for and were granted the conversion of all of our old-order mining rights into mining rights in terms of the MPRDA. We now have to comply with the required annual and bi-annual reporting to the DMR on the Social and Labor Plans, Environmental Management Programs, and Progress Reports on our prospecting rights.
We have already complied with the requirements of the Mining Charter, with an equivalent of 36% of production ounces qualifying as empowerment credit ounces. 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 have secured all old mining rights and validated existing mining authorizations. Our strategy has been to secure all strategic mining rights on a region-by-region basis. The first application for conversion from old-order to new-order mining rights was for the Evander Operations and was lodged on May 21, 2004. The Evander mining license was the first conversion application in the region and in October 2004 we became the first senior company to convert old-order to new-order mining rights for our Evander and Randfontein operations. We have worked closely with the DMR to help ensure, to the extent we are able, that the licenses are granted as swiftly as possible. The conversion of licenses for all our remaining operations were granted during November 2007 and Doornkop was executed in October 2008. All of our mining areas are therefore secured/supported by new-order mining rights.
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 to the government according to formula based on earnings before interest and tax. This rate is then applied to revenue to calculate the royalty amount due, with a minimum of 0.5% and a maximum of 5% for gold. For fiscal 2011, the average royalty rate for our South African operations was 0.63% of gross sales.
The MPRDA intends to, among other things:
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give effect to the Ministers stated intention to promote investment in the South African mining industry; |
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establish objective criteria for compliance with the MPRDAs socio- economic objectives; |
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remove the technical deficiencies of the MPRDA; |
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align the MPRDA with the Promotion of Administrative Justice Act, 2000; and |
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coordinate the environmental requirements between the MPRDA and the National Environmental Management Act. |
Papua New Guinea
According to the Mining Act of 1992 (PNG) mineral rights in PNG belong to the government of PNG and they have a statutory right to obtain up to a 30% participating interest in mining development projects. The government then issues and administers mining tenements under the relevant mining legislation, and mining companies must pay royalties to the government based on production.
The key difference in PNG is that citizens have the right to carry out non-mechanized mining of alluvial minerals on land owned by them. These customary rights do not extend over a mining lease, unless an alluvial mining lease is obtained.
Almost all land in PNG is owned by a person or group of persons, and is not generally overlaid by landowner title issues. There is, however, 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.
Prior to commencing exploration, compensation for loss or damage must be agreed with the landowners. Prior to commencing mining, a written agreement must be entered into with landowners dealing with compensation and other matters.
In PNG, Morobe Consolidated Goldfields Limited and Newcrest PNG 1 Limited hold a mining lease and various exploration licenses granted by the Department of Mineralogy and Geohazards Management for the Hidden Valley Project. Both parties have obligations under a memorandum of agreement with the state, local government and the landowners.
Wafi Mining Limited and Newcrest PNG 2 Limited hold various exploration licenses granted by the Department of Mineralogy and Geohazards Management for the Wafi-Golpu Project, and have entered into a compensation agreement with landowners on one of its exploration licenses.
HGEL manages three main project areas which include the Amanab project in the Sandaun Province, Mt Hagen project in the Western Highlands Province and Tapini project in the Central Province. A fourth project area, Tari project in the Southern Highlands, remains as applications pending.
In PNG there are no applicable exchange control restrictions but the PNG central bank does have to be informed of all transactions and has to approve lending facilities and interests rates charged.
Environmental Matters
We are committed to conducting our business in an ethically, morally, socially and environmentally responsible manner that will protect human health, natural resources and the environment in which we live. We aim to balance our economic, social and environmental goals and responsibilities to achieve sustainable, profitable growth in our business and, more importantly, to work with communities and regulatory agencies to implement sound management practices which will ensure that our mining is conducted in an environmentally-safe manner. In addition, with regard to legacy mining impacts, we remain committed to identifying and implementing coordinated remediation plans that are acceptable to all relevant parties.
South Africa
Harmony has recently approved its environmental strategy which is geared towards:
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managing the business with environment as an integral part of the business processes; |
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focusing relentlessly on effectiveness of risk controls; |
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reducing the environmental liability in the organisation; and |
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create a sharing, learning, challenging and innovative environmental culture. |
Environmental compliance is monitored through internal and external audits and technical audits.
Ultimate oversight for environmental strategy and performance in Harmony rests with the Social and Ethics Committee of the board. In addition to an executive environmental manager, an environmental leadership committee drives environmental improvement strategically at group level, which cascades down to the various operations. At each operation, general managers are accountable for environmental management, and each operation develops annual environmental management plans to identify opportunities to increase compliance and minimize pollution.
In support of the above strategy, our environmental policy stipulates that:
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Compliance |
We will strive to comply with all applicable municipal, provincial and national laws and regulations, as well as the other requirements to which the Company subscribes that are relevant to the environmental aspects of our activities.
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Continual Improvement |
We will evaluate and continually improve the effectiveness of our Environmental Management System ( EMS ) through periodic audits and management reviews, and we will review our environmental policy on an annual basis.
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Pollution Prevention |
We will actively design our operations and undertake our mining activities so as to prevent pollution. We will strive towards the continual reduction of adverse environmental effects and support the principle of sustainable development.
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Awareness |
We will communicate our environmental policies to our employees, contractors and suppliers, and will provide appropriate training to all employees to ensure their continuing awareness of our environmental responsibilities.
To address and minimize the impact of the Companys operations on the environment, taking into account regulatory requirements, the board has approved a number of five year targets relating to emissions to air, water consumption and usage, energy consumption, recycling and land use based on fiscal 2008, namely:
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Compliance |
The Company will reduce the number of significant incidents to zero.
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Air Pollution |
All sites with emissions >100,000 tonnes per year CO2 equivalent is required to have and maintain energy conservation plans by 2012.
Harmonys aggregate group target for reduction in energy consumption per ton milled is 10% by 2013, based on a 2005 base year.
Harmonys aggregate group target for reduction in GHG per ton milled is 5% by 2013, based on a 2005 base year.
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Biodiversity |
All sites will have a biodiversity action plan by 2012.
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Water Management |
The aggregate group target for increased affected water consumption per ton milled is a 5% improvement by 2013, based on a 2008 base year.
The aggregate group target for reducing fresh water consumption per ton milled is a 2% improvement by 2013, based on a 2008 base year.
The aggregate group target for recycling water is 5% by 2013, based on a 2008 base year.
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Recycling |
All steel, plastic and timber waste to be handled through designated areas, to improve levels of recycling, and 50% of all oil and grease to be recycled.
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Land Use |
The aggregate group target is a 5% reduction in the land available for rehabilitation.
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Energy Management |
Each operation exceeding 100 000 tonnes CO2e emissions must develop and maintain energy conservation plans by 2012. Group energy consumption target 10% less per tonne milled per annum (from 2005 base year)
Environmental performance
Use of resources
Water
Harmonys operations use significant amounts of water, and access to this resource is vital for the growth of our assets. Although we have an adequate supply at present, water is fast becoming a competitive resource. Accordingly, a group-wide campaign is under way to reuse processed water and optimize water retreatment.
Our South African operations do not draw water directly from surface sources, except for Kalgold which draws water from the aquifer. Water is sourced from:
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bulk water service providers and municipalities; |
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surface water run-off; |
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water that ingresses into deep-level mining operations and is then pumped to surface; |
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recycled water; and |
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boreholes. |
The Far Western Region Dolomitic Water Association is dealing with a number of water-related issues in the area, including an exercise to remediate the impact of radiation in the Wonderfonteinspruit catchment. While Harmony is a member of the committee working to reduce the impact on this area, it has no operational involvement in the upper region of this catchment, highlighted as the first area requiring intervention. Only one site may be linked to our operations, but this was deemed of lower environmental risk by an intergovernmental team and not requiring any urgent intervention. Harmony considers that any exposure in this catchment is limited and manageable.
Acid mine drainage, while being very topical at present, is not an issue for Harmony. There is some potential for acid mine decanting, but only at closure and Harmony is participating in regional closure forums to ensure this is appropriately managed.
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Our current focus is on improving our understanding of the groundwater and surface water regimes. In the last year, geo-hydrological assessments were undertaken in the Free State region, at Evander, Kalgold and Doornkop. In terms of acid mine drainage, the studies confirm there is no risk of decant from the Free State operations, Evander or Kalgold. From the perspective of surface water pollution, rehabilitation is being prioritised at the joint metallurgical scheme site and the acid plant site in the Free State, as well as at decommissioned shafts in the Free State, Winkelhaak and Deelkraal plants.
Water is being discharged from our Doornkop operation and this is being licensed. Based on the draft licence received, Doornkop complies with its licensing conditions. An intensive water-monitoring program is in place and reporting to the regulator takes place routinely.
During fiscal 2011, we recorded a few instances of discharge into a riverine environment. See Significant environmental incidents below. These were immediately addressed, and steps taken to monitor and manage any impact.
Energy consumption
Our energy consumption is largely in the form of electricity drawn from South Africas power utility, Eskom, which in turn is primarily driven by coal-fired power stations. Hoisting, cooling and ventilation systems all need electrical power, making Harmony a major user of electricity. Energy is therefore a significant and growing portion of our operating costs, given rising electricity tariffs.
After the electricity supply crisis in 2008/2009, domestic tariffs have increased steadily and are scheduled to rise further in the year ahead. Following a 27% hike in fiscal 2010, tariffs rose by a further 25% in the review period, and are expected to increase by 27% in fiscal 2012. These cumulative increases have catapulted energy efficiency from an environmental consideration to a business imperative.
South Africas 2005 energy efficiency strategy set a national improvement target of 12% by 2015. As industrial and mining companies are the largest users of energy in South Africa, these sectors have been set a final energy demand reduction target of 15% by 2015.
While this target is currently voluntary, it is effectively mandatory given the 10% demand reduction imposed by Eskom after the electricity crisis.
NERSA approved the renewable energy feed-in tariff guidelines in April 2009. While there is still debate on certain issues in these guidelines, this is expected to stimulate the development of renewable energy in the country once it becomes more financially feasible to invest in alternative energy options.
Harmony is committed to reducing its energy consumption and has worked closely with Eskom to manage its electricity use and peak demand both before and after the energy crisis. The company has a number of efficiency projects under way. Harmony has also actively engaged with Eskom in demand-side management ( DSM ) strategies to reduce electricity consumption during peak periods such as early morning and late afternoon. This involves measures such as timing pumping to coincide with cheaper off-peak periods, making more efficient use of Eskom tariffs that reward load-shifting, and improving the efficiency of pumping operations.
We installed sophisticated equipment and variable speed motors that reduce the surge in power consumption when a pump is started. While the software supporting these systems has been complex and costly to develop and implement, significant savings are reflected in lower electrical energy consumed despite the 7% increase in rock mined. We have several projects that have been approved by Eskom for partial DSM funding and several more that have been submitted to Eskom for approval. Seven more energy efficiency projects are in the final stages of investigation.
Climate change and greenhouse gas emissions
Harmony remains focused on reducing the use of fossil fuels and developing initiatives to mitigate and absorb GHGs to reduce its carbon footprint. During fiscal 2011, we recorded a very solid performance in reducing carbon emissions to meet our internal targets of 15% by 2013, with an actual reduction of 18%.
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In 2011, Harmony submitted its fourth response to the Carbon Disclosure Project. The year-on-year progress is encouraging; in 2010, we scored 74% to rank 17th among 71 companies.
The countries in which Harmony operates South Africa and PNG are non-Annex I countries and therefore do not have emission-reduction targets under the Kyoto Protocol in the first commitment period, ending 2012. Harmonys exposure to Australian legislation is limited as the operations we owned there have been sold or are under care and maintenance. After the climate summit in Copenhagen in December 2009, South Africa committed to 30% clean energy by 2025 with the vision that the countrys GHG emissions should peak by 2020 to 2025 at the latest, plateau for a decade and then decline by 40% by 2050. South Africa is also developing a national climate change response policy which is expected to be completed by 2012. This policy will be translated into a legislative, regulatory and fiscal package from now until 2012.
The largest portion of our GHG emissions relates to electricity, which accounts for around 10% of operational costs in South Africa. While cost management is clearly a strategic issue for Harmony, it is even more important that the energy supply is constant and reliable, given the impact of any loss of energy on both production and health and safety. GHG emissions regulation that would increase the price of energy, within reason, will not affect Harmony as significantly as regulation that stipulates emission thresholds, or sets technology standards that may threaten the security of energy supply.
As our current mines have a life expectancy of up to 25 years, capital projects are under way to sustain and increase production at the Phakisa, Doornkop, Kusasalethu, Tshepong and Hidden Valley operations. Our aim is to raise production to 1.82Moz by 2015. These expansions would extend our mining operations by ten years or more, by which time GHG regulations are expected to be a permanent feature of the global economy. Future climate change regulation will therefore need to be considered for all Harmonys extensions and acquisitions. As company policy, all greenfield and brownfield projects are required to consider the impact of climate change in their design and planning. Harmony is also likely to be exposed to GHG emission regulation thresholds, specifically any leakage from using refrigerant gas. We will therefore be required to manage CFC-free refrigerant gas, and will consider using absorption chillers.
ISO14001 implementation
An ISO14001 EMS is being introduced progressively across our operations, and it is planned that the implementation program at the longer-life operations will be completed in 2012 2013. In fiscal 2010, Harmony reviewed its strategy on ISO 14001, deciding that all operations would comply with these standards while all new and long-life assets would be ISO-certified within three years. This decision was aligned to our business strategy for scaling down certain operations while developing others. Given that a few of our assets are reaching the end of their lives, implementing a certification system would add only short-term value. At these operations (Deelkraal and Winkelhaak), the emphasis is on designing and implementing closure plans in line with ISO principles. Long-life assets that will benefit from continuous improvement were therefore prioritised for certification. These long-life assets are: Doornkop, Evander 8, Kusasalethu, Kalgold, Bambanani, Unisel, Masimong, Phakisa, Tshepong, Saaiplaas, Target 1 and 3, Joel and all new projects.
Formal certification will be sought progressively. During fiscal 2011, Doornkop shaft and Kusasalethu were certified to ISO 14001 standards, while Kalgold and Evander were recommended for certification. Implementation at other operations is ongoing, and action plans to address all high-risk impacts are under way. Certification is scheduled for Harmony 1 plant in December 2011.
The EMS forms the basis for the implementation of the environmental policy and monitoring compliance, while the Environmental Management Programme Report ( EMPR ) developed in line with legislative requirements, contains specific as well as general principles governing environmental management during the life of the mine. The EMPRs identify individual impacts, mitigation measures and rehabilitation requirements.
Generic closure objectives are set and high-level closure plans formulated within the EMPR, including investigation of the potential for re-use of existing infrastructure, preparation of a rehabilitation plan, rehabilitation and vegetation of the affected area and post-closure monitoring. These EMPRs are legally binding and forms part of our submission for, and receipt, of mining rights conversions.
A group-level environmental audit as well as a number of annual compliance audits were undertaken during the year, most notably by the DMR. Areas of non-compliance identified by the audits have been and are being addressed.
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Environmental management and auditing
We are implementing appropriate environmental management systems at all operations which will provide a formal, systematic approach to environmental management. To date, these systems are being implemented at all our North operations, with Doornkop plant, Doornkop shaft and Kusasalethu already certified. In the South region, systems are being developed and implemented. Self assessments will begin in the next financial year.
As required by the MPRDA, environmental management program have been drawn up for each operation, submitted and approved by the DMR. These plans are amended when necessary and resubmitted to the department.
Integrated water use licences were submitted for all operations as early as 2006. Evander has received its new-order water use licence. Doornkop has received a draft water use licence, and the final licence is imminent. After initially submitting an application in 2006, Kalgold will resubmit its water use licence application to ensure it complies with current legislation.
Other key legislation for the Company includes compliance with the National Environmental Management Act, National Water Act and the National Nuclear Regulator Act. Harmony has received an exemption from the nuclear regulators certificate of registration process as radiation levels are fairly low for Kalgold.
Harmony received no environmental fines or sanctions in FY11. Four directives were received during the period:
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Kalgolds EMPR was approved in 2009 for the D-zone pit. The approval letter accompanying the signed off EMPR stipulates a number of conditions that Kalgold must comply with. One of these conditions is a requirement to backfill D-zone pit which is in conflict with Kalgolds rehabilitation commitment of converting the pit into a strategic water resource for the water-scarce Mareetsane region. Scientific studies further support that backfilling the pit will have a negative impact on the environment, especially the surface and groundwater regimes. Supported by DWA, Kalgold is working with the DMR to revoke the approval letter and endorse the conversion of the pit into a strategic water resource. |
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Steyn 9 slimes dam: (DMR) airborne dust. This is being addressed by implementing a very comprehensive dust mitigating plan, which includes water and chemical suppressants creating dust barriers. |
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Doornkop shaft: (Department of Water Affairs) release of underground water. The mine has proved discharge does not impact on river water quality. |
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Kusasalethu: The DMR requested Kusasalethu to increase access control of communities to the return water dam for safety reasons. In addition to physical barriers, Kusasalethu has also started a risk awareness and education campaign in the community. |
Significant environmental incidents
Significant incidents are defined as those that have an impact outside the Groups boundaries, which may cause irreparable harm or which require significant expenditure to remedy. In fiscal 2011, ten significant environmental incidents were reported. These related primarily to:
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discharges to receiving environments; |
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return water dams overflow due to excessive rainfall events; and |
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one incident of nuisance dust. |
The incidents reported are as follows:
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Doornkop underground water discharge; |
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Pres Steyn non-compliance to water licence discharge conditions; |
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water discharge from Nyala wash bay to environment; |
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Doornkop return water dam overflow; |
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Kusasalethu return water dam overflow; |
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Evander return water dam overflow; |
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Nyala shaft water discharge overflowed into receiving environment; |
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Steyn 9 discharge overflowed into receiving environment; |
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treated sewage water discharge from Kusasalethu; and |
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dust pollution from Steyn 9 slimes dam received directive from DMR. |
Financial provision
In accordance with legislation, Harmony has constituted independent environmental rehabilitation trust funds to make adequate financial provision for the expected cost of environmental rehabilitation at mine closure and for the discharge of its obligations and contingent liabilities. Each operation reviews and updates the financial provision for its expected environmental closure liability annually in consultation with a consultant. This estimate is then used to calculate the contributions to be made to the rehabilitation trust funds, and, if necessary, adjustments are made to the trust fund provisions.
The accumulated amount in the various South African rehabilitation trust funds was R1,849 million (US$272.7 million) at the end of June 2011 (2010: R1,702 million (US$223.2 million), while the total rehabilitation liability was estimated at R2,441 million (US$360.0 million) (2010: R2,229 million (US$292.2 million)). We have guarantees for the environmental liabilities with Nedbank Limited amounting to R336 million (US$49.6 million). During the year, we contributed R10 million (US$1.5 million) to the trust funds.
The assets of each mine within each fund are ring-fenced and may not be used directly to cross-subsidize one another.
Papua New Guinea
Our PNG operations are in various phases of activity including exploration, pre-feasibility study and commissioning. We are subject to applicable environmental legislation including specific site conditions attached to the mining tenements imposed by the PNG Government Department of Environment and Conservation ( DEC ), the terms and conditions of operating licenses issued by the PNG MRA and DEC, and the Environment Permits for water extraction and waste discharge issued by DEC.
All PNG operations have departments and personnel dedicated to environmental matters who are responsible for implementing the Company environmental management programs, monitoring the impact of mining on the environment and responding to impacts that require specific attention outside of the normal program of environmental activities.
Environmental management and auditing
A framework for a Sustainable Business Management System ( SBMS ) has been completed which complies with relevant Australian and international standards and principles for safety, environment, quality and sustainable development (including AS/NZS ISO14001:Environmental Management Systems, Equator Principles, and the Cyanide Code). This system was implemented at Hidden Valley during fiscal 2011 and will be implemented at all other MMJV operations in 2012.
The PNG DEC commissioned a third party compliance audit of the Hidden Valley mine in 2010 following stakeholder concerns about sedimentation impacts on the Watut River. This led to the development of a DEC-approved environmental improvement plan to address compliance concerns and the appointment of an external stakeholder advisory panel. The Hidden Valley joint venture partners are systematically implementing the environmental improvement plan to the satisfaction of the DEC and local landowners. The projects relationship with key stakeholders remains good and the joint-venture partners continue to be guided by advice from the stakeholder panel and the technical advisory committee.
Use of resources
Water
The Hidden Valley mine receives an average of 2.8 meters of rain each year, coupled with annual evaporation of about 1 meter. The excess rainfall, combined with steep unstable topography, creates significant water management challenges for the project. Rainfall run-off must be controlled to prevent erosion and sediment run-off to the river system. Site-water use must also be conserved
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to limit volumes of contaminated waste water discharged into the river system. These waste-water streams include sewage effluent and discharge water from the tailings storage facility ( TSF ).
Conserving process water is particularly important because TSF discharge water must be treated through a Caros acid cyanide destruct plant, followed by filtration through activated carbon to remove contaminants prior to discharge. It is necessary to discharge this water to maintain a small ponded area on the TSF which, in turn, is necessary for adequate consolidation of tailings and protecting the integrity of the TSF. The minimum volumes of raw water are therefore drawn from the river system for key processes requiring raw water such as the elution and gravity circuits. This draw, however, in combination with high rainfall and low evaporation creates a high positive water balance, necessitating a high rate of discharge from the TSF and limiting the opportunity for process water recycling. Minimizing raw-water use is also important in protecting the project against occasional El Nino droughts when volumes of available river water are greatly reduced.
Construction of the Hidden Valley mine has contributed to sedimentation in the Watut River system. This is causing concern among downstream communities living on the river banks. In fiscal 2010, the joint venture partners commissioned a series of studies to assess current and future impacts on this river system. These sediment, biology and acid mine drainage characterization studies confirmed the impact on the Watut River, partly from activities at Hidden Valley and from other sources along the river.
A team of experienced personnel, supported by an independent advisory committee, is managing a range of remedial actions that includes ongoing assessments of the river, riverine biology and aquatic life. A highlight of the year was the launch of the community clean water program. Working with a faith-based organization, we have constructed wells in nearby villages which will provide a reliable source of clean water for these communities.
Since 2010, we have made significant progress in reducing mine-related sediment in the river.
Energy consumption
In the third quarter of fiscal 2011, Hidden Valley was connected to the new hydropower transmission line, part of the PNG electricity grid. While Hidden Valley is currently only drawing 50% of its requirements from the national grid, this has already significantly reduced reliance on diesel-generated power on site and the amount of fuel to be trucked to this remote site.
Climate change and greenhouse gas emissions
PNGs national office of climate change and environmental sustainability is studying the potential for future economic growth to be driven by renewable energy. Along with other Pacific Island countries, PNG has adopted a framework for action on climate change 2006 to 2015 and a disaster risk reduction and disaster management framework for action. The implications of these structures on Harmonys operations in PNG have not yet been established and studies are ongoing.
The introduction of an emissions trading system in Australia, known as the carbon pollution reduction scheme, has been delayed until 2013. This will enable the Australian government to assess the level of global action on climate change after the first phase of the Kyoto Protocol expires in 2012. Although this change in policy direction in Australia reduces the impetus for carbon emission reduction in the country in the short term, other non-regulatory risks, mostly substantial projected electricity price increases, remain significant drivers for achieving emission reductions in Australian operations.
Harmony is developing a framework for an internal GHG management strategy, including standardised emission measurements and estimation techniques at PNG. In the past, GHG emissions in PNG were only direct and treated as scope 1 emissions as these were derived from diesel generators with no electricity purchased. This changed in fiscal 2011 because Hidden Valley mine, previously under construction, is now fully operational, and was connected to the national grid in March 2011.
Significant environmental incidents
There were a number of environmental incidents reports in PNG that may have had a moderate impact on the receiving environment but were not considered major or at a level that would have affected the ecosystem function.
Financial provision
A closure plan has been developed for Hidden Valley, with a provision for rehabilitation and closure liabilities of US$52.7 million.
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Health and Safety Matters
South Africa
The Mine Health and Safety Act
For many years, the safety of persons working in South African mines and quarries was controlled by the Mines and Works Act of 1956 and then by the Minerals Act of 1991 which was replaced by the Mine Health and Safety Act. The Minerals Act of 1991 has subsequently been repealed and the MPRDA promulgated. The Mine Health and Safety Act has since been amended by Act 74 of 2008. The objectives of the Mine Health and Safety Act ( MHSA ) are:
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to protect the health and safety of employees and other persons at mines; |
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to promote a culture of health and safety; |
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to require employers and employees to identify hazards and eliminate, control and minimize the risks relating to health and safety at mines; |
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to give effect to the public international law obligations of South Africa that concern health and safety at mines; |
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to provide for employee participation in matters of health and safety through health and safety representatives and health and safety committees at mines; |
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to provide for the effective monitoring of health and safety conditions at mines; |
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to provide for the enforcement of health and safety measures at mines; and |
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to foster and promote co-operation and consultation on health and safety between the DMR, employers, employees and their representatives. |
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 representatives and the establishment of health and safety committees. It also entrenches the right of employees to refuse to work in dangerous conditions. Key amendments to the MHSA include the following:
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training records must be kept; |
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employer investigations; |
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permanent committees of the MHSC; |
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Health and Safety Management system; |
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administrative fines increased from R200,000 to R1 million; and |
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offences applicable to the employer. |
The South African Government, through the DMR, ordered the institution of audit teams to conduct legal compliance and systems and explosives control audits on mines across all commodities.
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It is anticipated that Harmony will incur additional expenditure in order to comply with the prescribed legislative requirements. Management anticipates that such additional expenditure will not have a material adverse effect upon our operational results or financial condition.
Management approach to safety
Harmonys objective is to eliminate all work-related injuries. Each operation is monitored monthly using a formal review system, while major safety issues are reviewed annually during the health and safety workshop.
Our approach to safety is comprehensive and includes training, auditing, communication, specific management interventions and programs, and ongoing campaigns. Corporate safety and health professionals monitor group-wide performance and develop initiatives to address common issues. Guided by an occupational health and safety policy, our cooperative health and safety management framework involves the active participation of management, unions and DMR representatives at all levels, and is aligned with the MHSA.
The chief executive officer and chief operating officers are responsible for safety strategy and management at Harmony operations. They, in turn, delegate responsibility to the relevant general and plant managers for implementation and monitoring because each operation has a unique risk profile. Post year end, we allocated the responsibility for safety to a senior executive with extensive experience of Harmonys operations.
Safety performance is a parameter in all management and employee incentive schemes.
Health and safety committees are in place at all operations, as required by the MHSA, and full-time health and safety stewards and health and safety representatives have been appointed. There were 52 full-time health and safety stewards in place at the South African operations in fiscal 2011.
These health and safety committees comprise management and elected employee representatives to ensure the active participation of our people in safety and health management. All safety representatives receive additional training, in line with revised Mining Qualifications Authority standards. The committees meet monthly to examine employee health and safety issues, and formal health and safety agreements are in place at all operations to deal with related issues.
In fiscal 2011, 190 occupational health and safety personnel were trained as OHSAS 18001 lead auditors. After adopting OHSAS 18001 and ISO 14001 standards in the prior year, a gap analysis was completed in 2011 to determine whether these standards could be implemented as an integrated framework. A decision on this will be taken in fiscal 2012.
The annual health and safety strategic workshop is a key event in our safety calendar. The review periods workshop was held in June 2010 with executives and management teams participating. The workshop identified specific safety aspects to be implemented in fiscal 2012 and monitored each quarter. These include:
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fall-of-ground prevention; |
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trucks and tramming; |
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occupational health and hygiene; |
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metallurgical plants; and |
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environmental management/occupational health and safety management systems. |
During fiscal 2011, we made good progress in installing standardized systems to accurately monitor and measure a number of performance indicators, including safety, to global best-practice levels. By June 30, 2011, modules for occupational health and radiation were in place, while scoping was under way for safety, health and environmental management modules. These are aligned to OHSAS and ISO standards. In tandem, we are consulting with individual health and safety committees to ensure their full cooperation. We have previously identified safety literacy as an issue. To address this, we are rolling out an e-learning program at Masimong, Tshepong, Phakisa, Target and Doornkop. By June 30, 2011, 16,368 employees were participating in this program.
In line with Harmonys 2013 milestones, safety management and performance targets have been set, and integrated into the performance parameters at each operation. The 2013 milestone is a fatality rate of 0.03 per million hours worked, as agreed by the
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CEOs of all mining companies and the Mine Health and Safety Council at the 2003 industry safety summit. At Harmony, while the long-term trend is firmly downwards, we have some way to go to reach this goal.
The DMR remains vigilant about ensuring compliance with safety legislation. Harmony continues to work closely with the DMR to resolve issues, thus minimizing safety stoppages and ensuring that all safety standards are adhered to and implemented at our operations.
Our aim is to produce safe, profitable ounces. We believe that safety in the workplace can only be addressed in a cooperative approach that ensures the right infrastructure is in place from systems and planning, to communication and training. Management and employees must accept joint responsibility for their actions and therefore it is imperative that the working environment empowers people management, supervisors, workers and union representatives to stop work and withdraw when they feel it is unsafe, or prevent others from acting in an unsafe way. Equally, safety is also about attitudes and mindsets, collectively and individually.
Criminal mining
In South Africa, criminal or illegal mining at many Free State gold operations, not only Harmony mines, presents significant safety and health risks for our own employees and for the illegal miners. It also has a considerable cost in terms of destroyed assets and infrastructure, security, and loss of skills (if employees are involved). Ultimately, this has ramifications for investment and job creation.
Unfortunately, this is a complex issue, spanning unemployment, illegal immigration, internal fraud and, most importantly, endemic poverty. As such, there is no simple solution, but the level of cooperation between mine owners, authorities, employees, communities and non-governmental organizations has been encouraging. We are doing everything reasonably practicable to proactively address illegal mining.
During fiscal 2011, the Department of Justice and Correctional Services amended the charge for illegal mining from petty to serious. We trust that prison sentences as opposed to negligible fines will prove a more compelling deterrent.
Harmony has made good progress in the battle against illegal mining. Access control and underground security processes have been enhanced, although at some operations the criminals have now focused on surface areas. This is being addressed. At Tshepong, the ban on food underground was agreed to by all stakeholders and has proved successful. Our focus on communicating the risks and consequences of illegal mining and fraud to our own workforces has also paid off, with the number of employees dismissed for related offences dropping from 314 in fiscal 2010 to 133 in fiscal 2011. We also continue to liaise with the DMR, the South African Police Service, justice department, private security companies and affected communities.
Healthcare services
Harmony values the health and well-being of all its employees and the communities affected by its activities. The company is therefore committed to preventing all illnesses not only occupational illnesses but other lifestyle diseases such as hypertension, diabetes and HIV through continued medical surveillance, active case finding, early detection and treatment as part of an integrated managed healthcare system. Harmony Healthcare provides tertiary, secondary and primary healthcare as well as occupational health services to around 80% of its employees through company-managed healthcare facilities and preferred provider arrangements. Company-owned facilities currently include two private hospitals, two private pharmacies and various shaft-based medical stations. During fiscal 2011, conversion of the medical station at Target was completed; this is now a health hub providing an integrated, proactive healthcare service. Casualty departments at the private hospitals provide 24-hour emergency services to local communities and to company employees.
The health and well-being of the remainder of Harmony employees, their dependants and contractors is ensured through medical aid membership or third-party service providers, as part of their employment benefits. In fiscal 2010, Harmony Healthcare began implementing a proactive healthcare strategy, shifting the focus from curative to preventative healthcare. Integrated individual healthcare can now be provided to employees, supported by management information systems that enable the Companys healthcare team to monitor and track the risk profile of individuals in terms of health and well-being. Individual disease management plans are then developed and continually reviewed to assess progress. This initiative is aligned with the Company strategy to ensure continued health improvements that will lead to notable improvements in employee attendance and workplace productivity. During fiscal 2011, the required training was provided to healthcare professionals and, given the encouraging early results, the long-term benefits of this initiative are expected to be significant.
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As part of an initiative to entrench compliance with DMR standards, the occupational health module of a safety, health, environmental risk and quality assurance system was customised, with staged implementation from August 2011. This will allow health and environmental exposure data to be coordinated, improve medical surveillance data for analysis, improve monitoring and reporting and ensure continued employee health and wellness improvement. The safety phase is scheduled for completion early in 2012.
Occupational health
In compliance with the Mine Health and Safety Act, medical surveillance continued at the groups four medical surveillance centres. Medical surveillance examinations were conducted including entry examinations (for new employees), annual examinations, exit (end of service) examinations, and out-of-cycle examinations (for transfers, for example).
We align our occupational health statistics reporting to international standards such as the International Labor Organizations Code of Practice on the Recording and Notification of Occupational Accidents and Diseases, as well as the Mine Health and Safety Act. In the case of an employee being identified as having a compensable occupational illness, the Company submits his or her details on the employees behalf to the Medical Bureau for Occupational Diseases ( MBOD ) or to the Rand Mutual Assurance Company ( RMA ), depending on the illness and legislation that covers it. The MBOD is a statutory body, responsible for certification and compensation in terms of the Occupational Diseases in Mines and Works Act, 1973, to which Harmony contributes. RMA is an industry body that provides compensation under the Compensation for Occupational Injuries and Diseases Act of 1993.
The primary occupational health risk areas in fiscal 2011 were silicosis, noise induced hearing loss ( NIHL ), tuberculosis ( TB ) and occupational injuries.
Noise-induced hearing loss: Harmony is committed to industry milestones for NIHL under the auspices of the Mine Health and Safety Council ( MHSC ):
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the industry hearing conservation program must ensure no deterioration in hearing greater than 10% among occupationally-exposed individuals after December 2008; and |
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total noise emitted by all equipment in any workplace must not exceed 110dB(A) at any location (including individual pieces of equipment) by December 2013. |
The hearing conservation program in place at Harmony has been intensified to reduce NIHL. This includes issuing individually moulded hearing protection devices for working areas where high noise levels have been recorded. To date, we are recording a compliance level of 88% for personal protective equipment, one of the highest in the industry and a reflection of Harmonys effective communication initiatives.
Occupational lung disease: Silicosis and TB are the two primary occupational lung diseases in the gold mining industry in South Africa and remain long-term concerns for Harmony. Chronic obstructive airways disease does occur, but less frequently.
Silicosis
Silicosis is linked to long-term exposure to quartz silica dust and can cause increased susceptibility to TB. Under the auspices of the MHSC, Harmony committed to the following milestones:
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95% of all exposure measurement results to be below the occupational exposure limit for respirable crystalline silica of 0.1mg/m³ by December 2008 (individual readings and not average results); |
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using present diagnostic techniques, no new cases of silicosis will occur after December 2013 among previously unexposed individuals (not exposed before 2008, or someone entering the industry in 2008). |
All Harmony operations are benchmarked to obtain uniform comparisons.
Harmony is steadily implementing a phased strategy to control dust and reduce silicosis:
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reducing dust in intake airways; |
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increased focus on silica dust exposure; and |
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awareness through formal training on airborne pollutant exposure. |
Silicosis is receiving heightened attention due to the recent court case against Anglo American by a former employee. Harmony, as a member of the Chamber of Mines, is participating in processes to address issues relating to historical silicosis cases following the Constitutional Court judgment in the Mankayi case. Please see Item 8. Financial Information Legal Proceedings for further information.
Tuberculosis
TB continues to hamper the health of workers and affect productivity (absenteeism, treatment costs, compensation, allocated resources, etc). As such, there is increasing pressure on the gold mining industry to reduce TB among its workers. While the gradual downward trend for TB across the industry has resumed, the incidence is still unacceptably high. We are liaising and cooperating with local departments of health on specific TB training for nursing staff, and the additional resources required to improve our collective management of this disease.
In line with the World Health Organization ( WHO ) and the national TB strategic plan in South Africa, Harmonys comprehensive TB control program includes early case findings, directly observed therapy short-course, chemotherapy and a radiological TB screening project. Harmony exceeds the national plan in certain respects such as:
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testing to identify early TB resistance; |
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number of investigative diagnostic tests conducted for early detection; |
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installing ultraviolet lights for infection control; |
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annual X-rays of employees exposed to dusty work environments for early TB detection; and |
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ongoing monitoring and education. |
Some 902 ultraviolet lights have been installed to date in a phased program that is currently targeting risk exposure areas at the mines. As required by the national plan, the Company prepares TB registers, which are regularly inspected by regional health authorities.
Multidrug-resistant TB ( MDR TB ) remains a growing concern for Harmony as it is costly to treat, loses more shifts (eg 18 months treatment) and has a higher mortality rate despite treatment. MDR TBs association with HIV is almost 100%, further supporting the proactive integration of HIV and TB treatment (and data management) that we are developing in the group. Quality patient and data management and monitoring remain a universal challenge in TB management. MDR TB cases are treated either at the dedicated ward at Ernest Oppenheimer Hospital in Welkom or in specialized state facilities in Gauteng. This treatment program falls under the auspices of the specialised MDR TB state hospitals.
HIV/AIDS Policy
We have managed to look at HIV/AIDS awareness campaigns holistically with our South African workforce. Our HIV and AIDS campaigns are in line with the national HIV counseling and testing ( HCT ) campaigns. Our treatment policy is also in line with the National Guidelines on Anti Retroviral Treatment, which assists employees who decide to leave their place of work and return home for care and are cared for at their homes through the TEBA home based care system, to which we contribute. See Item 3. Key Information Risk Factors Risks Relating to Our Business and Our Industry HIV/AIDS poses risks to Harmony in terms of productivity and costs and Item 3. Key Information Risk Factors Risks Relating to Our Business and Our Industry The cost of occupational healthcare services and the potential liabilities related to occupational health diseases may increase in the future .
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In South Africa, we have an agreement with the relevant stakeholders concerning the management of HIV/AIDS in the workplace. This agreement, originally signed in 2002 with the National Union of Mine Workers ( NUM ) and the United Association of South Africa ( UASA ) has been subsequently amended, the latest in August 2006. While many aspects of the policy have remained unaltered, the most fundamental change is the inclusion in the policy of a broad spectrum of chronic manageable diseases other than HIV/AIDS such as diabetes, asthma and hypertension. This was done in order to minimize the stigma surrounding stand alone HIV/AIDS treatment centers and also to emphasize our view that HIV/AIDS should no longer be viewed as a death sentence, but rather a chronic, manageable disease. We have decentralized some of the functions of the HIV and AIDS centers to the clinics at the shafts where these functions can be easily accessed by employees. The agreement also serves to reassure our employees of our commitment to the respect of all human rights and commitment to non-discriminatory practices and zero tolerance to discrimination of any of our employees. During the early stages of the implementation of the HIV/AIDS program, the agreement was also used as a marketing tool to encourage employee participation in the Harmony HIV/AIDS Program.
Management of HIV/AIDS
The HIV/AIDS pandemic continues to have a significant impact on the Company (through absenteeism, reduced performance, loss of skills) and employees and their families, and local and labor-sending communities.
The group estimates the HIV prevalence level among employees at 27%, based on best available state information and empirical modelling undertaken for the Company in 2009. While this modeling suggests prevalence levels will decline over the next ten years, prevalence levels could have increased in the short term as more employees are staying well and employed after the introduction of antiretroviral therapy ( ART ). No prevalence testing may be undertaken by law.
At Harmony HIV/AIDS is managed at three levels:
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at a clinical level, the symptoms of the illness are managed by the Groups health care services; |
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company-wide and mine-specific initiatives are conducted. Shaft-based HIV/AIDS committees form an integral part of the Health and Safety Committees, which meet on a monthly basis; and |
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group policy and practice is overseen by a specialist health care professional. |
The program is undertaken by an external provider using qualified registered professional nurses and protocols aligned with the South African Department of Health, WHO and the HIV Clinicians Society of Southern Africa.
In Harmonys integrated healthcare approach, the focus on HIV/Aids is not isolated, but an integral part of a wider range of chronic diseases managed by the Company. Because the co-infection rate between TB and HIV/Aids is high, the needs of immune-compromised employees require focused attention by all healthcare workers. In fiscal 2011, nursing staff and HIV coordinators attended an in-house training program on HIV clinical skills and basic counselling skills.
Information and education are vital elements of our prevention campaigns, as is providing voluntary counselling and testing ( VCT ) facilities. The focus on early detection is important as early intervention greatly increases the likelihood of long and healthy lives for employees. Harmonys approach, that HIV/Aids is a chronic illness that can be managed as such (just like diabetes or hypertension), has had a positive impact on the response to VCT.
HIV-positive employees are encouraged to participate in the Companys wellness program. This includes counselling on lifestyle choices and nutrition, treatment of opportunistic infections and ART. All Harmony employees have access to ART, either through our healthcare facilities or through private medical aid schemes. State-funded facilities in South Africa also provide ART and some employees may seek treatment there because of the stigma associated with the disease. Harmony supports the national HCT campaign and extended this to include all primary healthcare facilities and occupational healthcare centres as an ongoing service in the prior year.
Over the last 15 months, 26% of employees were tested for HIV and 48% of those tested received counselling. This is in line with the company target of 30%. During fiscal 2011, 7,009 individuals were tested (2010: 7,374), a decrease of 5%. The number of employees engaged in VCT has increased, with a current uptake rate of 54%. In fiscal 2011, 2 902 employees participated in the
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highly active antiretroviral therapy ( HAART ) program (2010: 3,226). The decrease could be attributed to various factors, including labor movements or patients staying above the CD4 count of 500 for longer by adhering to treatment programs.
Australia
Australia, via each State and Territory has a well regulated system of occupational health and safety ( OH&S ), comprised of legislation (Acts and Regulations) and Codes of Practice. Australia is moving to National OH&S Legislation and Draft Legislation has been circulated to the various levels of government and industry for consultation. Several of these specifically apply to the mining industry, including specific legislation and extensive codes of practice and guidelines. There is also a well developed certification and licensing system for employees for the usage of certain items of plant and equipment. The legislation governing this area also refers to the many Australian Standards and specifically AS/NZS 4801 Occupational health and safety management systems Specification with guidance for use which is the specific AS for the management of Safety Systems.
In the event of injury while at work, employees are protected by a compulsory workers compensation scheme, which are different for each state.
Papua New Guinea
PNG has a significant mining industry, and a developing system of occupational health and safety. The PNG Mining (Safety) Act of 1977 is the principal legislation that addresses a range of issues such as working hours, minimum safety and reporting requirements. Other legislation and regulations also apply.
Management approach to safety
Safety performance at Hidden Valley in PNG is monitored by Harmonys regional executive committee. As safety the responsibility of line management, safety managers at each operation report through steering committees to this executive committee, which in turn reports to the Harmony board committee responsible for sustainability.
Good progress is being made by the joint venture partners in developing a SBMS aligned to ISO 18000 and ISO 14001:2004, a health, safety and environmental management system. The SBMS will be externally audited every two to three years against these standards. Harmony has also made progress in developing a measurement system based on organizational and individual performance. Business performance indicators, including safety, were developed and agreed during the year. Future performance will be monitored against these benchmarks. Identifying and managing hazards in the workplace is an important element in improving safety performance and remains a key focus. As such, site-level risk assessments aim to ensure each job is completed safely and efficiently. In addition, the hazard identification and risk assessment approach is being successfully implemented, supported by ongoing training and coaching. The business, production and safety improvement program developed in fiscal 2010 (based on the mining six-sigma lean program) is actively involving management in continually improving and meeting targets in all aspects of the business, especially safety.
The program includes daily meetings at which all managers and senior staff are updated on activities across the site for the prior 24 hours. This update reviews safety-related issues, including significant potential incidents, injuries and other incidents in that period. The work system wheel was introduced across the MMJV operations in early 2010 to develop a controlled and safe work environment. The wheel is a graphical representation with a version translated into colloquial speech highlighting the four elements required for safe production: controlled work environment, trained and competent people, fit-for-purpose equipment and safe work practices. This concept encourages everyone to ensure the four elements are in place at all times. The model has been expanded across all management levels in addition to the mines.
Healthcare services
In PNG, medical centres at Hidden Valley, Wafi and Wau provide full-time primary healthcare and occupational health surveillance to employees, dependants and the local community. While the Wau centre is only available to dependants and community members for emergencies, four new community health facilities were built at Babuaf near Wafi and Nauti, Kwembu and Winima near Hidden Valley.
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Occupational health
The SBMS that is being developed includes a medical register that tracks and reviews each patients progress from initial health contact throughout the treatment process.
An occupational hygiene assessment conducted at the Hidden Valley operation in 2009 spanned respirable dust, respirable crystalline silica and a noise monitoring survey. It was conducted according to occupational hygiene practice and Australian standards for noise and dust monitoring (AS 2985-2004 and AS 1269.1- 1998), the methods for quartz measurement. Based on these results, activities at Hidden Valley do not exceed regulatory standards.
The primary health risks in fiscal 2011 at Hidden Valley were upper respiratory tract infections and malaria, neither of which are occupational illnesses.
Over 16,000 new cases of TB are detected in PNG every year (WHO), although only one case was identified at the MMJV medical centres. Communities in PNG are vulnerable to TB given the cramped living conditions in many settlements and villages, exacerbated by lack of access to health facilities, poor transport infrastructure, poverty and poor TB awareness. We support the Morobe health authorities by conducting TB community awareness programs with health NGO World Vision throughout the province for more effective prevention of this infectious disease.
Australian government statistics forecast that 208,000 people in PNG will be living with HIV by 2012. In partnership with government and other stakeholders, including the PNG Business Coalition Against HIV/AIDS, we are actively supporting HIV/Aids management and prevention initiatives at MMJV. Condoms are distributed free at PNG operations and to surrounding communities. MMJV also conducts regular HIV education training, distributes relevant material to employees and the community, and sponsors and organises World Aids Day activities in its areas of operation.
See Item 3. Key Information Risk Factors Risks Relating to Our Business and Our Industry HIV/AIDS poses risks to Harmony in terms of productivity and costs and Item 3. Key Information Risk Factors Risks Relating to Our Business and Our Industry The cost of occupational healthcare services and the potential liabilities related to occupational health diseases may increase in future .
Item 4A. UNRESOLVED STAFF COMMENTS
There is presently one unresolved comment between the Company and the staff of the SECs Division of Corporation Finance ( Staff ) as part of its review of our Form 20-F for the fiscal year ended June 30, 2010.
The Company originally received a comment letter from the SEC on May 11, 2011 regarding the process by which it took the decision to report mineral reserves for Rolspruit and Poplar (included in South Africa underground Evander (below infrastructure) ) as at June 30, 2010. The Staffs other comments in that letter and subsequent correspondence have since been resolved. In the Companys response, it provided the SEC certain supporting documentation including an independent Competent Persons Report (CPR ) regarding those projects, maintaining that the studies done on these projects included substantial geo-scientific, engineering, economic and social studies which showed the projects were economically and legally viable. On September 28, 2011 the Company received a follow up comment regarding the same, in particular certain recommendations from the CPR. The Company is currently in the process of assembling documentation regarding its views in support of the Rolspruit and Poplar reserves as declared at June 30, 2010, and has been granted an extension to do so until November 4, 2011.
The Company can provide no assurance that the Staff will have no further comments on these matters.
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Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis together with the consolidated financial statements, including the related notes, appearing elsewhere in this annual report.
Overview
We conduct underground and surface gold mining and related activities, including exploration, processing, smelting and beneficiation. We are currently the third largest producer of gold in South Africa, producing approximately one-fifth of the countrys gold output, and are among the worlds leading gold producers. Our gold sales for fiscal 2011 were approximately 1.3 million ounces of gold. As at June 30, 2011, our mining operations reported total proven and probable reserves of approximately 41.6 million ounces and in fiscal 2011, we processed approximately 21.3 million tons of ore.
For segment purposes, management distinguishes between Underground and Surface, with each shaft or group of shafts 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, Evander, Joel, Kusasalethu , Masimong, Phakisa, Target, Tshepong, Virginia and PNG;
Cooke operations (sold in November 2008) and Mount Magnet (sold in July 2010) are classified as discontinued operations; and
All other shafts and surface operations, including those that treat historic sand dumps, rock dumps and tailings dams, are grouped together under Other Underground and Other Surface.
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 based on our historical experience, terms of existing contracts, managements view on trends in the gold mining industry and information from outside sources.
Our significant accounting policies are described in more detail in note 2 to the consolidated financial statements. This discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in Item 18. Financial Statements . 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 the consolidated financial statements, affect its more significant judgments and estimates used in the preparation of the 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 Groups 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 SAMREC, JORC 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 proven and probable reserves may affect the Groups financial results and financial position in a number of ways, including 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 Harmonys gold reserve figures are based on a number of
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assumptions, including mining and recovery factors, future cash costs of production and the price of gold. As a result, quantities of gold produced may differ from current estimates.
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 assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets 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 gold 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, 2011, apart from production cost and capitalized expenditure assumptions unique to each operation, included a long-term gold price of US$1,274 per ounce and South African and Australian dollar exchange rates of US$1 = R7.57 and A$1 = US$0.89, respectively. The term recoverable minerals refers to the estimated amount of gold that will be obtained from proven 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 managements 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.
As discussed above under Gold mineral reserves, various factors could impact our ability to achieve our forecasted production schedules from proven and probable reserves. Additionally, gold 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 proven 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.
During fiscal 2011, 2010 and 2009, we recorded impairments of US$37 million, US$43 million and US$71 million respectively, on property, plant and equipment, all from continuing operations. Material changes to any of these factors or assumptions discussed above could result in future impairment charges, particularly around future gold price assumptions. A 10% decrease in gold price at June 30, 2011 would have resulted in the additional impairments amounting to US$6.8 million at the Steyn 2 shaft in the Bambanani segment and US$27.6 million at Evander.
Carrying Value of Goodwill
We evaluate, on at least 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 assets 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 future, we may need to record impairment charges on goodwill not previously recorded.
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During fiscal 2011, we recorded an impairment of US$1.5 million on goodwill relating to St Helena (in Other Underground segment). As at June 30, 2011 substantially all of our goodwill related to the Phakisa, Tshepong and Bambanani cash generating units, for which there is no significant risk of failing the goodwill impairment test. No impairment was recorded during fiscal 2009 and 2010.
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 Groups 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 rehabilitation 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 programs to prevent and control pollution is charged against income as incurred.
Deferred taxes
The taxable income from gold mining at our South African operations is subject to a formula to determine the taxation expense. The tax rate calculated using the formula is capped to a maximum mining statutory rate of 43% or 34%, depending on whether or not the taxpayer has elected to be exempt from Secondary Taxation on Companies. See Item 5. Results of OperationsContinuing OperationsIncome and Mining Taxes . Taxable income is determined after the deduction of qualifying mining capital expenditure to the extent that it does not result in an assessed loss. Excess capital expenditure is carried forward as unredeemed capital and is eligible for deduction in future periods, taking the assessed loss criteria into account. Further to this, mines are ring-fenced and are treated separately for tax purposes, with deductions only being utilized against the mining income of the relevant ring-fenced mine.
In terms of IAS 12 Income Taxes, deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, and at our South African operations, such average tax rates are directly impacted by the profitability of the relevant ring-fenced mine. The deferred tax rate is therefore based on the current estimate of future profitability of an operation when temporary differences will reverse, based on tax rates and tax laws that have been enacted at balance sheet date.
The future profitability of each ring-fenced mine, in turn, is determined by reference to the life-of-mine plan for that operation. The life-of-mine plan is based on parameters such as the Groups long term view of the US$ gold price and the Rand/US$ exchange rate, as well as the reserves declared for the operation. As some of these parameters are based on market indicators, they differ from one year to the next. In addition, the reserves may also increase or decrease based on updated or new geological information.
We do not recognize a deferred tax asset when it is more likely than not that the asset will not be utilized. Assessing recoverability of deferred tax assets requires management to make significant estimates related to expectation of future taxable income. Estimates of future taxable income are based on forecasted cash flows from operations, reversals of deferred tax liabilities and the application of existing tax laws in each jurisdiction. To the extent that future taxable income differs significantly from estimates, our ability to realize the net deferred tax assets recorded at the balance date could be impacted. Additionally, future charges in tax laws in the jurisdictions in which we operate could limit our ability to obtain the future tax benefits represented by deferred tax assets recorded at the balance date.
Revenue
Substantially most of our revenues are derived from the sale of gold. As a result, our operating results are directly related to the price of gold. Historically, the price of gold has fluctuated widely. The gold price is affected by numerous factors over which we do not have control. See Item 3. Key Information Risk Factors The profitability of Harmonys operations, and the cash flows generated by those operations, are affected by changes in the price for gold. A fall in the gold price below our cash cost of production for any sustained period may lead to losses and require Harmony to curtail or suspend certain operations.
As a general rule, we sell our gold produced at market prices to obtain the maximum benefit from increases in the prevailing gold price and do not enter into hedging arrangements such as forward sales or derivatives that establish a price in advance for the sale of our future gold production.
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Significant changes in the price of gold over a sustained period of time may lead us to increase or decrease our production in the near-term.
Harmonys Realized Gold Price
The average gold price in U.S. dollars received by us has generally increased since January 1, 2002. In fiscal 2011, the average gold price in U.S. dollars received by us for continuing operations was US$1,370 per ounce. The market price for gold (and, accordingly, the price received by us) is affected by numerous factors over which we have no control. See Item 3. Key Information Risk Factors The profitability of Harmonys operations, and the cash flows generated by those operations, are affected by changes in the price for gold. A fall in the gold price below our cash cost of production for any sustained period may lead to losses and require Harmony to curtail or suspend certain operations.
The following table sets out the average, the high and the low London Bullion Market price of gold and our average U.S. dollar sales price during the past three fiscal years:
Fiscal Year
Ended
June 30, |
||||||||||||
2011 | 2010 | 2009 | ||||||||||
($/oz) | ||||||||||||
Average |
1,369 | 1,089 | 874 | |||||||||
High |
1,553 | 1,261 | 989 | |||||||||
Low |
1,157 | 908 | 713 | |||||||||
Harmonys average sales price continuing operations (1) |
1,370 | 1,092 | 867 |
(1) |
Our average sales price differs from the average gold price due to the timing of our sales of gold within each year. |
Costs
Our cash costs and expenses typically make up approximately 80% of our total costs. The remainder of our total costs consists primarily of exploration costs, employment termination costs, corporate and sundry expenditure, and depreciation and amortization. Our cash costs consist primarily of production costs exclusive of depreciation and amortization. Production costs are incurred on labor, equipment, consumables and utilities. Labor costs are the largest component and typically comprise approximately 52% of our production costs.
Our cash costs for continuing operations has increased from US$583 per ounce in fiscal 2009 to US$1,009 per ounce in fiscal 2011, mainly as a result of lower production volumes, the impact of increased labor and energy costs as well as inflationary pressures on supply contracts. In U.S. dollar terms, the appreciation of the Rand-U.S. dollar exchange rate added to these increases.
Our U.S. translated costs are very sensitive to the exchange rate of the Rand and other non-U.S. currencies to the U.S. dollar. See Item 5. Operating and Financial Review and Prospects Exchange Rates. Appreciation of the Rand and other non-U.S. currencies against the U.S. dollar increases working costs at our operations when those costs are translated into U.S. dollars. See Item 3. Key Information Risk Factors Foreign exchange fluctuations could have a material adverse effect on Harmonys operational results and financial conditions.
The average rate of the South African Rand appreciated approximately 8% against the U.S. dollar in fiscal 2011 compared to fiscal 2010. In the case of our International operations, the Australian dollar appreciated approximately 12%, while the Kina appreciated by 9% against the U.S. dollar in fiscal 2011.
Going forward, we expect a longer term decrease in the real cash costs per ounce, primarily as a result of the completion of the major development projects, being Doornkop, Kusasalethu, Phakisa and Hidden Valley. As these operations ramp up to full production in the next three or so years, the volumes mined will increase and reduce the unit cost per ounce. Management expects a reduction in overall real cash costs as a result of the closure of loss-making shafts such as Merriespruit 1 & 3 shafts. This will however be offset by the increased production costs from the development projects. Management will continue with thorough review of costs at all operations and ensure that costs are properly managed and within budget. However, it should be noted that there are risks beyond our control such as safety stoppages, which would result in production being negatively affected while certain costs would still be incurred. This could result in our costs not decreasing as expected. This is discussed in more detail in Item 3 Key Information Risk Factors 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 and The nature of our mining operations presents safety risks.
Reconciliation of Non-GAAP Measures
Total cash costs and total cash costs per ounce are non-GAAP measures.
Our cash costs consist primarily of production costs and are expensed as incurred. The cash costs are incurred to access ore to produce current mined reserves. Cash costs do not include capital development costs, which are incurred to allow access to the ore body for future mining operations and are capitalized and amortized when the relevant reserves are mined.
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Total cash costs include mine production costs, transport and refinery costs, applicable general and administrative costs, costs associated with movements in production inventories, ore stockpiles, as well as ongoing environmental rehabilitation costs as well as transfers to and from deferred stripping and costs associated with royalties. Ongoing employee termination cost is included, however employee termination costs associated with major restructuring and shaft closures are excluded. The costs associated with movements in production inventories are excluded from total cash costs. Gold ounces produced are used as the denominator in the total cash costs per ounce calculation.
Changes in cash costs per ounce are affected by operational performance, as well as changes in the currency exchange rate between the Rand and the U.S. dollar and, in the case of the International operations, the Australian dollar and Kina. Total cash costs and total cash costs per ounce are non-GAAP measures. Total cash costs and total cash costs per ounce should 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. In addition, the calculation of total cash costs and total cash costs per ounce may vary from company to company and may not be comparable to other similarly titled measures of other companies. However, we believe that cash costs per ounce is a useful indicator to investors and management of a mining companys performance as it provides (1) an indication of the cash generating capacities of our mining operations, (2) the trends in cash costs as the companys operations mature, (3) a measure of a companys performance, by comparison of cash costs per ounce to the spot price of gold and (4) an internal benchmark of performance to allow for comparison against other companies.
Continuing operations
The following is a reconciliation of total cash costs from continuing operations, as a non-GAAP measure, to the nearest comparable GAAP measure, cost of sale from continuing operations:
Fiscal year ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
(in $ millions, except per ounce amounts) | ||||||||||||
Total cost of sales from continuing operations under IFRS |
1,664 | 1,383 | 1,083 | |||||||||
Depreciation and amortization expense |
(254 | ) | (181 | ) | (139 | ) | ||||||
Rehabilitation costs |
(11 | ) | (4 | ) | (1 | ) | ||||||
Care and maintenance costs of restructured shafts |
(18 | ) | (8 | ) | (5 | ) | ||||||
Employment termination and restructuring costs |
(23 | ) | (27 | ) | (4 | ) | ||||||
Share-based payments |
(19 | ) | (20 | ) | (13 | ) | ||||||
Impairment of assets |
(39 | ) | (43 | ) | (71 | ) | ||||||
Other |
13 | 3 | | |||||||||
Gold inventory movement |
(18 | ) | | 2 | ||||||||
Total cash costs from continuing operations |
1,295 | 1,103 | 852 | |||||||||
Per ounce calculation: |
||||||||||||
Ounces produced (1) |
1,283,261 | 1,377,499 | 1,460,831 | |||||||||
Total cash cost per ounce from continuing operations |
1,009 | 801 | 583 |
(1) |
The ounces produced for fiscal 2011 exclude pre-production ounces from Steyn 2 and Target 3 (2010: Hidden Valley, Target 3 and Steyn 2) for the period in which these shafts were in development. The associated costs have been capitalized. |
Discontinued operations
The following is a reconciliation of total cash costs from discontinued operations, as a non-GAAP measure, to the nearest comparable GAAP measure, cost of sales from discontinued operations:
Fiscal year ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
(in $ millions, except per ounce amounts) | ||||||||||||
Total cost of sales from discontinued operations under IFRS |
| 1 | 71 | |||||||||
Depreciation and amortization expense |
| | (28 | ) | ||||||||
Rehabilitation costs |
| | (2 | ) | ||||||||
Care and maintenance costs of restructured shafts |
| (1 | ) | (1 | ) | |||||||
Reversal of impairment of assets |
| | 10 | |||||||||
Gold inventory movement |
| | 2 | |||||||||
Total cash costs from discontinued operations |
| | 52 | |||||||||
Per ounce calculation: |
| |||||||||||
Ounces produced |
| | 80,377 | |||||||||
Total cash cost per ounce from discontinued operations |
| | 644 |
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Total Harmony Continuing and discontinued operations
The following is a reconciliation of total cash costs, as a non-GAAP measure, to the nearest comparable GAAP measure, cost of sales under IFRS:
Fiscal year ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
(in $ millions, except per ounce amounts) | ||||||||||||
Total production costs under IFRS |
1,664 | 1,384 | 1,154 | |||||||||
Depreciation and amortization expense |
(254 | ) | (181 | ) | (167 | ) | ||||||
Rehabilitation costs |
(11 | ) | (4 | ) | (3 | ) | ||||||
Care and maintenance costs of restructured shafts |
(18 | ) | (9 | ) | (6 | ) | ||||||
Employment termination and restructuring costs |
(23 | ) | (27 | ) | (4 | ) | ||||||
Share-based payments |
(19 | ) | (20 | ) | (13 | ) | ||||||
Impairment of impairment of assets |
(39 | ) | (43 | ) | (61 | ) | ||||||
Other |
13 | 3 | | |||||||||
Gold inventory movement |
(18 | ) | | 4 | ||||||||
Total cash costs |
1,295 | 1,103 | 904 | |||||||||
Per ounce calculation: |
||||||||||||
Ounces produced |
1,283,261 | 1,377,499 | 1,541,208 | |||||||||
Total cash cost per ounce |
1,009 | 801 | 586 |
Within this disclosure document, our discussion and analysis is focused on the total cash costs measure.
While recognizing the importance of reducing cash costs, our chief focus is on controlling and, where possible, reducing total costs, including overhead costs. We aim to control total unit costs per ounce produced by maintaining our low total cost structure at our existing operations. We have been able to reduce total costs by implementing a management structure and philosophy that is focused on reducing management and administrative costs, implementing a mineral reserve management system that allows for greater grade control and acquiring higher grade reserves. See Item 4 . Information on the Company Business Strategy .
Exchange Rates
Our revenues are very sensitive to the exchange rate of the Rand and other non-U.S. currencies to the U.S. dollar.
Currently, the majority of our earnings are generated in South Africa and, as a result, most of our costs are incurred in Rand. Since gold is generally sold in U.S. dollars, most of our revenues are received in U.S. dollars. The average gold price received by us during fiscal 2011 increased US$278 per ounce to US$1,370 per ounce from US$1,092 per ounce during fiscal 2010. Appreciation of the Rand against the U.S. dollar increases our U.S. dollar working costs at our South African operations when those costs are translated into U.S. dollars, which serves to reduce operating margins and net income from our South African operations. Depreciation of the Rand against the U.S. dollar reduces these costs when they are translated into U.S. dollars, which serves to increase operating margins and net income from our South African operations. Accordingly, strength in the Rand generally results in poorer earnings for us if there is not a similar increase in the gold price. Our International operations are similarly affected.
The exchange rates obtained when converting U.S. dollars to Rand are determined by foreign exchange markets, over which we have no control. The conversion rate for balance sheet items as at June 30, 2011 is R6.78 per US$1.00, except for specific items within equity that are converted at the exchange rate prevailing on the date the transaction was entered into. This compares with a conversion rate of R7.63 per US$1.00 as at June 30, 2010, reflecting an appreciation of 11% of the Rand against the U.S. dollar when compared with June 30, 2010. Income statement items were converted at the average exchange rate for the fiscal 2011 (R6.99 per US$1.00), reflecting an appreciation of 8% of the Rand against the U.S. dollar when compared with fiscal 2010. The majority of our working costs are incurred in Rands and as a result this appreciation of the Rand against the U.S. dollar would increase our working costs when translated into U.S. dollars. Adding to this increase are increases in our labor costs as well as inflationary pressures on our consumable stores and energy cost, which served to decrease operating margins and net income reflected in our consolidated income statement for fiscal 2011. Depreciation of the Rand against the U.S. dollar would cause a decrease in our costs in U.S. dollar terms. Similarly, at our International operations, depreciation of the Australia dollar or Kina against the U.S. dollar would cause a decrease in our costs in U.S. dollar terms. See Item 3 . Key Information Risk Factors Foreign exchange fluctuations could have a material adverse effect on Harmonys operational results and financial condition .
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Inflation
Our operations have been materially affected by inflation. At the end of fiscal 2011, inflation in South Africa was 4.6%, although it reached 6.9% in fiscal 2009 before declining to 4.2% in fiscal 2010. However, working costs, and wages especially, have increased considerably over the past several years resulting in significant cost pressures for the mining industry. In addition, the effect on inflation of the increase in electricity tariffs of 25% during fiscal 2010 and 2011, together with another increase of approximately 25% in the next year, will have a negative effect on the profitability of our operations.
The inflation rate in PNG has remained relatively flat in recent years at around 7%, before ending at 9.6% in fiscal 2011. Higher food and energy prices contributed to this increase, as well as the historically low level of the Kina/A$ cross rate, which led to imported inflation. This increase in inflation could have an adverse effect on the profitability of the PNG operations.
Our profits and financial condition could be adversely affected if the cost inflation is not offset by a concurrent devaluation of the Rand and other non-U.S. currencies and/or an increase in the price of gold. See Item 3. Key Information Risk Factors Our operations may be negatively impacted by inflation .
South African Socio-Economic Environment
We are a South African company and the majority of our operations are in South Africa. As a result, we are subject to various economic, fiscal, monetary and political policies and factors that affect South African companies generally. See Item 3. Key Information Risk Factors The socio-economic framework in the regions in which Harmony operates may have an adverse effect on its operations and profits.
South African companies are subject to exchange control limitations. While exchange controls have been relaxed in recent years, South African companies remain subject to restrictions on their ability to deploy capital outside of the Southern African Common Monetary Area. See Item 10. Additional Information Exchange Controls.
Social and Labor Plans, or SLPs, have been developed for each of our South African operations. These SLPs are prepared in line with legislation governing the participation of HDSAs in mining assets.
We have been granted all of our mining licenses under the MPRDA. We have therefore already started to incur expenses relating to HDSA participation. We believe the biggest challenge will lie in maintaining these licenses, as we will have a responsibility in respect of human resource development, procurement and local economic development. We are unable, however, to provide a specific amount of what the estimated cost of compliance will be but we will continue to monitor these costs on an ongoing basis.
Electricity in South Africa
Supply
Historically, South Africa has enjoyed both low-cost electrical energy provision, and a stable supply. In early 2008, however, the national power utility Eskom experienced a major capacity shortage resulting in country-wide blackouts and reduced energy supply. The mining industry was severely affected for a period of five days in January 2008, and thereafter Eskom imposed limitations which continued to have an impact. We have devised new strategies so as to optimize our usage of 90% of our previous electricity supply allowed in terms of the Energy Conservation Scheme ( ECS ) and interim rules imposed by Eskom. All operations were allocated an ECS allocation in line with the Eskom allocation and equipment and management structures were put in place to monitor and manage real-time consumption. As a result, we have been able to reduce our energy consumption to 7% below the 90% allocation.
No further submissions or applications for additional power allocation were made in fiscal 2011, with the possible Kalgold expansion project being put on hold until further notice.
Government at national level intervened to develop an integrated resource plan in order to arrest the supply constraint situation and map a long-term plan to add much needed generation capacity to the grid according to projected electricity demand increase. Electricity supply has not been a constraint in fiscal 2011. The electricity supply constraint in South Africa will be alleviated by the commissioning of the first generators at the Medupi power station in 2012. Eskoms ability to execute the build program successfully
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and on time as well as the successful development and implementation of the integrated resource plan is critical. We will remain a voluntary participant in the ECS until such time that the national ECS becomes compulsory and Eskom relationships are maintained on this basis. The challenge for us is to improve production to the required levels without compromising the cost-saving initiatives achieved during fiscal 2008 and 2009.
Cost
The average 25% per annum tariff increase for the three year multi-year price determination period ( MYPD ), as approved by NERSA, contributes significantly to escalate the cost of production well above inflationary figures in the foreseeable future. Electricity price projections based on the approved tariffs and extrapolations indicate that electricity costs could be as high as 25% of the total cost of production within the next five years. During fiscal 2011, electricity costs comprised 15% or US$200.3 million of our total cost of production (2010: 13% or US$147 million). The dollar increase in electricity costs over the next five years is expected to be $398 million. This is determined by an average 25% increase in cost for the next five years, and also takes into account the increased production as the development projects ramp up to, and operate at, full production capacity. The dollar amount was determined using an exchange rate of $1/R6.78.
Spiraling electricity costs sparked renewed electrical consumption awareness where operations and service departments alike are actively analyzing all opportunities to improve energy efficiency and optimizing electricity usage.
Energy efficiency
In conjunction with Eskom-approved Electricity Supply Companies and reputable service providers, an accelerated program was initiated to investigate and quantify energy efficiency project opportunities and cost. Projects under investigation, some of which have been approved, have the potential to reduce electricity consumption during peak, standard and off-peak periods and improve the efficiency of use at various operations. The projected energy savings could amount to 566,345MWh or 15.4% of FY11fiscal 2011 consumption per annum and an average demand reduction of 89.6MW. Projects successfully implemented in fiscal 2011 amount to a saving of 31,460 MWh.
Applications for Eskom demand side management funding and alternative funding models, are being investigated for all energy efficiency project opportunities in order to reduce the capital requirements and financial burden to the operations to implement these projects. Thus far, Harmony has been successful with all the applications submitted.
Renewable energy
The Eskom supply constraint continues to raise interest in renewable energy. Various companies have obtained access to internationally-proven technology that was previously not readily available or affordable in South Africa. Investigations into solar heating and solar electricity generation initiatives are currently underway to identify viable projects that could potentially contribute towards our energy efficiency improvement and carbon footprint reduction.
Although progress has been made with the investigations, capital cost and subsequent cost of generation remain high and are not yet comparable to Eskom-projected tariffs. This has not deterred the willingness of industry to participate in such projects, a number of which are being considered currently. Technical development of renewable technologies is however accelerating, with international implementation contributing towards cost reduction. International investors with access to green funds are also interested in South African renewable projects. This latest development can open the door to enter into direct private power agreements at Eskom-comparable tariffs in the foreseeable future.
The impact on the operating cost as a result of discontinuation of Conops is expected to result in a decrease as the variable costs for the additional production will no longer be incurred.
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Results of Operations
Years Ended June 30, 2011 and 2010
Continuing Operations
Revenues
Revenue increased by 20%, from US$1,489 million in fiscal 2010 to US$1,781 million. This increase can primarily be attributed to the higher average price of gold received by us, US$1,370 per ounce in fiscal 2011 compared to US$1,092 per ounce in 2010. This was offset by a decrease in ounces sold.
Our gold sales decreased 5%, from 1,363,863 ounces (excluding the capitalized ounces from Target 3, Steyn 2 and Hidden Valley) in fiscal 2010 to 1,299,597 (excluding the capitalized ounces from Target 3 and Steyn 2) in 2011. The grade recovered decreased from 0.07 ounces per ton in fiscal 2010 to 0.06 ounces per ton in fiscal 2011.The decrease in ounces can be attributed to the operations in Evander and Virginia being placed on care and maintenance during fiscal 2010, as well as the closure of Merriespruit 1 in 2011. Offsetting this decrease was the inclusion of production from Target 3 for the fourth quarter of 2011, and increased production from Doornkop, Kusasalethu, Phakisa and Hidden Valley (included for the full year in 2011 as opposed to three months in 2010) as these operations ramp up to full production capacity.
At Bambanani ounces sold decreased by 27%, from 133,105 in fiscal 2010 to 96,549 in fiscal 2011. This was due to lower production volumes and a decrease in recovery grade from 0.227 ounces per ton in fiscal 2010 to 0.203 in fiscal 2011.
At Doornkop ounces sold increased by 30% from 62,275 in fiscal 2010 to 81,149 in fiscal 2011. This is due to the increase in production volumes as the South Reef continues to build up to full production capacity. This was offset by a slight decrease in recovery grade from 0.105 ounces per ton in fiscal 2010 to 0.102 in fiscal 2011. We expect the ounces sold to increase until the operation has reached full production capacity.
At Evander ounces sold decreased by 33%, from 111,499 in fiscal 2010 to 74,655 in fiscal 2011. This was primarily due to a decrease in production volumes as a result of the closure of Evander 2, 5 and 7 shafts during fiscal 2010.
At Joel ounces sold decreased by 27%, from 63,788 in fiscal 2010 to 46,618 in fiscal 2011. This was due to a decrease in production volumes, mainly as a result of the shaft stoppage, as well as a decrease in recovery grade from 0.133 ounces per ton in fiscal 2010 to 0.104 in fiscal 2011.
At Kusasalethu ounces sold increased by 10% from 168,244 in fiscal 2010 to 185,510 in fiscal 2011. This is due to the increase in production volumes as the new mine continues to build up to full production capacity. This was offset by a decrease in recovery grade from 0.153 ounces per ton in fiscal 2010 to 0.149 in fiscal 2011. We expect the ounces sold to increase until the operation has reached full production capacity.
At Phakisa ounces sold increased by 29% from 44,496 in fiscal 2010 to 57,227 in fiscal 2011. This was due to an increase in production volumes as the mine continues building up to full production in the next three to five years. Also contributing was an improvement in the recovery grade from 0.118 ounces per ton to 0.133 in fiscal 2011. We expect the ounces sold to increase until the operation has reached full production capacity.
At Virginia ounces sold decreased from 173,035 ounces in fiscal 2010 to 72,017 in fiscal 2011. This is due to the closure of Harmony 2, Brand 3 and Merriespruit 3 shafts during fiscal 2010 as well as the closure of Merriespruit 1 during fiscal 2011.
At Hidden Valley in PNG ounces sold in fiscal 2011 was 101,017, compared with 8,327 in fiscal 2010. Fiscal 2011 was the first full year that production has been recognized from the operation. We expect the ounces sold to increase until the operation has reached full production capacity.
Cost of sales
Cost of sales includes production costs, depreciation and amortization, impairment of assets and employment termination and restructuring costs.
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a) Production costs (cash costs)
The following table sets out our total ounces produced and weighted average cash costs per ounce for fiscal 2010 and fiscal 2009:
Year Ended June
30,
2011 |
Year Ended June
30,
2010 |
Percentage (increase)/decrease in Cash |
||||||||||||||||||
(oz) | ($/oz) | (oz) | ($/oz) | Costs per ounce | ||||||||||||||||
SOUTH AFRICA |
||||||||||||||||||||
Bambanani (1) |
95,198 | 1,247 | 131,946 | 723 | (72.5 | ) | ||||||||||||||
Doornkop (4) |
80,763 | 1,054 | 62,694 | 822 | (28.2 | ) | ||||||||||||||
Evander |
74,011 | 1,186 | 111,724 | 1,018 | (16.5 | ) | ||||||||||||||
Joel |
46,586 | 1,297 | 64,495 | 792 | (63.8 | ) | ||||||||||||||
Kusasalethu (4) |
180,334 | 1,008 | 175,029 | 857 | (17.6 | ) | ||||||||||||||
Masimong |
137,605 | 788 | 155,609 | 602 | (30.9 | ) | ||||||||||||||
Phakisa (4) |
56,649 | 1,200 | 44,079 | 953 | (25.9 | ) | ||||||||||||||
Target (2) |
110,919 | 1,011 | 110,020 | 783 | (29.1 | ) | ||||||||||||||
Tshepong |
207,950 | 810 | 216,986 | 677 | (19.6 | ) | ||||||||||||||
Virginia |
71,149 | 1,114 | 170,013 | 1,036 | (7.5 | ) | ||||||||||||||
Other surface |
121,851 | 1,027 | 119,954 | 680 | (51.0 | ) | ||||||||||||||
INTERNATIONAL |
||||||||||||||||||||
PNG (3) (4) |
1,283.2 | 993 | 14,950 | 1,003 | 1.0 | |||||||||||||||
Total continuing operations |
1,283,261 | 1,377,499 | ||||||||||||||||||
Weighted average |
1,009 | 801 | (26.0 | ) |
(1) |
Excludes 2,894 (2010: 1,061) pre-production ounces from President Steyn 2 shaft, which have not been included in the cash cost calculation as the shaft was in development. |
(2) |
Excludes 17,073 (2010: 3,762) pre-production ounces from Target 3, which have not been included in the cash cost calculation for the period that the shaft was in development. |
(3) |
Excludes 46,223 pre-production ounces for the period ended April 2010, which have not been included in the cash cost calculation for the period that the operation was in development. |
(4) |
Ounces produced are expected to increase until the operations have reached full production capacity. Cash cost per ounce is expected to decrease as the operations move closer to full capacity. See Costs for further detail. |
Our average cash costs from continuing operations increased by US$208 per ounce, or 26.0%, from US$801 per ounce in fiscal 2010 to U.S$1,009 per ounce in fiscal 2011. Cash costs per ounce vary with the working costs per ton (which is, in turn, affected by the number of tons processed) and grade of ore processed. Cash costs expressed in U.S. dollars per ounce also vary with fluctuations in the Rand-U.S. dollar exchange rate, because most of our working costs are incurred in Rand. The increase in cash cost expressed in U.S. dollars per ounce in fiscal 2011 was attributable primarily to the appreciation of the South African Rand against the U.S. dollar of 11%, as well as an increase in operating cost of 9% in Rand terms and a decrease in ounces produced of 9% when compared to fiscal 2010. Annual increases in labor cost of 7.5% as well as inflationary pressures on our consumable stores and energy costs of 18% and 36% respectively were the main contributors towards a higher operating cost. The closure of shafts during fiscal 2010 and 2011 was a major contributing factor to the decrease in ounces produced.
At Bambanani, the cash cost per ounce increased by 72%, from US$723 in fiscal 2010 to US$1,247, primarily due to a decrease in ounces produced as a result of mining ceasing in certain areas.
At Doornkop, the cash cost per ounce increased by 28%, from US$822 in fiscal 2010 to US$1,054, primarily due to an increase in production costs as the South Reef continues to build up to full capacity.
At Joel, the cash costs per ounce increased from US$792 in fiscal 2010 to US$1,297. This increase is due to the decrease in ounces as a result of the production lost during the shaft stoppage.
At Masimong, the cash costs per ounce increased by 31% from US$602 in fiscal 2010 to US$788, primarily due to the appreciation of the Rand against the US dollar.
At Phakisa, the cash costs per ounce increased by 26% from US$953 in fiscal 2010 to US$1,200, primarily due to the increase in production costs as the mine continues to build up in full capacity.
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b) Depreciation and amortization
Depreciation and amortization increased from US$181 million in fiscal 2010 to US$254 million, or 40%. In Rand terms, the increase was 29%. The increase in US dollar terms was partially due to the appreciation of the Rand against the US dollar in fiscal 2011. Also contributing was the increase of depreciation as tons mined increased at Hidden Valley in PNG, Doornkop and Phakisa as well as Target 3 being brought into production.
c) Employment termination and restructuring costs
The charge for employment termination and restructuring costs decreased from US$27 million in fiscal 2010 to US$23 million in fiscal 2011. The costs in fiscal 2011 relate primarily to the closure of shafts at Virginia and Evander operations as well as the voluntary retrenchment program after closing Merriespruit 1 shaft. The charge in fiscal 2010 relates primarily to the cost of placing the Evander and Virginia shafts on care and maintenance.
d) Impairment of assets
The impairment charge decreased from US$43 million in fiscal 2010 to US$39 million in 2011. The charge in 2011 primarily relates to Pres Steyn 1 and 2 shafts as well as St Helena as carrying values for the shafts exceed recoverable amounts. Management decided for safetys sake not to continue mining in some areas of Steyn 2, which resulted in a shorter life-of-mine and therefore a lower recoverable amount. Plans for any future development at Steyn 1 and St Helena have been put on hold indefinitely, triggering an impairment on these assets. The charge in 2010 primarily relates to the impairments at the Virginia and Evander operations when several shafts at these operations were placed on care and maintenance. These operations were approaching the end of their planned lives, with between two and four years left in marginal areas. The closures were due to it no longer being economically viable to continue operating these shafts as a result of the increase in costs such as labor and electricity.
Exploration expenditure
In fiscal 2011, exploration expenditure increased from US$29 million to US$51 million, primarily as a result of the increase in exploration activity in PNG.
Other expenses net
The charge for other expenses decreased from US$8 million to US$3 million in fiscal 2011. The charge for fiscal 2011 includes a loss of US$6 million for the foreign exchange losses realized on the liquidation of certain dormant Australian subsidiaries. The charge for fiscal 2010 includes a loss of US$12 million relating to the translation of intercompany loans within the Australian operations which do not form part of the net investment in foreign operations.
(Loss)/profit from associates
The loss from associates was US$7 million in fiscal 2011, compared to the profit from associates of US$7 million in fiscal 2010. In both years, the amount represents Harmonys 40 % share in Rand Uraniums profits and losses. Harmony ceased equity accounting the investment at the end of March 2011 when shareholders of Rand Uranium agreed to sell the company, and the investment in Rand Uranium was classified as held for sale.
Impairment of investment in associate
The amount for fiscal 2011 relates to the impairment of the carrying value of the investment in Rand Uranium when it was classified as held for sale and written down to its recoverable amount.
Net gain on financial instruments
The gain of US$20 million in fiscal 2011 relates primarily to the fair value gain recognized on the equity-linked deposits ( ELDs ) held by the environmental trusts, which are classified as fair value through profit or loss investments. The gain recognized on the ELDs in fiscal 2010 was US$5 million. Also contributing to the gain in fiscal 2010 is the realized portion of mark-to-market gains previously recognized in other reserves being reclassified to the income statement on the disposal of certain listed investments during the year.
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Gain on farm-in option
In 2011, we recognized a gain of US$38 million on the cancellation of the Freegold farm-in option. The Freegold option allowed the group to acquire a beneficial interest of up to 40% in any future mines established by Witwatersrand Consolidated Gold Resources Limited ( Wits Gold ) on certain properties in the Free State. On 5 November 2010 the group received 4,376,194 shares in Wits Gold, with a quoted market value of US$38 million, as consideration for the cancellation of the option.
Investment income
Investment income decreased from US$25 million in fiscal 2010 to US$20 million in fiscal 2011, reflecting lower cash balances and interest rates. Interest received from the investments held by the environmental trusts decreased by 80% as further changes were made to the profile of these investment portfolios from cash to market-linked equity instruments. Offsetting these decreases was an increase in interest received and interest refunds from the South African Revenue Service ( SARS ), amounting to US$7 million in fiscal 2011.
Finance costs
Finance costs increased from US$32 million in fiscal 2010 to US$41 million in fiscal 2011, primarily due to higher balances of borrowings when compared to fiscal 2010.
Income and Mining Taxes
South Africa. We pay taxes on mining income and non-mining income. The amount of our South African mining income tax is calculated on the basis of a formula that takes into account our total revenue and profits from, and capital expenditures for, mining operations in South Africa. 5% of total mining revenue is exempt from taxation in South Africa as a result of the application of the applicable gold mine formula. The amount of revenue subject to taxation is calculated by deducting qualifying capital expenditures from taxable mining income. The amount by which the taxable mining income exceeds 5% of mining revenue constitutes taxable mining income. We and our subsidiaries each make our own calculation of taxable income.
The tax rate applicable to the mining and non-mining income of a gold mining company depends on whether the company has elected to be exempt from the Secondary Tax on Companies ( STC ). STC is a tax on dividends declared and, at present, the STC tax rate is equal to 10%. To the extent we receive dividends, such dividends received are offset against the amount of dividends paid for purposes of calculating the amount subject to STC. In 1993, all existing South African gold mining companies had the option to elect to be exempt from STC. If the election was made, a higher tax rate would apply for both mining and non-mining taxable income. In 2009 and 2008, the tax rates for companies that elected the STC exemption were 43% for mining income and 35% for non-mining income, compared with 34% for mining income and 28% for non-mining income if the STC exemption election was not made. In 1993, the Harmony Company elected to pay the STC tax. All of our South African subsidiaries, excluding Avgold, elected the STC exemption.
Income and Mining Tax |
2011 | 2010 | ||||||
Effective tax rate expense |
(493 | %) | 183 | % |
The effective tax rate for fiscal 2011 was lower than the statutory tax rate of 43% for us and our subsidiaries as a whole. The lower effective tax rate results primarily from the credit for the Freegold unredeemed capital allowance. The South African Revenue Service ( SARS ) previously disallowed Freegolds post 1973 gold mine additional capital allowance claim, and also disallowed Freegolds application of mining ringfencing. SARS withdrew the additional capital allowance claim on 10 March 2011, conceding that the Freegold operations are entitled to claim this capital allowance. The inclusion of the capital allowance caused an increase in the deferred tax asset on the balance sheet and the resulting credit in the income statement.
Deferred tax rates for the South African operations are calculated based on estimates of the future profitability of each ring-fenced mine when temporary differences will reverse. The future profitability of each ring-fenced mine, in turn, is determined by reference to the life-of-mine plan for that operation, which is based on parameters such as the Groups long term view of the US$ gold price and the Rand/US$ exchange rate, as well as the reserves declared for the operation. As some of these parameters are based on market indicators, they differ from one year to the next. In addition, the reserves may also increase or decrease based on updated or new
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geological information. Changes in the future profitability if each ring-fenced mine impact the deferred tax rates used to recognize temporary differences at these operations. See Critical Accounting Policies and Estimates Deferred taxes. The decrease in deferred tax on temporary differences due to changes in estimated effective tax rates results primarily from a decrease in the effective deferred tax rate at Evander Gold Mines Limited. The deferred tax rate for Evander Gold Mines Limited decreased from 22.9% in fiscal 2010 to 11.5% in fiscal 2011 due to the decreased estimated profitability of the operation over the life-of-mine as a result of higher working cost and capital expenditure, as well as a reduction in expected kilograms produced and recovered grade.
Australia . Generally, Australia imposes tax on the worldwide income (including capital gains) of all of our Australian incorporated and tax resident entities. The current income tax rate for companies is 30%. Ongoing business, mining, exploration and rehabilitation costs incurred each year are fully deductible. The cost of plant and capital mining expenditure may be depreciated and deducted over its effective life.
Harmony Gold Australia Proprietary Limited and its wholly-owned Australian subsidiary companies are recognized and taxed as a single entity. Under the consolidations rules all of the Australian subsidiary companies are treated as divisions of the Head Company, Harmony Gold Australia. As a result inter-company transactions between group members are generally ignored for tax purposes. This allows the group to transfer assets between group members without any tax consequences, and deems all tax losses to have been incurred by the Head Company of the group.
Withholding tax is payable on dividends, interest and royalties paid by Australian residents to non-residents, which would include any dividends on the shares of our Australian subsidiaries that are paid to us. In the case of dividend payments to non-residents, a 30% withholding tax applies. However, where the recipient of the dividend is a resident of a country with which Australia has concluded a double taxation agreement, the rate of withholding tax is generally limited to 15% (or in the case of South Africa 5% where the dividend is paid to a company which controls at least 10% of the Australian dividend paying company). Where dividends are fully franked, no withholding tax applies as an effective credit is allowed against any withholding tax otherwise payable, regardless of whether a double taxation agreement is in place. However, due to the tax profile of Harmony Gold Australia it is not expected to have any franking credits in the foreseeable future.
Australia has a Controlled Foreign Company regime which effectively attributes certain types of passive income derived by offshore subsidiaries and taxes that income as if it had been derived in Australia under Australian tax rules.
PNG . The Hidden Valley Project in PNG commenced operations in fiscal 2010. We are also reviewing other potential projects and carrying out extensive exploration.
PNG mining projects are taxed on a project basis. Therefore each project is taxed as a separate entity, even though it may be one of a number of projects carried on by the same company. In certain circumstances there is an ability to transfer the tax benefit obtained through exploration expenditure between projects and wholly-owned companies. Tax losses are generally quarantined and cannot be transferred between projects.
PNG mining companies are taxed at a rate of tax of 30%. Mining operations in PNG are subject to a 2% royalty which is payable to the PNG Government.
Capital development and exploration expenditure incurred in PNG is capitalized for tax purposes and can be generally deducted at 25% per annum on a diminishing value basis against project income, with the deduction being limited to the lesser of 25% of the diminished value or the income of the project for the year.
PNG imposes dividend withholding tax of 10% on dividends paid by PNG mining operations to non-residents. Although PNG also imposes interest withholding tax on interest paid off-shore, the PNG Tax Act exempts interest paid to non-resident lenders from withholding tax where the PNG company is engaged in mining operations in PNG.
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Discontinued Operations
Costs
Costs decreased from US$4 million in fiscal 2010 to US$nil in fiscal 2011.
Profit on sale of investment in subsidiary
The profit on sale of investment in subsidiary in fiscal 2011 relates to the sale of Mount Magnet during July 2010. The total is net of the realization of accumulated foreign exchange losses of US$11.2 million.
Income and Mining Taxes
Australia . We pay taxes on mining income and non-mining income. For details, refer to the discussion under Income and Mining Taxes in the Continuing Operations section. In fiscal 2011 and 2010, the income tax rate for companies was 30%.
Continuing and discontinued operations
Net profit/(loss)
The net profit/(loss) increased from a net loss of US$24 million to a net profit of US$86 million. This is due to the factors discussed above.
Years Ended June 30, 2010 and 2009
Continuing Operations
Revenues
Revenue increased by US$212 million, or 17%, from US$1,277 million in fiscal 2009 to US$1,489 million in fiscal 2010. This increase can primarily be attributed to the higher average price of gold received by us, US$1,092 per ounce in fiscal 2010 compared to US$867 per ounce in 2009. This was offset by a decrease in ounces sold.
Our gold sales decreased 109,699 ounces, or 7%, from 1,473,562 in fiscal 2009 to 1,363,863 (excluding the capitalized ounces from Target 3, Steyn 2 and Hidden Valley) in fiscal 2010. The grade recovered was constant, at 0.07 ounces per ton in fiscal 2010 and 2009. The decrease in ounces can be attributed to the operations in Evander and Virginia being placed on care and maintenance.
At Bambanani ounces sold increased by 11%, from 119,665 in fiscal 2009 to 133,105 in fiscal 2010. This was due to a better recovery grade which increased from 0.213 in fiscal 2009 to 0.227 in fiscal 2010.
At Doornkop ounces sold increased by 44% from 43,211 in fiscal 2009 to 62,275 in fiscal 2010. This is due to the higher recovery grade, which improved from 0.070 in fiscal 2009 to 0.105 in fiscal 2010 due to the change in the mining mix by the increase in higher grade ore from the South Reef section.
At Evander ounces sold decreased by 43%, from 195,668 in fiscal 2009 to 111,499 in fiscal 2010. This was primarily due to a decrease in production volumes as a result of the closure of Evander 2, 5 and 7 shafts.
At Phakisa ounces sold increased from 21,477 in fiscal 2009 to 44,496 in fiscal 2010. This was due to an increase in production volumes as the various sections moved into production, building up to full production in the next three to five years.
At Target ounces sold increased by 22% from 87,611 in fiscal 2009 to 106,837 in fiscal 2010. This is due to higher production volumes of 857,000 tons in fiscal 2010, compared with 710,000 tons in fiscal 2009.
At Virginia ounces sold decreased to 173,035 ounces from 259,070 in fiscal 2009. This is due to the closure of Harmony 2, Brand 3 and Merriespruit 3 shafts during fiscal 2010.
At Hidden Valley in PNG ounces sold were 8,327 in fiscal 2010. This was the first year that production has been recognized from the operation.
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Cost of sales
Cost of sales includes production costs, depreciation and amortization, impairment of assets and employment termination and restructuring costs.
a) Production costs (cash costs)
The following table sets out our total ounces produced and weighted average cash costs per ounce for fiscal 2010 and fiscal 2009:
Year Ended June
30,
2010 |
Year Ended June
30,
2009 |
Percentage (Increase)/decrease in Cash |
||||||||||||||||||
(oz) | ($/oz) | (oz) | ($/oz) | Costs per ounce | ||||||||||||||||
SOUTH AFRICA |
||||||||||||||||||||
Bambanani (1) |
131,946 | 723 | 121,530 | 611 | (18.3 | ) | ||||||||||||||
Doornkop |
62,694 | 822 | 42,150 | 804 | (2.2 | ) | ||||||||||||||
Evander |
111,724 | 1,018 | 190,075 | 572 | (78.0 | ) | ||||||||||||||
Joel |
64,495 | 792 | 65,684 | 636 | (24.3 | ) | ||||||||||||||
Kusasalethu |
175,029 | 857 | 174,321 | 660 | (29.8 | ) | ||||||||||||||
Masimong |
155,609 | 602 | 154,034 | 476 | (26.5 | ) | ||||||||||||||
Phakisa |
44,079 | 953 | 22,216 | 555 | (71.7 | ) | ||||||||||||||
Target (2) |
110,020 | 783 | 87,225 | 645 | (21.4 | ) | ||||||||||||||
Tshepong |
216,986 | 677 | 230,778 | 483 | (40.2 | ) | ||||||||||||||
Virginia |
170,013 | 1,036 | 258,170 | 638 | (62.4 | ) | ||||||||||||||
Other surface |
119,954 | 680 | 114,648 | 521 | (30.5 | ) | ||||||||||||||
INTERNATIONAL |
||||||||||||||||||||
PNG (3) |
14,950 | 1,003 | | | (100 | ) | ||||||||||||||
Total continuing operations |
1,377,499 | 1,460,831 | ||||||||||||||||||
Weighted average |
801 | 583 | (37.4 | ) |
(1) |
Excludes 1,061 pre-production ounces from President Steyn 2 shaft, which have not been included in the cash cost calculation as the shaft was in development. |
(2) |
Excludes 3,762 pre-production ounces from Target 3, which have not been included in the cash cost calculation as the shaft was in development. |
(3) |
Excludes 46,223 pre-production ounces for the period ended April 2010, which have not been included in the cash cost calculation for the period that the operation was in development. |
Our average cash costs from continuing operations increased by US$218 per ounce, or 37.4%, from US$583 per ounce in fiscal 2009 to U.S$801 per ounce in fiscal 2010. Cash costs per ounce vary with the working costs per ton (which is, in turn, affected by the number of tons processed) and grade of ore processed. Cash costs expressed in U.S. dollars per ounce also vary with fluctuations in the Rand-U.S. dollar exchange rate, because most of our working costs are incurred in Rand. The increase in cash cost expressed in U.S. dollars per ounce in fiscal 2010 was attributable primarily to the appreciation of the South African Rand against the U.S. dollar of 16%, as well as an increase in operating cost of 9% in Rand terms and a decrease in ounces produced of 6% when compared to fiscal 2009. Annual increases in labor cost of 7.5% as well as inflationary pressures on our consumables and energy costs resulting in an increase in costs of 18% and 44% respectively, were the main contributors towards a higher operating cost.
At Evander, the cash costs per ounce increased by 78%, from US$572 in fiscal 2009 to US$1,018, primarily due to a decrease in ounces produced as a result of the closure of Evander 2, 5 and 7 shafts.
At Joel, the cash costs per ounce increased from US$636 in fiscal 2009 to US$792. This increase is due to the increase in labor and energy costs as well as additional costs related to the development of level 129.
At Kusasalethu the cash costs per ounce increased by 30% from US$660 in fiscal 2009 to US$857 in fiscal 2010. This increase is primarily due to the increase in labor and utility costs as well as inflationary pressures on supply costs.
At Masimong, the cash costs per ounce increased by 27% from US$476 in fiscal 2009 to US$602 in fiscal 2010, primarily due to the higher labor and electricity costs, as well as the appreciation of the Rand against the US dollar.
At Phakisa, the cash costs per ounce increased from US$555 to US$953, or 72%, in fiscal 2010. This was due to the increase in tons mined as a result of the planned ramp-up in production.
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At Target, the cash costs per ounce increased from US$645 in fiscal 2009 to US$783, or by 21%. This increase was due to higher production volumes, an increase in employees at the operation as well as inflationary cost increases.
At Tshepong, the cash costs per ounce increased from US$483 in fiscal 2009 to US$677, or 40%, in fiscal 2010. This was due to the decrease in ounces produced in fiscal 2010, increases in labor and electricity costs as well as inflationary increases in material and supply costs.
At Virginia, the cash costs per ounce increased from US$638 to US$1,036 in fiscal 2010, primarily due to the decrease in ounces produced in fiscal 2010, increases in labor and electricity costs, as well as other inflationary cost increases.
At Hidden Valley in PNG, the cash costs per ounce were US$1,003 in fiscal 2010. The operation has started ramping up and this is the first year that its production has been included.
b) Depreciation and amortization
Depreciation and amortization increased from US$139 million in fiscal 2009 to US$181 million in fiscal 2010, or 30%. In Rand terms, the increase was 9.7%. The increase in US dollar terms was partially due to the appreciation of the Rand against the US dollar in fiscal 2010. Also contributing to the increase was the commencement of depreciation at Hidden Valley in PNG, Doornkop and Phakisa as these operations were brought into production.
c) Employment termination and restructuring costs
The charge for employment termination and restructuring costs increased from US$4 million in fiscal 2009 to US$27 million in fiscal 2010. The charge in fiscal 2010 relates primarily to the cost of placing the Evander and Virginia shafts on care and maintenance. The charge for fiscal 2009 relates to the voluntary retrenchment process that was commenced in December 2007 when management decided to de-centralize certain of the central services departments and the cessation of continuous operations at several of the shafts.
d) Impairment of assets
The impairment charge decreased from US$71 million in fiscal 2009 to US$43 million in fiscal 2010. The charge in 2010 primarily relates to the impairments at the Virginia and Evander operations when several shafts at these operations were placed on care and maintenance. These operations were approaching the end of their planned lives, with between two and four years left in marginal areas. The closures were due to it no longer being economically viable to continue operating these shafts as a result of the increase in costs such as labor and electricity. The charge in fiscal 2009 relates to impairments at the Virginia, Evander and Target operations amounting to US$71 million. These impairments resulted primarily from a decrease in the expected life-of-mine of these operations, as well as an increase in the costs to operate the shafts. At Target and Evander, additional capital expenditure has been included in the revised life-of-mine plans in order to access reserve ounces in areas where geological anomalies have been discovered. These changes resulted in the carrying amount exceeding the recoverable amount.
e) Share based compensation
The charge for share based compensation increased from US$13 million in fiscal 2009 to US$20 million in fiscal 2010. This increase is primarily attributable to the appreciation of the Rand against the US dollar, as well as the granting of additional share awards in November 2009.
Corporate, administration and other expenditure
The charge increased from US$36 million in fiscal 2009 to US$50 million in fiscal 2010. The increase in US dollar terms was partially due to the appreciation of the Rand and Australian dollar against the US dollar.
Corporate social investment expenditure
In fiscal 2010, the charge for corporate social investment expenditure increased from US$4 million in fiscal 2009 to US$11 million. This increase is primary due to the increase of costs related to meeting our obligations in terms of our social and labor plans, or SLPs.
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Profit on sale of property, plant and equipment
The profit decreased from US$114 million in fiscal 2009 to US$14 million in fiscal 2010. The profit for fiscal 2009 included the sale of 50% of our interest in the PNG gold and copper assets to Newcrest, which contributed US$112 million to the total. The profit for fiscal 2010 includes the sale of the Jeanette prospecting rights to Taung Gold Limited for a total consideration and profit of US$10 million, and the sale of royalty rights in Australia to Regis Resources Limited for a total consideration and profit of US$4 million.
Other expenses net
The charge for other expenses increased to US$8 million, compared with a charge of US$3 million in fiscal 2009. The charge for fiscal 2010 includes a loss of US$12 million relating to the translation of intercompany loans within the Australian operations which do not form part of the net investment in foreign operations. Included in the total for fiscal 2009 is a charge of US$22 million recognized in the income statement for the foreign exchange movements after the de-designation of loans previously designated as forming part of the net investment in foreign operations. Also included in the total for fiscal 2009 is an amount of US$53 million relating to the reclassification to the income statement, following the partial repayment of the loans, of a portion of the accumulated gains recorded in equity that arose while these loans were considered to form part of the net investment in the foreign operations. During fiscal 2010, bad debts written off increased from US$3 million in fiscal 2009 to US$4 million. A credit of US$2 million was recorded against the provision for bad debts in fiscal 2010. This compared favorably with the provision for bad debts of US$11 million in fiscal 2009.
Profit from associates
The profit from associates was US$7 million in fiscal 2010, compared to US$1 million in fiscal 2009. The increase relates primarily to inclusion of a full year of profits from Rand Uranium in fiscal 2010, compared to the seven months in fiscal 2009 since acquisition on November 21, 2008. Also contributing to the increase was the fact that no losses where included for Pamodzi in fiscal 2010, compared to losses amounting to US$4 million in fiscal 2009.
Impairment of investment in associate
The charge in fiscal 2009 for the impairment of investment in associate relates primarily to the impairment of the investment in Pamodzi. When Pamodzi was placed into liquidation and the trading of its shares on the JSE suspended during fiscal 2009, the investment was fully impaired.
Loss on sale of investment in subsidiary
The amount in fiscal 2010 relates to the sale of the Australian subsidiary, Big Bell, after taking the reclassification of foreign exchange losses recorded in other reserves into account.
Net gain/(loss) on financial instruments
The gain of US$5 million in fiscal 2010 relates primarily to the fair value gains on the equity-linked deposits held by the environmental trusts, which are classified as fair value through profit or loss investments. Also contributing to the gain is the realized portion of mark-to-market gains previously recognized in other reserves being reclassified to the income statement on the disposal of certain listed investments during the year. The loss in fiscal 2009 relates primarily to the impairment of the investment in Dioro of US$11 million reclassified from other reserves to the income statement when the investment was considered to be permanently impaired at December 31, 2008. This was offset by the subsequent gain recognized in the income statement on the disposal of the investment in April 2009.
Investment income
Investment income decreased from US$49 million in fiscal 2009 to US$25 million in fiscal 2010, primarily due to the reduction in interest received on cash balances and loans receivables, where the balances were lower, throughout the year. Interest received from the investments held by the environmental trusts was also lower as the profile of these investment portfolios were diversified from cash only to include equity-linked deposits.
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Finance costs
Finance costs increased from US$24 million in fiscal 2009 to US$32 million in fiscal 2010. This was due primarily to the decrease in interest capitalized to qualifying assets, from US$31 million in fiscal 2009 to US$nil in fiscal 2010, as well as the increase of US$6 million in the time value of money and inflation component of rehabilitation costs from fiscal 2009.
Income and Mining Taxes
South Africa. We pay taxes on mining income and non-mining income. The amount of our South African mining income tax is calculated on the basis of a formula that takes into account our total revenue and profits from, and capital expenditures for, mining operations in South Africa. 5% of total mining revenue is exempt from taxation in South Africa as a result of the application of the applicable gold mine formula. The amount of revenue subject to taxation is calculated by deducting qualifying capital expenditures from taxable mining income. The amount by which the taxable mining income exceeds 5% of mining revenue constitutes taxable mining income. We and our subsidiaries each make our own calculation of taxable income.
The tax rate applicable to the mining and non-mining income of a gold mining company depends on whether the company has elected to be exempt from the Secondary Tax on Companies ( STC ). STC is a tax on dividends declared and, at present, the STC tax rate is equal to 10% (previously 12.5%). To the extent we receive dividends, such dividends received are offset against the amount of dividends paid for purposes of calculating the amount subject to STC. In 1993, all existing South African gold mining companies had the option to elect to be exempt from STC. If the election was made, a higher tax rate would apply for both mining and non-mining taxable income. In 2009 and 2008, the tax rates for companies that elected the STC exemption were 43% for mining income and 35% for non-mining income, compared with 34% for mining income and 28% for non-mining income if the STC exemption election was not made. In 1993, the Harmony Company elected to pay the STC tax. All of our South African subsidiaries, excluding Avgold, elected the STC exemption.
Income and Mining Tax |
2010 | 2009 | ||||||
Effective tax rate expense |
183 | % | 9 | % |
The effective tax rate for fiscal 2010 was higher than the statutory tax rate of 43% for us and our subsidiaries as a whole. The higher effective tax rate results primarily from non-deductible expenses and changes in the rates used to provide deferred tax at our South African operations, offset by the additional capital allowance we receive at our Avgold operation (effectively resulting in no tax payable at this operation).
Deferred tax rates for the South African operations are calculated based on estimates of the future profitability of each ring-fenced mine when temporary differences will reverse. The future profitability of each ring-fenced mine, in turn, is determined by reference to the life-of-mine plan for that operation, which is based on parameters such as the Groups long term view of the US$ gold price and the Rand/US$ exchange rate, as well as the reserves declared for the operation. As some of these parameters are based on market indicators, they differ from one year to the next. In addition, the reserves may also increase or decrease based on updated or new geological information. Changes in the future profitability if each ring-fenced mine impact the deferred tax rates used to recognize temporary differences at these operations. See Critical Accounting Policies and Estimates Deferred taxes. The increase in deferred tax on temporary differences due to changes in estimated effective tax rates results primarily from increases in the effective deferred tax rate at Evander Gold Mines Limited and Harmony Gold Mining Company Limited. The deferred tax rate for Evander Gold Mines Limited increased from 6.9% in fiscal 2009 to 22.9% in fiscal 2010 due to the increased estimated profitability of the operation over the life-of-mine as a result of the closure of loss-making shafts, as well as an increase in the gold price and a planned decrease in capital expenditure. Similarly, Harmony Gold Mining Company Limiteds deferred tax rate increased from 17.1% to 23.1 mainly as a result of the closure of loss-making shafts.
Australia . Generally, Australia imposes tax on the worldwide income (including capital gains) of all of our Australian incorporated and tax resident entities. The current income tax rate for companies is 30%. Ongoing business, mining, exploration and rehabilitation costs incurred each year are fully deductible. The cost of plant and capital mining expenditure may be depreciated and deducted over its effective life.
Harmony Gold Australia Proprietary Limited and its wholly-owned Australian subsidiary companies are recognized and taxed as a single entity. Under the consolidations rules all of the Australian subsidiary companies are treated as divisions of the Head Company,
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Harmony Gold Australia. As a result inter-company transactions between group members are generally ignored for tax purposes. This allows the group to transfer assets between group members without any tax consequences, and deems all tax losses to have been incurred by the Head Company of the group.
Withholding tax is payable on dividends, interest and royalties paid by Australian residents to non-residents, which would include any dividends on the shares of our Australian subsidiaries that are paid to us. In the case of dividend payments to non-residents, a 30% withholding tax applies. However, where the recipient of the dividend is a resident of a country with which Australia has concluded a double taxation agreement, the rate of withholding tax is generally limited to 15% (or in the case of South Africa 5% where the dividend is paid to a company which controls at least 10% of the Australian dividend paying company). Where dividends are fully franked, no withholding tax applies as an effective credit is allowed against any withholding tax otherwise payable, regardless of whether a double taxation agreement is in place. However, due to the tax profile of Harmony Gold Australia it is not expected to have any franking credits in the foreseeable future.
Australia has a Controlled Foreign Company regime which effectively attributes certain types of passive income derived by offshore subsidiaries and taxes that income as if it had been derived in Australia under Australian tax rules.
PNG . The Hidden Valley Project in PNG commenced operations in fiscal 2010. We are also reviewing other potential projects and carrying out extensive exploration.
PNG mining projects are taxed on a project basis. Therefore each project is taxed as a separate entity, even though it may be one of a number of projects carried on by the same company. In certain circumstances there is an ability to transfer the tax benefit obtained through exploration expenditure between projects and wholly-owned companies. Tax losses are generally quarantined and cannot be transferred between projects.
PNG mining companies are taxed at a rate of tax of 30%. Mining operations in PNG are subject to a 2% royalty which is payable to the PNG Government.
Capital development and exploration expenditure incurred in PNG is capitalized for tax purposes and can be generally deducted at 25% per annum on a diminishing value basis against project income, with the deduction being limited to the lesser of 25% of the diminished value or the income of the project for the year.
PNG imposes dividend withholding tax of 10% on dividends paid by PNG mining operations to non-residents. Although PNG also imposes interest withholding tax on interest paid off-shore, the PNG Tax Act exempts interest paid to non-resident lenders from withholding tax where the PNG company is engaged in mining operations in PNG.
Discontinued Operations
Revenues
Revenues decreased from US$69 million in fiscal 2009 to US$nil in fiscal 2010. This was due to the fact that the Cooke operation was sold in November 2008 and that Mount Magnet was placed on care and maintenance in December 2007.
Costs
Costs decreased from US$103 million in fiscal 2009 to US$4 million in fiscal 2010. This was due to fact that the sale of the Cooke operation was recognized in November 2008.
Reversal of impairment
The gain recognized in fiscal 2009 relates to the reversal of impairment when Mount Magnet was re-measured in terms of IFRS 5 on no longer being classified as held for sale.
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Profit on sale of shares
The profit on shares in fiscal 2009 relates to the sale of the Cooke operations in November 2008.
Income and Mining Taxes
South Africa . We pay taxes on mining income and non-mining income. For details, refer to the discussion under Income and Mining Taxes in the Continuing Operations section.
In 2010 and 2009, the tax rates for companies that elected the STC exemption were 43% for mining income and 35% for non-mining income, compared with 34% for mining income and 28% for non-mining income if the STC exemption election was not made.
Australia . We pay taxes on mining income and non-mining income. For details, refer to the discussion under Income and Mining Taxes in the Continuing Operations section. In fiscal 2010 and 2009, the income tax rate for companies was 30%.
Continuing and discontinued operations
Net (loss)/profit
The net (loss)/profit decreased from a net profit of US$311 million in fiscal 2009 to a net loss of US$24 million. This is due to the factors discussed above.
Recent Accounting Pronouncements
Harmonys accounting policies are described in note 2 to the consolidated financial statements Accounting policies. Recently adopted accounting policies, as well as recent accounting pronouncement with the potential for impact on the consolidated financial statements, are described in note 2.1.
Liquidity and Capital Resources
We centrally manage our funding and treasury policies. There are no legal or economic restrictions on the ability of our subsidiaries to transfer funds to us. We have generally funded our operations and our short-term and long-term liquidity requirements from (i) cash generated from operations, (ii) credit facilities and other borrowings and (iii) sales of equity securities.
Cash Resources
Fiscal year ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Continuing operations |
||||||||||||
Operating cash flows |
340 | 216 | 246 | |||||||||
Investing cash flows |
(411 | ) | (453 | ) | (108 | ) | ||||||
Financing cash flows |
29 | 85 | (233 | ) | ||||||||
Foreign exchange differences |
13 | 6 | 8 | |||||||||
Total cash flows from continuing operations |
(29 | ) | (146 | ) | (87 | ) | ||||||
Discontinued operation |
||||||||||||
Operating cash flows |
| (6 | ) | 8 | ||||||||
Investing cash flows |
30 | | 202 | |||||||||
Financing cash flows |
| | | |||||||||
Foreign exchange differences |
| | 77 | |||||||||
Total cash flows from discontinued operations |
30 | (6 | ) | 287 |
Operations
Net cash provided by operations is primarily affected by the quantities of gold sold, the gold price, the Rand-U.S. dollar exchange rate, cash costs per ounce and, in the case of the International operations, the Australian dollar and Kina versus U.S. dollar exchange rate. A significant adverse change in one or more of these parameters could materially reduce cash provided by operations as a source of liquidity.
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Net cash generated by operations was US$340 million in fiscal 2011, as compared with US$210 million in fiscal 2010. The increase is attributed primarily to the increase in the revenue as a result of the higher gold price received. Also contributing to the year-on-year increase was the reduction in taxation paid by US$10 million and the insurance refund from unwinding the previous self-insurance scheme. This was offset by the increase in production costs due to inflationary pressures on labor, materials and electricity as well as the increase in exploration expenditure of US$22 million. In addition, the reduction of interest received contributed to a decrease of US$5 million.
Investing
Net cash utilized by investing activities was US$381 million in fiscal 2011, as compared with net cash generated of US$453 million in fiscal 2010. Proceeds from the disposal of assets were US$33 million in fiscal 2011, compared to US$19 million in 2010. US$15 million was received in April 2011 as a deposit for the sale of Evander 6 and Twistdraai to Taung Gold Limited. In fiscal 2010, the Pamodzi FS assets were acquired at a cost of US$36 million.
Financing
Financing activities generated US$29 million in fiscal 2011, compared with US$85 million in fiscal 2010. In fiscal 2010, the group entered into a loan facility with Nedbank and drew down US$160 million during the year. In fiscal 2011, a further US$130 million was drawn down from Nedbank. Loan repayments in fiscal 2011 amounted to US$81 million (2010: US$57 million).
Outstanding Credit Facilities and Other Borrowings
On December 11, 2009, we entered into a loan facility with Nedbank Limited ( Nedbank ), comprising a term facility of R900 million (US$119 million) and a revolving credit facility of R600 million (US$80 million). Interest accrues on a day to day basis over the term of the loan at a variable interest rate, equal to 3 month Johannesburg Interbank Agreed Rate ( JIBAR ) plus 3.5%. Interest is repayable quarterly. The term facility is repayable bi-annually in equal instalments of R90 million (US$12 million) over five years. The revolving credit facility is repayable after three years. The term facility was fully drawn during fiscal 2010 and R300 million (US$41 million) was drawn on the revolving credit facility on April 15, 2010.
On November 30, 2010, we entered into an additional loan facility with Nedbank, comprising a term loan of R500 million (US$70 million) and a revolving credit facility of R250 million (US$35 million). Interest terms are identical to the original facility. The repayment terms of the original revolving credit facility were amended to coincide with the repayment of the new revolving credit facility. The new term facility was fully drawn during fiscal 2011 and R400 million (US$57 million) was drawn down from the two revolving credit facilities. We repaid R250 million (US$37 million) of the revolving credit facilities by June 30, 2011. At June 30, 2011, US$59 million of the revolving credit facility was undrawn.
We need to comply with certain debt covenants, including that the interest cover ratios shall not be less than two times and the current ratio not less than one time. We complied with the relevant covenants during fiscal 2011.
During July 2007, Morobe Consolidated Goldfields entered into a finance lease agreement with Westpac Bank for the purchase of mining fleet to be used on the Hidden Valley project amounting to US$37 million. Interest is charged at U.S. LIBOR plus 1.25% per annum. Interest is accrued monthly and lease instalments are repayable quarterly terminating June 30, 2013. The mining fleet financed is used as collateral for these loans. The balance at June 30, 2011 was US$7.5 million.
Recently Retired Credit Facilities and Other Borrowings
During October 2010 and December 2010, Morobe Consolidated Goldfields entered into two US dollar loans with Pacific Premium Funding (Proprietary) Limited to finance insurance payments. The loan totaling US$3.6 million were repaid during May 2011, at an average interest rate of 3.55%.
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Contractual Obligations and Commercial Commitments
Our contractual obligations and commercial commitments consist primarily of credit facilities, post-retirement healthcare and environmental obligations.
Contractual Obligations on the Balance Sheet
The following table summarizes our contractual obligations as of June 30, 2011:
Payments Due by Period | ||||||||||||||||||||
Total
($million) |
Less Than
12 Months July 1, 2011 to June 30, 2012 ($million) |
12-36
Months July 1, 2012 to June 30, 2014 ($million) |
36-60
Months July 1, 2014 To June 30, 2016 ($million) |
After 60
Months Subsequent June 30, 2016 ($million) |
||||||||||||||||
Nedbank facility (1) |
241 | 65 | 152 | 24 | | |||||||||||||||
Westpac Bank (1) |
7 | 4 | 3 | | | |||||||||||||||
Post-retirement health care (2) |
25 | | | | 25 | |||||||||||||||
Environmental obligations (3) |
291 | | | | 291 | |||||||||||||||
Total contractual obligations |
564 | 69 | 155 | 24 | 316 |
(1) |
See Item 5. Operating and Financial Review and Prospects Liquidity and Capital Resources Credit Facilities and Other Borrowings Outstanding Credit Facilities and Other Borrowings . |
(2) |
This liability relates to post-retirement medical benefits of Freegold employees at the time of acquisition as well as for former employees who retired prior to December 31, 1996 and is based on actuarial valuations conducted during fiscal 2011. |
(3) |
We make provision for environmental rehabilitation costs and related liabilities based on managements interpretations of current environmental and regulatory requirements. See Item 5. Operating and Financial Review and Prospects Critical Accounting Policies. |
Contractual Obligations off the Balance Sheet
Our obligation with regards to operating leases is US$16 million and relates to the International office in Brisbane as well as expenditure on mineral tenements. Of this amount, US$8 million is due within 12 months.
Capital Expenditure
The following table sets forth our authorized capital expenditure as of June 30, 2011:
$million | ||||
Authorized and contracted for (1) |
28 | |||
Authorized but not yet contracted for |
222 | |||
Total |
250 |
(1) |
Including our share of the PNG joint ventures capital expenditure of US$6 million. |
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Commercial Commitments
The following table provides details regarding our commercial commitments as of June 30, 2011:
Amount of Commitments Expiring by Period | ||||||||||||||||||||
Total
($million) |
Less Than
July 1, 2011
2012
|
12-36 Months
July 1, 2012
2014
|
36-60 Months
July 1, 2014
2016
|
After 60 Months Subsequent to June 30,
2016
|
||||||||||||||||
Guarantees (1) |
59 | | | | 59 | |||||||||||||||
Capital commitments (2) |
28 | 28 | | | | |||||||||||||||
Total commitments expiring by period |
87 | 28 | | | 59 |
(1) |
Amount of Commitments Expiring by Period. |
(2) |
Capital commitments consist only of amounts committed to external suppliers, although a total of US$222 million has been approved by the board for capital expenditures. |
Trend Information
Information on recent trends in our operations is discussed in Item 4 . Information on the Company Business Strategy and Results of Operations above.
Working Capital and Anticipated Financing Needs
The board believes that our working capital resources, by way of cash generated from operations, borrowings and existing cash on hand, are sufficient to meet our present working capital needs. Several of the growth projects will require additional capital expenditure over the next two to three years to complete construction, most of which will be funded from cash generated by operations and the balance by debt. For more information on our planned capital expenditures, see Capital Expenditures above and Item 4. Information on the Company Business Harmonys Mining Operations. We may, in the future, explore debt and/or equity financing in connection with our acquisition strategy. See Item 3. Key Information Risk Factors To maintain gold production beyond the expected lives of Harmonys existing mines or to increase production materially above projected levels, Harmony will need to access additional reserves through exploration or discovery. Our board believes that we will have access to adequate financing on reasonable terms given our cash-based operations and modest leverage. Our ability to generate cash from operations could, however, be materially adversely affected by increases in cash costs, decreases in production, decreases in the price of gold and appreciation of the Rand and other non-US$ currencies against the U.S. dollar. Future financing arrangements would also be subject to the limits on the boards borrowing powers described in Item 10. Additional Information Memorandum and Articles of Association Directors Borrowing Powers. In addition, South African companies are subject to significant exchange control limitations, which may impair our ability to fund overseas operations or guarantee credit facilities entered into by overseas subsidiaries. See Item 10. Additional Information Exchange Controls.
Other Financial Information
Export Sales
In fiscal years 2009, 2010 and 2011, 100% of our gold produced in South Africa was refined by Rand Refinery, which is owned by a consortium of the major gold producers in South Africa. All of our gold produced in Australia and PNG in those periods was sold to The Perth Mint Australia, a Perth-based refinery.
Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management
The composition of Harmonys board of directors is as follows:
Name | Date of appointment | |
Patrice Motsepe (1) | September 23, 2003 | |
Frank Abbott (1) | October 1, 1994 | |
Graham Briggs | August 6, 2007 | |
Joaquim Chissano (1) | April 20, 2005 | |
Fikile De Buck (1) (2)(3) | March 30, 2006 | |
Ken Dicks (1) (2) | February 13, 2008 | |
Dr Simo Lushaba (1) (2) | October 18, 2002 | |
Cathie Markus (1) (2) | May 31, 2007 | |
Harry Ephraim Mashego | February 24, 2010 | |
Hannes Meyer | November 1, 2009 | |
Modise Motloba (1) (2) | July 30, 2004 | |
Mavuso Msimang (1) (2) | March 26, 2011 | |
David Noko (1) (2) | March 26, 2011 | |
Cedric Savage (1) (2) | September 23, 2003 | |
John Wetton (1) (2) | July 1, 2011 | |
André Wilkens (1) | August 7, 2007 |
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(1) | Non-executive directors |
(2) | Independent |
(3) | Lead independent director |
The members of the board, their principal past affiliations, information on their business experiences and principal outside activities and selected other information can be found in exhibit 15.1.
Board Practices
Our Articles of Association provide that the board must consist of no less than four and no more than twenty directors at any time. At October 17, 2011, the board consists of 16 directors.
Our Articles of Association provide that the longest serving one-third of directors retire from office at each annual general meeting. Retiring directors normally make themselves available for re-election and are re-elected at the annual general meeting at which they retire. Members of our senior management who are also directors retire as directors in terms of the Articles of Association, but their service as officers is regulated by standard industry employment agreements. According to the Articles of Association, the board meets not less than quarterly.
Details of directors service contracts are described under Compensation of Directors and Senior Management and Directors Terms of Employment, below. We also describe significant ways in which our corporate governance practices differ from practices followed by U.S. companies listed on the NYSE on our website under Corporate Governance.
In order to ensure good corporate governance, the board has formed an Audit Committee, a Remuneration Committee, a Nomination Committee, an Investment Committee, an Empowerment Committee, a Sustainable Development Committee (subsequent to year-end, this was replaced by a Social and Ethics Committee in compliance with the new Companies Act) and a Technical Committee. All of the board committees are comprised of a majority of independent, non-executive directors.
Executive Management Committee
Our Executive Committee comprises our executive directors and selected senior officers, each with his or her own area of responsibility. The Executive Committee consists of 13 executives who meet on a weekly basis and more often if required. See exhibit 15.1 for their abridged curricula vitae.
The composition of the Executive Management Committee (with areas of responsibility indicated) is as follows:
Graham Briggs | Chief Executive Officer | |
Hannes Meyer | Financial Director | |
Harry Ephraim Mashego | Executive Director: Government Relations | |
Bob Atkinson | Africa New Business | |
Jaco Boshoff (1) | Reserves and Resources and Projects | |
Alwyn Pretorius (1) | Chief Operating Officer North Operations South Africa | |
Tom Smith | Chief Operating Officer South Operations South Africa | |
Marian van der Walt | Corporate and Investor Relations | |
Johannes van Heerden | Chief Executive Officer: South East Asia | |
Abre van Vuuren | Risk Management and Health Services | |
Melanie Naidoo-Vermaak | Environment | |
Matthews Dikane | Legal, Governance and Ethics | |
Anton Buthelezi (2) | Human Resources |
(1) | Subsequent to June 30, 2011, Alwyn was appointed as executive: health and safety and Jaco took over as acting COO: North |
(2) | During September 2011, it was announced that Anton would be joining the executive committee as executive: human resources on October 1, 2011. |
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Board Committee
Details of the various board committees and their composition and members can be found in exhibit 15.2.
Compensation of Directors and Senior Management
The following table shows the compensation of directors and senior management for fiscal 2011:
Name |
Directors
fees ($000) 2011 |
Salaries and
2011 |
Retirement
the year ($000) 2011 |
Bonuses
Paid ($000) 2011 |
Share
Options Exercised during the year ($000) 2011 |
Total
($000) 2011 |
||||||||||||||||||
Non-executive |
||||||||||||||||||||||||
Patrice Motsepe |
119 | | | | | 119 | ||||||||||||||||||
Frank Abbott (1) |
48 | | | | | 48 | ||||||||||||||||||
Joaquim Chissano |
61 | | | | | 61 | ||||||||||||||||||
Fikile De Buck (2) |
87 | | | | | 87 | ||||||||||||||||||
Cheick Diarra (3) |
21 | | | | | 21 | ||||||||||||||||||
Ken Dicks |
47 | | | | | 47 | ||||||||||||||||||
Dr Simo Lushaba (4) |
65 | | | | | 65 | ||||||||||||||||||
Cathie Markus |
49 | | | | | 49 | ||||||||||||||||||
Modise Motloba |
76 | | | | | 76 | ||||||||||||||||||
Mavusa Msimang (5) |
9 | | | | | 9 | ||||||||||||||||||
David Noko (5) |
9 | | | | | 9 | ||||||||||||||||||
Cedric Savage |
101 | | | | | 101 | ||||||||||||||||||
Andre Wilkens |
63 | | | | | 63 | ||||||||||||||||||
Executive |
||||||||||||||||||||||||
Graham Briggs |
| 755 | | 386 | 324 | 1,465 | ||||||||||||||||||
Hannes Meyer |
| 383 | | 186 | | 569 | ||||||||||||||||||
Mashego Mashego |
| 309 | 30 | 149 | 147 | 635 | ||||||||||||||||||
Frank Abbott (6) |
| 68 | | 115 | | 183 | ||||||||||||||||||
TOTAL |
755 | 1,515 | 30 | 836 | 471 | 3,607 |
(1) | August 2010 June 2011 (appointed August 1, 2010). Received additional service fee (US$66,037). |
(2) | Also received fees for serving on the Rand Uranium board (US$14,306). |
(3) | July 2010 to May 2011 (resigned May 31, 2010). |
(5) | Also received fees for serving on the Rand Uranium board (US$2,861). |
(3) | April 2011 to June 2011 (appointed March 26, 2011) |
(4) | July 2010 (resigned July 31, 2010) |
Directors Terms of Employment
None of our directors have a service contract with us or any of our subsidiaries with a notice or contract period of one year or more or with provisions for pre-determining compensation on termination of an amount which equals or exceeds one years salary and benefits in kind.
The terms of employment of our executive directors continue until terminated by reaching the mandatory retirement age of 60 or on service of three months notice by either us or the employee. Each of our executive directors participates in our share option scheme and a discretionary executive profit share scheme, the latter provided that certain profit targets, set by the Remuneration Committee, are achieved. They have all waived their rights to directors fees.
The executive directors also benefit from pension contributions, provident funds, life insurance and medical aid, the value of which is included in the salary details listed above. The total amount currently set aside or accrued by us and our subsidiaries for the payment of these pension, life insurance, medical aid and retirement benefits is US$nil million. The non-executive directors are entitled to fees as agreed at our annual general meeting from time to time, reimbursement of out-of-pocket expenses incurred on our behalf and remuneration for other services, such as serving on committees. For fiscal 2011, total directors remuneration amounted to
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US$3.7 million and senior managements remuneration to US$6.1 million.
Non-executive directors are paid as per the chart below. Executives participate in an executive bonus scheme and bonuses (if any) are determined for a financial year by the Remuneration Committee, in line with our reward philosophy. A bonus of US$385,980 was awarded to the chief executive officer during the past financial year.
The board has agreed to an increase in non-executive directors fees, effective from July 1, 2010. Shareholders approved the increase in fees at the annual general meeting held on December 1, 2010.
For fiscal 2011 non-executive directors received the following fees:
Annual Fee | ||
Board | R 162,000 annually (US$23,175) | |
Audit Committee | R 90,000 annually (US$13,162) | |
Empowerment Committee | R 62,000 annually (US$8,870) | |
Investment Committee | R 62,000 annually (US$8,870) | |
Nomination Committee | R 62,000 annually (US$8,870) | |
Remuneration Committee | R 62,000 annually (US$8,870) | |
Sustainable Development Committee | R 70,000 annually (US$10,014) | |
Technical Committee | R 70,000 annually (US$10,014) | |
Chairman of board | R 756,000 annually (US$101,155) | |
Chairman of board committees | Double the amount that the individual | |
board committee member received annually | ||
Lead independent director | R243,000 annually (US$34,764) |
The terms of employment of the non-executive directors are not set out in any written agreements.
Share Options
At October 17, 2011, our directors and senior management held the following share options, totalling less than 1% of our share capital:
Directors and Senior Management |
Number of
Share Options |
Average
Strike Price (R) |
Expiration
Dates |
|||||||||
Graham Briggs |
91,938 | 48.55 | 2014 - 2015 | |||||||||
Hannes Meyer |
| | | |||||||||
Harry Ephraim Mashego |
| | | |||||||||
Senior Management (as a group) |
200,451 | 52.55 | 2013 - 2015 | |||||||||
Total |
292,389 | 51.29 | 2013 - 2015 |
Options to purchase a total of 1,135,565 ordinary shares were outstanding on October 17, 2011. The exercise prices of the outstanding options range between R39.00 and R91.60 per share and they expire between 2012 and 2015. Of the outstanding options, options to purchase 292,389 ordinary shares were held by our directors and senior management, as described above. No consideration was payable on the grant of these options. See Note 36 to the Consolidated Financial Statements included herein.
Shares issued in terms of the Harmony 2006 Share Plan
At October 17, 2011, our directors and senior management held the following share appreciation rights and performance shares, totaling less than 1% of our share capital:
Directors and Senior Management |
Share Appreciation
Rights (SAR) |
Weighted
SAR Price (R) |
Performance
Shares
(PS) |
PS
Price (R) |
Restricted
Shares (RS) |
RS
Price (R) |
Expiration
Dates |
|||||||||||||||||||||
Graham Briggs |
265,713 | 78.44 | 305,011 | | 48,485 | | 2011 - 2016 | |||||||||||||||||||||
Hannes Meyer |
15,608 | 80.68 | 55,800 | | 24,525 | | 2015 - 2016 | |||||||||||||||||||||
Harry Ephraim Mashego |
54,485 | 77.11 | 77,201 | | 22,262 | | 2011 - 2016 | |||||||||||||||||||||
Senior management (as a group) |
615,480 | 74.72 | 653,770 | | 130,271 | | 2011 - 2016 |
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Awards to purchase a potential maximum of 10,410,699 ordinary shares were outstanding on October 17, 2011. The exercise prices of the outstanding options range between R70.54 and R112.64 per share and they expire between 2011 and 2016. Of the outstanding awards, awards to purchase a potential maximum of 2,268,584 ordinary shares were held by our directors and senior management, as described above. No consideration was payable on the grant of these options. See Note 36 to the Consolidated Financial Statements included herein.
Share Ownership
The following sets forth, as at June 30, 2011 and at October 17, 2011, the total amount of ordinary shares directly or indirectly owned by our directors and senior management, including shares issued under the 2006 Share Plan. Our directors and senior management do not own any preference shares.
Holder |
Ordinary
June 30, 2011 |
Percentage |
Ordinary
Shares Number as at October 17, 2011 |
Percentage | ||||||||||||
Non-executive chairman |
||||||||||||||||
Patrice Motsepe (1) |
| | | | ||||||||||||
Directors Non-executive |
||||||||||||||||
Fikile De Buck |
| | | | ||||||||||||
Joaqium Chissano |
| | | | ||||||||||||
Dr Cheick Diarra |
| | | | ||||||||||||
Ken Dicks |
| | | | ||||||||||||
Dr. Simo Lushaba |
| | | | ||||||||||||
Cathie Markus |
| | | | ||||||||||||
Modise Motloba |
| | | | ||||||||||||
Cedric Savage |
| | | | ||||||||||||
André Wilkens |
101,303 | (2) | 101,303 | (2) | ||||||||||||
Executive Directors |
||||||||||||||||
Graham Briggs |
| | | | ||||||||||||
Hannes Meyer |
| | | | ||||||||||||
Frank Abbott |
| | | | ||||||||||||
Harry Ephraim Mashego |
| | | | ||||||||||||
Total Directors (14 persons) |
101,303 | | 101,303 | |
(1) |
Patrice Motsepe, our Chairman, has an indirect holding through ARM |
(2) |
Less than 1%. |
Employees
General
Set out below is the number of people working at each of our operations and the number at our operations who are employed by outside contractors as at the end of each of fiscal years 2011, 2010 and 2009.
Harmony Employees
at
June 30, |
Outside Contractors
at
June 30, |
|||||||||||||||||||||||
2011 | 2010 | 2009 | 2011 | 2010 | 2009 | |||||||||||||||||||
South Africa |
34,345 | 35,788 | 37,316 | 4,921 | 4,331 | 4,962 | ||||||||||||||||||
International |
1,558 | 1,105 | 979 | 2,982 | 1,373 | 2,482 | ||||||||||||||||||
Grand total |
35,903 | 36,893 | 38,295 | 7,903 | 5,704 | 7,444 |
The numbers for the International Operations include the employees and contractors at the MMJV.
These numbers show a reduction in the number of employees which was achieved over the 12 month period ended June 30, 2011. It represents the consequences of the restructuring program on the employee numbers (see below).
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South Africa
South Africa is a signatory to all the International Labor Organization conventions in respect of employment and fair labor practices. Consequently, South African labor relations are characterized by a high degree of regulation, with legislation covering all aspects of the employment relationship, including but not restricted to the following:
|
minimum conditions of employment (note there is no prescribed basic minimum wage, but laws cover most aspects of employment, from hours of work to prohibitions on child labor); |
|
trade union access and membership; |
|
training and development; |
|
mandatory compensation in the event of termination for operational reasons; |
|
affirmative action policies and programs; |
|
compensation for occupational illness and injury; |
|
mechanisms for collective bargaining; |
|
procedures for the resolution of disputes; and |
|
regulation of strikes and dismissals. |
Harmony invests in the training and development of its current and potential employees. During fiscal 2011 a significant number of South African employees received some form of training in areas such as mining, engineering, metallurgy, mineral reserve, human resources and soft skills. In South Africa, we have various programs in place to attract and develop university and young school leavers through apprenticeships, bridging programs and bursaries, as well as extensive in-house and external training programs.
In the mining industry, our relationship with the unions and the government is well established and provides a structure for negotiation between independent representative Trade Unions and employer associations of all conditions of employment and the provision of benefits, including retirement benefits and health care for employees and their dependants. This structure also allows for consultation on many operational issues including for example, recruitment and selection, training and development and health and safety. We are no different from the other major gold producers in this regard; we fully participate, and in some instances have played a major role, in the industrys industrial relations structures, including the Chamber of Mines of South Africa (which represents the interest of the major employers in the mining sector), the various statutory training bodies and benefit structures.
The major unions present and recognized by us are the (i) National Union of Mineworkers ( NUM ), (ii) United Association of South Africa ( UASA ) and (iii) Mineworkers Solidarity. The unions are represented as follows:
NUM |
78 | % | ||
UASA |
8 | % | ||
Solidarity |
2 | % | ||
Collective Bargaining Fund |
2 | % | ||
Non-union |
10 | % |
Certain employees are subject to Agency Shop arrangements (termed the Collective Bargaining Fund above) whereby the terms and conditions of service negotiated and agreed to with the recognized Trade Unions are extended to apply to non-union members who, in turn, then pay a small fee to the union) and the rest of the employees either do not belong to a union or belong to one of the more insignificant unions active in Harmony from time to time.
As a result of our highly unionized labor force and the fact that labor costs constitute approximately 52% of production costs, we have attempted over the years to balance union demands for improvements in wages and conditions of employment with the need to contain and reduce cash costs in order to ensure the long-term viability of our operations.
While no statutory minimum notice period in respect of operational changes is stipulated in Harmonys collective agreements,
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there are prescribed processes both in the statutes and collective agreements that have to be completed before any significant operational change can be implemented. The Labor Relations Act in South Africa governs the minimum notice period required in respect of organizational change affecting 50 or more employees. A 60-day notice and consultation period regarding any proposed restructuring or organizational change is allowed in terms of Section 189A of the Act.
Wage negotiations are conducted in a centralized industry forum under the Chamber of Mines. During August 2011, a two-year wage agreement was signed, which includes profit sharing, after a five-day strike across the gold mining industry.
Each year, negotiations with unions span a wide range of issues. In fiscal 2011, these included:
|
the process of closing Virginia operations affecting 3,800 people. This was completed successfully, and without any industrial stoppages. About 2,480 employees were transferred to other Harmony operations or redeployed to support services; and |
|
curbing illegal mining activities: the company implemented various measures to curb the activities of illegal miners in Free State operations. These ranged from stricter access controls, limited food and liquids permitted to be carried underground, to more frequent security operations and police action. The success of these initiatives underlines the effective engagement processes in place and the solid relationship between Harmony management teams and the unions. |
Other issues currently being discussed with unions include:
|
an employee share option scheme for Harmony employees; |
|
establishment of a bargaining council for the gold mining industry. This has not been finalised and it is envisaged that it will be concluded by the next round of wage negotiations scheduled for 2013; |
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discussions on co-designing arrangements for the effective use of mining assets are due to start shortly; and |
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issues around developing young people living in communities close to mining operations. |
Work Stoppages
There were no group-wide work stoppages in fiscal 2011.
HDSAs in management
Harmonys recruitment, development and retention initiatives are focused on historically disadvantaged South Africans (HDSAs) in line with the original Mining Charter requirement that these employees (including white women) made up 40% of management in South Africa by 2009. Commendably, given the shortage of HDSA management skills in the country, Harmony improved its employment equity status in management levels over the past year to 41.5% from 40% in fiscal 2010.
Women in mining
In line with good practice, we require that 10% of the total workforce should be made up of women. We have exceeded this target at some of the operations. At the end of June 2011, there were 3,936 women in the group (11.5%), compared with 4,423 in fiscal 2010, or 12% of women in the total workforce. Various steps have been taken to accommodate women in the underground mining environment. The percentage of women in management was 18% and 6% (2010: 16% and 9%) in the core disciplines of engineering, mining, ore reserve management and metallurgy.
There is no differentiation in salary scales for men and women at Harmony.
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 Fair Work Act of 2009 and the National Employment Standards. Our Australian workforce is not unionized.
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Papua New Guinea
Employee relations in PNG are regulated by the Employment Act of 1978 (PNG) and the Employment of Non-Citizens Act 1978 (PNG). 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 ( ERC ). Employees at PNG are not unionized, however, employment is guided by a Memorandum of Agreement ( MOA ) between the Landowner Association, the company and the government. The MOA governance process requires that, when qualifications and experience are equivalent, employment preference is given to local and landowner candidates before individuals from other provinces or countries. Compliance with this agreement is a critical issue in maintaining Harmonys license to operate.
Localization
Under the ongoing localization process in PNG, more locally resourced employees are being recruited to reduce externally resourced employees ( EREs ) to around 4% by fiscal 2013. In PNG, 118 employees (9%) comprised foreign labor in fiscal 2011.
In terms of diversity and equal opportunity, PNG operations are governed by a three-year training plan lodged with the Department of Labor for approval in separate documents for each operation: Hidden Valley JV, Wafi-Golpu JV and the exploration JV. Under this three-year plan and for the company to have EREs, the JVs are required to ensure that locally resourced employees are continuously trained and succession is managed. The first set of plans was submitted in November 2010 and approved in January 2011.
The succession target of less than 4% permanent EREs at PNG is on track. The leadership development program to run in the first quarter of fiscal 2012 will ensure the target is achieved by 2013.
Women in mining
PNG obtained government approval to recruit females specifically in the surface mining environment. As a result, there are plans in place across Morobe Mining to address the gender balance of employees. Aptitude tests of women landowners are ongoing to establish a pool of available candidates. In fiscal 2011, 12% of the workforce in PNG was women, closer to the 15% national average. Our efforts are focused on achieving the 2013 target of 17%.
Long Term Incentive Schemes
In addition to employees annual salaries, Harmony has implemented various share option schemes, including the Harmony 2006 Share Plan. In all, 60,011,669 shares of Harmonys share capital is reserved for long-term incentive schemes.
The 2001 and 2003 share option schemes
Harmony has two share option schemes, namely the 2001 Share Option Scheme and the 2003 Share Option Scheme (collectively the existing schemes), which all have similar rules. Since the implementation of the 2006 Share Plan, no options have been nor will be issued in terms of the existing schemes. Options granted before the implementation of the 2006 Share Plan remain open for acceptance for 10 years after the date of grant, subject to the terms of the relevant option scheme.
Broad-Based Employee Share Scheme ( ESOP )
The Group intends to implement a broad-based ESOP and intends to structure the scheme so as to maximise the recognition of black participation therein, both from the perspective of the MPRDA and the Broad-Based Black Economic Empowerment Act. Discussions relating to option benefits for non- managerial employees are ongoing with unions representing these employees.
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The Harmony 2006 Share Plan
The Harmony 2006 Share Plan ( the Plan ) was adopted by shareholders at the annual general meeting held on November 10, 2006. The Plan incorporates the following elements: equity- settled share appreciation rights, performance shares and performance allocated restricted shares. The Plan is in line with global best practice and South African best practice, which in combination serves to reward the required attributes of shareholder alignment and long- term, sustained performance.
In terms of the Plan, executive directors and senior employees of Harmony and its subsidiaries and associates are awarded rights to receive shares in Harmony. This is based on the value of these awards when time and performance conditions have been met, the awards have vested and, in the case of the Share Appreciation Rights ( SARs ), the rights have been exercised.
The primary intent of the Plan is to reward executives and senior management for long term, sustained performance achievements which are aligned to shareholder value.
The nature of the Plan, which is linked to performance conditions, is not as dilutive as a normal share option scheme.
Annual allocations of SARs awards of performance shares and grants of restricted shares are governed by Harmonys reward philosophy, in which ( inter alia ) the expected value of long-term incentive rewards is set for defined categories of executives and senior management. The expected value is defined as the present value of the future reward outcome of an allocation/award/grant, given the targeted future performance of Harmony and its share price.
The 2007 allocations and awards became eligible for vesting during fiscal 2011. Both the SARs and performance shares vested as the performance conditions were met.
Short-term incentive scheme
Our Remuneration Committee ensures that our directors and senior executives are fairly rewarded for their individual contributions to our overall performance.
In September 2006, the Remuneration Committee approved an annual incentive scheme as part of Harmonys Reward Philosophy This scheme was revised in 2010 to provide twice-yearly incentive bonuses for all management employees applying to corporate, Harmony central services, medical services and central operations; and quarterly incentive bonuses for designated shaft management team members as well as regional operations management teams to benefit executive directors and members of management.
Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
We are an independent gold producer, with no single shareholder exercising control. As of October 17, 2011, our issued share capital consisted of 430,298,789 ordinary shares. To our knowledge, (A) we are not directly or indirectly owned or controlled (i) by another corporation or (ii) by any foreign government and (B) there are no arrangements (including any announced or expected takeover bid), the operation of which may at a subsequent date result in a change in our control.
The voting rights of our major shareholders do not differ from the voting rights of other holders of the same class of shares.
Significant changes in the percentage ownership held by major shareholders in the past three years are described below on Related Party Transactions.
A list of the 5% holders of our securities as of October 17, 2011 is set forth below:
Holder |
Number of
Shares |
Percentage | ||||||
1. Deutsche Bank Trust Company Americas (1) |
143,536,409 | 33 | % | |||||
2. ARM Ltd. (2) |
63,632,922 | 14.8 | % | |||||
3. Blackrock Investment Management (UK) Ltd. (3) |
43,664,924 | 10 | % | |||||
4. Allan Gray (3) |
30,168,304 | 7 | % | |||||
5. Public Investment Corporation of South Africa (3) |
28,097,384 | 6.5 | % | |||||
6. First Eagle Investment Management LLC (3) |
22,377,989 | 5.2 | % |
(1) |
Depository changed from Bank of New York Mellon to Deutsche Bank Trust Company Americas as of October 10, 2011 with respect to the ADRs held on the U.S. register. Holding disclosed represents outstanding ADRs on October 17, 2011. |
(2) |
Patrice Motsepe, our Chairman, has an indirect holding in ARM Limited. |
(3) |
Holdings as of September 30, 2011 |
As of October 17, 2011, there were 2,014 record holders of our ordinary shares in the United States.
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Capital Raising
During fiscal 2009, Harmony engaged in capital raising by issuing two tranches of shares following the resolution passed by shareholders at the annual general meeting held on November 24, 2008, that allowed directors to issue shares for cash. In the first tranche, completed between November 25, 2008 and December 19, 2008, 10,504,795 Harmony shares were issued at an average subscription price of R93.20, resulting in R979 million (US$98 million) before costs being raised.
The second tranche of shares was issued between February 10, 2009 and March 6, 2009 and consisted of 7,540,646 Harmony shares being issued at an average subscription price of R124.45, resulting in R938 million (US$94 million) before costs being raised. The combined share issue amounts to R1.9 billion (US$192 million) at a cost of R30 million (US$3.5 million).
Related Party Disclosure and Transactions
None of our directors or major shareholders or, to our knowledge, their families, had any interest, direct or indirect, in any transaction since July 1, 2008 or in any proposed transaction that has affected or will materially affect us or our subsidiaries, other than as stated below.
ARM Limited currently holds approximately 14.8% of our shares. Patrice Motsepe, André Wilkens, Joaquim Chissano and Frank Abbott are directors of ARM Limited.
We have three directors on the board of Rand Uranium, being Graham Briggs, Hannes Meyer and Alwyn Pretorius. Dr Simo Lushaba is a member of the Rand Uranium Investment Committee. During fiscal 2010 and 2011, Fikile de Buck served as a director and a member of the audit committee until May 17, 2011.
During fiscal 2010 we concluded separate purchase agreements with the liquidators of Pamodzi FS for the purchase of its Free State assets and inventories. The consideration paid for the mining assets was US$36.6 million and US$16.0 million was paid for the inventories. Pamodzi FS was a subsidiary of Pamodzi, which is an associate of Harmony.
On March 19, 2010, Harmony Gold Mining Company Limited concluded an agreement with AVRD, for the purchase of its 26% share of the mining titles of the Doornkop South Reef. The 26% interest was transferred from AVRD to Harmony in exchange for Harmony repaying the AVRD Nedbank loan of US$33.4 million and the issue of 2,162,359 Harmony shares, valued at US$20.5 million. In terms of the agreement, 975,419 of these shares will be held in escrow until May 1, 2014.
On November 21, 2008, the Group disposed of its Randfontein Cooke assets to Rand Uranium in exchange for 100% interest in the company. On the same date the Group disposed of 60% of the interest held in Rand Uranium to PRF which resulted in a 40% interest held and Rand Uranium became an associate. The conditions precedent for the second part of the Rand Uranium transaction relating to the sale of the Old Randfontein assets were fulfilled on April 22, 2009. Additional shares were issued in settlement and 60% of these shares were sold to PRF in terms of the agreement. PRF paid its portion of the purchase price in cash on April 20, 2009. The total value of these transactions was US$348 million.
In fiscal 2008 Morobe Consolidated Goldfields Limited and Wafi Mining Limited, subsidiaries of Harmony Gold (Australia) (Proprietary) Limited entered into a Master Purchase and Farm-in Agreement with Newcrest. This agreement provided for Newcrest to purchase a 30.01% participating interest (stage 1) and a further buy-out of an additional 19.99% participating interest in Harmonys PNG Gold and copper assets, giving them a 50% interest.
On July 11, 2008, we sold our 37.8% share in Village Main Reef Gold Mining Company (1934) Limited for R1.1 million (US$0.1 million) to To the Point Investments. ZB Swanepoel, our former Chief Executive Officer, is a director and founder of To the Point Investments.
See note 37 of the consolidated financial statements for the balances due to and from associates and joint ventures.
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INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
CONSOLIDATED STATEMENTS
Please refer to Item 18. Financial Statements of this annual report.
Legal Proceedings
None of our properties is the subject of pending material legal proceedings. We have experienced a number of claims and legal and arbitration proceedings incidental to the normal conduct of our business, such as the ones described below. The directors, however, do not believe that liabilities related to such claims and proceedings are likely to be, individually or in the aggregate, material to the companys consolidated financial condition.
Harmony has been named as a second defendant in the Mr. Thembekekile Mankayi v AngloGold Ashanti court case, under which the principles of compensation under ODIMWA are currently being tested. During March 2011, the Constitutional Court handed down judgment in the case which allows Mr. Mankayis executor to proceed with the case in the High Court of South Africa.The case was heard in the High Court of South Africa in June 2008, and an appeal heard in the Supreme Court of Appeals in 2010. In both instances judgment was awarded in favor of AngloGold Ashanti. A further appeal that was lodged by Mr Manyaki was heard in the Constitutional Court in 2010. Judgment in the Constitutional Court was handed down on 3 March 2011. The judgment allows Mr Mankayis executor to proceed with the case in the High Court of South Africa. Should anyone bring similar claims against Harmony in future, those claimants would need to provide evidence proving that silicosis was contracted while in the employment of the company and that it was contracted due to negligence on the companys part. The link between the cause (negligence by the company while in its employ) and the effect (the silicosis) will be an essential part of any case. It is therefore uncertain as to whether the company will incur any costs related to silicosis claims in the future and due to the limited information available on any claims and potential claims and the uncertainty of the outcome of these claims, no estimation can be made for the possible obligation.
See Recent developments for a discussion on the US class action and the Freegold court case.
Dividends and Dividend Policy
On August 13, 2009, the board approved a final dividend for fiscal 2009 of R0.50 per share that was paid on September 21, 2009. The total amount of the dividend paid was R213 million (US$28.6 million). As the dividend was declared after the reporting date of June 30, 2009, the dividend was not recorded in fiscal 2009. On August 13, 2010, the board approved a final dividend for fiscal 2010 of R0.50 per share that was paid on September 20, 2010. The total amount of the dividend paid was R214 million (US$29.3 million). As the dividend was declared after the reporting date of June 30, 2010, the dividend was not recorded in fiscal 2010. On August 12, 2011, the board approved a final dividend for fiscal 2011 of R0.60 per share that was paid on September 19, 2011. The total amount of the dividend paid was R258 million (US$34 million). For information on our accounting policy relating to dividends, see note 2.20 to the consolidated financial statements.
South African law was relaxed to permit the distribution of a companys equity as a dividend, provided that the necessary shareholder or board approval is obtained and, after the distribution of the dividend, the company remains solvent and liquid. Cash dividends, however, may only be paid out of accumulated profits or other distributable reserves. Previously under South African law, a companys equity could not be distributed as a dividend. The amount of dividends, if any, paid in the future will depend on our results of operations, financial condition, cash requirements and other factors deemed relevant by the board.
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Recent Developments
Dividends
On August 12, 2011, the board approved a final dividend for fiscal 2011 of 60 SA cents per share, paid on September 19, 2011. The total dividend amounts to R258 million (US$34 million).
Freegold court case
The courts decision on Freegolds appeal regarding the South African Revenue Services ( SARS ) supplication of mining tax ring-fencing was received on August 1, 2011 and found in favour of SARS. The case was concluded in March 2011 and judgment was reserved at that time. The company has decided to appeal the finding by the court. Any additional income taxes payable are expected to be offset by additional deferred tax credits due to the impact of this application will have on unredeemed capital.
US$ facility
On August 11, 2011, the group entered into a US$300 million syndicated Revolving Credit Facility. The facility has a term of four years and attracts interest at LIBOR plus 260 basis points. The facility is jointly arranged by Nedbank Limited and Firstrand Bank Limited (acting through its Rand Merchant Bank division).
US class action
Subsequent to June 30, 2011 we came to a mutually acceptable settlement with the class plaintiffs in a pending class action in the United States District Court for the Southern District of New York in which certain ADR and ADR Option holders are seeking damages against us pertaining to our business practices for the period April 25, 2007 to August 7, 2007. The settlement requires the courts approval and, if approved by the Court, and by the appellate court if appealed, will result in the dismissal of all claims against the company as to all members of the Class. The hearing on the settlement approval is currently scheduled for November 10, 2011, in the United States District Court for the Southern District of New York. The Companys insurers have undertaken to pay the settlement pursuant to the terms of a directors and officers insurance contract.
Markets
Stock Exchange Listings and Ticker Codes
The primary listing of our ordinary shares is on the JSE Limited. Our ordinary shares are also listed on stock exchanges in London and Berlin, as well as being quoted in Brussels in the form of International Depositary Receipts and on the New York Stock Exchange in the form of ADSs. We notified NASDAQ on June 9, 2010 of our intention to voluntarily terminate our listing on NASDAQ. The last day of trading of Harmonys ADSs on NASDAQ was June 21, 2010. We voluntarily delisted from Euronext Paris on August 30, 2010.
JSE Limited | HAR | |
New York Stock Exchange | HMY | |
London Stock Exchange | HRM | |
Euronext Brussels | HMY | |
Berlin Stock Exchange | HAM1 |
Offering and Listing Details
The high and low sales prices in Rand for our ordinary shares on the JSE for the periods indicated were as follows:
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Harmony Ordinary Shares (Rand per Ordinary Share) |
||||||||
High | Low | |||||||
Fiscal year ended June 30, 2007 |
||||||||
Full Year |
123.00 | 86.10 | ||||||
Fiscal year ended June 30, 2008 |
||||||||
Full Year |
118.52 | 60.00 | ||||||
Fiscal year ended June 30, 2009 |
||||||||
Full Year |
129.50 | 54.99 | ||||||
Fiscal year ended June 30, 2010 |
||||||||
First Quarter |
87.51 | 69.05 | ||||||
Second Quarter |
87.00 | 74.00 | ||||||
Third Quarter |
80.77 | 68.80 | ||||||
Fourth Quarter |
81.40 | 68.65 | ||||||
Full Year |
87.51 | 68.65 | ||||||
Fiscal year ended June 30, 2011 |
||||||||
First Quarter |
83.80 | 71.90 | ||||||
Second Quarter |
88.02 | 76.18 | ||||||
Third Quarter |
102.26 | 74.77 | ||||||
Fourth Quarter |
103.25 | 83.29 | ||||||
Full Year |
103.25 | 71.90 | ||||||
Fiscal year ended June 30, 2012 |
||||||||
July 2011 |
99.66 | 85.80 | ||||||
August 2011 |
101.99 | 90.18 | ||||||
September 2011 |
106.00 | 90.60 | ||||||
As of October 17, 2011 |
98.89 | 96.52 |
On October 17, 2011, the share price of our ordinary shares on the JSE was R98.00.
Our ADRs are listed on the New York Stock Exchange. We were listed on NASDAQ from November 29, 2005 until we voluntarily de-listed on June 21, 2010. The high and low sales prices in U.S. dollars for our ADRs for the periods indicated, as reported on the NYSE and NASDAQ, were as follows:
NYSE Harmony ADRs ($ per ADR) |
NASDAQ Harmony ADRs ($ per ADR) |
|||||||||||||||
High | Low | High | Low | |||||||||||||
Fiscal year ended June 30, 2007 |
||||||||||||||||
Full Year |
17.26 | 11.91 | 16.76 | 12.67 | ||||||||||||
Fiscal year ended June 30, 2008 |
||||||||||||||||
Full Year |
15.27 | 8.42 | 15.27 | 8.74 | ||||||||||||
Fiscal year ended June 30, 2009 |
||||||||||||||||
Full Year |
13.06 | 5.58 | 13.07 | 5.54 | ||||||||||||
Fiscal year ended June 30, 2010 |
||||||||||||||||
First Quarter |
11.75 | 8.50 | 11.78 | 8.50 | ||||||||||||
Second Quarter |
11.98 | 9.73 | 11.94 | 9.74 | ||||||||||||
Third Quarter |
11.11 | 8.79 | | | ||||||||||||
Fourth Quarter |
10.57 | 9.04 | | | ||||||||||||
Full Year |
11.98 | 8.50 | | | ||||||||||||
Fiscal year ended June 30, 2011 |
||||||||||||||||
First Quarter |
11.74 | 9.72 | | | ||||||||||||
Second Quarter |
12.75 | 10.75 | | | ||||||||||||
Third Quarter |
15.26 | 10.56 | | | ||||||||||||
Fourth Quarter |
15.57 | 12.34 | | | ||||||||||||
Full Year |
15.57 | 9.72 | | | ||||||||||||
Month of |
||||||||||||||||
July 2011 |
14.35 | 12.81 | | | ||||||||||||
August 2011 |
14.87 | 11.96 | | | ||||||||||||
September 2011 |
14.06 | 11.50 | | | ||||||||||||
As of October 17, 2011 |
12.39 | 12.09 | | |
On October 17, 2011, the closing share price of our ordinary shares on the NYSE was US$12.18.
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The Securities Exchange in South Africa
The JSE is the sixth largest emerging market exchange and by far the leading exchange in Africa, playing a leadership role in the continent, supporting South Africas role as the African financial hub. It is also recognized as a leading exchange in the global resources sector.
As South Africas only full service securities exchange, the JSE connects buyers and sellers in five different markets; equities, which includes a primary and secondary board, equity derivatives, agricultural derivatives and interest rate instruments. The JSE is one of the top 20 exchanges in the world in terms of market capitalization. The market capitalization of the JSE equities market was R6,687 billion (US$986 billion) at June 30, 2011. The mining market capitalization was, at June 30, 2011, 22% of the overall JSE market capitalization and constituted 30% in terms of value traded.
STRATE Settlement
Under STRATE there are essentially two types of clients: controlled and non-controlled. A controlled client is one who elects to keep his shares and cash with his broker and these shares are held in custody at the brokers chosen Custodian Bank, the CSDP. A non-controlled client is one who appoints his own CSDP to act as custodian on his behalf. Equity settlements take place on a contractual T+5 (where T= trade date) settlement cycle. Securities and funds become due for settlement a set number of business days after the trade. Contractual settlement is a market convention embodied in the rules of the JSE which states that a client has a contractual obligation to cause a JSE trade to settle on settlement day. The JSE, in its capacity as Settlement Authority, ensures that all on-market trades entered into by two JSE member firms settle five days after the trade date.
PLAN OF DISTRIBUTION
Not applicable.
SELLING SHAREHOLDERS
Not applicable.
DILUTION
Not applicable.
EXPENSES OF THE ISSUE
Not applicable.
Item 10. ADDITIONAL INFORMATION
Memorandum and Articles of Association
This section summarizes certain material provisions of Harmonys Memorandum and Articles of Association, the Companies Act and the JSE Listings Requirements, each as currently in effect. These descriptions do not purport to be complete and are qualified in their entirety by reference to all of the provisions of those sources. Directions on how to obtain a complete copy of Harmonys Articles of Association are provided under Documents on Display below.
General
We are a public company with limited liability, and is registered under Registration number 1950/038232/06 with the Companies and Intellectual Property Commission (CIPC) (previously known as CIPRO or the Registrar of Companies), a member of the Department of Trade and Industry. We are governed by our Memorandum of Association and Articles of Association, the provisions of the Companies Act and the various Listings Requirements. Our operations are also subject to various laws and regulations, including those described in Item 4 . Information on the Company Regulation .
In accordance with the provisions of the Act, which came into operation on 1 May 2011, the Memorandum of Association and Articles of Association will forthwith be known as the Memorandum of Incorporation and will be replaced in its entirety at the annual general meeting of the company to be held in 2012.
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Objects and Purposes
Our objects are set forth in Paragraph 3 of our Memorandum of Association and include:
|
to acquire by purchase, cession, grant, lease, exchange or otherwise any movable or immovable property, mines, mineral property, claims, mineral rights, mining rights, mining leases, mining titles, mynpachts, lands, farms, buildings, water rights, concessions, grants, rights, powers, privileges, surface rights of every description, servitudes or other limited rights or interests in land and mineral contracts of every description; and any interest therein and rights over the same; and to enter into any contract, option or prospecting contract in respect thereof, and generally to enter into any arrangement that may seem conducive to our objects or any of them; |
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to carry out all forms of exploration work and in particular to search for, prospect, examine, explore and obtain information in regard to mines, mineral properties, claims, mineral rights, mining rights, mining leases, mining titles, mynpachts, mining districts or locations and ground and soil supposed to contain or containing precious stones, minerals or metals of every description; |
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to open, work, develop and maintain gold, silver, diamond, copper, coal, iron and other mines, mineral and other rights, properties and works, and to carry on and conduct the business of raising, crushing, washing, smelting, reducing and amalgamating ores, metals, minerals and precious stones, and to render the same merchantable and fit for use and to carry on all or any of the businesses of miners, mineralogists, metallurgists, amalgamators, geophysicists, smelters, quarry owners, quarrymen and brickmakers; |
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to buy, sell, refine and deal in bullion, specie, coin and precious and base metals, and also precious stones and other products of mining; and |
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to employ and pay mining experts, agents and other persons, partnerships, companies or corporations, and to organize, equip and dispatch expeditions for prospecting, exploring, reporting on, surveying, working and developing lands, farms, districts, territories and properties in any part of the world, whether the same are our property or otherwise. |
Directors
Disclosure of Interests
A Harmony director may not vote in respect of any contract or arrangement in which he or she is interested, and may not be counted in the quorum for the purpose of any resolution regarding such a contract or arrangement. This restriction does not apply, however, to:
|
any arrangement for giving the director a security or indemnity in respect of money lent, or an obligation undertaken, by such director for our benefit; |
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any arrangement by which we give any security to a third party in respect of our debt or obligation for which the director himself or herself has assumed responsibility, in whole or in part, whether under a guarantee or indemnity or by the deposit of a security; |
|
any contract by the director to subscribe for or underwrite our shares or debentures; |
|
any contract or arrangement with a company other than us, in which the director holds or controls, directly or indirectly, no more than 1% of shares representing either (i) any class of the equity share capital of that company or (ii) the overall voting rights of that company; or |
|
any retirement scheme or fund which relates to both directors and to employees (or a class of employees) and does not accord to any director, as such, any privilege or advantage not generally accorded to the employees to which such scheme or fund relates. |
The restrictions preventing directors from voting in respect of contracts or arrangement in which they are interested may be suspended or relaxed at any time, either generally or in respect of particular circumstances, by the holders of 75% of our ordinary shares who are present and voting in a general meeting.
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A director, notwithstanding his of her interest, may be counted in the quorum present at any meeting where: (i) he or she or any other director is appointed to hold any office or position of profit in Harmony; (ii) the directors resolve to exercise any of our rights to appoint, or concur in the appointment of, a director to hold any office or position of profit in any other company; or (iii) the terms of any such appointment are considered or varied. At this meeting, each director may vote on the matters listed above, but no director may vote in respect of his or her own appointment, or the arrangement or variation of the terms of his or her own appointment.
The restrictions described above do not prevent or debar any director, as a holder of any class of our shares, from taking part in or voting upon any question submitted to a vote by that class at a general meeting, regardless of that directors personal interest or concern.
Compensation
The remuneration of our directors in their capacity as directors, including fees per directors meeting, and additional compensation for the performance of other services, such as serving on committees, may be established either by a majority of the holders of our ordinary shares, present and voting in a general meeting, or by a majority of disinterested directors at a meeting of directors, provided they constitute a quorum.
Borrowing Powers
Our directors may raise, borrow or secure the payment of any sums of money for our purposes as they see fit. However, without the consent of a majority of the holders of our ordinary shares present and voting in a general meeting, the aggregate principal amount outstanding in respect of monies raised, borrowed or secured by us and any of our subsidiaries may not exceed the greater of (i) R40 million or (ii) the aggregate amount, from time to time, of our issued and paid up capital, plus the aggregate of the amounts standing to the credit of all distributable and non-distributable reserves, plus our share premium account and the share premium accounts of our subsidiaries.
The Companies Act provides that a company may only make a loan to its owner, director or manager with the prior consent of all the members of the company or pursuant to a special resolution relating to a specific transaction.
Rotation
At each of our annual general meetings, one-third of the directors, or, if the number is not a multiple of three, then the number nearest to but not exceeding one-third, shall retire from office by rotation. Those directors who have been longest in office since their last election or re-election shall retire. As between directors of equal seniority, the directors to retire by rotation shall, in the absence of agreement, be selected by lot. If at the date of any annual general meeting, any director shall have held office for a period of at least three years since his or her last election or re-election, he or she shall retire at such meeting, either as one of the directors resigning pursuant to the aforementioned rotation principles, or in addition thereto. Retiring directors are eligible for re-election and said directors have made themselves available for re-election.
If a director is appointed to any Harmony executive office, his or her employment contract may provide that he or she shall be exempt from rotation for the lesser of (i) a period of 5 years or (ii) the period during which he or she continues to hold the relevant executive office. During the relevant period, the director in question shall not be taken into account in determining the retirement of directors by rotation. The number of directors who may be exempt from retirement by rotation in this manner shall not equal or exceed one-half of the total number of the directors at the time of the relevant directors appointment. Currently none of our directors are exempted from retirement under these provisions.
Qualifications
There is no age limit requirement with regard to retirement or non-retirement of directors. Directors are not required to hold any of our shares to qualify them for appointment as directors.
Share Capital
As of June 30, 2011, our issued share capital consisted of 430,084,628 ordinary shares with a par value of R0.50 each. As of October 17, 2011, our issued share capital consisted of 430,298,789 ordinary shares with a par value of R0.50 each. Our authorized
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share capital is 1,200,000,000 ordinary shares with a par value of R0.50 each. The terms of the ordinary shares are described in Description of Ordinary Shares below.
Description of Ordinary Shares
This section summarizes the material provisions of Harmonys ordinary shares as set out in Harmonys Memorandum and Articles of Association, the Companies Act and the JSE listings requirements, each as currently in effect. It does not purport to be complete and is qualified in its entirety by reference to all of the provisions of those sources.
Dividends
Either the board or a majority of the holders of our ordinary shares, voting in a general meeting, may, from time to time, declare a dividend to be paid to the registered holders of ordinary shares according to their respective rights and interests in the profits, measured in proportion to the number of ordinary shares held by them. Under South African law, a companys equity may be distributed as a dividend, provided that any necessary shareholder approval is obtained and, after the distribution of the dividend, the company remains solvent and liquid. Cash dividends, however, may only be paid out of the profits of the company. Cash dividends paid by us will not bear any interest payable by us. Dividends may be declared either free of, or subject to, the deduction of income tax and any other tax or duty which may be chargeable. There is currently no tax payable in South Africa by the recipients of dividends who are outside South Africa.
Dividends are declared payable to holders of ordinary shares who are registered as such on a record date determined by the board, which must be after the later of the date of the dividend declaration or the date of confirmation of the dividend. The period between the record date and the date of the closing of the transfer registers in respect of the dividend shall be not less than 14 days.
Holders of our ordinary shares, voting in a general meeting, may not declare a dividend greater than the amount recommended by the directors, but may declare a smaller dividend. Dividends will be paid to the holders of our ordinary shares in proportion to the number of their shares. All unclaimed dividends may be invested or otherwise utilized by the board for our benefit until claimed; provided that dividends unclaimed after a period of twelve years from the date of declaration may be declared forfeited by the board. Forfeited dividends revert to us.
Any dividend or other sum payable in cash to a holder may be transmitted by a payment method determined by the directors, such as electronic bank transfer or ordinary post to the address of the holder recorded in the register or any other address the holder may previously have given to us in writing. We will not be responsible for any loss in transmission.
Any dividend may be paid and satisfied, either wholly or in part, by the distribution of specific assets, including shares and debentures of any other company, in cash, or by one or more of such methods, as the board may determine and direct at the time of the dividend declaration.
When any holders of our ordinary shares reside outside of South Africa, the board has the power, subject to any applicable laws or regulations, to declare a dividend in a relevant currency other than the Rand and to determine the date on which and the rate of exchange at which the dividend shall be converted into the other currency.
All cash dividends paid by us are expected to be in Rand. Holders of ADRs on the relevant record date will be entitled to receive any dividends payable in respect of the ordinary shares underlying the ADRs, subject to the terms of the Deposit Agreement. Cash dividends paid in Rand will be converted by the depository to U.S. dollars and paid by the depository to holders of ADRs, to the extent it can do so on a reasonable basis and can transfer the U.S. dollars to the United States, net of conversion expenses of the depository, and in accordance with the Deposit Agreement.
Voting Rights
Subject to any rights or restrictions attached to any class of ordinary shares, every holder of our ordinary shares who is present in person at a shareholder meeting, or a person present as a representative of holders of one or more ordinary shares, shall on a show of hands have one vote, irrespective of the number of ordinary shares he holds or represents. Every holder of ordinary shares shall, on a poll, have one vote for every ordinary share held by him. A shareholder is entitled to appoint a proxy to attend and speak and vote at any meeting on his or her behalf. The proxy need not be a shareholder. On a poll, a shareholder entitled to more than one vote (or his
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representative, proxy or agent) need not, if he votes, use all of his votes or cast all of his votes in the same way.
Distribution of Assets on Liquidation
In the event of voluntary or compulsory liquidation, dissolution or winding up, the assets remaining after payment of all our debts and liabilities, including the costs of liquidation, will be applied to repay the amount paid up on our issued capital to holders of our ordinary shares and, thereafter, the balance will be divided pro rata among the holders of our ordinary shares, subject to any special rights or conditions attaching to any shares. Any portion of our assets may, upon such liquidation, dissolution or winding up, and with the approval of a special resolution, be paid to the ordinary shareholders by the distribution of specific assets or may be vested in trustees for the benefit of such ordinary shareholders.
Redemption/Purchase of Shares
No shares shall be issued which are redeemable by their terms or at the option of any party.
The Companies Act permits companies to establish share incentive trusts and provide funds with which such trusts may purchase securities (including debt and equity securities) of a company or its holding company. These securities are to be held by or for the benefit of employees, including salaried directors. The Companies Act also permits such a trust to loan funds to company employees for the purpose of purchasing or subscribing for our securities, provided that such trusts may not loan funds to directors who do not hold salaried employment or office.
The Companies Act provides that a company may approve the acquisition of its own shares by special resolution, if authorized to do so by its articles. A company is not, however, permitted to make any form of payment to acquire any of its own shares if there are reasonable grounds for believing that the company is or, after the payment, would be unable to pay its debts or if, after the payment, the consolidated assets of the company fairly valued would be less than the consolidated liabilities of the company. The procedure for acquisition of shares by a company is regulated, in the case of listed companies, both by the Companies Act and the Listings Requirements of the JSE. The Companies Act further provides that a company may make payments to its shareholders if authorized by its articles subject to the liquidity and solvency requirements described above.
We are authorized pursuant to our Articles of Association to approve the acquisition of our shares by special resolution from time to time. We are also authorized pursuant to our Articles of Association to make payments in cash or in specie to any class of our shareholders.
Issue of Additional Shares and Pre-emptive Rights
The Companies Act does not provide holders of any class of our shares with pre-emptive rights. However, the JSE requires that any new issues of equity shares by companies listed on the exchange must first be offered to existing holders of such shares, in proportion to their current holding.
The JSE will, however, allow a company to issue shares to third parties without first offering them to existing shareholders, in circumstances such as the following:
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pursuant to an employee share incentive scheme the terms of which have been approved by the holders of the relevant class of shares in a general meeting; |
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for the acquisition of an asset, provided that if the issue is more than 30% of the companys issued share capital, a simple majority of holders of ordinary shares present and voting, must vote in favor of the acquisition; |
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to raise cash by way of a general issue in the discretion of the directors (but not to related parties) of up to 15% of the issued share capital in any one fiscal year at an issue price with a discount not exceeding 10% of the 30-day weighted average trading price prior to the determination date, provided that the holders of ordinary shares, present and voting at a general meeting, must approve the granting of such authority to the directors by a 75% vote; or |
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to raise cash by way of a specific issue of a specified number or a maximum number of shares for cash provided that the holders of ordinary shares, other than controlling shareholders, present and voting, vote in favor of the resolution to issue the shares at a |
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general meeting by a 75% vote. In terms of JSE listings requirements, the circular to be sent to all shareholders informing them of the general meeting must include, inter alia: |
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details of the persons to whom the shares are to be issued if such persons fall into the following categories or other categories identified by the JSE: directors of the company or its subsidiaries or their associates; trustees of employee or directors share scheme or pension funds; any person having the right to nominate directors of the company; and certain shareholders holding more than 10% of the issued share capital; |
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if the persons to whom the shares are to be issued are related parties, an independent experts opinion that the issue price is fair and reasonable; and |
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should the maximum size of the issue equal or exceed 30% of the companys issued share capital, full listing particulars, which include, inter alia, a reporting accountants report and, in the case of a mining company, a competent persons report setting out technical details of the companys operations and assets. |
Transfer of Shares
Owners of our ordinary shares may transfer any or all of their shares in writing in any common form or in any form approved by our directors. Every instrument of transfer must be executed by the transferor or, if the directors so determine, by the transferor and the transferee. The transferor will remain the holder of the ordinary shares transferred until the name of the transferee is entered in our register of members in respect of such ordinary shares.
The board may refuse to recognize any instrument of transfer that is not duly stamped (if required) or is not accompanied by appropriate evidence of the transferors title. Such right of refusal will not prevent dealings occurring on an open and proper basis. We retain all instruments of transfer that are registered. Any instrument of transfer that the board refuses to register is, except in the case of fraud, returned on demand to the person depositing such instrument.
Rights of Minority Shareholders and Fiduciary Duties
Majority shareholders of South African companies have no fiduciary obligations under South African common law to minority shareholders. However, under the Companies Act, a shareholder may, under certain circumstances, seek relief from the court if he has been unfairly prejudiced by the company. The provisions in the Companies Act are designed to provide relief for oppressed shareholders without necessarily overruling the majoritys decision. There may also be common law personal actions available to a shareholder of a company.
Although the concepts are similar, the specific interpretations of fiduciary obligations of directors in South Africa may differ from those in the U.S. and certain other countries. In South Africa, the common law imposes on directors a duty to act with care, skill and diligence and fiduciary duties, which include the duty to conduct the companys affairs honestly and in the best interests of the company.
Variation of Rights
We may vary the rights attached to any issued or not yet issued shares by special resolution. However, if at any time the issued share capital is divided into different classes of shares, the rights attached to any class may not be varied except with the consent in writing of the holders of at least 75% of the issued shares of that class or through a resolution passed at a separate general meeting of the holders of the shares of that class. The quorum for such a meeting shall be the lesser of (i) 3 shareholders or (ii) 75% of the shareholders of that class, present in person or by their representatives, agents or proxies, provided that such shareholders must control or hold at least one half of the issued shares of that class. A share shall be a share of a different class from another share if the two shares do not rank pari passu in every respect.
Changes in Capital or Objects and Powers of Harmony
The provisions of our Memorandum and Articles of Association pertaining to changes in our share capital and powers are substantially equivalent to the provisions of the Companies Act. We may by special resolution:
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increase our authorized or paid-up share capital; |
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consolidate and divide all or any part of our shares into shares of a larger amount; |
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increase the number of our no par value shares without an increase of our stated capital; |
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sub-divide all or any part of our shares having a par value; |
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convert all of our ordinary or preference share capital consisting of shares having a par value into stated capital constituted by shares of no par value and vice versa; |
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convert our stated capital constituted by ordinary or preference shares of no par value into share capital consisting of shares having a par value; |
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vary the rights attached to any shares whether issued or not yet issued; |
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convert any of our issued or unissued shares into shares of another class; |
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convert any of our paid-up shares into stock, and reconvert any stock into any number of paid-up shares of any denomination; |
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convert any of our issued shares into preference shares which can be redeemed; |
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cancel shares which, at the date of passing of the resolution, have not been taken or agreed to be taken by any person, and diminish the amount of the authorized share capital by the amount of the shares so cancelled; or |
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reduce the authorized share capital. |
We may by ordinary resolution:
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reduce our issued share capital; |
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reduce our stated capital; or |
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reduce our capital redemption reserve fund and share premium account. |
Meetings of Shareholders
Our directors may at any time convene general meetings of our shareholders. The directors shall convene a general meeting upon request of shareholders in accordance with the provisions of the Companies Act. No more than fifteen months may elapse between the date of one annual general meeting and the next, and the annual general meeting shall be held within six months after the expiration of each of our financial years.
We are required to provide our members with written notice of meetings, which shall specify the place, the day and time of the meeting. In every notice calling a meeting of Harmony or of any class of members of Harmony, there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy to attend and vote in lieu of such person and that a proxy need not also be a member. Notice of a general meeting shall be given to the JSE and to the following persons and no other person shall be entitled to receive notice of general meetings:
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to every member of Harmony except any member who has not supplied to Harmony a registered address for the giving of notices; |
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to every person entitled to a share in consequence of the death or insolvency of a member; |
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to the directors and auditor for the time being of Harmony; and |
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by advertisement to the holders of share warrants to bearer. |
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Annual general meetings and meetings calling for the passage of a special resolution require twenty-one days notice in writing. Any other general meeting requires no less than fourteen days notice in writing. A meeting called upon shorter notice shall be deemed to have been duly called if a majority in number of the members having a right to attend and vote at the meeting agree to such a shortened notice period, and if such members hold no less than 95% of the total voting rights of all members.
Our business may be transacted at a general meeting only when a quorum of members is present. Three members present personally or by representative and entitled to vote are a quorum.
The annual general meeting deals with and disposes of all matters prescribed by our Articles of Association and by the Companies Act, including:
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the consideration of the annual financial statements and report of the auditors; |
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the election of directors; |
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the appointment of auditors; and |
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any business arising from the annual financial statements considered at the meeting. |
The holder of a general or special power of attorney given by a member, whether the holder is a member or not, shall be entitled to attend meetings of Harmony or of any class of members of Harmony and to vote at such meetings if so authorized by the power of attorney. Any member may appoint a proxy, who need not be a member, to attend, speak and, subject to the provisions of the Companies Act, to vote in his place on a show of hands and on a poll at any general meeting or at any meeting of any class of members. The instrument appointing a proxy to vote at a meeting of Harmony and the power of attorney or other authority shall be deposited at our transfer office not later than 48 hours (excluding Saturdays, Sundays and Public Holidays) before the meeting at which the person empowered proposes to vote. No instrument appointing a proxy shall be valid after the end of a period of 6 months commencing on the date on which it is signed unless otherwise expressly stated in the proxy.
Title to Shares
The registered holder or holders of any shares shall, during his or their respective lifetimes and while not subject to any legal incapacity, be the only person or persons recognized by us as having any right to, or in respect of, such shares and, in particular, we shall not be bound to recognize:
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that the registered holder or holders hold such shares upon trust for, or as the nominee of, any other person; or |
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that any person, other than the registered holder or holders, holds any contingent, future or partial interest in such shares or any interest in any fractional part of any of such shares. |
Where any share is registered in the names of two or more persons they shall be deemed to be joint holders. Accordingly where any member dies, the survivor or survivors, where the deceased was a joint holder, and the executor of the deceased, where the deceased was the sole holder, shall be the only persons recognized by us as having any right to the interest of the deceased in any of our shares.
We may enter in the register as member, no mine official, of Harmony, the name of any person who submits proof of his appointment as the executor, administrator, trustee, curator or guardian in respect of the estate of a deceased member of Harmony or of a member whose estate has been sequestrated or of a member who is otherwise under disability or as liquidator of any body corporate in the course of being wound up which is a member of Harmony, and any person whose name has been so entered in the register shall be deemed to be a member of Harmony.
Non-South African Shareholders
There are no limitations imposed by South African law or by our Articles of Association on the rights of non-South African shareholders to hold or vote our ordinary shares or securities convertible into ordinary shares.
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Disclosure of Interest in Shares
Pursuant to the Companies Amendment Act Number 37 of 1999, where securities of an issuer are registered in the name of a person and that person is not the holder of the beneficial interest in all of the securities so held, it is obliged, at the end of every three-month period after June 30, 1999 (i.e., commencing on September 30, 1999), to disclose to the issuer the identity of each person on whose behalf the registered holder holds securities and the number and class of securities issued by that issuer held on behalf of each such person. Moreover, an issuer of securities may, by notice in writing, require a person who is a registered shareholder, or whom the issuer knows or has reasonable cause to believe to have a beneficial interest in, a security issued by the issuer, to confirm or deny whether or not such person holds that beneficial interest and, if the security is held for another person, to disclose to the issuer the identity of the person on whose behalf a security is held. The addressee of the notice may also be required to give particulars of the extent of the beneficial interest held during the three years preceding the date of the notice. All issuers of securities are obliged to establish and maintain a register of the disclosures described above and to publish in their annual financial statements a list of the persons who hold beneficial interests equal to or in excess of 5% of the total number of securities of that class issued by the issuer together with the extent of those beneficial interests.
Changes in Control
There are various procedures under the Companies Act whereby mergers and takeovers can be effected. These procedures are not exclusive and there are a variety of techniques that can be used to acquire control. All of these procedures are, however, subject to control by the Securities Regulation Panel and the requirements embodied in the Securities Regulation Code on Takeovers and Mergers shall be adhered to. The JSE Listing Requirements also contain certain requirements with regard to the process involved in a merger or takeover. While the requirements of the Securities Regulation Panel and the JSE Listings Requirements might have the general effect of delaying, deferring or preventing a change in control of a company, our Memorandum and Articles of Association do not impose additional restrictions on mergers or takeovers.
Register of Members
We keep a register of shareholders at our office and at the office of our transfer secretaries in South Africa, and our transfer secretaries in the United Kingdom keep a branch shareholders register at their offices.
The register of members includes:
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the names and addresses of the members; |
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the shares held by each member, distinguishing each share by its denoting number, if any, by its class or kind, and by the amount paid or deemed to be paid thereon; |
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the date on which the name of any person was entered in the register as a member; and |
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the date on which any person ceased to be a member. |
Annual Report and Accounts
The board is required to keep such accounting records and books of account as are prescribed by the Companies Act.
The directors will cause to be prepared annual financial statements and a South African annual report as required by the Companies Act and the JSE rules. We will deliver a copy of the South African annual report and annual financial statements to every member not less than twenty-one days prior to the date of each annual general meeting.
Our annual report on Form 20-F is available on our website at www.harmony.co.za. We will deliver a paper copy of the annual report containing our IFRS audited financial statements, free of charge, to any shareholder upon request.
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Material Contracts
We enter into material contracts in connection with our business, as described in Item 4. Information on the Company Business and in connection with financing arrangements, as described in Item 5. Operating and Financial Review and Prospects Liquidity and Capital Resources .
Exchange Controls
Introduction
The following is a general outline of South African exchange controls. Investors should consult a professional adviser as to the exchange control implications of their particular investments.
The Republic of South Africas exchange control regulations provide for restrictions on exporting capital from a Common Monetary Area consisting of South Africa, the Republic of Namibia and the Kingdoms of Lesotho and Swaziland. Transactions between South African residents (including corporations) and between residents of the Common Monetary Area are subject to these exchange controls, which are regulated by the South African Reserve Bank ( SARB ).
Since 1995 a number of exchange control regulations have been relaxed with regard to both residents and non-residents. The government remains committed to the total abolition of exchange controls, but has stated its intention of following a gradual approach. This gradual approach to the abolition of exchange controls adopted by the South African government is designed to allow the economy to adjust more smoothly to the removal of controls that have been in place for a considerable period of time. The stated objective of the authorities is to reach a point where there is equality of treatment between residents and non-residents in relation to inflows and outflows of capital. South Africa, being classified as an emerging market, is therefore still regarded as a capital importer, hence the controls over capital flows. Unlimited outward transfers of capital are not permitted at this stage, but the emphasis of regulation is expected to be increasingly on the positive aspects of prudential financial supervision.
A considerable degree of flexibility is built into the system of exchange controls, and the SARB possesses substantial discretionary powers in approving or rejecting the applications that fall outside the authority granted to authorized dealers.
The main purpose of exchange controls is to ensure the timely repatriation of funds into the South African banking system of certain foreign currency acquired by residents of South Africa, whether through transactions of a current or of a capital nature. Timely repatriation of funds will help avoid undue pressure on the countrys gold and foreign reserves and an undue depreciation of the exchange rate of the Rand. Payment of foreign currency and the use of gold and foreign reserves for importation of goods and services into the country are relatively freely allowed.
These comments relate to exchange controls in force at June 30, 2011. These controls are subject to change at any time without notice, however, the government has previously announced most changes during the annual budget statement in February. It is not possible to predict whether existing exchange controls will be abolished, continued or modified by the South African government in the future, however, the trend in recent years has been the continued gradual relaxation of the exchange controls.
Government Regulatory Considerations
Shares
A foreign investor may invest freely in shares in a South African company, whether listed on the JSE or not. The foreign investor may also sell his or her share investment in a South African company and transfer the proceeds out of South Africa without restriction. However, when the company is not listed on the JSE, the SARB must be satisfied that the sales price of any shares reflects fair market value.
Under present South African exchange control regulations, our ordinary shares and ADSs are freely transferable outside the Common Monetary Area between non-residents of the Common Monetary Area. No prior SARB approval is required for the transfer of proceeds to South Africa, in respect of shares listed on the JSE, provided these funds enter the country through the normal banking channels. In addition, the proceeds from the sale of ordinary shares on the JSE on behalf of those holders of ordinary shares who are not residents of the Common Monetary Area are freely remittable to those holders. Share certificates and warrant certificates held by non-residents will be endorsed with the words non-resident.
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Loans
Generally, the making of loans to us or our subsidiaries, our or our subsidiaries ability to borrow from non-South African sources and the repatriation of dividends, interest and royalties by Harmony will be regulated by the Exchange Control Department of the SARB. If a foreign investor wishes to lend capital to a South African company, the prior approval of the SARB must be sought mainly in respect of the interest rate and terms of repayment applicable to such loan.
Interest on foreign loans is freely remittable abroad, provided the loans received prior approval from the SARB.
Investments
We are also required to seek approval from the SARB to use funds held in South Africa to make investments outside of South Africa.
Dividends
Dividends declared by a quoted company are freely transferable out of South Africa from both trading and non-trading profits earned in South Africa through a major bank as agent for the SARB.
Where 75% or more of a South African companys capital, voting power, power of control or earnings is directly or indirectly controlled by non-residents, such a company is designated an affected person by the SARB, and certain restrictions are placed on its ability to obtain local financial assistance. We are not, and have never been, designated an affected person by the SARB.
If an affected person made use of local borrowing facilities, the affected persons must apply for SARB approval prior to remitting dividends offshore. As a general matter, an affected person that has accumulated historical losses may not declare dividends out of current profits unless and until such time that the affected persons local borrowings do not exceed the local borrowing limit.
Certain South African Tax Considerations
The discussion in this section is based on current law and our interpretation thereof. Changes in the law may alter the tax treatment of our ordinary shares or ADSs, as applicable, possibly on a retrospective basis. The following summary is not a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase, own or dispose of our ordinary shares or ADSs, and does not cover the tax consequences that depend upon your particular tax circumstances. In particular, the following summary addresses tax consequences for holders of ordinary shares or ADSs who are not tax residents of South Africa. It specifically excludes the tax consequences for non-tax residents whose holding of shares or ADSs is effectively connected with a permanent establishment in South Africa through which the holder carries on business activities, or who is not a beneficial recipient of the dividends, or where the source of the transaction or dividends is to be in South Africa. In addition, it does not cover the tax consequences for the holder that is not entitled to the benefits of the double taxation agreement concluded between the Republic of South Africa and the United States of America signed on February 17, 1997 ( U.S. Treaty ). It also assumes that the holders would hold the ordinary shares or ADSs on capital account (that is, for investment purpose). We recommend that you consult your own tax adviser concerning the consequences of holding our ordinary shares or ADSs, as applicable, in your particular situation.
Dividends
South Africa does not currently levy any withholding tax on dividends. Rather, it currently imposes a corporate tax known as Secondary Tax on Companies ( STC ) at a rate of 10% on dividends declared by a South African company. It is important to appreciate that STC is not a withholding tax on dividends, but a tax on profits of a company. However, it was announced that STC would be abolished and be replaced by a traditional dividend withholding tax. At this stage it is expected that the new dividend withholding tax will be introduced in the near future. The rate of the new dividend withholding tax will be 10%. The new withholding tax will be imposed on, amongst others, non-resident shareholders, and it would be withheld by the company declaring and paying the dividend to its shareholders or the regulatory intermediary, as the case may be.
Article 10 of the U.S. Treaty provides that a dividend withholding tax may be levied by South Africa. However, it may not exceed 5% of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 10% of the voting stock of the South African company paying the dividends. Although the U.S. Treaty refers to a maximum withholding tax rate of 15% in other cases, the rate would be 10%.
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Capital Gains Tax
A Capital Gains Tax ( CGT ) was introduced with effect from October 1, 2001. In the case of an individual, 25% of the capital gain is included in its taxable income. In the case of a corporate entity, 50% of such gain is included in its taxable income. CGT is only applicable to non-residents if the proceeds from the sale are attributable to a permanent establishment of the non-resident shareholder. The terms of the U.S. Treaty (which will prevail in case of conflict) provide that the U.S. holder of ordinary shares or ADSs will not be subject to CGT if the assets have been held as capital assets, unless they are linked to a permanent establishment of such non-resident shareholder in South Africa. To the extent that shares or ADSs are held on revenue account, a similar principle would apply with reference to the payment of income tax, and income tax will only be payable to the extent that the gain is attributable to the carrying on of a business in South Africa through a permanent establishment situation therein. The current corporate rate is equal to 28%. Any gains realized on the disposal of equity shares are automatically deemed to be of a capital nature if they have been held for a continuous period of 3 years. Such provision applies automatically and is not elective.
Generally the domestic laws of South Africa provide that a capital gain will be deemed to have been sourced in South Africa and be subject to South African tax to the extent that the asset related to an interest in immovable property situated in South Africa. It includes any equity shares held by a person in a company if
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80% or more of the market value of the equity shares, ownership or right to ownership or vested interest, as the case may be, at the time of disposal thereof is attributable directly or indirectly to immovable property held otherwise than as trading stock; and |
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the person directly or indirectly holds at least 20% of the equity shares in the company or ownership or right to ownership of the other entity. |
(Certain amendments have been announced to these deeming provisions effective 1 January 2012 and apply in respect of amounts received or accrued during years of assessment commencing on or after that date).
The provisions of the U.S. Treaty will override the deemed source rules to the extent applicable. Article 13 of the U.S. Treaty provides that South Africa may tax a gain that is attributable to the alienation of real property situated in South Africa, which concept includes the equivalent of a U.S. real property interest, even if held through shares.
With effect from 1 January 2012 it is deemed that an amount will be derived by a person from a source within South Africa if the amount constitutes a dividend received by or accrued to that person.
Securities Transfer Tax
A Security Transfer Tax ( STT ) is applicable in respect of the transfer of any security issued by a South African company at a rate of 0.25% of the taxable amount of the security concerned (generally the market value thereof). A security is defined to include depository receipt in a company, in addition to company shares. STT is not payable on the issue of any security.
Although ADSs in respect of our shares are not listed on the JSE, reference is specifically made to the transfer of depository receipts in a South African company. As a consequence, STT will therefore be payable on the transfer of ADSs. In addition, the process of depositing shares listed on the JSE in return for ADSs, or withdrawing such shares from the deposit facility, may attract STT as and when the shares are transferred to or from the depository institution.
STT is payable by the broker or participant if a transaction is effected through a stockbroker or a strata participant, but it may be recovered from the person acquiring the beneficial ownership of the rights concerned. In other instances, STT is payable by the person acquiring beneficial ownership.
STT is also payable on the subsequent redemption or cancellation of shares or cancellation of shares or ADSs.
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Interest
It was recently announced that South Africa will ignore a traditional withholding tax on interest at the rate of 10%, which would be reduced to zero in the case of the U.S. Treaty. However, the South African government announced that the treaties will be renegotiated to refer generally to a minimum 5% withholding tax on interest unless one is dealing with a developed tax system such as the U.S.
Capitalization Shares
Capitalization shares distributed at the option of holders of shares in lieu of cash dividends are currently not subject to STC. However, this position may change to the extent that the new withholding tax on dividends is introduced.
Voting Rights
There are no limitations imposed by South African law or by our charter on the right of non-resident or foreign owners to hold or vote our ordinary shares.
Certain United States Federal Income Tax Considerations
Except as described below under the heading Non-U.S. Holders, the following is a discussion of certain material U.S. federal income tax consequences for a U.S. holder of purchasing, owning and disposing of the ordinary shares (for purposes of this summary, references to the ordinary shares include the ADSs, unless the context otherwise requires). This summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase the ordinary shares. In particular, this summary deals only with U.S. holders that will hold the ordinary shares as capital assets. It does not address considerations that may be relevant to you if you are an investor that is subject to special tax rules, such as a bank, real estate investment trust, regulated investment company, insurance company, dealer in securities or currencies, trader in securities or commodities that elects mark-to-market treatment, person that will hold the ordinary shares as a hedge against currency risk or as a position in a straddle or conversion transaction, tax-exempt organization, person whose functional currency is not the U.S. dollar, person liable for alternative minimum tax, or a person who owns directly, indirectly or by attribution, at least 10 percent of our stock.
You will be a U.S. holder if you are a beneficial owner of ordinary shares and you are:
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an individual who is a citizen or resident of the United States; |
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a U.S. domestic corporation, or other entity treated as a domestic corporation for U.S. federal income tax purposes; |
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an estate whose income is subject to U.S. federal income tax regardless of its source; or |
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a trust if a U.S. court can exercise primary supervision over the trusts administration and one or more U.S. persons are authorized to control all substantial decisions of the trust. |
If a partnership (including for this purpose any entity treated as a partnership for U.S. tax purposes) is a beneficial owner of the ordinary shares, the U.S. tax treatment of a partner in the partnership generally will depend on the status of the partner and the activities of the partnership. A holder of the ordinary shares that is a partnership and partners in such a partnership should consult their own tax advisors about the U.S. federal income tax consequences of holding and disposing of the ordinary shares.
A non-U.S. holder is a beneficial owner of ordinary shares that is not a U.S. person for U.S. federal income tax purposes. If you are a non-U.S. holder, the discussion below under Non-U.S. Holders will apply to you.
This summary is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing and proposed U.S. Treasury regulations, rulings, and decisions, all as now in effect and all of which may change. Any change could apply retroactively and could affect the continued validity of this summary.
In general, if you hold ADSs, you will be treated as the holder of the ordinary shares represented by those ADSs for U.S. federal income tax purposes.
We believe that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for the
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current taxable year. However, we cannot assure you that we will not be considered a PFIC in the current or future years. The determination whether or not we are a PFIC is a factual determination that is based on the types of income we earn and the value of our assets and cannot be made until the close of the applicable tax year. If we were currently or were to become a PFIC, U.S. holders of ordinary shares would be subject to special rules and a variety of potentially adverse tax consequences under the Code.
Taxation of Dividends
Subject to the PFIC rules referred to below, under U.S. federal income tax laws, if you are a U.S. holder, the gross amount of dividends that you receive in cash (or that are part of a distribution that any shareholder has the right to receive in cash) in respect of the ordinary shares generally will be subject to U.S. federal income taxation as dividend income to the extent paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes). You must include the amount of any South African tax withheld from the dividend payment in this gross amount even though you do not in fact receive it. Dividends received by an individual taxpayer during taxable years beginning before January 1, 2013 will be taxed at a maximum rate of 15% where certain holding period and other requirements are satisfied, if such dividends constitute qualified dividend income. Qualified dividend income includes dividends paid by a Qualified Foreign Corporation, and we believe that we are, and will continue to be, a Qualified Foreign Corporation. Holders of ordinary shares should consult their own tax advisors regarding the availability of the reduced dividend tax rate in light of their own particular circumstances. Dividends will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from other corporations.
Dividends paid in South African Rand will be includible in your gross income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day you receive (or the depository receives, in the case of the ADSs) the dividend, regardless of whether the payment is in fact converted into U.S. dollars. If the foreign currency received as a dividend is not converted into U.S. dollars on the date of receipt, a U.S. holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitations. You generally should not be required to recognize any foreign currency gain or loss to the extent such dividends paid in South African Rand are converted into U.S. dollars immediately upon receipt by the applicable party. If we distribute non-cash property as a dividend, you generally will include in income an amount equal to the fair market value of the property, in U.S. dollars, on the date that it is distributed. Subject to certain limitations, a U.S. holder may be entitled to a credit or deduction against its U.S. federal income taxes for the amount of any South African taxes that are withheld from dividend distributions made to such U.S. holders. The decision to claim either a credit or deduction must be made annually, and will apply to all foreign taxes paid by the U.S. holder to any foreign country or U.S. possession with respect to the applicable tax year.
Dividends received from us will generally be income from non-United States sources, for U.S. foreign tax credit purposes, subject to various classifications and other limitations. The rules relating to computing foreign tax credits are complex. You should consult your own tax advisor to determine the foreign tax credit implications of owning ordinary shares.
Distributions in excess of current and accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the ordinary shares and thereafter as capital gain.
Capital Gains
Subject to the PFIC rules referred to below, if you are a U.S. holder and you sell your ordinary shares, you will recognize capital gain or loss in an amount equal to the difference between the U.S. dollar value of the amount you realize on the sale and your adjusted tax basis in the ordinary shares, determined in U.S. dollars. Such gain or loss generally will be long-term capital gain or loss if you held the ordinary shares for more than one year. Prior to January 1, 2013, long-term capital gain recognized by a non-corporate U.S. holder is generally subject to a maximum tax rate of 15%. In general, any capital gain or loss recognized upon the sale or exchange of ordinary shares will be treated as U.S. source income or loss, as the case may be, for U.S. foreign tax purposes. Your ability to offset capital losses against income is subject to limitations.
Deposits and withdrawals of ordinary shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.
To the extent that you incur South African stamp duty, MST or uncertified securities tax (to be replaced with STT) in connection
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with a transfer or withdrawal of ordinary shares as described under Certain South African Tax Considerations Security Transfer Tax above, such stamp duty, MST or uncertified securities tax will not be a creditable tax for U.S. foreign tax credit purposes.
Medicare Tax on Unearned Income
Certain U.S. holders that are individuals, estates or trusts are required to pay an additional 3.8% tax on, among other things, dividends on and capital gains from the sale or other disposition of ordinary shares for taxable years beginning after December 31, 2012. U.S. holders that are individuals, estates or trusts should consult their tax advisors regarding the effect, if any, of this tax on their ownership and disposition of our ordinary shares.
Non-U.S. Holders
If you are a non-U.S. holder of the ordinary shares, you generally will not be subject to U.S. federal income or withholding tax on dividends received on such ordinary shares, unless such income is effectively connected with your conduct of a trade or business in the United States, and the dividends are attributable to a permanent establishment (or in the case of an individual, a fixed place of business) that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to U.S. taxation on a net income basis. In such cases, you generally will be taxed in the same manner as a U.S. holder, and will not be subject to U.S. federal income tax withholding. If you are a corporate non-U.S. holder, effectively connected dividends may, under certain circumstances, be subject to an additional branch profits tax at a 30% rate or a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.
If you are a non-U.S. holder of the ordinary shares, you will also generally not be subject to U.S. federal income or withholding tax in respect of gain realized on the sale of such ordinary shares, unless (i) such gain is effectively connected with your conduct of a trade or business in the United States, and the gain is attributable to a permanent establishment (or in the case of an individual, a fixed place of business) that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to U.S. taxation on a net income basis; or (ii) in the case of gain realized by an individual non-U.S. holder, you are present in the United States for 183 days or more in the taxable year of the sale and certain other conditions are met. In the first case, the non-U.S. holder will be taxed in the same manner as a U.S. holder. In the second case, the non-U.S. holder will be subject to U.S. federal income tax at a rate of 30% on the amount by which such non-U.S. holders U.S.-source capital gains exceed such non-U.S. holders U.S.-source capital losses. If you are a corporate non-U.S. holder, effectively connected dividends may, under certain circumstances, be subject to an additional branch profits tax at a 30% rate or a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.
PFIC Rules
We believe that our ordinary shares will not be treated as stock of a PFIC for U.S. federal income tax purposes for the current tax year. The determination of whether or not we are a PFIC is a factual determination that cannot be made until the close of the applicable tax year and that is based on the types of income we earn and the value of our assets (including goodwill), both of which are subject to change. In calculating goodwill for this purpose, we will value our total assets based on the total market value, determined with reference to the then market price of the ordinary shares, and will make determinations regarding the amount of this value allocable to goodwill. Because the determination of goodwill will be based on the market price of the ordinary shares, it is subject to change. It is possible that the U.S. Internal Revenue Service may challenge our valuation of our assets (including goodwill), which may result in us being classified as a PFIC. Thus, it is possible that we may be or become a PFIC in the current or any future taxable year and we cannot assure you that we will not be considered a PFIC in any such tax year.
In general, if you are a U.S. holder, we will be a PFIC with respect to you if for any taxable year in which you held the ordinary shares:
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at least 75% of our gross income for the taxable year is passive income; or |
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at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income. |
Passive income generally includes dividends, interest, royalties, rents (other than certain rents and royalties derived in the active
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conduct of a trade or business), the excess of gains over losses from certain types of transactions in commodities, annuities and gains from assets that produce passive income. If a foreign corporation owns at least 25% by value of the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, as receiving directly its proportionate share of the other corporations income.
If we are treated as a PFIC, and you are a U.S. holder that did not make a mark-to-market election, as described below, you will be subject to special rules with respect to:
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any gain you realize on the sale or other disposition of your ordinary shares; and |
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any excess distribution that we make to you (generally, any distributions to you during a single taxable year that are greater than 125% of the average annual distributions received by you in respect of the ordinary shares during the three preceding taxable years or, if shorter, your holding period for the ordinary shares). Under these rules: |
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the gain or excess distribution will be allocated ratably over your holding period for the ordinary shares; |
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the amount allocated to the taxable year in which you realized the gain or excess distribution will be taxed as ordinary income; |
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the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year; and |
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the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year. |
Special rules apply for calculating the amount of the foreign tax credit with respect to excess distributions by a PFIC.
If you own shares in a PFIC that are treated as marketable stock, you may make a mark-to-market election. If you make this election in a timely fashion, you will not be subject to the PFIC rules described above. Instead, in general, you will include as ordinary income each year the excess, if any, of the fair market value of your ordinary shares at the end of the taxable year over your adjusted basis in your ordinary shares. You will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of your ordinary shares over the fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). Your basis in the ordinary shares will be adjusted to reflect any such income or loss amounts.
We do not intend to furnish you with the information that you would need in order to make a qualified electing fund election to include your share of its income on a current basis.
If you own ordinary shares during any year that we are a PFIC, you must file U.S. Internal Revenue Service Form 8621 that describes the distribution received on the ordinary shares and the gain realized on the disposition of the ordinary shares. The reduced tax rate for dividend income, discussed in Taxation of Dividends, is not applicable to dividends paid by a PFIC.
U.S. Information Reporting and Backup Withholding Rules
Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries are subject to information reporting and may be subject to backup withholding at a rate currently of 28% unless the holder (i) is a corporation or other exempt recipient or (ii) provides a taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred. Backup withholding is not an additional tax, and the amount of any backup withholding from a payment to a U.S. holder will be allowed as a credit against the U.S. holders U.S. federal income tax liability provided that the appropriate returns are filed. A non-U.S. holder generally may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status to the payor, under penalties of perjury, on IRS Form W-8BEN.
Recently Enacted Legislation Related to Disclosure of Information with Respect to Foreign Financial Assets
Recently enacted legislation requires a U.S. holder that is an individual that holds an interest in specified foreign financial assets to disclose certain information related to these holdings. This applies for any year in which the aggregate value of all such holdings is greater than US$50,000. For these purposes, specified foreign financial assets include (i) any depository or custodial account
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maintained by, or certain equity or debt interests in, certain foreign financial institutions, (ii) stock or securities issued by non-U.S. persons, (iii) certain other financial instruments or contracts held for investment where the issuer or counterparty is a non-U.S. person, and (iv) any interest in a foreign entity. In addition, a U.S. holder may be required to furnish certain information to avoid a presumption that the aggregate value of the U.S. holders holdings of specified foreign financial assets are in excess of US$50,000. Penalties may apply in the event of noncompliance. These disclosure requirements are effective for taxable years beginning after March 18, 2010. As with all new legislation, the application of certain of these requirements in any particular circumstance may not be entirely clear. Prospective investors should consult their own tax advisors regarding the effect of this legislation in their particular circumstances.
THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IS INTENDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE TAX ADVICE. ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISER AS TO PARTICULAR TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF THE ORDINARY SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS, AND PROPOSED CHANGES IN APPLICABLE LAWS.
DIVIDENDS AND PAYING AGENTS
Not applicable.
STATEMENTS BY EXPERTS
Not applicable.
DOCUMENTS ON DISPLAY
Our Memorandum and Articles of Association may be examined at our principal place of business at: Randfontein Office Park, Corner of Main Reef Road and Ward Avenue, Randfontein, 1760, South Africa. We also file annual and furnish interim reports and other information with the Securities and Exchange Commission, or the SEC. You may read and copy any reports or other information on file at the SECs public reference room at the following location:
Public Reference Room
100 F Street, NW
Room 1580
Washington D.C. 20549
Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. The SEC filings are also available to the public from commercial document retrieval services. We file electronically with the SEC, and the documents it files are available on the website maintained by the SEC at www.sec.gov.
SUBSIDIARY INFORMATION
Not applicable.
Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General
We are exposed to market risks, including credit risk, foreign currency risk, commodity price risk and interest rate risk associated with underlying assets, liabilities and anticipated transactions. Following periodic evaluation of these exposures, we may enter into derivative financial instruments to manage these exposures. We have policies in areas such as counterparty exposure and hedging practices, which have been approved by our senior management. We do not hold or issue derivative financial instruments for trading or speculative purposes.
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We did not apply hedge accounting to incidental hedges held in the past.
In accordance with IAS 39 Financial Instruments: Recognition and Measurement, we account for our derivative financial instruments as hedging transactions if the following criteria are met:
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in the case of a hedge of an anticipated future transaction, there is a high probability that the transaction will occur. |
Foreign Currency Sensitivity
In the ordinary course of business, we enter into transactions denominated in foreign currencies (primarily U.S. dollars, Australian dollars and Kina). In addition, we incur investments and liabilities in U.S. dollars, Canadian dollars, British pounds sterling and Australian dollars from time to time. As a result, we are subject to transaction and translation exposure from fluctuations in foreign currency exchange rates. We do not generally hedge our exposure to foreign currency exchange rates.
Our revenues and costs are very sensitive to the exchange rate of the Rand and other non-U.S. currencies to the U.S. dollar because gold is generally sold throughout the world in U.S. dollars, but most of our operating costs are incurred in Rand and other non-U.S. currencies. Appreciation of the Rand and other non-U.S. currencies against the U.S. dollar increases working costs at our operations when those costs are translated into U.S. dollars, which reduces operating margins and net income from our operations. Depreciation of the Rand and other non-U.S. currencies against the U.S. dollar reduces these costs when they are translated into U.S. dollars, which increases operating margins and net income from our operations. See Item 3. Key Information Exchange Rates and Item 3. Key Information Risk Factors Because most of Harmonys production costs are in Rand and other non-U.S. currencies, while gold is generally sold in U.S. dollars, Harmonys financial condition could be materially harmed by an appreciation in the value of the Rand and other non-U.S. currencies.
We did not have any currency contracts in place as of June 30, 2011, 2010 or 2009.
Commodity Price Sensitivity
General
The market price of gold has a significant effect on our results of operations, our ability to pay dividends and undertake capital expenditures, and the market prices of our ordinary shares.
Gold prices have historically fluctuated widely and are affected by numerous industry factors over which we do not have any control. See Item 3. Key Information Risk Factors The profitability of Harmonys operations, and the cash flows generated by those operations, are affected by changes in the market price for gold, which in the past has fluctuated widely. The aggregate effect of these factors, all of which are beyond our control, is impossible for us to predict.
Harmonys Hedging Policy
As a general rule, we sell our gold production at market prices. We generally do not enter into forward sales, commodity, derivatives or hedging arrangements to establish a price in advance for the sale of our future gold production, although we may do so in the future. For more detailed information on our hedging policy, see Item 4. Information on the Company Business Hedge Policy.
Commodity Sales Agreements
We did not have any forward commodity sales agreements in place during fiscal 2011, 2010 and 2009.
Interest Rate Sensitivity
Our interest rate risk arises mainly from long-term borrowings. We have variable interest rate borrowings. Variable rate borrowings expose us to cash flow interest rate risk. We have not entered into any agreements to manage this risk in fiscal years 2009, 2010 and 2011.
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Sensitivity analysis
A change of 100 basis points in interest rates at June 30, 2011, 2010 and 2009 would have increased (decreased) profit or loss before tax by the amounts shown below. This analysis assumes that all other variables remain constant.
June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Increase in 100 basis points |
2 | 2 | | |||||||||
Decrease in 100 basis points |
(2 | ) | (2 | ) | |
The above table excludes the fixed rate convertible bond for fiscal 2009. As it was accounted for at amortized cost, and had a fixed coupon interest rate rather than a floating coupon interest, interest rate changes did not affect reported profit and loss.
For further information on sensitivities, see note 4 of the consolidated financial statements in Item 18.
Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
On October, 7 2011, Harmony appointed Deutsche Bank Trust Company Americas in place of Bank of New York Mellon as its depositary bank for ADRs. The principal terms regarding fees and charges that an ADR holder might have to pas, as well as any fee and other payments made by the depositary to us as part of the depositary agreement, are summarized below.
Fees and Expenses
Persons depositing shares or ADR holders must pay: | For | |
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) |
The execution and delivery of ADRs The surrender of ADRs |
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$.02 (or less) per ADS | Any cash distribution to you | |
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs | Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADR holders | |
Registration or transfer fees | Transfer and registration of equity shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares | |
Expenses of the depositary |
Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) Converting foreign currency |
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Taxes and other governmental charges the depositary or the custodian have to pay on any ADR or share underlying an ADR, for example, stock transfer taxes, stamp duty or withholding taxes | As necessary | |
Any charges incurred by the depositary or its agents for servicing the deposited securities | As necessary |
Payments of Taxes
ADR holders must pay any tax or other governmental charge payable by the custodian or the depositary on any ADS or ADR, deposited security or distribution. If an ADR holder owes any tax or other governmental charge, the depositary may:
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refuse to effect any transfer of such ADRs or any withdrawal of ADSs; |
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withhold any dividends or other distributions; or |
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sell part or all of the ADSs evidenced by such ADR, |
and may apply dividends or other distributions or the proceeds of any sale in payment of the outstanding tax or other governmental charge. The ADR holder remains liable for any shortfall.
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GLOSSARY OF MINING TERMS
The following explanations are not intended as technical definitions, but rather are intended to assist the general reader in understanding certain terms as used in this annual report.
Alluvial: the product of sedimentary processes in rivers, resulting in the deposition of alluvium (soil deposited by a river).
Arenaceous: said of a sediment or sedimentary rock consisting wholly or in part of sand-sized fragments or having a sandy texture or the texture of such a sediment or rock.
Auriferous: a substance that contains gold (AU).
Beneficiation: the process of adding value to gold products by transforming gold bullion into fabricated gold products.
By-products : Any products that emanate from the core process of producing gold, including silver and uranium in South Africa and copper, silver and molybdenum in Papua New Guinea.
Calc-silicate rock : A metamorphic rock consisting mainly of calcium-bearing silicates such as diopside and wollastonite, and formed by metamorphism of impure limestone or dolomite.
Carbon in leach (CIL) : Gold is leached from a slurry of gold ore with cyanide in agitated tanks and adsorbed on to carbon granules in the same circuit. The carbon granules are separated from the slurry and treated in an elution circuit to remove the gold.
Carbon In Pulp (CIP): a common process used to extract gold from cyanide leach slurries. The process consists of carbon granules suspended in the slurry and flowing counter-current to the process slurry in multiple-staged agitated tanks. The process slurry, which has been leached with cyanide prior to the CIP process, contains solubilised gold. The solubilized gold is absorbed onto the carbon granules, which are subsequently separated from the slurry by screening. The gold is then recovered from the carbon by electrowinning onto steel wool cathodes or by a similar process.
Carbon In Solution (CIS): a process similar to CIP except that the gold, which has been leached by the cyanide into solution, is separated by the process of filtration (solid/liquid separation). The solution is then pumped through six stages where the solution comes into contact with the activated carbon granules.
Cash cost: a measure of the average cost of producing an ounce of gold, calculated by dividing the total cash working costs in a period by the total gold production over the same period. Working costs represent total operating costs less certain administrative expenses, royalties and depreciation. In determining the cash cost of different elements of the operations, production overheads are allocated pro rata.
Conglomerate: a coarse-grained classic sedimentary rock, composed of rounded to sub-angular fragments larger than 2mm in diameter (granules, pebbles, cobbles, boulders) set in a fine-grained matrix of sand or silt, and commonly cemented by calcium carbonate, iron oxide, silica or hardened clay.
Crosscut: a mine working that is driven horizontally and at right angles to an adit, drift or level.
Cut and fill: a method of underground mining in which a stope is excavated and refilled with material (waste or tailings).
Cut-off grade: the grade at which the total profit from mining the orebodies, under a specified set of mining parameters, is maximized.
Cyanide leaching: the extraction of a precious metal from an ore by its dissolution in a cyanide solution.
Decline: an inclined underground access way.
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Deferred Stripping: the removal of overburden through stripping in the current period to access ore expected to be exploited in a future period. Costs incurred with deferred stripping are deferred until the ore is accessed, in order to ensure matching of costs and revenues.
Depletion: the decrease in quantity of ore in a deposit or property resulting from extraction or production.
Development: activities (including shaft sinking and on-reef and off-reef tunneling) required to prepare for mining activities and maintain a planned production level and those costs to enable the conversion of mineralized material to reserves.
Electro-winning: the process of removing gold from solution by the action of electric currents.
Elution: removal of the gold from the activated carbon before the zinc precipitation stage.
Exploration: activities associated with ascertaining the existence, location, extent or quality of mineralized material, including economic and technical evaluations of mineralized material.
Fabricated gold: gold on which work has been performed to turn it into a product, such as jewelry, which differs from a pure investment product, such as a gold bullion bar.
Fatal injury frequency rate: the number of fatal injuries per million hours worked.
Fluvial: produced by the action of a stream or river.
Footwall: the underlying side of a fault, orebody or stope.
Forward purchase: an agreement for the purchase of a commodity at a specified future date at a fixed price.
Forward sale: the sale of a commodity for delivery at a specified future date and price.
Gold reserves: the gold contained within proven and probable reserves on the basis of recoverable material (reported as mill delivered tons and head grade).
Gold lease rate swap: an agreement to pay a floating lease rate in exchange for the fixed lease rate inherent in establishing the fixed price in one or more forward gold sales.
Grade: the quantity of metal per unit mass of ore expressed as a percentage or, for gold, as ounces of gold per ton of ore.
Greenfield: a potential mining site of unknown quality.
Greenstone: a field term applied to any compact dark-green altered or metamorphosed basic igneous rock that owes its color to the presence of chlorite, actinolite or epidote.
Grinding: reducing mineralized rock to the consistency of fine sand by crushing and abrading in a rotating steel grinding mill.
Head grade: the grade of the ore as delivered to the metallurgical plant.
Heap leaching: a low-cost technique for extracting metals from ore by percolating leaching solutions through heaps of ore placed on impervious pads. Generally used on low-grade ores.
Leaching: dissolution of gold from the crushed and milled material, including reclaimed slime, for absorption and concentration on to the activated carbon.
Level: the workings or tunnels of an underground mine that are on the same horizontal plane.
Littoral: of or pertaining to a shore.
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Longhole sub-level caving: a process for removing ore in which relatively thin blocks of ore are caused to cave in by successively undermining small panels of ore. The broken and caved ore is then extracted by mechanical means.
Lost time injury frequency rate: the number of lost time injuries per million hours.
Measures: conversion factors from metric units to U.S. units are provided below.
Metric unit | U.S. equivalent | |||
1 tonne |
= 1 t | = 1.10231 short tons | ||
1 gram |
= 1 g | = 0.03215 ounces | ||
1 gram per tonne |
= 1 g/t | = 0.02917 ounces per short ton | ||
1 kilogram per tonne |
= 1 kg/t | = 29.16642 ounces per short ton | ||
1 kilometer |
= 1 km | = 0.621371 miles | ||
1 meter |
= 1 m | = 3.28084 feet | ||
1 centimeter |
= 1 cm | = 0.3937 inches | ||
1 millimeter |
= 1 mm | = 0.03937 inches | ||
1 hectare |
= 1 ha | = 2.47105 acres |
Metallurgical plant: a processing plant used to treat ore and extract the contained gold.
Mill delivered tons: a quantity, expressed in tons, of ore delivered to the metallurgical plant.
Milling/mill: the comminution of the ore, although the term has come to cover the broad range of machinery inside the treatment plant where the gold is separated from the ore.
Mineable: that portion of a mineralized deposit for which extraction is technically and economically feasible.
Mineralization: the presence of a target mineral in a mass of host rock.
Mineralized material: a mineralized body that has been delineated by appropriately spaced drilling and/or underground sampling to support a sufficient tonnage and average grade of metals to warrant further exploration. Such a deposit does not qualify as a reserve until a comprehensive evaluation based upon unit cost, grade, recoveries, and other material factors conclude legal and economic feasibility.
Morphology: the form or shape of a crystal or mineral aggregate.
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Open-pit/Opencast/Open cut: mining in which the ore is extracted from a pit. The geometry of the pit may vary with the characteristics of the orebody.
Ore: a mixture of mineralized material from which at least one of the contained minerals can be mined and processed at an economic profit.
Ore grade: the average amount of gold contained in a ton of gold bearing ore expressed in ounces per ton.
Mineral reserves: that part of mineralized material which at the time of the reserve determination could be economically and legally extracted or produced. Mineral reserves are reported as general indicators of the life-of-mineralized materials. Changes in reserves generally reflect:
|
development of additional reserves; |
|
depletion of existing reserves through production; |
|
actual mining experience; and |
|
price forecasts. |
Grades of ore actually processed may be different from stated reserve grades because of geologic variation in different areas mined, mining dilution, losses in processing and other factors. Recovery rates vary with the metallurgical characteristics and grade of ore processed. Neither reserves nor projections of future operations should be interpreted as assurances of the economic life-of-mineralized material nor of the profitability of future operations.
Orebody: a well defined mass of mineralized material of sufficient mineral content to make extraction economically viable.
Ounce: one Troy ounce, which equals 31.1035 grams.
Overburden: the soil and rock that must be removed in order to expose an ore deposit.
Overburden tons: tons that need to be removed to access an ore deposit.
Palaeotopography: the topography implied at some time in the past.
Pay limit: the breakeven grade at which the orebody can be mined without profit or loss, calculated using the forecast gold price, working costs and recovery factors.
Placer: a sedimentary deposit containing economic quantities of valuable minerals mainly formed in alluvial environments.
Precipitate: the solid product of chemical reaction by fluids such as the zinc precipitation referred to below.
Probable reserves: reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.
Prospect: an area of land with insufficient data available on the mineralization to determine if it is economically recoverable, but warranting further investigation.
Prospecting license: an area for which permission to explore has been granted.
Proven reserves: reserves for which: (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling; and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.
Pyrite: a brassy-colored mineral of iron sulphide (compound of iron and sulfur).
Quartz: a mineral compound of silicon and oxygen.
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Recovery grade: the actual grade of ore realized after the mining and treatment process.
Reef: a gold-bearing sedimentary horizon, normally a conglomerate band, which may contain economic levels of gold.
Refining: the final stage of metal production in which final impurities are removed from the molten metal by introducing air and fluxes. The impurities are removed as gases or slag.
Rehabilitation: the process of restoring mined land to a condition approximating its original state.
Sampling: taking small pieces of rock at intervals along exposed mineralization for assay (to determine the mineral content).
Shaft: a shaft provides principal access to the underground workings for transporting personnel, equipment, supplies, ore and waste. A shaft is also used for ventilation and as an auxiliary exit. It is equipped with a surface hoist system that lowers and raises conveyances for men, materials and ore in the shaft. A shaft generally has more than one conveyancing compartment.
Slimes: the finer fraction of tailings discharged from a processing plant after the valuable minerals have been recovered.
Slurry: a fluid comprising fine solids suspended in a solution (generally water containing additives).
Smelting: thermal processing whereby molten metal is liberated from beneficiated mineral or concentrate with impurities separating as lighter slag.
Spot price: the current price of a metal for immediate delivery.
Stockpile: a store of unprocessed ore.
Stockwork: mineralized material consisting of a three-dimensional network of planar to irregular veinlets closely enough spaced that the whole mass can be mined.
Stope: the underground excavation within the orebody where the main gold production takes place.
Stripping: the process of removing overburden to expose ore.
Sulphide: a mineral characterized by the linkages of sulfur with a metal or semi-metal, such as pyrite, FeS.
Syncline: a basin-shaped fold.
Tailings: finely ground rock from which valuable minerals have been extracted by milling.
Tailings dam (slimes dam) : Dam facilities designed to store discarded tailings.
Ton: one ton is equal to 2,000 pounds (also known as a short ton).
Tonnage: quantities where the ton or tonne is an appropriate unit of measure. Typically used to measure reserves of gold-bearing material in situ or quantities of ore and waste material mined, transported or milled.
Tonne: one tonne is equal to 1,000 kilograms (also known as a metric ton).
Trend: the arrangement of a group of ore deposits or a geological feature or zone of similar grade occurring in a linear pattern.
Unconformity: the structural relationship between two groups of rock that are not in normal succession.
Waste: ore rock mined with an insufficient gold content to justify processing.
Waste rock: the non-mineralized rock and/or rock that generally cannot be mined economically that is hoisted to the surface for disposal on the surface normally close to the shaft on an allocated dump.
Yield: the actual grade of ore realized after the mining and treatment process.
Zinc precipitation: a chemical reaction using zinc dust that converts gold solution to a solid form for smelting into unrefined gold bars.
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Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
At a general meeting held on December 1, 2010, our shareholders authorized the board to allot and issue authorised but unissued ordinary shares with a par value of R0.50 each in the share capital of the Company ( Unissued Shares ) under and in accordance with the terms of the Harmony (2001) Share Option Scheme, the Harmony (2003) Share Option Scheme and the Harmony 2006 Share Plan and, in addition, as a general authority, to allot and issue up to 42 865 478 Unissued Shares, being 10% of the total share capital of the Company as at 30 June 2010, at such time or times to such person or persons or bodies corporate upon such terms and conditions as the directors may from time to time in their sole discretion determine, subject to the provisions of the Companies Act, No 61 of 1973 ( Companies Act ) and the Listings Requirements of the Johannesburg Stock Exchange ( JSE Listings Requirements ).
At a general meeting held on November 23, 2009, our shareholders authorized the board to (i) place 10% of the unissued ordinary shares of the company under directors control and (ii) authorizing the board to allot and issue up to 5% of all or any of our authorized but unissued ordinary shares for cash to such persons and on such terms as the board may, without restriction, from time to time, deem fit as and when suitable opportunities arise, but subject to the requirements of the JSE.
At a general meeting held on November 24, 2008, our shareholders authorized the board to (i) place 10% of the unissued ordinary shares of the company under directors control and (ii) authorizing the board to allot and issue up to 10% of all or any of our authorized but unissued ordinary shares for cash to such persons and on such terms as the board may, without restriction, from time to time, deem fit as and when suitable opportunities arise, but subject to the requirements of the JSE.
USE OF PROCEEDS
Not applicable.
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Item 15. DISCLOSURE CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
As of June 30, 2011, our management, with the participation of our Chief Executive Officer ( CEO ) and Chief Financial Officer ( CFO ), carried out an evaluation, pursuant to Rule 13a-15 promulgated under the Exchange Act of the effectiveness of our disclosure controls and procedures. Based on the foregoing, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of June 30, 2011.
(b) Managements Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Harmonys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the financial statements. Where appropriate, the necessary actions are taken to remedy any failings or weaknesses identified from review of the effectiveness of the internal control system.
Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human error. Internal control over financial reporting also can be circumvented by collusion or improper management override. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of change in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Management conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ( COSO ). Management has assessed the effectiveness of internal control over financial reporting, as of June 30, 2011, and has concluded that such internal control over financial reporting was effective based upon those criteria.
PricewaterhouseCoopers Inc, an independent registered public accounting firm, which has audited the consolidated financial statements included in this Annual Report, has issued an attestation report on the effectiveness of Harmonys internal control over financial reporting as of June 30, 2011.
(c) Attestation Report of the Registered Public Accounting Firm
See report of PricewaterhouseCoopers Inc, an independent registered public accounting firm, on page F-2.
(d) Changes in Internal Control over Financial Reporting
There has been no change in Harmonys internal control over financial reporting that occurred during fiscal 2011 that has materially affected or is reasonably likely to materially affect, Harmonys internal control over financial reporting.
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Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT
At this time, we do not have an individual audit committee financial expert as defined by the rules of the SEC.
The audit committee members through their collective experience do meet a majority of the definitions of the SEC for an audit committee financial expert in both the private and public sectors. The members have served as directors and officers of numerous public companies and have over the years developed a strong knowledge and understanding of IFRS as issued by the IASB, overseeing the preparation, audit and evaluation of financial statements. We believe that the combined knowledge, skills and experience of the Audit Committee, and their authority to engage outside experts as they deem appropriate to provide them with advice on matters related to their responsibilities, enable them, as a group, to act effectively in the fulfillment of their tasks and responsibilities required under the Sarbanes-Oxley Act of 2002.
The Harmony Code of Ethics has been developed to respond to the challenge of ethical conduct in a business environment. The Code of Ethics goes beyond the companys legal and institutional responsibilities by formalizing our values. The purpose of the code is to guide employees behavior, not to provide specific answers to every conceivable situation in the workplace. We approached the development and the annual review of the Code of Ethics in a fully inclusive manner, with broad consultation and information gathering at all levels of the company. Employees have been kept fully informed about the Code of Ethics and all employees are expected to comply with its contents. (The term employees is used in the broadest sense and includes all staff with which a service contract exists, including management, non-management, directors, contractors, consultants, suppliers and temporary staff.) An Ethics Committee was formed in May 2006, which consists of five executive managers and the Company Secretary (who chairs the meeting). This committee is required to meet quarterly to monitor the gift registers and any reported unethical behavior. The Code of Ethics is available on our website at www.harmony.co.za.
Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES
The following sets forth the aggregate fees billed for each of the two past fiscal years for professional fees to our principal accountants for the audit of the annual financial statements or for services normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.
Fiscal year ended June 30, 2010 |
US$ | 2.128 million | ||
Fiscal year ended June 30, 2011 |
US$ | 2.516 million |
AUDIT-RELATED FEES
The following sets forth additional aggregate fees to those reported under Audit Fees in each of the last two fiscal years that were provided by the principal accountant that are reasonably related to the performance of the audit or review of the financial statements:
Fiscal year ended June 30, 2010 |
US$ | 0.413 million | ||
Fiscal year ended June 30, 2011 |
US$ | 0.363 million |
Fees related to interim reviews.
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TAX FEES
The following sets forth the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning:
Fiscal year ended June 30, 2010 |
US$ | 0.107 million | ||
Fiscal year ended June 30, 2011 |
US$ | 0.047 million |
Services comprised advice on disclosure for completion of certain tax returns.
ALL OTHER FEES
The following sets forth the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant not described above:
Fiscal year ended June 30, 2010 |
US$ | 0.066 million | ||
Fiscal year ended June 30, 2011 |
US$ | 0.198 million |
AUDIT COMMITTEE APPROVAL
Our audit committee pre-approves our engagement of PricewaterhouseCoopers Inc to render audit or non-audit services. All of the services described above were approved by the audit committee.
Item 16D. EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
Item 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
Not applicable.
Item 16G. CORPORATE GOVERNANCE
Significant ways in which Harmonys corporate governance practices differ from practices followed by publicly-listed US companies.
Foreign private issuers, such as Harmony, must briefly highlight any significant ways in which their corporate governance practices differ from those following by US-listed companies. Set out below is a brief, general summary of the significant differences:
US-listed companies are required to have a nominating/corporate governance committee and all members of this committee must be non-executive directors. Harmony has a Nomination Committee which comprises three non-executive board members. The lead independent non-executive director serves as Chairman of the Nomination Committee.
For US-listed companies, the chairperson of this committee is required to be the chairperson of the Board of Directors. The current chairman of the Harmony Board of Directors, Patrice Motsepe, is Chairman of one of Harmonys largest shareholders, African
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Rainbow Minerals Limited, and is thus not independent. He is, however, in terms of South African governance practices, a member of the Nomination Committee. The lead independent non-executive director was re-appointed in August 2011.
US-listed companies are required to have a remuneration committee composed entirely of independent directors. Harmony has appointed a Remuneration Committee, comprising three board members, all of whom are non-executive and two of whom are independent.
The non-management directors of US-listed companies must meet at regularly scheduled executive sessions without management. Although Harmony does not specifically require such meetings of its non-executive directors, the board has unrestricted access to all company information, records, documents and property. Directors may, if necessary, take independent professional advice at the companys expense and non-executive directors have access to management and may meet separately with management, without the attendance of executive directors.
US-listed companies are required to publish and distribute to shareholders an annual report within 120 days from the end of its fiscal year. Non-US companies such as Harmony are given 225 days from the end of the fiscal year. Beginning with our 2012 annual report next year, we will be aligned with US-listed companies and will have 120 days to publish our annual report.
We have elected to provide financial statements for the fiscal year ended June 30, 2011 and the related information pursuant to Item 18.
Financial Statements
The financial statements appear in this annual report on Form 20-F beginning on page F-3. The report of the independent registered public accounting firm appears on page F-2.
1.1 | Memorandum of Association of Harmony, as amended (incorporated by reference to Harmonys Registration Statement (file no. 333-13516) on Form F-3 filed on June 21, 2001). | |
1.2 | Articles of Association of Harmony, as amended (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
*2.1 | Notice to shareholders dated October 24, 2011 in respect of the annual general meeting held on November 30, 2011. | |
*2.2 | Deposit Agreement among Harmony, Deutsche Bank Trust Company Limited, as Depositary, and owners and holders of American Depositary Receipts, dated as of October 7, 2011. | |
*2.3 | Form of ADR (included in Exhibit 2.2). | |
4.1 | Harmony (2003) Share Option Scheme, as amended (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed on November 3, 2005). | |
4.2 | Harmony 2006 Share Scheme (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2007, filed on December 7, 2007). | |
4.3 | Draw Down Facility Agreement with Westpac Bank dated June 27, 2007 (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2007, filed on December 7, 2007). | |
4.5 | Shareholders Agreement between ARMGold/Harmony Joint Investment Company (Proprietary) Limited, Clidet No. 770 |
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(Proprietary) Limited and Clidet No. 726 (Proprietary) Limited dated December 18, 2007 (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2008, filed on October 29, 2008). | ||
4.6 | Sale of Shares and Claim Agreement with Randfontein Estates Limited, ARMGold/Harmony Joint Investment Company (Proprietary) Limited and Clidet No. 770 (Proprietary) Limited dated December 18, 2007 (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2008, filed on October 29, 2008). | |
4.8 | Senior Facility Agreement with Nedbank Limited dated September 28, 2007 (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2008, filed on October 29, 2008). | |
4.9 | Master Lease Facility Agreement between Morobe Consolidated Goldfields Limited and Westpac Bank PNG Limited (Hidden Valley Project) dated June 14, 2007 (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2008, filed on October 29, 2008). | |
4.10 | Deed of Extinguishment of Royalty (Wafi-Golpu Project) dated February 16, 2009 (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2009, filed on October 26, 2009). | |
4.11 | Master Purchase and Farmin Agreement dated May 22, 2008 between Morobe Consolidated Goldfields Limited, Wafi Mining Limited, Morobe Exploration Limited, Newcrest PNG 1 Limited, Newcrest PNG 2 Limited and Newcrest PNG 1 Limited (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2009, filed on October 26, 2009). | |
4.12 | Hidden Valley Joint Venture Agreement dated May 22, 2008 between Morobe Consolidated Goldfields Limited, Newcrest PNG 1 Limited and Hidden Valley Services Limited (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2009, filed on October 26, 2009). | |
4.13 | Master Co-operation Agreement dated on or about August 5, 2008 between Hidden Valley Services Limited, Wafi-Golpu Services Limited, Morobe Exploration Services Limited, Harmony Gold (PNG Services) Pty Limited and Newcrest Mining Limited (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2009, filed on October 26, 2009). | |
4.14 | Administration Expenses Agreement dated August 11, 2009 between Pamodzi Gold Free State (Proprietary) Limited (in provisional liquidation) and Harmony Gold Mining Company Limited (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2010, filed on October 25, 2010) | |
4.15 | Sale of Assets Agreement (South) dated September 8, 2009 between Pamodzi Gold Free State (Proprietary) Limited (in provisional liquidation) and Harmony Gold Mining Company Limited (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2010, filed on October 25, 2010) | |
4.16 | Sale of Assets Agreement (Waste Rock Dump) dated September 8, 2009 between Pamodzi Gold Free State (Proprietary) Limited (in provisional liquidation) and Avgold Limited (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2010, filed on October 25, 2010) | |
4.17 | Sale of Assets Agreement (North) dated September 8, 2009 between Pamodzi Gold Free State (Proprietary) Limited (in provisional liquidation), Avgold Limited and Harmony Gold Mining Company Limited (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2010, filed on October 25, 2010) | |
4.18 | Sale of Assets Agreement (Plant) dated September 8, 2009 between Pamodzi Gold Free State (Proprietary) Limited (in provisional liquidation) and Harmony Gold Mining Company Limited (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2010, filed on October 25, 2010) | |
4.19 | Facilities Agreement dated December 11, 2009 between Nedbank Limited, Harmony Gold Mining Company Limited and the Guarantors listed in Schedule 2 (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2010, filed on October 25, 2010) | |
4.20 | Amended and Restated Sale Agreement dated March 18, 2010 between Harmony Gold Mining Company Limited, Africa Vanguard Resources (Doornkop) (Proprietary) Limited and Randfontein Estates Limited (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2010, filed on October 25, 2010) | |
*4.21 | Facilities Agreement dated November 30, 2010 between Nedbank Limited, Harmony Gold Mining Company Limited and the Guarantors listed in Schedule 2 | |
*4.22 | Amended and Restated Sale Agreement dated September 10, 2010 between Evander Gold Mines Limited, Harmony Gold |
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Mining Company Limited, Pluriclox (Proprietary) Limited, Taung Gold Limited, Clidet No. 790 (Proprietary) Limited and Clidet No. 791 (Proprietary) Limited | ||
*4.23 | Amended and Restated Joint Venture Agreement dated February 27, 2011 between Evander Gold Mines Limited and Taung Gold Holdings (Proprietary) Limited | |
*4.24 | Amended and Restated Mining Right Abandonment Agreement dated September 3, 2010 between Harmony Gold Mining Company Limited and Witwatersrand Consolidated Gold Resources Limited | |
*4.25 | Option Cancellation Agreement dated September 3, 2010 between Armgold/Harmony Joint Venture (Proprietary) Limited, Witwatersrand Consolidated Gold Resources Limited and Harmony Gold Mining Company Limited | |
8.1 | Significant subsidiaries of Harmony Gold Mining Company Limited (incorporated by reference to Harmonys Annual Report on Form 20-F for the fiscal year ended June 30, 2009, filed on October 26, 2009). | |
*12.1 | Certification of the principal executive officer required by Rule 13a-14(a) or Rule 15(d)-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
*12.2 | Certification of the principal financial officer required by Rule 13a-14(a) or Rule 15(d)-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
*13.1 | Certification of the principal executive officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
*13.2 | Certification of the principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
*15.1 | Information in respect of Harmonys Board and Executive Management (Extracted from Harmonys Annual Report 2011) | |
*15.2 | Information in respect of Harmonys Corporate Governance (Extracted from Harmonys Annual Report 2011) |
* | Filed herewith |
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Pursuant to the requirements of Section 12 of the Exchange Act, we hereby certify that we meet all of the requirements for filing on Form 20-F and that we have duly caused this annual report to be signed on our behalf by the undersigned, thereunto duly authorized.
HARMONY GOLD MINING COMPANY LIMITED
By: |
/s/ Graham Briggs |
|
Graham Briggs | ||
Chief Executive Officer | ||
Date: October 24, 2011 |
Page | ||
Harmony Gold Mining Company Limited |
||
F-2 | ||
Consolidated Income Statements for the years ended June 30, 2011, 2010 and 2009 |
F-3 | |
Consolidated Statements of Comprehensive Income for the years ended June 30, 2011, 2010 and 2009 |
F-4 | |
F-5 | ||
F-6 | ||
Consolidated Cash Flow Statements for the years ended June 30, 2011, 2010 and 2009 |
F-7 | |
F-8 |
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Harmony Gold Mining Company Limited
In our opinion, the accompanying consolidated balance sheets and the related consolidated income statements, statements of other comprehensive income, of changes in shareholders equity and cash flows present fairly, in all material respects, the financial position of Harmony Gold Mining Company Limited and its subsidiaries at June 30, 2011 and 2010 and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2011 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2011, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Managements Annual Report on Internal Control over Financial Reporting appearing under Item 15 (b). Our responsibility is to express opinions on these financial statements and on the Companys internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers Inc
Johannesburg, Republic of South Africa
October 24, 2011
F-2
Consolidated income statements
For the years ended 30 June 2011
US dollar | ||||||||||||||||
Figures in million | Note | 2011 | 2010 | 2009 | ||||||||||||
Continuing operations |
||||||||||||||||
Revenue |
1,781 | 1,489 | 1,277 | |||||||||||||
Cost of sales |
5 | (1,664 | ) | (1,383 | ) | (1,083 | ) | |||||||||
Production costs |
(1,313 | ) | (1,103 | ) | (850 | ) | ||||||||||
Amortisation and depreciation |
(254 | ) | (181 | ) | (139 | ) | ||||||||||
Impairment of assets |
(39 | ) | (43 | ) | (71 | ) | ||||||||||
Employment termination and restructuring costs |
(23 | ) | (27 | ) | (4 | ) | ||||||||||
Other items |
(35 | ) | (29 | ) | (19 | ) | ||||||||||
Gross profit |
117 | 106 | 194 | |||||||||||||
Corporate, administration and other expenditure |
(51 | ) | (50 | ) | (36 | ) | ||||||||||
Social investment expenditure |
(12 | ) | (11 | ) | (4 | ) | ||||||||||
Exploration expenditure |
6 | (51 | ) | (29 | ) | (29 | ) | |||||||||
Profit on sale of property, plant and equipment |
7 | 4 | 14 | 114 | ||||||||||||
Other expenses net |
8 | (3 | ) | (8 | ) | (3 | ) | |||||||||
Operating profit |
9 | 4 | 22 | 236 | ||||||||||||
(Loss)/profit from associates |
22 | (7 | ) | 7 | 1 | |||||||||||
Impairment of investment in associate |
22 | (20 | ) | | (14 | ) | ||||||||||
Loss on sale of investment in subsidiary |
10 | | (3 | ) | | |||||||||||
Net gain on financial instruments |
11 | 20 | 5 | (10 | ) | |||||||||||
Gain on farm-in option |
12 | 38 | | | ||||||||||||
Investment income |
13 | 20 | 25 | 49 | ||||||||||||
Finance cost |
14 | (41 | ) | (32 | ) | (24 | ) | |||||||||
Profit before taxation |
14 | 24 | 238 | |||||||||||||
Taxation |
15 | 69 | (44 | ) | (22 | ) | ||||||||||
Net profit/(loss) from continuing operations |
83 | (20 | ) | 216 | ||||||||||||
Discontinued operations |
||||||||||||||||
Profit/(loss) from discontinued operations |
16 | 3 | (4 | ) | 95 | |||||||||||
Net profit/(loss) |
86 | (24 | ) | 311 | ||||||||||||
Attributable to: |
||||||||||||||||
Owners of the parent |
86 | (24 | ) | 311 | ||||||||||||
Non-controlling interest |
| | | |||||||||||||
Earnings/(loss) per share (cents) |
17 | |||||||||||||||
Earnings/(loss) from continuing operations |
19 | (5 | ) | 52 | ||||||||||||
Earnings/(loss) from discontinued operations |
1 | (1 | ) | 23 | ||||||||||||
Total earnings/(loss) for the year |
20 | (6 | ) | 75 | ||||||||||||
Diluted earnings/(loss) per share (cents) |
17 | |||||||||||||||
Earnings/(loss) from continuing operations |
19 | (5 | ) | 51 | ||||||||||||
Earnings/(loss) from discontinued operations |
1 | (1 | ) | 23 | ||||||||||||
Total diluted earnings/(loss) for the year |
20 | (6 | ) | 74 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Consolidated statements of comprehensive income
For the years ended 30 June 2011
US dollar | ||||||||||||||||
Figures in million | Note | 2011 | 2010 | 2009 | ||||||||||||
Net profit/(loss) for the year |
86 | (24 | ) | 311 | ||||||||||||
Other comprehensive income/(loss) for the year, net of income tax |
540 | 25 | 111 | |||||||||||||
Foreign exchange translation |
28 | 555 | 25 | 105 | ||||||||||||
Fair value movement of available-for-sale investments |
28 | (15 | ) | | 6 | |||||||||||
Total comprehensive income/(loss) for the year |
626 | 1 | 422 | |||||||||||||
Attributable to: |
||||||||||||||||
Owners of the parent |
626 | 1 | 422 | |||||||||||||
Non-controlling interest |
| | | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
As at 30 June 2011
US dollar | ||||||||||||
Figures in million | Note | 2011 | 2010 | |||||||||
Assets |
||||||||||||
Non-current assets |
||||||||||||
Property, plant and equipment |
18 | 4,607 | 3,874 | |||||||||
Intangible assets |
19 | 320 | 290 | |||||||||
Restricted cash |
20 | 5 | 19 | |||||||||
Restricted investments |
21 | 278 | 228 | |||||||||
Investment in associates |
22 | | 50 | |||||||||
Deferred tax assets |
15 | 170 | 246 | |||||||||
Investment in financial assets |
23 | 27 | 2 | |||||||||
Inventories |
25 | 25 | 28 | |||||||||
Trade and other receivables |
26 | 3 | 10 | |||||||||
Total non-current assets |
5,435 | 4,747 | ||||||||||
Current assets |
||||||||||||
Inventories |
25 | 124 | 129 | |||||||||
Trade and other receivables |
26 | 158 | 122 | |||||||||
Income and mining taxes |
21 | 10 | ||||||||||
Cash and cash equivalents |
102 | 101 | ||||||||||
405 | 362 | |||||||||||
Assets of disposal groups classified as held for sale |
16 | 40 | 32 | |||||||||
Total current assets |
445 | 394 | ||||||||||
Total assets |
5,880 | 5,141 | ||||||||||
Equity and liabilities |
||||||||||||
Share capital and reserves |
||||||||||||
Share capital |
27 | 4,033 | 4,027 | |||||||||
Other reserves |
28 | 519 | (40 | ) | ||||||||
Accumulated loss |
(102 | ) | (159 | ) | ||||||||
Total equity |
4,450 | 3,828 | ||||||||||
Non-current liabilities |
||||||||||||
Deferred tax liabilities |
15 | 623 | 709 | |||||||||
Provision for environmental rehabilitation |
29 | 291 | 222 | |||||||||
Retirement benefit obligation and other provisions |
30 | 26 | 22 | |||||||||
Borrowings |
31 | 181 | 129 | |||||||||
Total non-current liabilities |
1,121 | 1,082 | ||||||||||
Current liabilities |
||||||||||||
Borrowings |
31 | 49 | 27 | |||||||||
Income and mining taxes |
| 1 | ||||||||||
Trade and other payables |
32 | 258 | 185 | |||||||||
307 | 213 | |||||||||||
Liabilities of disposal groups classified as held for sale |
16 | 2 | 18 | |||||||||
Total current liabilities |
309 | 231 | ||||||||||
Total equity and liabilities |
5,880 | 5,141 | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Consolidated statements of changes in shareholders equity
For the years ended 30 June 2011
Number of
ordinary shares issued |
Share capital |
Share
premium |
Accumulated
loss |
Other
reserves |
Total | |||||||||||||||||||
Figures in million (US dollar) | ||||||||||||||||||||||||
Note |
27 | 28 | ||||||||||||||||||||||
Balance 30 June 2008 |
403,253,756 | 32 | 3,755 | (419 | ) | (196 | ) | 3,172 | ||||||||||||||||
Issue of shares |
||||||||||||||||||||||||
- Exercise of employee share options |
1,322,964 | | 7 | | | 7 | ||||||||||||||||||
- Exchange for PNG Royalty |
3,364,675 | | 23 | | | 23 | ||||||||||||||||||
- Capital raising |
18,045,441 | 1 | 186 | | | 187 | ||||||||||||||||||
Share-based payments |
| | | | 13 | 13 | ||||||||||||||||||
Net profit for the year |
| | | 311 | | 311 | ||||||||||||||||||
Other comprehensive income for the year |
| | | | 111 | 111 | ||||||||||||||||||
Balance 30 June 2009 |
425,986,836 | 33 | 3,971 | (108 | ) | (72 | ) | 3,824 | ||||||||||||||||
Issue of shares |
||||||||||||||||||||||||
- Exercise of employee share options |
505,584 | | 3 | | | 3 | ||||||||||||||||||
- Issued for AVRD investment |
2,162,359 | | 21 | | | 21 | ||||||||||||||||||
Repurchase of equity interest (note 28(f)) |
| | | | (13 | ) | (13 | ) | ||||||||||||||||
Share-based payments |
| | (1 | ) | | 20 | 19 | |||||||||||||||||
Net loss for the year |
| | | (24 | ) | | (24 | ) | ||||||||||||||||
Other comprehensive income for the year |
| | | | 25 | 25 | ||||||||||||||||||
Dividends paid (1) |
| | | (27 | ) | | (27 | ) | ||||||||||||||||
Balance 30 June 2010 |
428,654,779 | 33 | 3,994 | (159 | ) | (40 | ) | 3,828 | ||||||||||||||||
Issue of shares |
||||||||||||||||||||||||
- Exercise of employee share options |
1,429,849 | | 6 | | | 6 | ||||||||||||||||||
Share-based payments |
| | | | 19 | 19 | ||||||||||||||||||
Net profit for the year |
| | | 86 | | 86 | ||||||||||||||||||
Other comprehensive income for the year |
| | | | 540 | 540 | ||||||||||||||||||
Dividends paid (1) |
| | | (29 | ) | | (29 | ) | ||||||||||||||||
Balance 30 June 2011 |
430,084,628 | 33 | 4,000 | (102 | ) | 519 | 4,450 | |||||||||||||||||
(1) |
Dividend per share is disclosed under the earnings per share note. Refer to note 17. |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Consolidated cash flow statements
For the years ended 30 June 2011
US dollar | ||||||||||||||||
Figures in million | Notes | 2011 | 2010 | 2009 | ||||||||||||
Cash flow from operating activities |
||||||||||||||||
Cash generated by operations |
33 | 346 | 214 | 319 | ||||||||||||
Interest received |
20 | 25 | 51 | |||||||||||||
Dividends received |
| | | |||||||||||||
Interest paid |
(19 | ) | (12 | ) | (31 | ) | ||||||||||
Income and mining taxes paid |
(7 | ) | (17 | ) | (85 | ) | ||||||||||
Cash generated by operating activities |
340 | 210 | 254 | |||||||||||||
Cash flow from investing activities |
||||||||||||||||
Increase in amounts invested in environmental trusts |
(1 | ) | (1 | ) | | |||||||||||
Decrease in restricted cash |
17 | 2 | (9 | ) | ||||||||||||
Proceeds on disposal of Mount Magnet |
33 | 30 | | | ||||||||||||
Proceeds on disposal of Big Bell operation |
33 | | 3 | | ||||||||||||
Proceeds on disposal of Papua New Guinea joint venture |
33 | | | 235 | ||||||||||||
Proceeds on disposal of Randfontein Cooke assets |
33 | | | 209 | ||||||||||||
Proceeds on disposal of available-for-sale financial assets |
2 | 7 | | |||||||||||||
Prepayment for Evander 6 and Twistdraai transaction |
16 | 15 | | | ||||||||||||
Acquisition of Steyn 2 and Target 3 |
33 | | (36 | ) | | |||||||||||
Disposal of investments |
2 | | (4 | ) | ||||||||||||
Decrease in Social Trust Fund |
1 | 1 | | |||||||||||||
Additions to intangible assets |
(2 | ) | (2 | ) | (4 | ) | ||||||||||
Proceeds on disposal of property, plant and equipment |
3 | 16 | 6 | |||||||||||||
Additions to property, plant and equipment |
(448 | ) | (443 | ) | (339 | ) | ||||||||||
Cash (utilised by)/generated from investing activities |
(381 | ) | (453 | ) | 94 | |||||||||||
Cash flow from financing activities |
||||||||||||||||
Borrowings raised |
134 | 168 | | |||||||||||||
Borrowings repaid |
(81 | ) | (57 | ) | (427 | ) | ||||||||||
Ordinary shares issued |
6 | 3 | 194 | |||||||||||||
Dividends paid |
(30 | ) | (29 | ) | | |||||||||||
Cash generated/(utilised) by financing activities |
29 | 85 | (233 | ) | ||||||||||||
Foreign currency translation adjustments |
13 | 6 | 85 | |||||||||||||
Net increase/(decrease) in cash and equivalents |
1 | (152 | ) | 200 | ||||||||||||
Cash and equivalents beginning of year |
101 | 253 | 53 | |||||||||||||
Cash and equivalents end of year |
102 | 101 | 253 | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Notes to the consolidated financial statements
For the years ended 30 June 2011
1 | GENERAL INFORMATION |
Harmony Gold Mining Company Limited (the company) and its subsidiaries (collectively Harmony or the group) are engaged in gold mining and related activities, including exploration, extraction and processing. Gold bullion, the groups principal product, is currently produced at its operations in South Africa and Papua New Guinea (PNG).
The company is a public company, incorporated and domiciled in South Africa. The address of its registered office is Randfontein Office Park, Corner Main Reef Road and Ward Avenue, Randfontein, 1759.
The consolidated financial statements were authorized for issue by the board of directors on 24 October 2011.
2 | ACCOUNTING POLICIES |
The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied in all years presented, unless otherwise stated.
2.1 | Basis of preparation |
The financial statements of the group have been prepared in accordance with, and are in compliance with, International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS). The financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets and financial assets at fair value through profit or loss.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the groups accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.
New standards, amendments to standards and interpretations to existing standards adopted by the group:
The effective dates below are for financial periods beginning on or after the given date.
The following standards or amendments to standards have become effective but had no impact on the results of the group:
|
IFRS 2 (Amendment) Share-based Payments Group cash-settled and share-based payment transactions (effective 1 January 2010). |
Amendments arising from the Annual Improvements issued in April 2009
|
IFRS 2 (Amendment) Share-based Payments (effective 1 January 2010). |
|
IFRS 5 (Amendment) Non-current Assets Held for Sale and Discontinued Operations (effective 1 January 2010). |
|
IAS 7 (Amendment) Statement of Cash Flows (effective 1 January 2010). |
|
IAS 17 (Amendment) Leases (effective 1 January 2010). |
|
IAS 18 (Amendment) Revenue (effective I January 2010). |
|
IAS 36 (Amendment) Impairment of Assets (effective 1 January 2010). |
|
IAS 38 (Amendment) Intangible assets (effective 1 January 2010). |
|
IAS 39 (Amendment) Financial instruments: Recognition and measurement (effective 1 January 2010). |
|
IFRS 8 (Amendment) Operating Segments (effective 1 January 2010). |
|
IFRIC 16 (Amendment) Hedges of a net investment in foreign operation (effective 1 January 2010). |
The following standards or amendments to standards have become effective but were not relevant to the group:
|
IFRS 1 (Amendment) First-time Adoption of International Financial Reporting Standards Additional Exemptions for First-time Adopters (effective 1 January 2010). |
|
IFRS 1 (Amendment) First-time Adoption of International Financial Reporting Standards Limited Exemptions from Comparative IFRS 7 Disclosures for First-time Adopters (effective 1 July 2010). |
|
IAS 32 (Amendment) Financial Instruments: Presentation Classification of rights issues (effective 1 February 2010). |
|
IFRIC 15 Agreements for construction of real estate (effective 1 January 2010). |
|
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective 1 July 2010). |
Amendments arising from the Annual Improvements issued in April 2009
|
IAS 1 (Amendment) Presentation of Financial Statements (effective 1 January 2010). |
|
IFRIC 9 (Amendment) Reassessment of embedded derivatives (effective 1 January 2010). |
F-8
Notes to the consolidated financial statements
For the years ended 30 June 2011
New standards, amendments to standards and interpretations to existing standards that are not yet effective and have not been early adopted:
At the date of authorization of these financial statements, the standards, amendments to standards and interpretations listed below were in issue but not yet effective. These standards and interpretations have not been early adopted by the group and the group plans on adopting these standards, amendments to standards and interpretations on the dates when they become effective.
The following standards, amendments to standards and intepretations are not expected to be relevant to the group:
|
IAS 1 (Amendment) Presentation of Financial Statements (effective for financial periods beginning on/after 1 July 2012). |
|
IAS 12 (Revised) Income Taxes: Deferred Tax Recovery of Underlying Assets (effective for financial periods beginning on/after 1 January 2012). |
|
IAS 19 (Amendment) Employee Benefits Recognition and Measurement of Defined Benefit Pension Expense (effective for periods beginning on/after 1 January 2013). |
|
IAS 24 (Revised) Related party disclosures (effective for periods beginning on/after 1 January 2011). The amendment clarifies and simplifies the definition of a related party and is not expected to have a significant impact on the groups financial statements. |
|
IFRS 1 (Amendment) First-time Adoption of International Financial Reporting Standards: Removal of Fixed Dates for First-time Adopters (effective for financial periods beginning on/after 1 July 2011). |
|
IFRS 1 (Amendment) First-time Adoption of International Financial Reporting Standards: Guidance on Severe Hyperinflation (effective for financial periods beginning on/after 1 July 2011). |
|
IFRIC 14 (Amendment): The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction Prepayment of Minimum Funding Requirements (effective for financial periods beginning on or after 1 January 2011). |
|
Improvements to IFRS 2010 (effective for periods beginning on/after 1 January 2011). |
The following standards, amendments to standards and interpretations to existing standards may possibly have an impact on the group, but have not been assessed by management:
|
IAS 27 (Revised) Separate Financial Statements (effective for periods beginning on/after 1 January 2013). This standard includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in IFRS 10. |
|
IAS 28 (Revised) Investments in Associates and Joint Ventures (effective for periods beginning on/after 1 January 2013). This standard includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11. |
|
IFRS 7 (Amendment) Financial Instruments: Disclosures Transfer of Financial Assets (effective for financial periods beginning on/after 1 July 2011). |
|
IFRS 9 (Amendment) Financial Instruments (effective for periods beginning on/after 1 January 2013). This IFRS is part of the IASBs project to replace IAS 39. The standard addresses classification and measurement of financial assets and replaces the multiple classification and measurement models in IAS 39 with a single model that has only two classification categories: amortized cost and fair value. The standard also includes guidance on accounting for and the presentation of financial liabilities and derecognizing financial liabilities which have been relocated from IAS 39 without change, except for financial liabilities that are designated at fair value through profit or loss. |
|
IFRS 10 Consolidated financial statements (effective for periods beginning on/after 1 January 2013). This standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included in the consolidated financial statements. |
|
IFRS 11 Joint Arrangements (effective for periods beginning on/after 1 January 2013). The standard provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form. Proportional consolidation of joint ventures is no longer allowed under this standard. |
|
IFRS 12 Disclosure of Interest in Other Entities (effective for periods beginning on/after 1 January 2013). This standard includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. |
|
IFRS 13 Fair Value Measurement (effective for periods beginning on/after 1 January 2013). The standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value and disclosure requirements across all IFRSs. |
2.2 | Consolidation |
The consolidated financial information includes the financial statements of the company, its subsidiaries, its proportionate interest in joint ventures, special purpose entities (SPEs) and its interests in associates.
F-9
Notes to the consolidated financial statements
For the years ended 30 June 2011
(i) | Subsidiaries are all entities (including special purpose entities) over which the group has power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group and are deconsolidated when that control ceases. The group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, liabilities incurred and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interests proportionate share of the aquirees net assets. |
The excess of consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the aquiree over the fair value of the groups share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognized directly in the statement of comprehensive income.
Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the group.
(ii) | Associates are those entities over which the group has significant influence, but not control over operational and financial policies, generally accompanying a shareholding of between 20% and 50% of the voting rights. |
Investments in associates are accounted for by using the equity method of accounting, and are initially recognized at cost. The cost of an acquisition is measured as the fair value of the assets given, shares issued or liabilities assumed at the date of exchange plus costs directly attributable to the acquisition. The groups investment in associates includes goodwill identified on acquisition.
The groups share of the associates post-acquisition profits or losses is recognized in the income statement, and its share of post-acquisition movement in reserves is recognized in other reserves. Cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the groups shares of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate.
The carrying value of an associate is reviewed on a regular basis and, if an impairment in the carrying value has occurred, it is written off in the period in which such impairment is identified.
Unrealized gains on transactions between the group and its associates are eliminated to the extent of the groups interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment that should be recognized.
Accounting policies of associates have been reviewed to ensure consistency with the policies adopted by the group.
(iii ) | Joint arrangements. Joint venture entities are those entities in which the group holds an interest and shares joint control over strategic, financial and operating decisions with one or more other ventures under a contractual arrangement. The groups interest in jointly controlled entities is accounted for by proportionate consolidation. Under this method, the group includes its share of the joint ventures individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the groups financial statements. |
The group recognizes the portion of gains or losses on the sale of assets by the group to the joint venture that is attributable to the other ventures. The group does not recognize its share of profits or losses from the joint venture that result from the purchase of assets by the group from the joint venture until it resells the assets to an independent party. However, if a loss on the transaction provides evidence of a reduction in the net realizable value of current assets or an impairment loss, the loss is recognized immediately.
Where the group has contractual arrangements with other participants to engage in joint activities or invest in joint assets other than through a separate entity, the group includes its assets, liabilities and share of income and expenditure in such joint venture operations with similar items in its financial statements.
(iv ) | Special purpose entities (SPEs) are those undertakings that are created to satisfy specific business needs of the group. These are consolidated where the group has the right to the majority of the benefits of the SPE and/or is exposed to the majority of the risk thereof. SPEs are consolidated in the same manner as subsidiaries when the substance of the relationship indicates that the SPE is controlled by the group. |
F-10
Notes to the consolidated financial statements
For the years ended 30 June 2011
(v) | Transactions and non-controlling interests . The group treats transactions with non-controlling interests as transactions with equity owners of the group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. |
When the group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the group directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a portion of the amount previously recognized in other comprehensive income is reclassified to profit or loss where appropriate.
2.3 | Foreign currency translation |
(i) | Functional and presentation currency . Items included in the financial statements of each of the groups entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). |
For translation of the rand financial statement items to US dollar, the average of R6.99 (2010 :R7.58) (2009: R9.00) per US$1 was used for income statement items (unless this average was not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case these items were translated at the rate on the date of the transactions) and the closing rate of R6.78 (2010: R7.63) per US$1 for asset and liability items. Equity items were translated at historic rates.
The translation effect from Rand to US Dollar is included in other comprehensive income in the US$ financial statements.
References to A$ refers to Australian currency, R to South African currency, $ or US$ to United States currency and K or Kina to Papua New Guinean currency.
(ii) | Transactions and balances . Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation to year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except where deferred in equity as qualifying cash flow hedges and qualifying investment hedges. Gains and losses recognized in the income statement are included in the determination of other expenses net. |
Changes in the fair value of monetary securities denominated in a foreign currency classified as available for sale are analyzed between translation differences resulting from changes in the amortized cost of the security, and other changes in the carrying amount of the security. Translation differences related to the changes in amortized cost are recognized in profit or loss, and other changes in carrying amount are recognized in other comprehensive income.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognized in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available for sale are included in other comprehensive income.
(iii ) | Group companies. The results and financial position of all group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: |
a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
b) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the date of the transactions);
c) all resulting exchange differences are recognized as a separate component of other comprehensive income; and
d) equity items are translated at historic rates.
F-11
Notes to the consolidated financial statements
For the years ended 30 June 2011
On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive income. When a foreign operation is sold or control is otherwise lost, cumulative exchange differences that were recorded in other comprehensive income are recognized in profit or loss in the period in which the foreign operation is sold or control is otherwise lost.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign entity and translated at the closing rate.
2.4 | Segmental reporting |
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the executive committee. Refer to note 40 for detailed guidance on the identification of an operating and reportable segment.
2.5 | Property, plant and equipment |
(i) | Mining assets including mine development costs and mine plant facilities are initially recorded at cost, which after it is measured at cost less accumulated depreciation and impairment. Costs include expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. |
At the groups surface mines, when it has been determined that a mineral property can be economically developed as a result of establishing proved and probable reserves, costs incurred to develop the property are capitalized as incurred until the mine is considered to have moved into the production phase. These costs include costs to further delineate the ore body and remove overburden to initially expose the ore body. Stripping costs incurred during the production phase to remove waste ore are deferred and charged to production costs on the basis of the average life-of-mine stripping ratio. The average stripping ratio is calculated as the number of tonnes of waste material removed per tonne of ore mined. The average life-of-mine ratio is revised annually in the light of additional knowledge and change in estimates. The cost of excess stripping is capitalized as mine development costs when the actual stripping ratio exceeds the average life-of-mine stripping ratio. Where the average life-of-mine stripping ratio exceeds the actual stripping ratio, the cost is charged to the income statement.
At the groups underground mines, all costs incurred to develop the property, including costs to access specific ore blocks or other areas of the underground mine, are capitalized to the extent that such costs will provide future economic benefits. These costs include the cost of shaft sinking and access, the costs of building access ways, lateral development, drift development, ramps, box cuts and other infrastructure development.
During the development stage, the group may enter into arrangements whereby it agrees to transfer a part of its mineral interest in consideration for an agreement by another party (the farmee) to meet certain expenditure which would otherwise have to be undertaken by the group. Such arrangements, referred to as farm-in transactions, are accounted for as executory contracts particularly when the expenditures to be incurred by the farmee are discretionary in nature, and the mineral interest to be transferred may vary depending upon such discretionary spend. At the date of completion of each partys obligations under the farm-in arrangement, the group derecognizes the proportion of the mining assets and liabilities associated with the joint venture that it has sold to the farmee, and recognizes its interest in the capital expenditure (consideration received) at fair value within operating assets. The difference between the net disposal proceeds and the carrying amount of the asset disposed of is recognized in profit or loss.
Borrowing costs are capitalized to the extent that they are directly attributable to the acquisition and construction of qualifying assets. Qualifying assets are assets that take a substantial time to get ready for their intended use. These costs are capitalized until the asset moves into the production phase. Other borrowing costs are expensed.
The net assets of operations placed on care and maintenance are impaired to their recoverable amount. Expenditure on the care and maintenance of these operations is charged against income, as incurred.
Where a depreciable asset is used in the construction or extension of a mine, the depreciation is capitalized against the mines cost.
(ii) | Non-mining assets. Land is shown at cost and not depreciated. Other non-mining fixed assets are shown at cost less accumulated depreciation and accumulated impairment losses. |
(iii) | Undeveloped properties are initially valued at the fair value of resources obtained through acquisitions. The carrying value of these properties are annually tested for impairment. Once development commences, these properties are transferred to mining properties and accounted for in accordance with the related accounting policy. |
F-12
Notes to the consolidated financial statements
For the years ended 30 June 2011
(iv) | Mineral and surface use rights represent mineral and surface use rights for parcels of land both owned and not owned by the group. Mineral and surface rights include acquired mineral use rights in production, development and exploration phase properties. The amount capitalized related to a mineral and surface right represents its fair value at the time it was acquired, either as an individual asset purchase or as part of a business combination, and is recorded at cost of acquisition. |
The groups mineral use rights are enforceable regardless of whether proved or probable reserves have been established. In certain limited situations, the nature of a use changes from an exploration right to a mining right upon the establishment of proved and probable reserves. The group has the ability and intent to renew mineral use rights where the existing term is not sufficient to recover all identified and valued proved and probable reserves and/or undeveloped mineral interests.
(v) | Leased assets. The group leases certain property, plant and equipment. Leases of property, plant and equipment where the group has substantially all the risks and rewards of ownership are classified as finance leases. The assets are capitalized at the leases commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. |
Finance lease payments are allocated using the rate implicit in the lease, which is included in finance costs, and the capital repayment, which reduces the liability to the lessor. The corresponding rental obligations, net of finance charges, are included in non-current Borrowings, with the current portion included under Current Liabilities.
Capitalized lease assets are depreciated over the shorter of their estimated useful lives and the lease terms.
(vi) | Depreciation and amortization of mineral property interests, mineral and surface rights, mine development costs and mine plant facilities are 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. |
In most instances, proved and probable reserves provide the best indication of the useful life of the groups mines (and related assets). However, in some instances, proved and probable reserves may not provide a realistic indication of the useful life of the mine (and related assets). This may be the case, for example, where management is confident that further resources will be converted into reserves and are approaching economic decisions affecting the mine on this basis, but has chosen to delay the work required to designate them formally as reserves. Managements confidence in the economical recovery of such resources may be based on historical experience and available geological information. In instances where management is able to demonstrate the economic recovery of such resources with a high level of confidence, such additional resources, as well as the associated future development costs of accessing those resources, are included in the calculation of depreciation and amortization.
(vii) | Depreciation and amortization of non-mining fixed assets. Other non-mining fixed assets are depreciated on a straight line basis over their estimated useful lives as follows: |
|
Vehicles at 20% per year; |
|
Computer equipment at 33.3% per year; and |
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Commercial, off-the-shelf software at 50% per year; and |
|
Furniture and equipment at 16.67% per year. |
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized in the income statement.
(viii) | Depreciation and amortization of mineral and surface use rights. Mineral rights associated with production phase mineral interests are amortized over the life-of-mine using the units-of-production method in order to match the amortization with the expected underlying future cash flows. Mineral interests associated with development and exploration phase mineral interests are not amortized until such time as the underlying property is converted to the production stage. |
For details on the groups accounting policy on impairments, refer to note 2.8.
2.6 | Exploration costs |
The group expenses all exploration and evaluation expenditures until it is concluded that a future economic benefit is more likely to be realized than not, ie probable. The information used to make that determination depends on the level of exploration as well as the degree of confidence in the ore body.
Exploration and evaluation expenditure on greenfield sites, being those where the group does not have any mineral deposits which are already being mined or developed, is expensed as incurred until a final feasibility study has been completed. In this case future pre-commercial production expenditure is capitalized within development costs that demonstrates that future economic benefits are probable. Capitalization of pre-production cost ceases when commercial levels of production are reached. Commercial levels of production are discussed under production start date in note 3.12.
F-13
Notes to the consolidated financial statements
For the years ended 30 June 2011
Exploration and evaluation expenditure on brownfield sites, being those adjacent to mineral deposits which are already being mined or developed, is expensed as incurred until the group is able to demonstrate that future economic benefits are probable through the completion of a feasibility study, after which the expenditure is capitalized as mine development cost. A feasibility study consists of a comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has been established, and which, if an effective method of mineral processing has been determined, includes a financial analysis based on reasonable assumptions of technical, engineering, operating economic factors and the evaluation of other relevant factors. The feasibility study, when combined with existing knowledge of the mineral property that is adjacent to mineral deposits that are already being mined or developed, allows the group to conclude that it is more likely than not that it will obtain future economic benefit from the expenditures.
Exploration and evaluation expenditure relating to extensions of mineral deposits which are already being mined or developed, including expenditure on the definition of mineralization of such mineral deposits, is capitalized as a mine development cost following the completion of an economic evaluation equivalent to a feasibility study. This economic evaluation is distinguished from a feasibility study in that some of the information that would normally be determined in a feasibility study is instead obtained from the existing mine or development. This information when combined with existing knowledge of the mineral property already being mined or developed allow the groups to conclude that more likely than not that it will obtain future economic benefit from the expenditures.
Exploration properties acquired are recognized in the balance sheet within development cost and are shown at cost less provisions for impairment determined in accordance with the groups accounting policy on impairment of non-financial assets (note 2.8).
2.7 | Intangible assets |
Intangible assets consist of all identifiable non-monetary assets without physical substance. They are stated at cost less accumulated amortization and accumulated impairment losses, if any. The following are the main categories of intangible assets:
(i) | Intangible assets with an indefinite useful life |
Intangible assets with an indefinite useful life are not amortized but tested for impairment on an annual basis. Goodwill represents the excess of the cost of an acquisition over the fair value of the groups share of the net identifiable assets of the acquired subsidiary, associate, joint venture or business at the date of acquisition. Goodwill on acquisition of subsidiaries, joint ventures and businesses are included in intangible assets. Goodwill on acquisition of associates is included in investments in associates and tested for impairment as part of the overall balance.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are recognized immediately in the income statement and are not reversed. The impairment testing is performed annually on 30 June or when events or changes in circumstances indicate that it may be impaired.
Goodwill is allocated to cash-generating units for the purpose of impairment testing, the largest of which is on operating segment level. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. If the composition of one or more cash-generating units to which goodwill has been allocated changes due to a re-organization, the goodwill is re-allocated to the units affected.
The gain or loss on disposal of an entity includes the carrying amount of goodwill relating to the entity sold.
(ii) | Intangible assets with a finite useful life |
Acquired computer software licenses that require further internal development are capitalized on the basis of costs incurred to acquire and bring to use the specific software. Cost to bring to use the specific software, includes software development employee costs and attributable overheads. Development expenditure incurred that will not likely generate probable future economic benefits and cannot be reliability measured are recognized as an expense as incurred. Intangible assets with a finite useful life are amortized on a straight line basis over their estimated useful lives, which are reviewed annually, as follows:
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Computer software at 20% per year. |
2.8 | Impairment of non-financial assets |
Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.
Assets that are subject to amortization are reviewed annually on 30 June for impairment or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
F-14
Notes to the consolidated financial statements
For the years ended 30 June 2011
An impairment loss is recognized in the income statement for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets 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 from the cash flows of other shafts and assets belonging to the group.
Fair value less cost to sell is generally determined by using discounted estimated after-tax future cash flows. Future cash flows are estimated based on quantities of recoverable minerals, expected gold prices (considering current and historical prices, price trends and related factors), production levels and cash costs of production, all based on life-of-mine plans. Future cash flows are discounted to their present value using a post tax discount rate that reflect current market assessments of the time value of money and risk specific to the asset. Refer to note 3.1 for detail.
The term recoverable minerals refers to the estimated amount of gold that will be obtained from reserves and resources and all 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 related exploration stage mineral interests will be risk adjusted based on managements relative confidence in such materials. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of cash flows from other asset groups. 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, if any. Assumptions underlying future cash flow estimates are subject to significant risks and uncertainties.
Non-financial assets other than goodwill that suffered an impairment are reviewed annually for possible reversal of the impairment at 30 June. Reversal of impairments is also considered when there is objective evidence to indicate that the asset is no longer impaired. Where an impairment subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, but not higher than the carrying value that would have been determined had no impairment been recognized in prior years.
2.9 | Financial instruments |
Financial instruments are initially measured at fair value when the group becomes a party to their contractual arrangements. Transaction costs are included in the initial measurement of financial instruments, with the exception of financial instruments classified as at fair value through profit or loss. The subsequent measurement of financial instruments is discussed below.
A financial asset is derecognized when the right to receive cash flows from the asset has expired or the group has transferred its rights to receive cash and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the assets.
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires.
On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss recognized in equity is recognized in profit and loss.
On derecognition of a financial liability, the difference between the carrying amount of the liability extinguished or transferred to another party and the amount paid is recognized in profit or loss.
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
Financial assets
The group classifies its financial assets in the following categories: loans and receivables, available-for-sale, held-to-maturity and at fair value through profit or loss. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
Purchases and sales of financial assets are recognized on trade-date, the date on which the group commits to purchase or sell the asset.
F-15
Notes to the consolidated financial statements
For the years ended 30 June 2011
(i) | Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the group provides money, goods or services directly to a debtor with no intention of trading the receivable. Loans and receivables are subsequently measured at amortized cost using the effective interest method. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables include trade and other receivables (excluding VAT and prepayments), restricted cash and cash and cash equivalents. |
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, deposits held at call with banks and short-term highly liquid investments with original maturities of three months or less. Cash and cash equivalents exclude restricted cash.
Trade and other receivables
Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets. A provision for impairment of receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the assets carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The carrying amount of the asset is reduced through the use of a provision for impairment (allowance account) and the amount of the loss is recognized in the income statement. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the income statement.
(ii ) | Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the balance sheet date. |
Available-for-sale financial assets are subsequently carried at fair value. Changes in the fair value of monetary securities denominated in a foreign currency are accounted for as described in note 2.3 (ii).
When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognized in other comprehensive income are reclassified in the income statement as profit or loss from investment securities.
The fair values of quoted investments are based on current bid prices. If the value for a financial instrument cannot be obtained from an active market, the group establishes fair value by using valuation techniques. These include the use of recent arms length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuers specific circumstances. The valuation techniques make maximum use of market inputs and rely as little as possible on entity-specific inputs.
The group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If considered impaired, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss is removed from other reserves and recognized in the income statement. Subsequent increases in the fair value are recognized in equity impairment losses recognized in the income statement on equity instruments are not reversed through the income statement.
(iii ) | Held-to-maturity investment s are non-derivative financial assets with fixed or determinable payments and fixed maturities that the groups management has the positive intention and ability to hold to maturity. Held-to-maturity investments are subsequently measured at amortized cost using the effective interest method. |
A portion of restricted investments held by the trust funds (refer note 21) are classified as held-to-maturity investments.
The group assesses at the end of each reporting period whether there is objective evidence that a held-to-maturity investment is impaired as a result of an event. The amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the held-to-maturity investments original effective interest rate. The assets carrying amount of the asset is reduced and the amount of the loss is recognized in the consolidated income statement. If a held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the reversal of the previously recognized impairment loss is recognized in the consolidated income statement.
F-16
Notes to the consolidated financial statements
For the years ended 30 June 2011
(iv ) | Financial assets at fair value through profit or loss have two sub-categories: financial assets held for trading, and |
those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management in terms of specified criteria. Derivatives are also categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realized within 12 months of the balance sheet date. These assets are subsequently measured at fair value with gains or losses arising from changes in fair value recognized in the income statement in the period in which they arise. |
Financial liabilities
(i ) | Borrowings are initially recognized at fair value net of transaction costs incurred and subsequently measured at amortized cost, comprising original debt less principal payments and amortization, using the effective yield method. Any difference between proceeds (net of transaction cost) and the redemption value is recognized in the income statement over the period of the borrowing using the effective interest rate method. |
Fees paid on the establishment of loan facilities are capitalized as a pre-payment and amortized over the period of the facility to which it relates.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
(ii) | Trade and other payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. Payables are classified as current liabilities if payment is due within a year or less. If not, they are presented as non-current liabilities. |
2.10 | Inventories |
Inventories which include bullion on hand, gold in process, gold in lock-up, ore stockpiles and consumables, are measured at the lower of cost and net realizable value after appropriate allowances for redundant and slow moving items. Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to perform the sale.
Cost of bullion, gold in process and gold in lock-up is determined by reference to production cost, including amortization and depreciation at the relevant stage of production. Ore stockpiles are valued at average production cost. Stockpiles and gold in lock-up are classified as a non-current asset where the stockpile exceeds current processing capacity and where a portion of static gold in lock-up is expected to be recovered more than 12 months after balance sheet date.
Gold in process inventories represent materials that are currently in the process of being converted to a saleable product. Conversion processes vary depending on the nature of the ore and the specific mining operation, but include mill in-circuit, leach in-circuit, flotation and column cells, and carbon in-pulp inventories. In-process material is measured based on assays of the material fed to process and the projected recoveries at the respective plants. In-process inventories are valued at the average cost of the material fed to process attributable to the source material coming from the mine, stockpile or leach pad plus the in-process conversion costs, including the applicable depreciation relating to the process facility, incurred to that point in the process. Gold in process includes gold in lock-up which is generally measured from the plants onwards. Gold in lock-up is estimated as described under the section dealing with critical accounting estimates and judgments (refer to note 3.9). It is expected to be extracted when plants are demolished at the end of its useful lives, which is largely dependant on the estimated useful life of the operations feeding the plants. Where mechanized mining is used in underground operations, in-progress material is accounted for at the earliest stage of production when reliable estimates of quantities and costs are capable of being made. Given the varying nature of the groups open pit operations, gold in process represents either production in broken ore form or production from the time of placement on heap leach pads.
Consumables are valued at weighted average cost.
2.11 | Non-current assets or disposal group held for sale and discontinued operations |
A non-current asset or disposal group (a business grouping of assets and their related liabilities) is designated as held for sale and stated at lower of carrying value and fair value less cost to sell, when its carrying amount will be recovered principally through a sale transaction rather than through continuing use. The classification as held for sale of a non-current asset or disposal group occurs when it is available for immediate sale in its present condition and the sale is highly probable. A sale is considered highly probable if management is committed to a plan to sell the non-current asset or disposal group, an active divestiture programme has been initiated, the non-current assets or disposal group is marketed at a price reasonable to its fair value and the disposal is expected to be completed within one year from classification.
Upon classification of a non-current asset or disposal group as held for sale, it is reviewed for impairment. The impairment charged to the income statement is the excess of the carrying value of the non-current asset or disposal group over its expected net selling price (fair value less costs to sell). At each subsequent reporting date, the carrying values are remeasured for possible impairment. A reversal of impairment is recognized for any subsequent increase in net selling price but not in excess of the cumulative impairment loss already recognized.
F-17
Notes to the consolidated financial statements
For the years ended 30 June 2011
No depreciation is provided on non-current assets from the date they are classified as held for sale. Where an investment in associate is classified as held for sale, the group will no longer equity account for the investment.
When a disposal group is classified as held for sale it is also necessary to assess whether or not the criteria for discontinued operations are met. If the criteria are met, the results of the disposal group are classified as discontinued operations in the income statement and the comparative amounts restated for all periods presented. No restatement of balance sheet comparative amounts are done.
If a non-current asset or disposal group is classified as held for sale but the criteria for classification as held for sale are no longer met, the disclosure of such non-current asset or disposal group as held for sale is ceased.
On ceasing such classification, the non-current assets are reflected at the lower of:
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the carrying amount before classification as held for sale adjusted for any depreciation or amortization that would have been recognized had the assets not been classified as held for sale; or |
|
the recoverable amount at the date the classification as held for sale ceases. The recoverable amount is the amount at which the asset would have been recognized after the allocation of any impairment loss arising on the cash generating unit as determined in accordance with the groups policy on impairment of non-financial assets. |
Any adjustment required to be made on reclassification is charged to the income statement on reclassification, and included in income from continuing operations.
Where the disposal group was also classified as a discontinued operation, the subsequent classification from held for sale also requires that the discontinued operation be included in continuing operations. Comparative information in the income statement and cash flow note disclosures relating to the classification as a discontinued operation is re-presented accordingly. Comparative information in the balance sheet is not re-presented for this change.
2.12 | Environmental obligations |
Estimated long-term environmental obligations, comprising pollution control, rehabilitation and mine closure, are based on the groups environmental management plans in compliance with current technological, environmental and regulatory requirements.
Based on disturbances to date, the net present value of expected rehabilitation cost estimates are recognized and provided for in full in the financial statements. The estimates are reviewed annually and are discounted using a pre-tax risk-free rate that is adjusted to reflect the current market assessments of the time value of money and the risks specific to the obligation.
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 are capitalized to mining assets against an increase in the rehabilitation provision. If a decrease in liability exceeds the carrying amount of the asset, the excess is recognized immediately in the income statement. If the asset value is increased and there is an indication that the revised carrying value is not recoverable, an impairment test is performed in accordance with the accounting policy dealing with impairments of non financial assets. Rehabilitation projects undertaken, included in the estimates are charged to the provision as incurred. The cost of on-going current programmes to prevent and control pollution is charged against income as incurred. Over time, the liability is increased to reflect an interest element, and the capitalized cost is depreciated over the life of the related asset.
2.13 | Environmental trust funds |
Contributions are made to the groups trust funds, created in accordance with statutory requirements, to fund the estimated cost of pollution control, rehabilitation and mine closure at the end of the life of the groups mines. The trusts are consolidated into the group as the group exercises full control of the trust. The measurement of the investments held by the trust funds is dependent on their classification under financial assets and income received and fair value movements are treated in accordance with these classifications.
2.14 | Provisions |
Provisions are recognized when the group has a present legal or constructive obligation as a result of past events where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.
The amount recognized as a provision is the present value of the best estimate of the expenditure required to settle the present obligation at balance sheet date using a pre-tax rate that reflects current market assessment of the time value of money and the risks specific to the obligation. This estimate takes into account the associated risks and uncertainties. The increase in the provision due to the passage of time is recognized as interest expense.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic benefits will be required, the provision is reversed.
F-18
Notes to the consolidated financial statements
For the years ended 30 June 2011
2.15 | Current and deferred taxation |
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
The group follows the comprehensive liability method of accounting for deferred tax using the balance sheet approach. Under this method deferred income taxes are recognized for the tax consequences of temporary differences by applying expected tax rates to the differences between the tax base of all assets or liabilities and its balance sheet carrying amount, except to the extent that deferred tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and does not affect the accounting or taxable profit or loss at the time of the transaction. Deferred tax is charged to profit or loss, except where the tax relates to items recognized in other comprehensive income or directly in equity in which case the tax is also recognized in other comprehensive income or directly in equity. The effect on deferred tax of any changes in tax rates is recognized in the income statement, except to the extent that it relates to items previously charged or credited directly to equity.
The principal temporary differences arise from amortization and depreciation on property, plant and equipment, provisions, post retirement benefits, unutilized tax losses and unutilized capital allowances carried forward. Deferred tax assets relating to the carry forward of unutilized tax losses and unutilized capital allowances are recognized to the extent that it is probable that future taxable profits will be available against which the unutilized tax losses and unutilized capital allowances can be utilized.
Deferred income tax is provided on temporary differences arising from investments in subsidiaries, joint ventures and associates, except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Interest received from and paid to the tax authorities are classified as interest income and expense.
2.16 | Employee benefits |
(i) | Pension and provident plans are funded through annual contributions . The group pays fixed contributions into a separate entity in terms of the defined contribution pension and provident plans which are charged to the income statement in the year to which they relate. The groups liability is limited to its annually determined contributions and has no further liability, legal or constructive, if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. |
(ii) | Medical plans. The group provides medical cover to current employees and certain retirees through certain funds. The medical accounting costs for the defined benefit plan are assessed using the projected unit credit method. The health care obligation is measured as the present value of the estimated future cash outflows using high quality government bond interest rates consistent with the term and risks of the obligation together with adjustments for unrecognized past service cost. Actuarial gains and losses as a result of these valuations are recognized in the income statement at revaluation date. The future liability for current and retired employees and their dependents is accrued in full based on actuarial valuations obtained annually. |
(iii) | Equity compensation benefits. The group operates an equity-settled, share-based payments plan, where the group grants share options to certain employees in exchange for services received. Equity share-based payments are measured at fair value that includes market performance conditions but excluded the impact of any service and non market performance conditions of the equity instruments at the date of the grant. The share-based payments are expensed over the vesting period, based on the groups estimate of the shares that are expected to eventually vest. The group used an appropriate option pricing model in determining the fair value of the options granted. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the estimates of the number of options that are expected to become exercisable are revised. The impact of the revision of original estimates, if any, are recognized in the income statement, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. |
(iv) | Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The group recognizes termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value. |
(v) | Leave pay. The group accrues for the cost of the leave days granted to employees during the period in which the leave days accumulate. |
F-19
Notes to the consolidated financial statements
For the years ended 30 June 2011
2.17 | Share capital |
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
2.18 | Leases |
Leases in which a significant portion of the risk and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.
For the groups policy on finance leases, refer to note 2.5 (v).
2.19 | Revenue recognition |
(i) | Revenue arising from gold sales is recognized when the price is determinable, the product has been delivered in accordance with the terms of the contract, the significant risks and rewards of ownership have been transferred to the customer and collection of the sales price is reasonably assured. These criteria are typically met when the gold arrives at the refinery. |
Revenue further excludes value-added tax. Revenues from silver and other by-products sales are credited to production costs as a by-product credit.
(ii) | Interest income : Interest is recognized on a time proportion basis, taking into account the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the group. |
(iii) | Dividend income is recognized when the shareholders right to receive payment is established. This is recognized at the last date of registration. |
2.20 | Dividends declared |
Dividends declared are recognized in the period in which they are approved by the board of directors. Dividends are payable in South African rand.
3 | CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS |
The preparation of the financial statements in conformity with IFRS requires the groups management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The resulting accounting estimates may differ from actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
3.1 | Impairment of mining assets |
The recoverable amount of mining assets is generally determined utilizing discounted future cash flows. Management also considers such factors as the quality of the individual orebody, market risk, asset specific risks and country risk in determining the fair value.
Key assumptions for the calculations of the mining assets recoverable amounts are the gold price, marketable discount rates (cost-to-sell), exchange rates and the annual life-of-mine plans. In determining the gold price to be used, management assess the long-term views of several reputable institutions on the gold price and based on this, derive the gold price. The life-of-mine plans are based on the proved and probable reserves as included in the Reserve Declaration, which are determined in terms of SAMREC and JORC, as well as resources where management has high confidence in the ore-body and economical recovery of gold, based on historic and similar geological experience.
During the year under review, the group calculated the recoverable amounts (generally fair value less costs to sell) based on updated life-of-mine plans, a gold price of R310 000 per kilogram (US$1 274 per ounce) and a post tax real discount rate, which ranges between 5.09% and 8.47%, depending on the asset (2010: R275 000 per kilogram (US$1050 per ounce) and a post tax real discount rate ranging between 5.92% and 10.72% depending on the asset) (2009: R225 000 per kilogram (US$750 per ounce) and a 9.34% discount rate). Cash flows used in the impairment calculations are based on life-of-mine plans which exceed five years for the majority of the mines. Refer to note 5 for details of impairments recorded.
F-20
Notes to the consolidated financial statements
For the years ended 30 June 2011
Should managements estimate of the future not reflect actual events, further impairments may be identified. Factors affecting the estimates include:
|
changes to proved and probable ore reserves; |
|
economical recovery of resources; |
|
the grade of the ore reserves may vary significantly from time to time; |
|
review of strategy; |
|
unforeseen operational issues at the mines; |
|
differences between actual commodity prices and commodity price assumptions; |
|
changes in the discount rates and foreign exchange rates; and |
|
changes in capital, operating mining, processing and reclamation costs. |
Sensitivity analysis
One of the most significant assumptions that influence the life-of-mine plans and therefore impairments is the expected gold price. A 10% decrease in the gold price at the reporting date would have resulted in an additional impairment at Steyn 2 (included in Bambanani segment) of US$6.8 million and US$27.6 million at Evander. This analysis assumes that all other variables remain constant.
3.2 | Impairment of investment in associates |
The investments in associates are evaluated annually for impairment by comparing the entire carrying value of the investment to the recoverable amount, which is the higher of value in use or fair value less costs to sell. In 2011, the investment in Rand Uranium was classified as held for sale for the sale and an impairment recognized. Refer to note 16.
3.3 | Valuation of available-for-sale financial assets |
If the value of financial instruments cannot be obtained from an active market, the group establishes fair value by using valuation techniques. These include the use of recent arms length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and option pricing models refined to reflect the issuers specific circumstances. When considering indications of an impairment, management considers a prolonged decline to be longer than 12 months. The significance of the decline is assessed for each security individually.
3.4 | Estimate of exposure and liabilities with regard to rehabilitation costs |
Estimated long-term environmental obligations, comprising pollution control, rehabilitation and mine closure, are based on the groups environmental management plans in compliance with current technological, environmental and regulatory requirements.
Significant judgment is applied in estimating ultimate rehabilitation cost that will be required in future to rehabilitate the groups mines. Ultimate cost may significantly differ from current estimates.
For the South African operations, management used an inflation rate of 6.60% (2010: 6.23 %) (2009: 6%) and the expected life of the mines according to the life-of-mine plans in the calculation of the estimated net present value of the rehabilitation liability. The discount rates used for the calculation are dependant on the shafts life-of-mine and are as follows: for 12 months 5.75% (2010: 6.75%) (2009: 6.75%); for 1 5 years 7.25% (2010: 8%) (2009: 8.25%); for 6 9 years 8.50% (2010: 8.50%) (2009: 8.25%) and for 10 years or more 8.75% (2010: 9%) (2009: 8.75%). These estimates were based on recent yields determined on government bonds.
In calculating the rehabilitation liability in PNG for 2011, an inflation rate of 3.3% (2010: 5.4%; 2009: 5.4%) was used, together with a discount rate of 7% (2010: 8%; 2009: 8%).
3.5 | Estimate of employee benefit liabilities |
An updated actuarial valuation is carried out at the end of each financial year. Assumptions used to determine the liability included a discount rate of 9.80%, no increases in employer subsidies (in terms of the agreement) and mortality rates according to the SA 1956/62 mortality table ( SA a mf tables) (60 years) and a medical inflation rate of 7.65% (2010: discount rate of 10.30%, 60 years and 8.14% inflation rate) (2009: discount rate of 10.00%, 60 years and 7.80% inflation rate).
Management determined the discount rate by assessing financial instruments with similar terms to the liability. The changes to the discount rate and medical inflation rate are similar to changes in interest and inflation rates in South Africa.
3.6 | Estimate of taxation |
The group is subject to income tax in several jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
Management has to exercise judgment with regards to deferred tax assets. Where the possibility exists that no future taxable income may flow against which these assets can be offset, the deferred tax assets are not recognized.
F-21
Notes to the consolidated financial statements
For the years ended 30 June 2011
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. When different tax rates apply to different levels of taxable income, deferred tax assets and liabilities are measured using the average tax rates that are expected to apply to the taxable profit (tax loss) of the periods in which the temporary differences are expected to reverse. At the groups South African operations, such average tax rates are directly impacted by the profitability of the relevant mine. The deferred tax rate is therefore based on the current estimate of future profitability of an operation when temporary differences will reverse, based on tax rates and tax laws that have been enacted at the balance sheet date. Refer to note 15 for further detail.
The future profitability of each mine, in turn, is determined by reference to the Life-of-Mine (LoM) plan for that operation. The LoM plan is influenced by factors as disclosed in note 3.1, which may differ from one year to the next and ultimately result in the deferred tax rate changing from one year to the next.
3.7 | Fair value of share-based payments |
The fair value of options granted are being determined using either a binominal, Black-Scholes or a Monte Carlo valuation model. The significant inputs into the model are: vesting period, risk free interest rate, volatility, price on date of grant and dividend yield. (Refer to note 36 for detail on each of the share option schemes.)
3.8 | Impairment of goodwill |
Due to the wasting nature of mining assets and the finite life of a mines reserves, the allocation of goodwill to a shaft will eventually result in an impairment charge for the goodwill. The group tests annually whether separately identifiable goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.8. These calculations require the use of estimates as stated in note 3.1.
3.9 | Gold in lock-up |
Gold in lock-up is carried at the lower of cost and net realizable value. The net realizable value is estimated based on the expected volumes treated and calculated plant call factor. Plant call factor is the efficiency measurement of the percentage of gold extracted from the ore. Management need to exercise judgment with regards to lock-up volumes, life-of-mine plans, gold prices, exchange rates and post tax real discount rates. Net realizable value tests are performed at least annually.
3.10 | Assessment of contingencies |
Contingencies will only realize when one or more future events occur or fail to occur. The exercise of significant judgment and estimates of the outcome of future events are required during the assessment of the impact of such contingencies.
Litigation and other judicial proceedings as a rule raise difficult and complex legal issues and are subject to uncertainties and complexities including, but not limited to, the facts and circumstances of each particular case, issues regarding the jurisdiction in which the suit is brought and differences in applicable law. Upon resolution of any pending legal matter, the group may be forced to incur charges in excess of the presently established provisions and related insurance coverage. It is possible that the financial position, results of operations or cash flows of the group could be materially affected by the outcome of the litigation.
3.11 | Gold mineral reserves and resources |
Gold mineral reserves and resources are estimates of the amount of ounces that can be economically and legally extracted from the groups properties. In order to calculate the gold mineral reserves and resources, 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 and resources requires the size, shape and depth of the ore bodies 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.
Because the economic assumptions used to estimate the gold mineral reserves and resources change from year to year, and because additional geological data is generated during the course of operations, estimates of the mineral reserves and resources may change from year to year. Changes in the reserves and resources may affect the groups financial results and financial position in a number of ways, including:
|
asset carrying values may be affected due to changes in estimated cash flows; |
|
depreciation and amortization charged in the income statement may change as they are calculated on the units-of-production method; and |
|
environmental provisions may change as the timing and/or cost of these activities may be affected by the change in mineral reserves. |
At the end of each financial year, the estimate of proved and probable gold mineral reserves and resources is updated. Depreciation of mining assets is prospectively adjusted, based on these changes.
F-22
Notes to the consolidated financial statements
For the years ended 30 June 2011
3.12 | Production start date |
Various relevant criteria are considered in order to assess when the mine is substantially complete and ready for its intended use and moves into the production phase. Some of the criteria would include but are not limited to the following:
|
the level of capital expenditure compared to the total project cost estimates; |
|
the ability to produce gold in a saleable form (where more than an insignificant amount of gold has been produced); and |
|
the ability to sustain the on-going production of gold. |
F-23
Notes to the consolidated financial statements
For the years ended 30 June 2011
4 | FINANCIAL RISK MANAGEMENT |
The groups financial instruments expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and other price risk), credit risk and liquidity risk. The group may use derivative financial instruments to hedge certain risk exposures.
The groups financial instruments are set out below:
Figures in million (US dollar) |
Loans and
receivables |
Available-
for-sale financial assets |
Held-to-
maturity investments |
Fair value
through profit or loss financial assets |
Financial
liabilities at amortized cost |
|||||||||||||||
At 30 June 2011 |
||||||||||||||||||||
Restricted cash |
5 | | | | | |||||||||||||||
Restricted investments |
| | 30 | 248 | | |||||||||||||||
Investments in financial assets |
| 27 | | | | |||||||||||||||
Trade and other receivables |
124 | | | | | |||||||||||||||
Cash and cash equivalents |
102 | | | | | |||||||||||||||
Borrowings |
| | | | 230 | |||||||||||||||
Trade and other payables |
| | | | 73 | |||||||||||||||
At 30 June 2010 |
||||||||||||||||||||
Restricted cash |
19 | | | | | |||||||||||||||
Restricted investments |
| | 53 | 175 | | |||||||||||||||
Investments in financial assets |
| 2 | | | | |||||||||||||||
Trade and other receivables |
97 | | | | | |||||||||||||||
Cash and cash equivalents |
101 | | | | | |||||||||||||||
Borrowings |
| | | | 156 | |||||||||||||||
Trade and other payables |
| | | | 59 | |||||||||||||||
Risk management is carried out by a central treasury department (group treasury) under policies approved by the board of directors. Group treasury identifies, evaluates and hedges certain selected financial risks in close co-operation with the groups operating units. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and the investment of excess liquidity.
(a) | Market risk |
(i) Foreign exchange risk
The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar (US$). Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entitys functional currency. Harmonys revenues are sensitive to the ZAR/US$ exchange rate as all revenues are generated by gold sales denominated in US$. Harmony generally does not enter into forward sales, derivatives or other hedging arrangements to establish an exchange rate in advance for the sale of its future gold production.
The group is exposed to foreign exchange risk arising from inter-company loans denominated in a currency other than the functional currency of that entity (A$ and Kina). Harmony generally does not enter into forward sales, derivatives or other hedging arrangements to manage this risk.
F-24
Notes to the consolidated financial statements
For the years ended 30 June 2011
Sensitivity analysis
The group has reviewed its foreign currency exposure on financial assets and financial liabilities and has identified the following sensitivities for a 10% change in the exchange rate.
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
A$ against US$ |
||||||||
Increase by ten percent |
1 | 1 | ||||||
Decrease by ten percent |
(1 | ) | (1 | ) | ||||
Closing rate |
1.07 | 0.85 | ||||||
Kina against A$ |
||||||||
Increase by ten percent |
47 | 30 | ||||||
Decrease by ten percent |
(47 | ) | (30 | ) | ||||
Closing rate |
2.41 | 2.31 | ||||||
(ii) Other price risk
The group is exposed to the risk of fluctuations in the fair value of the available-for-sale and fair value through profit or loss financial assets as a result of changes in market prices (other than changes in interest rates and foreign currencies). Harmony generally does not use any derivative instruments to manage this risk.
Sensitivity analysis
A 1% increase in the share price of available-for-sale financial assets at the reporting date, with all other variables held constant, would have increased other comprehensive income by US$0.3 million (2010: US$nil); an equal change in the opposite direction would have decreased comprehensive income by US$0.3 million (2010: US$nil).
A 1% increase in the Shareholder Weighted Top 40 Index (SWIX40) on the JSE at the reporting date, with all other variables held constant, would have increased profit or loss by US$1.1 million (2010: US$1.8 million); an equal change in the opposite direction would have decreased comprehensive income by US$1.1 million (2010: US$1.8 million).
The analysis is performed on the same basis for 2010. The financial assets to which the sensitivity has been performed are disclosed in notes 21 and 23.
Commodity price sensitivity
The profitability of the groups operations, and the cash flows generated by those operations, are affected by changes in the market price of gold. Harmony generally does not enter into forward sales, derivatives or other hedging arrangements to establish a price in advance for the sale of future gold production.
(iii) Cash flow and fair value interest rate risk
The groups interest rate risk arises mainly from long-term borrowings. The group has variable interest rate borrowings. Variable rate borrowings expose the group to cash flow interest rate risk. The group has not entered into any agreements to manage this risk.
Sensitivity analysis
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) profit before tax by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is performed on the same basis for 2010.
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Increase by 100 basis points |
2 | 2 | ||||||
Decrease by 100 basis points |
(2 | ) | (2 | ) |
(b) | Credit risk |
Credit risk is the risk that a counterparty may default or not meet its obligations timeously. Financial instruments, which subject the group to concentrations of credit risk, consist predominantly of restricted cash, restricted investments, trade and other receivables (excluding non-financial instruments) and cash and cash equivalents.
F-25
Notes to the consolidated financial statements
For the years ended 30 June 2011
Exposure to credit risk on trade and other receivables is monitored on a regular basis. The credit risk arising from restricted cash, cash and cash equivalents and restricted investments is managed by ensuring amounts are only invested with financial institutions of good credit quality. The group has policies that limit the amount of credit exposure to any one financial institution.
Cash and cash equivalents and restricted cash
Financial institutions credit rating by exposure:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Credit rating |
||||||||
AAA (1) |
38 | 57 | ||||||
AA (1) |
41 | 31 | ||||||
AA- (1) |
24 | 25 | ||||||
A+ |
4 | 5 | ||||||
A |
| 2 | ||||||
Cash and cash equivalents and restricted cash |
107 | 120 | ||||||
(1) Includes restricted cash |
||||||||
AAA |
4 | - | ||||||
AA |
1 | 7 | ||||||
AA- |
| 12 | ||||||
Total restricted cash |
5 | 19 | ||||||
It is the policy of the group to renegotiate credit terms with long-standing customers who have a good credit history with the group. These customers are monitored on an ongoing basis to ensure that the customer remains within the renegotiated terms. Refer to note 26.
The groups maximum exposure to credit risk is represented by the carrying amount of all financial assets determined to be exposed to credit risk, amounting to US$505.9 million as at 30 June 2011 (2010: US$445.5 million). US$297 million of this amount, which includes the equity-linked notes and interest-bearing short term investments (refer to note 21) are held with Nedbank Limited which has a AA- rating.
(c) | Liquidity Risk |
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, and the availability of funding through an adequate amount of committed credit facilities.
In the ordinary course of business, the group receives cash from its operations and is required to fund working capital and capital expenditure requirements. The cash is managed to ensure that surplus funds are invested in a manner to achieve market-related returns and to provide sufficient liquidity at the minimum risk. The group is able to actively source financing at competitive rates.
The following are the contractual maturities of financial liabilities (including principle and interest payments):
US dollar | ||||||||
Figures in million | Current |
|
More than
1 year |
|
||||
2011 |
||||||||
Borrowings (1)(2)(3) |
69 | 179 | ||||||
Trade and other payables (excluding non-financial liabilities) |
74 | | ||||||
143 | 179 | |||||||
2010 |
||||||||
Borrowings (1)(2)(3) |
41 | 152 | ||||||
Trade and other payables (excluding non-financial liabilities) |
59 | | ||||||
100 | 152 | |||||||
(1) |
US$35 million is due between 0 to 6 months. (2010: US$21 million). |
(2) |
US$34 million is due between 6 to 12 months. (2010: US$20 million). |
(3) |
US$61 million is due between 1 to 2 years. (2010: US$40 million). |
F-26
Notes to the consolidated financial statements
For the years ended 30 June 2011
(d) | Capital risk management |
The primary objective of managing the groups capital is to ensure that there is sufficient capital available to support the funding requirements of the group, in a way that optimizes the cost of capital and matches the current strategic business plan.
The group manages and makes adjustments to the capital structure, which consists of debt and equity as and when borrowings mature or when funding is required. This may take the form of raising equity, market or bank debt or hybrids thereof. The group may also adjust the amount of dividends paid, sell assets to reduce debt or schedule projects to manage the capital structure.
There were no changes to the groups approach to capital management during the year.
(e) | Fair value determination |
The carrying values (less any impairment allowance) of short-term financial instruments are assumed to approximate their fair values.
The fair value of the available-for-sale financial assets are determined by reference to quoted market prices. The fair value of other non-current financial instruments are determined using a discounted cash flow model with market observable inputs, such as market interest rates.
The carrying values of financial assets and liabilities are assumed to approximate their fair values.
The following table presents the groups assets that are measured at fair value by level at 30 June 2011. This requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
1) | Quoted prices (unadjusted) in active markets for identical assets (level 1). |
2) | Inputs other than quoted prices included within level 1 that are observable for the asset, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). |
3) | Inputs for the asset that are not based on observable market data (that is, unobservable inputs) (level 3). |
Assets | Level 1 | Level 2 | Level 3 | |||||||||
Figures in million (US dollar) |
||||||||||||
Available-for-sale financial assets (1) |
26 | | 1 | |||||||||
Fair value through profit and loss financial assets (2) |
| 248 | | |||||||||
The following table presents the groups assets that are measured at fair value by level at 30 June 2010.
Assets | Level 1 | Level 2 | Level 3 | |||||||||
Figures in million (US dollar) |
||||||||||||
Available-for-sale financial assets (1) |
| | 2 | |||||||||
Fair value through profit and loss financial assets (2) |
| 175 | | |||||||||
(1) |
Refer to note 23. Level 1 and 2 fair values are either directly or indirectly derived from actively trading shares on the JSE. |
(2) |
Level 2 fair values are indirectly derived from the Shareholder Weighted Top 40 Index (SWIX 40) on the JSE and is discounted at market interest rates. |
F-27
Notes to the consolidated financial statements
For the years ended 30 June 2011
5 | COST OF SALES |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Production costs (a) |
1,313 | 1,103 | 850 | |||||||||
Amortization and depreciation of mining properties, mine development costs and mine plant facilities |
244 | 175 | 130 | |||||||||
Amortization and depreciation of assets other than mining and mining related assets (b) |
10 | 6 | 9 | |||||||||
Rehabilitation expenditure (c) |
11 | 4 | 1 | |||||||||
Care and maintenance cost of restructured shafts |
18 | 8 | 5 | |||||||||
Employment termination and restructuring costs (d) |
23 | 27 | 4 | |||||||||
Share-based payments (e) |
19 | 20 | 13 | |||||||||
Impairment of assets (f) |
39 | 43 | 71 | |||||||||
Other (g) |
(13 | ) | (3 | ) | | |||||||
Total cost of sales |
1,664 | 1,383 | 1,083 | |||||||||
(a) | Production costs include mine production, transport and refinery costs, applicable general and administrative costs, movement in inventories and ore stockpiles, ongoing environmental rehabilitation costs and transfers to and from deferred stripping. Ongoing employee termination costs are included, however employee termination costs associated with major restructuring and shaft closures are excluded. Production costs, analyzed by nature, consist of the following: |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Labor costs, including contractors |
832 | 762 | 540 | |||||||||
Consumables |
357 | 302 | 215 | |||||||||
Water and electricity |
196 | 160 | 93 | |||||||||
Insurance |
16 | 24 | 25 | |||||||||
Transportation |
19 | 19 | 15 | |||||||||
Changes in inventory |
34 | (3 | ) | (2 | ) | |||||||
Capitalization of mine development costs |
(170 | ) | (157 | ) | (106 | ) | ||||||
Deferred stripping |
(6 | ) | 1 | | ||||||||
By-products sales |
(24 | ) | (5 | ) | (3 | ) | ||||||
Royalty expense |
14 | 4 | | |||||||||
Other |
45 | (4 | ) | 73 | ||||||||
Total production cost |
1,313 | 1,103 | 850 | |||||||||
(b) | Amortization and depreciation of assets other than mining and mining related assets consist of the following: |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Other non-mining assets |
3 | 2 | 1 | |||||||||
Intangible assets |
6 | 4 | 3 | |||||||||
Amortization of issue costs |
1 | | 5 | |||||||||
Total amortization and depreciation |
10 | 6 | 9 | |||||||||
(c) | Rehabilitation expenditure |
For the assumptions used to calculate the rehabilitation costs, refer to note 3.4. This expense includes the change in estimate for the rehabilitation provision as well as ongoing rehabilitation cost.
F-28
Notes to the consolidated financial statements
For the years ended 30 June 2011
(d) | Employment termination and restructuring costs consist of the following: |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Harmony Gold Mining Company Limited (Harmony) |
13 | 9 | 1 | |||||||||
Randfontein Estates Limited (Randfontein) |
1 | 1 | 1 | |||||||||
Evander Gold Mines Limited (Evander) |
3 | 15 | 1 | |||||||||
ARMGold/Harmony Freegold Joint Venture Company (Proprietary) Limited (Freegold) |
6 | 2 | 1 | |||||||||
Total employment termination and restructuring cost |
23 | 27 | 4 | |||||||||
During the 2011 financial year Merriespruit 1 shaft was closed and placed on care and maintenance due to mining no longer being economically viable. The voluntary retrenchment process, which the group commenced in the 2010 financial year was finalized during the latter part of the 2011 financial year.
During the 2010 financial year certain shafts in Harmony and Evander were closed and placed on care and maintenance. These closures were due to mining no longer being economically viable. The group also engaged in a voluntary retrenchment process during the 2010 financial year, resulting in retrenchment costs for various operations.
(e) | Share-based payments |
Refer to note 36 for details on the share-based payment schemes operated by the group.
(f) | Impairment of assets consist of the following: |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Steyn 1 (Bambanani) |
15 | | | |||||||||
Steyn 2 (Bambanani) |
15 | | | |||||||||
Evander 2/5 (Evander) |
| 9 | 33 | |||||||||
St Helena (Other Underground) |
9 | | | |||||||||
Freddies 7 (Target) |
| 1 | 31 | |||||||||
Harmony 2 (Virginia) |
| 5 | 7 | |||||||||
Merriespruit 1 (Virginia) |
| 17 | | |||||||||
Merriespruit 3 (Virginia) |
| 6 | | |||||||||
Brand 2/3 complex (Virginia) |
| 5 | | |||||||||
Total impairment of assets |
39 | 43 | 71 | |||||||||
In 2011 impairments amounting to US$15.3 million (2010: US$1.8 million) (2009: US$71 million)) were recognized as a result of the revised business (life-of-mine) plans, which are completed in June of each year, and included increases in electricity and labor costs and a decrease in reserves declared as a result of revised cut-off grades. The remaining US$23.6 million impairment in 2011 (2010: US$41.4 million) relates to operations where a decision was made not to mine in future. In 2010 this included impairments as a result of the shaft closures under note 5(d) above.
These adjustments impacted negatively on the recoverable amount of property, plant and equipment and contributed to the recognition of the impairments at the shafts. Impairment tests were performed as required by IAS 36, Impairment of Assets, and as a result these impairments were recorded. For assumptions used to calculate the recoverable amount, refer to note 3.1.
(g) | Included in Other for the 2011 financial year are certain inventory adjustments. Refer to note 25. |
F-29
Notes to the consolidated financial statements
For the years ended 30 June 2011
6 | EXPLORATION EXPENDITURE |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Total expenditure |
57 | 29 | 29 | |||||||||
Expenditure capitalised ( ¹ ) |
(6 | ) | | | ||||||||
Exploration expenditure as per income statement |
51 | 29 | 29 | |||||||||
Exploration expenditure was incurred as follows:
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
South Africa |
8 | 7 | 7 | |||||||||
PNG |
49 | 22 | 22 | |||||||||
Brownfields |
6 | | | |||||||||
Greenfields |
33 | 20 | 22 | |||||||||
Technical and economic feasibility |
10 | 2 | | |||||||||
57 | 29 | 29 | ||||||||||
( ¹ ) |
The capitalized amount of US$S6.4 million (2010: US$nil), (2009: US$nil) relates to brownfields exploration at Hidden Valley. |
7 | PROFIT ON SALE OF PROPERTY, PLANT AND EQUIPMENT |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Profit on sale of property, plant and equipment |
4 | 14 | 114 |
On 24 September 2010, the group concluded the sale of a royalty right held by Aurora Gold Limited a subsidiary of Harmony (Australia) (Pty) Ltd to Kingsrose Mining Limited (Kingsrose) for a total consideration and profit of US$1.9 million. The consideration was received in the form of Kingsrose shares valued at US$1.6 million and cash of US$0.3 million.
During June 2010, the group concluded the sale of the Jeanette prospecting right to Taung Gold Limited (Taung) for a total consideration and profit of US$10 million, as well as the sale of royalty rights in Australia to Regis Resources Limited for a total consideration of US$3.5 million.
Included in the total for 2009 is US$111.9 million profit on sale of 50% of Harmonys gold and copper assets in Morobe Province, Papua New Guinea, to Newcrest Mining Limited (Newcrest) in terms of the Master Purchase and Farm-in agreement. The sale was concluded in three stages.
8 | OTHER EXPENSES NET |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Foreign exchange loss/(gain) net (a) |
4 | 10 | (14 | ) | ||||||||
Bad debts provision (credit)/expense |
3 | (2 | ) | 11 | ||||||||
Bad debts written off |
| 4 | 3 | |||||||||
Other (income)/expenses net |
(4 | ) | (4 | ) | 3 | |||||||
Total other expenses net |
3 | 8 | 3 | |||||||||
(a) | During the 2011 financial year foreign exchange gains relating to the Australasia intercompany loans amounting to US$0.7 million (2010: loss of US$12.2 million), (2009: loss of US$22.3 million) were recognized in the consolidated income statement. During 2011 one of these loans was designated as forming part of the net investment of the groups international operations. |
During the 2011 financial year foreign exchange losses amounting to US$6.2 million were realized on the liquidation of certain dormant Australian subsidiaries. During the 2010 financial year foreign exchange gains of US$2.9 million were realized on liquidation of Harmony Gold Peru SA and Harmony Precious Metals Services SAS, wholly owned subsidiaries of Harmony.
F-30
Notes to the consolidated financial statements
For the years ended 30 June 2011
During the 2009 financial year, foreign exchange losses of US$30.0 million were recognized on the US$ denominated Pamodzi Resource Fund 1 LLP (PRF) loan for the Cooke transaction.
In anticipation of the receipt of the purchase consideration for the Cooke assets, the group arranged a forward exchange contract, allowing the group to sell the proceeds at R10.27 per US$1 on 21 April 2009. The gain on this arrangement was US$21.1 million.
9 | OPERATING PROFIT |
The following have been included in operating profit:
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Auditors remuneration |
4 | 3 | 3 | |||||||||
Made up as follows: |
||||||||||||
External |
||||||||||||
Fees current year |
3 | 2 | 2 | |||||||||
Internal |
||||||||||||
Fees current year |
1 | 1 | 1 |
10 | LOSS ON SALE OF INVESTMENT IN SUBSIDIARY |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Loss on sale of Big Bell Operations (Proprietary) Limited |
| 3 | |
During January 2010 the group concluded the sale of Big Bell Operations (Proprietary) Limited (Big Bell), an operation in Western Australia, for a total consideration of US$3.2 million. The group realized a net loss of US$3.3 million after recycling a foreign currency reserve of US$4.0 million on disposal date from other comprehensive income to the consolidated income statement.
11 | NET GAIN ON FINANCIAL INSTRUMENTS |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Available-for-sale |
||||||||||||
Impairment recognized in profit or loss (a) |
| | (12 | ) | ||||||||
Realized portion of fair value movement (b) |
1 | 1 | 2 | |||||||||
1 | 1 | (10 | ) | |||||||||
Fair value through profit or loss |
||||||||||||
Fair value gain on environmental trust funds |
19 | 4 | | |||||||||
19 | 4 | | ||||||||||
Total net gain/(loss) on financial instruments |
20 | 5 | (10 | ) | ||||||||
(a) | The impairment for 2010 and 2009 relates to the portion of impairment losses reclassified from other reserves to the income statement when certain investments were considered to be permanently impaired. The amount in 2010 relates to several small investments, while the amount in 2009 relates to Dioro Exploration NL (Dioro) investment. |
(b) | During the 2011 financial year the group acquired and disposed of an investment in Kingsrose. The fair value gains of US$0.4 million relating to this investment were reclassified from other reserves to the income statement. The remaining realized portion of fair value gains related to the disposal of other listed investments. |
During the 2010 financial year the group disposed of its entire shareholding in Avoca Resources Limited (Avoca), Alloy Resources Limited (Alloy) and various other smaller investments for a total consideration of US$6.6 million. Total fair value gains of US$1.4 million relating to these investments were reclassified from other reserves to the income statement. |
The amount in the 2009 financial year relates to the realized portion of the fair value gains reclassified from other reserves to the income statement on the disposal of Dioro investment. |
F-31
Notes to the consolidated financial statements
For the years ended 30 June 2011
12 | GAIN ON FARM-IN OPTION |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Gain on farm-in option |
38 | | |
During 2011, a gain of US$38.0 million was recognized on the cancellation of the Freegold farm-in option. The Freegold option allowed the group to acquire a beneficial interest of up to 40% in any future mines established by Witwatersrand Consolidated Gold Resources Limited (Wits Gold) on certain properties in the Southern Free State. On 5 November 2010 the group received 4 376 194 shares in Wits Gold as consideration for the cancellation of the option.
13 | INVESTMENT INCOME |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Interest received |
20 | 25 | 49 | |||||||||
Loans and receivables |
3 | 3 | 9 | |||||||||
Held-to-maturity investments |
3 | 10 | 19 | |||||||||
Cash and cash equivalents |
7 | 12 | 20 | |||||||||
South African Revenue Service (SARS) |
7 | | 1 | |||||||||
Dividend income from available-for-sale investments |
| | | |||||||||
Total investment income |
20 | 25 | 49 | |||||||||
14 | FINANCE COST |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Financial liabilities |
||||||||||||
Bank and short-term facilities |
| | 2 | |||||||||
Convertible unsecured fixed rate bonds |
| | 15 | |||||||||
Borrowings |
20 | 11 | 23 | |||||||||
Other creditors |
1 | | | |||||||||
Total finance costs from financial liabilities |
21 | 11 | 40 | |||||||||
Non-financial liabilities |
||||||||||||
Post-retirement benefits |
2 | 2 | 2 | |||||||||
Time value of money and inflation component of rehabilitation costs |
18 | 17 | 11 | |||||||||
South African Revenue Service (SARS) |
1 | 2 | 2 | |||||||||
Total finance costs from non-financial liabilities |
21 | 21 | 15 | |||||||||
Total finance cost before interest capitalized |
42 | 32 | 55 | |||||||||
Interest capitalized |
(1 | ) | | (31 | ) | |||||||
Total finance costs |
41 | 32 | 24 | |||||||||
The average capitalization rate used to determine the amount of borrowing costs eligible for capitalization during the year is 9.7% (2010: 10.6% and 2009: 12.3%).
F-32
Notes to the consolidated financial statements
For the years ended 30 June 2011
15 | TAXATION |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Taxation by region |
||||||||||||
SA taxation |
||||||||||||
Mining tax (a) |
(4 | ) | 6 | 19 | ||||||||
Current year |
1 | 6 | 14 | |||||||||
Prior year overprovision |
(5 | ) | | 5 | ||||||||
Non-mining tax (b) |
4 | 5 | 19 | |||||||||
Current year |
4 | 5 | 18 | |||||||||
Prior year underprovision |
| | 1 | |||||||||
Deferred tax (c) |
(40 | ) | 48 | 40 | ||||||||
Current year |
12 | | | |||||||||
Previously unrecognized temporary differences |
(52 | ) | | | ||||||||
Secondary Tax on Companies (STC) |
1 | | | |||||||||
(39 | ) | 59 | 78 | |||||||||
Foreign taxation |
||||||||||||
Deferred tax (d) |
(30 | ) | (15 | ) | (56 | ) | ||||||
Total taxation |
(69 | ) | 44 | 22 | ||||||||
Taxation by type |
||||||||||||
Mining tax |
(4 | ) | 6 | 19 | ||||||||
Non-mining tax |
4 | 5 | 19 | |||||||||
Deferred tax |
(70 | ) | 33 | (16 | ) | |||||||
STC |
1 | | | |||||||||
(69 | ) | 44 | 22 | |||||||||
(a) | Mining tax on gold mining income in South Africa is determined according to a formula, based on the taxable income, net of any qualifying capital expenditure from mining operations. 5% of total mining revenue is exempt from taxation while the remainder is taxable at a higher rate than non-mining income as a result of applying the gold mine formula. All qualifying mining capital expenditure is deducted from taxable mining income to the extent that it does not result in an assessed loss. Accounting depreciation is eliminated when calculating the South African mining tax income. Excess capital expenditure is carried forward as unredeemed capital to be claimed from future mining taxable income. The group has several tax paying entities in South Africa. In terms of the mining ring-fencing application, each ring-fenced mine is treated separately and deductions can normally only be utilized against mining income generated from the relevant ring-fenced mine. |
Gold mining companies within the group that have elected to be exempt from Secondary Tax on Companies (STC) are taxed at higher rates than those that have not made the election.
(b) | Non-mining income is taxed at 35% (exempt from STC) and 28% (no election made). Non-mining companies are taxed at the statutory corporate rate of 28%. |
(c) | The deferred tax rate used to calculate deferred tax is based on the current estimate of future profitability when temporary differences will reverse, based on tax rates and tax laws that have been enacted at balance sheet date. Depending on the profitability of the operations, the deferred tax rate can consequently be significantly different from year to year. The only significant movement in the deferred tax rate for 2011 was at Evander Gold Mines Limited, where the tax rate changed from 22.9% to 11.5%. This was due to the annual review of the life-of-mine of the operation. During fiscal 2010, the deferred tax rate for Evander Gold Mines Limited and Harmony Gold Mining Company Limited increased mainly as a result of the closure of loss-making shafts. |
(d) | Mining and non-mining income of Australian and PNG operations are taxed at a standard tax rate of 30%. |
F-33
Notes to the consolidated financial statements
For the years ended 30 June 2011
Income and mining tax rates
The tax rates remained unchanged for the 2011, 2010 and 2009 financial years.
Major items causing the groups income tax provision to differ from the maximum mining statutory tax rate of 43% (2010: 43% and 2009: 43%) were:
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Tax on net profit from continuing operations at the maximum mining statutory tax rate |
(6 | ) | (10 | ) | (102 | ) | ||||||
Non-allowable deductions |
(6 | ) | (19 | ) | (33 | ) | ||||||
(Loss)/profit from associates |
(3 | ) | 3 | 1 | ||||||||
Difference between effective mining tax rate and statutory mining rate on mining income |
3 | 2 | 14 | |||||||||
Difference between non-mining tax rate and statutory mining rate on non-mining income |
2 | 3 | 11 | |||||||||
Effect on temporary differences due to changes in effective tax rates |
(36 | ) | (95 | ) | 53 | |||||||
Previously unrecognized temporary differences (1) |
52 | | | |||||||||
Prior year overprovision mining and non-mining tax |
5 | | (5 | ) | ||||||||
Capital allowance, sale of business and other rate differences |
59 | 72 | 39 | |||||||||
STC |
(1 | ) | | | ||||||||
Income and mining taxation |
69 | (44 | ) | (22 | ) | |||||||
Effective income and mining tax rate |
(493 | %) | 183 | % | 9 | % | ||||||
(1) |
The credit in 2011 relates to the Freegold unredeemed capital allowance. The South African Revenue Service (SARS) previously disallowed Freegolds post 1973 gold mine additional capital allowance claim, and also disallowed Freegolds application of mining ringfencing. SARS withdrew the additional capital allowance claim on 10 March 2011, conceding that the Freegold operations are entitled to claim this capital allowance. The inclusion of the capital allowance caused an increase in the deferred tax asset on the balance sheet and the resulting credit in the income statement. Refer to note 38(b) for developments on the ringfencing application dispute. |
Deferred tax
The analysis of deferred tax assets and liabilities is as follows:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Deferred tax assets |
(170 | ) | (246 | ) | ||||
Deferred tax asset to be recovered after more than 12 months |
(148 | ) | (221 | ) | ||||
Deferred tax asset to be recovered within 12 months |
(22 | ) | (25 | ) | ||||
Deferred tax liabilities |
623 | 709 | ||||||
Deferred tax liability to be recovered after more than 12 months |
578 | 672 | ||||||
Deferred tax liability to be recovered within 12 months |
45 | 37 | ||||||
Net deferred tax liabilities |
453 | 463 | ||||||
Deferred tax liabilities and assets on the balance sheets as at 30 June 2011 and 30 June 2010 relate to the following:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Gross deferred tax liability |
825 | 711 | ||||||
Amortization and depreciation |
823 | 709 | ||||||
Other |
2 | 2 | ||||||
Gross deferred tax asset |
(372 | ) | (248 | ) | ||||
Unredeemed capital expenditure |
(321 | ) | (198 | ) | ||||
Provisions, including non-current provisions |
(39 | ) | (35 | ) | ||||
Tax losses |
(12 | ) | (15 | ) | ||||
Net deferred tax liability |
453 | 463 | ||||||
Movement in the net deferred tax liability recognized in the balance sheet is as follows:
F-34
Notes to the consolidated financial statements
For the years ended 30 June 2011
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Balance at beginning of year |
463 | 421 | ||||||
(Credit)/charge per income statement continuing operations |
(70 | ) | 33 | |||||
Charge per income statement discontinued operations |
5 | | ||||||
Foreign currency translation |
55 | 9 | ||||||
Balance at end of year |
453 | 463 | ||||||
As at 30 June, certain subsidiaries in the group had the following tax credits:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Unredeemed capital expenditure available for utilization against future mining taxable income (1) |
2,481 | 1,783 | ||||||
Tax losses carried forward utilizable against taxable income |
60 | 52 | ||||||
Capital Gains Tax (CGT) losses available to be utilized against future CGT gains. |
69 | 61 | ||||||
As at 30 June, the group has not recognized the following deferred tax asset amounts |
476 | 386 | ||||||
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
The unrecognized temporary differences are: |
||||||||
Unredeemed capital expenditure (2) |
1,325 | 1,070 | ||||||
Tax losses |
17 | 15 | ||||||
CGT losses |
69 | 61 | ||||||
Temporary differences relating to investments in associates |
176 | 156 | ||||||
(1) |
The three highest contributors were Avgold US$1,325 million, Australia US$691 million, Randfontein US$226 million. |
(2) |
Relates to Avgold. |
Secondary Tax on Companies
STC is a tax levied on South African companies at a rate of 10% with effect from 1 October 2007 on dividends distributed.
Current and deferred tax are measured at the tax rate applicable to undistributed income and therefore only take STC into account to the extent that dividends have been received or paid.
On declaration of a dividend, the Company includes the STC on this dividend in its computation of the income tax expense in the period of such declaration.
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Available STC credits at end of year |
| 18 | 35 | |||||||||
On 12 August 2011, the board of directors approved a final dividend for the 2011 financial year of 60 (2010: 50; 2009: 50) SA cents per share (8.3 (2010: 6.8; 2009: 6.3) US cents). The total dividend amounts to US$35.9 million (at date of declaration) (2010: US$29.3 million; 2009: US$26.7 million) based on issued shares at 30 June 2011. As the dividends declared exceed the STC credits available, STC on the amount of US$35.9 million (2010: US$9.6 million; 2009: US$nil) is payable at a rate of 10%.
16 | DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS |
(i) | Following a decision by the shareholders of Rand Uranium (Proprietary) Limited (Rand Uranium) to commence with a process to sell the company and the criteria for IFRS 5 being met subsequently, the investment in Rand Uranium and the subordinated shareholders loan have been classified as held for sale. As a result the group ceased equity accounting for the investment in associate. An offer to purchase the investment was received from Gold One International (Gold One) and was accepted by the shareholders on 21 April 2011. The groups attributable portion of the sales proceeds, which includes the subordinated shareholders loan, amounts to US$37.25 million. |
F-35
Notes to the consolidated financial statements
For the years ended 30 June 2011
The investment does not meet the criteria to be classified as a discontinued operation. An impairment of US$20.3 million was recorded during the 2011 financial year to bring the investment in associate in line with its fair value less cost to sell. At the date of this report management expects the outstanding conditions precedent to be fulfilled during the 2012 financial year.
(ii) | On 10 September 2010, Harmony concluded a sale of assets agreement with Taung, in which Taung acquired the Evander 6 Shaft, the related infrastructure and surface rights permits as well as a mining right over the Evander 6 and Twistdraai areas. When the criteria for IFRS 5 were met, the assets and liabilities were classified as held for sale. The operation did not meet the criteria to be classified as a discontinued operation. The Evander 6 operation is on care and maintenance with a book value of US$nil. The total purchase consideration is US$33.2 million, which will be settled in cash when all remaining conditions precedent to the transaction have been fulfilled. As at the date of this report certain conditions of the agreement had not been met and management expects the conditions precedent to be fulfilled during the 2012 financial year. In terms of an amended agreement reached between the parties, Taung paid an initial deposit of US$15.2 million on 29 April 2011. There is no interest on the amount and the deposit is refundable should the conditions precedent not be met. Refer to note 32(b) for additional disclosure. |
(iii) | On 20 July 2010, the conditions precedent for the sale of the Mount Magnet operation (operation in Western Australia) were fulfilled, this following approval of the groups management on 17 May 2010 to sell this operation. The assets and liabilities were presented as held for sale from this date and the operation also met the criteria to be classified as a discontinued operation. |
A total purchase consideration of US$31.6 million was received from Ramelius Resources Limited in exchange for 100% of the issued shares of Mount Magnet. The group recognized as total profit of US$13.8 million net of tax before the realization of accumulated foreign exchange losses of US$11.2 million from other comprehensive income to the income statement.
An amount of US$4.1 million was released to the group as a result of performance bonds being replaced by the purchaser. This amount was previously included in Restricted Cash. Refer to note 20.
The | assets and liabilities for the operations classified as held for sale at the reporting dates are as follows: |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Balance sheet |
||||||||
Assets of disposal groups classified as held for sale |
||||||||
Property, plant and equipment |
| 29 | ||||||
Investment in associates |
28 | | ||||||
Restricted investments |
2 | | ||||||
Deferred income tax |
| 2 | ||||||
Inventories |
| 1 | ||||||
Trade and other receivables |
10 | | ||||||
Total assets of disposal groups classified as held for sale |
40 | 32 | ||||||
Liabilities of disposal groups classified as held for sale |
||||||||
Deferred income tax |
| 2 | ||||||
Provision for environmental rehabilitation |
2 | 16 | ||||||
Trade and other payables |
| | ||||||
Total liabilities of disposal groups classified as held for sale |
2 | 18 | ||||||
F-36
Notes to the consolidated financial statements
For the years ended 30 June 2011
The analysis of the results and cash flows of discontinued operations are disclosed in the tables below:
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Income statement |
||||||||||||
Revenue |
| | 69 | |||||||||
Reversal of impairment |
| | 28 | |||||||||
Expenses net |
| (4 | ) | (103 | ) | |||||||
Profit on sale of investment in subsidiary |
7 | | | |||||||||
Profit on sale of shares |
| | 171 | |||||||||
Profit on sale of property, plant and equipment |
| | 2 | |||||||||
Profit/(loss) from discontinued operations before tax |
7 | (4 | ) | 167 | ||||||||
Taxation |
(4 | ) | | (72 | ) | |||||||
Profit/(loss) for the year from discontinued operations |
3 | (4 | ) | 95 | ||||||||
Cash flows |
||||||||||||
Operating cash flows |
| (6 | ) | 8 | ||||||||
Investing cash flows |
30 | | 202 | |||||||||
Foreign exchange translation adjustment |
| | 77 | |||||||||
Total cash flows |
30 | (6 | ) | 287 | ||||||||
17 | EARNINGS/(LOSS) PER SHARE |
Basic earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the net income attributable to shareholders by the weighted number of shares in issue during the year.
US dollar | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Weighted average number of ordinary shares in issue (000) |
429,310 | 426,382 | 414,121 | |||||||||
Net profit/(loss) from continuing operations (million) |
83 | (20 | ) | 216 | ||||||||
Net profit/(loss) from discontinued operations (million) |
3 | (4 | ) | 95 | ||||||||
Total net profit/(loss) attributable to shareholders (million) |
86 | (24 | ) | 311 | ||||||||
Basic earnings/(loss) per share from continuing operations (cents) |
19 | (5 | ) | 52 | ||||||||
Basic earnings/(loss) per share from discontinued operations (cents) |
1 | (1 | ) | 23 | ||||||||
Total basic earnings/(loss) per share (cents) |
20 | (6 | ) | 75 | ||||||||
Fully diluted earnings/(loss) per share
For diluted earnings per share, the weighted average number of shares in issue is adjusted to assume conversion of all potential dilutive shares as a result of share options granted to employees under the share option schemes in issue. A calculation is performed to determine the number of shares that could have been acquired at fair value, determined as the average annual market share price of the companys shares, based on the monetary value of the subscription rights attached to the outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Weighted average number of shares in issue (000) |
429,310 | 426,382 | 414,121 | |||||||||
Potential shares (000) |
1,110 | 1,465 | 1,842 | |||||||||
Weighted average number of shares for fully diluted earnings per share (000) |
430,420 | 427,847 | 415,963 | |||||||||
Fully diluted earnings/(loss) per share from continuing operations (cents) |
19 | (5 | ) | 51 | ||||||||
Fully diluted earnings/(loss) per share from discontinued operations (cents) |
1 | (1 | ) | 23 | ||||||||
Total fully diluted earnings/(loss) per share (cents) |
20 | (6 | ) | 74 | ||||||||
F-37
Notes to the consolidated financial statements
For the years ended 30 June 2011
The inclusion of share options issued to employees, as potential shares, has a dilutive effect on the earnings/(loss) per share. The issue price and the exercise price include the fair value of any service to be supplied to the entity in the future under the share option or other share-based payment arrangement.
US dollar | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Dividend |
||||||||||||
Dividend declared (million) |
29 | 27 | | |||||||||
Dividend per share (cents) |
6.8 | 6.2 | | |||||||||
On 12 August 2011, the board of directors declared a dividend of 60 cents (US$8.4 cents) per share amounting R258 million (US$35.9 million) as a final dividend for the year ended 30 June 2011. This dividend is not reflected in the financial statements as it was declared after the reporting date.
F-38
Notes to the consolidated financial statements
For the years ended 30 June 2011
18 | PROPERTY, PLANT AND EQUIPMENT |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Mining properties, mine development costs and mine plant facilities (a) |
3,556 | 2,910 | ||||||
Mining assets under construction (b) |
98 | 108 | ||||||
Undeveloped properties (c) |
926 | 839 | ||||||
Deferred stripping (d) |
18 | 9 | ||||||
Other non-mining assets (e) |
9 | 8 | ||||||
Total property, plant and equipment |
4,607 | 3,874 | ||||||
(a) | Mining properties, mine development costs and mine plant facilities: |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Cost |
||||||||
Balance at beginning of year |
4,766 | 3,236 | ||||||
Acquisition Pamodzi FS assets (1) |
| 37 | ||||||
Additions |
356 | 379 | ||||||
Disposals (2) |
(228 | ) | (52 | ) | ||||
Adjustment to rehabilitation asset |
15 | 24 | ||||||
Transfers and other movements |
128 | 1,060 | ||||||
Translation |
667 | 82 | ||||||
5,704 | 4,766 | |||||||
Net reclassification to held for sale |
| (226 | ) | |||||
Balance at end of year |
5,704 | 4,540 | ||||||
Accumulated depreciation and impairments |
||||||||
Balance at beginning of year |
1,850 | 1,608 | ||||||
Impairment of assets (refer to note 5(f) for detail) |
37 | 43 | ||||||
Disposals (2) |
(226 | ) | (17 | ) | ||||
Depreciation (3) |
244 | 175 | ||||||
Depreciation capitalized to mining assets under construction |
| 6 | ||||||
Transfers and other movements |
| | ||||||
Translation |
243 | 35 | ||||||
2,148 | 1,850 | |||||||
Net reclassification to held for sale |
| (220 | ) | |||||
Balance at end of year |
2,148 | 1,630 | ||||||
Net book value |
3,556 | 2,910 | ||||||
(1) |
During the 2010 financial year the group concluded separate purchase agreements with the liquidators of Pamodzi Gold Free State (Proprietary) Limited (In Liquidation) (Pamodzi FS) for the purchase of its Free State assets and inventories (refer to note 25). The consideration paid for the mining assets was US$36.9 million and US$16.0 million was paid for the inventories. |
(2) |
Included is the groups disposal of its Mount Magnet operations to Ramelius Resources Limited, on 20 July 2010. Refer to notes 16 and 33. |
(3) |
For the 2010 financial year, the amounts include both continuing and discontinued operations. |
(b) | Mining assets under construction: |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Cost |
||||||||
Balance at beginning of year |
108 | 725 | ||||||
Additions |
92 | 51 | ||||||
Finance costs capitalized (1) |
| | ||||||
Disposals |
(1 | ) | | |||||
Transfers and other movements |
(108 | ) | (667 | ) | ||||
Translation |
7 | (1 | ) | |||||
Book value |
98 | 108 | ||||||
(1) |
The average capitalization rate applied was 9.7% (2010: 10.6%). |
F-39
Notes to the consolidated financial statements
For the years ended 30 June 2011
(c) | Undeveloped property |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Cost |
||||||||
Balance at beginning of year |
933 | 1,320 | ||||||
Disposals (1) |
(27 | ) | (9 | ) | ||||
Transfers and other movements |
(82 | ) | (393 | ) | ||||
Translation |
107 | 15 | ||||||
931 | 933 | |||||||
Net reclassification to held for sale |
| (28 | ) | |||||
Balance at end of year |
931 | 905 | ||||||
Accumulated depreciation and impairments |
||||||||
Balance at beginning of year |
70 | 67 | ||||||
Disposals (1) |
(3 | ) | | |||||
Transfers and other movements |
(62 | ) | | |||||
Translation |
| 3 | ||||||
5 | 70 | |||||||
Net reclassification to held for sale |
| (4 | ) | |||||
Balance at end of year |
5 | 66 | ||||||
Net book value |
926 | 839 | ||||||
(1) |
Included is the group's disposal of its Mount Magnet operations to Ramelius Resources Limited, on 20 July 2010. Refer to notes 16 and 33. |
(d) | Deferred stripping |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Cost |
||||||||
Balance at beginning of year |
9 | | ||||||
Additions |
9 | 10 | ||||||
Transferred to production cost |
(3 | ) | (1 | ) | ||||
Translation |
3 | | ||||||
Book value |
18 | 9 | ||||||
(e) | Other non-mining assets |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Cost |
||||||||
Balance at beginning of year |
52 | 49 | ||||||
Additions |
3 | 3 | ||||||
Disposals |
| (1 | ) | |||||
Transfers and other movements |
| | ||||||
Translation |
7 | 1 | ||||||
Balance at end of year |
62 | 52 | ||||||
Accumulated depreciation and impairments |
||||||||
Balance at beginning of year |
44 | 41 | ||||||
Disposals |
| | ||||||
Depreciation |
3 | 2 | ||||||
Impairment of assets |
| | ||||||
Translation |
6 | 1 | ||||||
Balance at end of year |
53 | 44 | ||||||
Net book value |
9 | 8 | ||||||
F-40
Notes to the consolidated financial statements
For the years ended 30 June 2011
On 3 September 2010, Harmony entered into an agreement with Wits Gold for the sale of its prospecting rights over Harmony's Merriespruit South area, which will be settled in cash or a combination of cash and shares in Wits Gold, when all remaining conditions precedent have been fulfilled. At 30 June 2011, the prospecting right had a carrying value of US$nil.
Additional disclosures for leased assets
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Carrying value of capitalized leased assets (included in mining properties, mine development costs and mine plant facilities and mining assets under construction) |
14 | 14 | ||||||
Cost |
26 | 21 | ||||||
Accumulated depreciation |
(12 | ) | (7 | ) | ||||
Finance lease additions |
| 2 | ||||||
Except for the leased assets mentioned above, none of the assets listed above have been pledged or otherwise committed as security for any liabilities.
19 | INTANGIBLE ASSETS |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Goodwill (a) |
317 | 283 | ||||||
Computer software (b) |
3 | 7 | ||||||
Total intangible assets |
320 | 290 | ||||||
(a) | Goodwill |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Cost |
||||||||
Balance at beginning of year |
311 | 307 | ||||||
Translation |
39 | 4 | ||||||
Balance at end of year |
350 | 311 | ||||||
Accumulated amortization and impairments |
||||||||
Balance at beginning of year |
28 | 27 | ||||||
Impairments recognized |
2 | | ||||||
Translation |
3 | 1 | ||||||
Balance at end of year |
33 | 28 | ||||||
Net book value |
317 | 283 | ||||||
The net book value of goodwill has been allocated to the following cash generating units:
Bambanani |
33 | 29 | ||||||
Tshepong |
83 | 73 | ||||||
Phakisa |
195 | 174 | ||||||
Joel |
6 | 5 | ||||||
St Helena (Other underground) |
| 2 | ||||||
317 | 283 | |||||||
During the 2011 financial year, goodwill of US$1.5 million relating to St. Helena was impaired. This was due to a revised life-of-mine plan. Refer to note 5 for details.
F-41
Notes to the consolidated financial statements
For the years ended 30 June 2011
(b) | Computer software |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Cost |
||||||||
Balance at beginning of year |
16 | 13 | ||||||
Additions |
2 | 2 | ||||||
Translation |
2 | 1 | ||||||
Balance at end of year |
20 | 16 | ||||||
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Accumulated amortization and impairments |
||||||||
Balance at beginning of year |
9 | 5 | ||||||
Amortization charge for the year |
6 | 4 | ||||||
Translation |
2 | | ||||||
Balance at end of year |
17 | 9 | ||||||
Net book value |
3 | 7 | ||||||
The additions in 2011 relate to a project for the implementation of a health and safety software application. The project will be finalized in the 2012 financial year and amortized over five years. The Oracle ERP software application has been fully amortized at 30 June 2011.
20 | RESTRICTED CASH |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Environmental guarantees (a) |
4 | 15 | ||||||
Security deposits (b) |
| | ||||||
Cash management account (c) |
| 4 | ||||||
Translation |
1 | | ||||||
Total restricted cash |
5 | 19 | ||||||
(a) | The amount relates to funds set aside for guarantees made to the Department of Mineral Resources (DMR) in South Africa for environmental and rehabilitation obligations. A portion of the funds are held on call account and the rest are invested in money market funds. |
During the 2011 financial year, guarantees amounting to US$18.9 million, backed by collateral of US$12.9 million, were cancelled and the cash was released back to the group for general corporate use. These guarantees were provided on behalf of Rand Uranium to the DMR, until such time that Rand Uranium had provided its own guarantees.
(b) | The amount relates to lease security deposits on mining tenements. |
(c) | The amount relates to funds set aside by the international operations for the benefit of the Hidden Valley Joint Venture landowners, and proceeds received for share options exercised, which are to be distributed to beneficiaries. The decrease during 2011 relates to the disposal of Mt Magnet. Refer to note 16. |
21 | RESTRICTED INVESTMENTS |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Investments held by Environmental Trust Funds (a) |
273 | 223 | ||||||
Investments held by Social Trust Fund (b) |
5 | 5 | ||||||
Total restricted investments |
278 | 228 | ||||||
F-42
Notes to the consolidated financial statements
For the years ended 30 June 2011
(a) | Environmental Trust Funds consist of: |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Held-to-maturity financial assets |
25 | 48 | ||||||
Fair value through profit or loss financial assets |
248 | 175 | ||||||
Total Environmental Trust Funds |
273 | 223 | ||||||
The Environmental Trust Funds are irrevocable trusts under the groups control. Contributions to the trusts are invested in interest-bearing short-term or medium-term equity-linked notes issued by commercial banks that provide guaranteed interest and additional interest or growth linked to the growth of the Shareholder Weighted Top 40 index (SWIX 40) of the JSE. The equity-linked notes are designated fair value through profit or loss investments and recorded at fair value whilst the interest-bearing short-term investments are classified as held to maturity and recorded at amortized cost. These investments provide for the estimated cost of rehabilitation at the end of the life of the groups mines. Income earned on the investments is retained in the funds and reinvested.
Reconciliation of the movement in the Environmental Trust Funds:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Balance at beginning of year |
223 | 207 | ||||||
Interest income |
2 | 9 | ||||||
Fair value movement |
19 | 4 | ||||||
Contributions made |
1 | 1 | ||||||
Translation |
30 | 2 | ||||||
275 | 223 | |||||||
Net reclassification to held for sale |
(2 | ) | | |||||
Balance at end of year |
273 | 223 | ||||||
(b) | The Social Trust Fund |
The Social Trust Fund is an irrevocable trust under the groups control. The group has undertaken to donate over a period of 10 years to The Harmony Gold Mining Company Social Plan Trust in terms of an agreement signed on 3 November 2003. An initial donation of R18.5 million (US$2.7 million) was made during the 2004 year. Thereafter installments of R 3.5 million per annum were and will be made with the final installment to be made in 2013. The purpose of the trust is to fund the social plan to reduce the negative effects of restructuring on the groups workforce, to put measures in place to ensure that the technical and life skills of the groups workforce are developed and to develop the groups workforce in such a manner to avoid or minimize the effect of job losses and a decline in employment through turnaround or redeployment strategies.
Reconciliation of the movement in the Social Trust Fund:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Balance at beginning of year |
5 | 5 | ||||||
Contributions made |
1 | 1 | ||||||
Claims paid |
(2 | ) | (1 | ) | ||||
Translation |
1 | | ||||||
Balance at end of year |
5 | 5 | ||||||
22 | INVESTMENT IN ASSOCIATES |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Balance at beginning of year |
50 | 43 | ||||||
Share of (losses)/profits after tax |
(7 | ) | 7 | |||||
Impairment of investment in associate |
(20 | ) | | |||||
Translation |
5 | | ||||||
28 | 50 | |||||||
Reclassification to held for sale |
(28 | ) | | |||||
Balance at end of year |
| 50 | ||||||
F-43
Notes to the consolidated financial statements
For the years ended 30 June 2011
US dollar | ||||||||
2011 | 2010 | |||||||
Carrying amount before reclassification to held for sale consist of: |
||||||||
Pamodzi Gold Limited (a) |
| | ||||||
Rand Uranium (Proprietary) Limited (b) |
28 | 50 | ||||||
Total investment in associates |
28 | 50 | ||||||
(a) | Harmony acquired 32.4% of Pamodzi Gold Limited (Pamodzi) on 27 February 2008 when the group sold its Orkney operations to Pamodzi in exchange for a consideration of 30 million Pamodzi shares, initially valued at US$46.5 million. Pamodzi was listed on the JSE and had interests in operating gold mines in South Africa. |
Pamodzi was placed in liquidation in March 2009 and the trading of its shares on the JSE was suspended. At 31 December 2008 the group had already reduced the net investment in Pamodzi to US$nil, following the recording of its accumulated share in losses of US$14.3 million and accumulated impairment losses of US$25.8 million. Subsequently the group has not recognised any losses.
As at 30 June 2011, the liquidation process has not been concluded. Refer to note 26(d) for details on the loans to Pamodzi. No financial information subsequent to 31 March 2009 is available and therefore no information has been disclosed for the years ended 31 December 2010 and 2009.
(b) | The group owns a 40% share in Rand Uranium, which was acquired during several transactions with PRF, when the company's wholly-owned subsidiary Randfontein Estates Limited disposed of its Randfontein Cooke and Old Randfontein assets to Rand Uranium. The investment was initially valued at US$139 million. Rand Uranium is an unlisted company registered in South Africa, with gold mining operations in the Gauteng province of South Africa. |
The investment in Rand Uranium has been classified as held for sale on 31 March 2011 following a decision by the shareholders to sell the company. A binding offer was accepted by shareholders on 21 April 2011, and as a result an impairment of US$20 million has been recognised in the income statement. The group ceased equity accounting the associate from 31 March 2011 in line with the requirements of IFRS 5. Refer to note 16 for detail.
The group recognised its share of the post-acquisition losses of US$7.3 million (2010: profits of US$7 million). Upon classification as held for sale, it ceased to equity account the investment.
Rand Uranium has a year end of 30 June, and the audited financial information for the years ended 2011 and 2010 is as follows:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
100 | % | 100 | % | |||||
Revenue |
221 | 223 | ||||||
Production costs |
(204 | ) | (172 | ) | ||||
Gross profit |
17 | 51 | ||||||
Net (loss)/profit |
(313 | ) | 18 | |||||
Non-current assets |
339 | 612 | ||||||
Current assets |
27 | 27 | ||||||
Total assets |
366 | 639 | ||||||
Non-current liabilities |
68 | 100 | ||||||
Current liabilities |
40 | 23 | ||||||
Total liabilities |
108 | 123 | ||||||
F-44
Notes to the consolidated financial statements
For the years ended 30 June 2011
23 | INVESTMENT IN FINANCIAL ASSETS |
(a) | On 3 March 2011, the group received US$2 million for the disposal of Kingsrose shares. The shares were acquired on 24 September 2010, when the group disposed of a royalty right held by Aurora Gold Limited to Kingsrose for consideration in the form of Kingsrose shares valued at US$1.6 million and cash of US$0.3 million. Refer to note 7. |
The group classified the shares as an available-for-sale financial asset. A gain of US$0.4 million was realized in the statement of comprehensive income. Refer to note 11 and 28(b).
(b) | On 5 November 2010, the group received 4 376 194 shares in Wits Gold, as consideration for the cancellation of the option held by Freegold. |
The value of the shares on acquisition date was US$41 million and represents 13% investment in Wits Gold. The group classifies the investment in Wits Gold as an available-for-sale financial asset. During the 2011 year, a loss of US$14.3 million was recorded in the fair value reserve. Refer to note 28(b).
(c) | These investments have been valued by the directors by performing independent valuations on an annual basis to ensure that no significant prolonged decline in the value of the investments has occurred. During 2011 the group disposed of certain unlisted investments for a net profit of US$0.2 million. Fair value gains recognised in other comprehensive income for the year totaled US$0.3 million (2010: US$0.8 million). During the 2011 financial year the group received US$0.1 million in income from these investments (2010: Nil). |
24 | INVESTMENT IN JOINT VENTURE |
Morobe Mining Joint Ventures (MMJV) partnership agreement (50%)
The group has a 50% interest in gold and copper assets located in the Morobe Province, PNG. Newcrest owns the remaining 50% interest in these assets. This partnership was formed during the 2009 financial year through a range of transactions, which included Newcrest's purchase of an initial 30.01% participating interest and a further farm-in of an additional 19.99% participating interest in the assets. The total value of the transaction was estimated at US$530 million and was completed by 30 June 2009.
The following are the group's effective share of income, expenses, assets and liabilities, which are included in the 2011 consolidated financial statements:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
50 | % | 50 | % | |||||
Revenue |
140 | 10 | ||||||
Production costs |
(103 | ) | (8 | ) | ||||
Gross profit |
37 | 2 | ||||||
Other costs |
(51 | ) | (40 | ) | ||||
Net loss |
(14 | ) | (38 | ) | ||||
Non-current assets |
737 | 382 | ||||||
Current assets |
63 | 48 | ||||||
Total assets |
800 | 430 | ||||||
Non-current liabilities |
182 | 22 | ||||||
Current liabilities |
45 | 19 | ||||||
Total liabilities |
227 | 41 | ||||||
F-45
Notes to the consolidated financial statements
For the years ended 30 June 2011
25 | INVENTORIES |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Gold in lock-up |
30 | 27 | ||||||
Gold in process, ore stockpiles and bullion on hand |
54 | 68 | ||||||
Consumables at weighted average cost |
65 | 63 | ||||||
Total inventories |
149 | 158 | ||||||
Non-current portion of gold in lock-up and gold in-process |
(25 | ) | (28 | ) | ||||
124 | 130 | |||||||
Net reclassification to held for sale |
| (1 | ) | |||||
Total current portion of inventories |
124 | 129 | ||||||
Included in the balance above is |
||||||||
Inventory valued at net realizable value |
36 | 27 | ||||||
During the 2011 financial year, write downs of US$6.1 million were recorded for the Steyn plant demolishment project as a result of changes to the life of mine plan, US$3.1 million for the net realizable value adjustment for other gold in lock-up and US$4.3 million relating to certain stockpiles.
During the year, US$0.7 million (2010: US$3.9 million) was provided for slow-moving stock. The total provision at 30 June 2011 was US$9.2 million (2010: US$7.5 million).
During the 2010 financial year, the group acquired a waste rock dump valued at US$2.7 million and a gold plant (Steyn plant) containing gold in lock-up valued at US$13.3 million from Pamodzi FS, which have been included in the cost of inventory.
26 | TRADE AND OTHER RECEIVABLES |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Current |
||||||||
Financial assets: |
||||||||
Trade receivables (gold) |
52 | 44 | ||||||
Other trade receivables (a) |
35 | 30 | ||||||
Provision for impairment |
(18 | ) | (13 | ) | ||||
Trade receivables net |
69 | 61 | ||||||
Loans to associates (b) |
4 | 5 | ||||||
Interest and other receivables (c) |
45 | 19 | ||||||
Employee receivables |
3 | 2 | ||||||
Non-financial assets: |
||||||||
Prepayments |
6 | 9 | ||||||
Value added tax |
31 | 26 | ||||||
Total current trade and other receivables |
158 | 122 | ||||||
Non-current |
||||||||
Financial assets: |
||||||||
Loans to associates (d) |
26 | 23 | ||||||
Other loans receivable |
4 | 2 | ||||||
Provision for impairment (e) |
(17 | ) | (15 | ) | ||||
Total non-current trade and other receivables |
13 | 10 | ||||||
Disposal groups classified as held for sale |
(10 | ) | | |||||
Total non-current trade and other receivables |
3 | 10 | ||||||
(a) | Included in other trade receivables is an amount of US$6.3 million (2010: US$0.7 million) owed by Rand Uranium. |
(b) | A loan of US$4 million (2010: US$5 million) is due from Rand Uranium for services and goods supplied in terms of the service level agreements entered into between the group and Rand Uranium. |
(c) | Included in 2011 financial year, interest and other receivables is an amount of US$2.5 million (2010: US$2.2 million) owing by Pamodzi FS in terms of the asset purchase agreement, for rehabilitation trust funds to be released to the group. Also included in 2011 financial year is the balance of the self-insurance fund of US$13.2 million and insurance claims receivable of US$5.2 million for the conveyor belt at Hidden Valley. |
No impairment allowance is necessary in respect of any balances included in interest and other receivables as all amounts are classified as fully performing.
F-46
Notes to the consolidated financial statements
For the years ended 30 June 2011
(d) | Included in the balance for 2011 is a loan of US$9.2 million (2010: US$8.3 million) to Rand Uranium. The loan bears interest at three-month JIBAR plus 250 basis points and is repayable on 21 November 2015. The loan has been subordinated. Following the acceptance of a binding offer on 21 April 2011, the investment in Rand Uranium and the capital portion of the subordinated shareholders loan have been presented as held for sale. Refer to note 16(i) for further detail. |
Also included in this balance is a loan of US$17.1 million, (2010: US$15.2 million) owed by Pamodzi. The interest on this loan was at prime rate until March 2009 when Pamodzi was placed into liquidation. Harmony is a concurrent creditor in the Pamodzi Orkney liquidation.
(e) | The balance represents the provision for Pamodzis irrecoverable loan. |
The movement in the provision for impairment of trade receivables during the year was as follows:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Balance at beginning of year |
13 | 15 | ||||||
Impairment loss recognised |
4 | 2 | ||||||
Reversal of impairment loss |
(1 | ) | (4 | ) | ||||
Translation |
2 | | ||||||
Balance at end of year |
18 | 13 | ||||||
The movement in the provision for impairment of loans receivables during the year was as follows:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Balance at beginning of year |
15 | 16 | ||||||
Loans written off during the year |
| (1 | ) | |||||
Translation |
2 | | ||||||
Balance at end of year |
17 | 15 | ||||||
The ageing of trade receivables at the reporting date was:
US dollar | ||||||||
Figures in million | Gross | Impairment | ||||||
30 June 2011 |
||||||||
Fully performing |
55 | | ||||||
Past due by 1 to 30 days |
7 | | ||||||
Past due by 31 to 60 days |
1 | | ||||||
Past due by 61 to 90 days |
2 | | ||||||
Past due by more than 90 days |
4 | 3 | ||||||
Past due by more than 361 days |
18 | 15 | ||||||
87 | 18 | |||||||
30 June 2010 |
||||||||
Fully performing |
55 | | ||||||
Past due by 1 to 30 days |
3 | | ||||||
Past due by 31 to 60 days |
2 | | ||||||
Past due by 61 to 90 days |
1 | | ||||||
Past due by more than 90 days |
4 | 4 | ||||||
Past due by more than 361 days |
9 | 9 | ||||||
74 | 13 | |||||||
F-47
Notes to the consolidated financial statements
For the years ended 30 June 2011
The ageing of loans receivable at the reporting date was:
US dollar | ||||||||
Figures in million | Gross | Impairment | ||||||
30 June 2011 |
||||||||
Fully performing |
13 | | ||||||
Past due by 1 to 30 days |
| | ||||||
Past due by 31 to 60 days |
| | ||||||
Past due by 61 to 90 days |
| | ||||||
Past due by more than 90 days |
| | ||||||
Past due by more than 361 days |
17 | 17 | ||||||
30 | 17 | |||||||
30 June 2010 |
||||||||
Fully performing |
10 | | ||||||
Past due by 1 to 30 days |
| | ||||||
Past due by 31 to 60 days |
| | ||||||
Past due by 61 to 90 days |
| | ||||||
Past due by more than 90 days |
| | ||||||
Past due by more than 361 days |
15 | 15 | ||||||
25 | 15 | |||||||
Based on past experience, the group believes that no impairment allowance is necessary in respect of fully performing receivables as the amount relates to customers that have a good track record with the group. Similarly, the other loans and receivables noted above, other than those provided for, are fully performing and considered to be a low credit risk.
During the year 2011 and 2010 there was no renegotiation of the terms of any receivable.
As at 30 June 2011 and 30 June 2010, there was no collateral pledged or held for any of the receivables.
27 | SHARE CAPITAL |
Authorized
1 200 000 000 (2010: 1 200 000 000) ordinary shares of SA 50 cents each.
10 958 904 (2010: 10 958 904) redeemable convertible preference shares of SA 50 cents each.
Issued
430 084 628 (2010: 428 654 779) ordinary shares of SA 50 cents each. All issued shares are fully paid.
Included in the total of issued shares is an amount of 2 314 shares held by Lydenburg Exploration Limited, a wholly owned subsidiary of the Company.
10% of the authorized but unissued shares are under the control of the directors until the forthcoming annual general meeting. Note 36 set out details in respect of the share option scheme and shares held in trust for employees of the group.
Share issues
2011 Financial year
Shares issued in 2011 financial year relates to exercise of share options by employees.
2010 Financial year
On 19 March 2010, Harmony concluded an agreement with Africa Vanguard Resources (Doornkop) (Proprietary) Limited (AVRD) for the purchase of its 26% share of the mining titles on the Doornkop South Reef. Part of the purchase consideration was the issuance of 2 162 359 Harmony shares to AVRD. In terms of the purchase agreement 975 419 Harmony shares are held in escrow until 1 May 2014 for the benefit of AVRD and will revert to AVRD on that date. Refer to note 28(f).
F-48
Notes to the consolidated financial statements
For the years ended 30 June 2011
28 | OTHER RESERVES |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Foreign exchange translation reserve (a) |
469 | (86 | ) | |||||
Fair value movement of available-for-sale financial assets (b) |
(11 | ) | 4 | |||||
Equity component of convertible bond (c) |
41 | 41 | ||||||
Acquisition of non-controlling interest in subsidiary (d) |
(57 | ) | (57 | ) | ||||
Share-based payments (e) |
94 | 75 | ||||||
Repurchase of equity interest (f) |
(13 | ) | (13 | ) | ||||
Other |
(4 | ) | (4 | ) | ||||
Total other reserves |
519 | (40 | ) | |||||
(a) | Foreign exchange translation reserve |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Balance at beginning of year |
(86 | ) | (111 | ) | ||||
Realized portion reclassified through profit or loss |
18 | 1 | ||||||
Current year's foreign exchange movement |
537 | 24 | ||||||
Balance at end of year |
469 | (86 | ) | |||||
The balance of the foreign exchange translation reserve movement represents the cumulative translation effect of the group's off-shore operations. The US dollar amount includes the translation effect from Rand to US dollar.
The realized portion reclassified through profit or loss in 2011 relates to the sale of Mount Magnet and the deregistration of dormant Australian subsidiaries. The realized portion reclassified through profit or loss in 2010 relates to the sale of Big Bell in Australia and the liquidation of Harmony Gold Peru SA and Harmony Precious Metal Services SAS. Refer to note 8 for further detail.
(b) | Fair value movement of available-for-sale financial assets |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Balance at beginning of year |
4 | 4 | ||||||
Impairment recognised in profit or loss |
| | ||||||
Realized portion reclassified through profit or loss |
(1 | ) | (1 | ) | ||||
Tax on realized portion |
| | ||||||
Fair value movement unrealized |
(14 | ) | | |||||
Translation |
| 1 | ||||||
Balance at end of year |
(11 | ) | 4 | |||||
The balance of the fair value movement reserve represents the movement in the fair value of the available-for-sale financial assets. For details on the movement, refer to note 23. For details regarding the realized portion reclassified to profit or loss refer to note 11.
(c) | Equity component of convertible bond |
On 24 May 2004, the group issued a convertible bond. The amount representing the value of the equity conversion component is included in other reserves, net of deferred income taxes. The equity conversion component is determined on the issue of the bonds and is not changed in subsequent periods. The convertible bonds were repaid in 2009.
(d) | Acquisition of non-controlling interest in subsidiary |
On 15 March 2004 Harmony announced that it had made an off market cash offer to acquire all the ordinary shares, listed and unlisted options of Abelle, held by non-controlling interests. The excess of the purchase price of US $86.5 million (A$123 million) over the carrying amount of non-controlling interest acquired, amounting to US$57 million has been accounted for under other reserves.
F-49
Notes to the consolidated financial statements
For the years ended 30 June 2011
(e) | Share-based payments |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Balance at beginning of year |
75 | 55 | ||||||
Share-based payments expensed |
19 | 20 | ||||||
Balance at end of year |
94 | 75 | ||||||
The group issues equity-settled instruments to certain qualifying employees under an Employee Share Option Scheme to purchase shares in the company's authorized but unissued ordinary shares. Equity share-based payments are measured at the fair value of the equity instruments at the date of the grant. Share-based payments are expensed over the vesting period, based on the group's estimate of the shares that are expected to eventually vest. During the 2011 financial year, a share-based payment expense of US$19.5 million (2010: US$19.5 million) was charged to the income statement. (Refer to note 36 for more detail).
(f) | Repurchase of equity interest |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Balance at beginning of year |
(13 | ) | | |||||
Acquired equity interest during the year |
| (13 | ) | |||||
Balance at end of year |
(13 | ) | (13 | ) | ||||
On 19 March 2010, Harmony Gold Mining Company Limited concluded an agreement with AVRD, for the purchase of its 26% share of the mining titles of the Doornkop South Reef. From an accounting perspective, the sale of the 26% share in the mining titles was never recognised and accounted for as an in-substance call option by AVRD over the 26% mineral right. This was due to AVRD not being exposed to any losses relating to the Doornkop mineral right, and entitled at any point in time to repay the Nedbank loan guaranteed by Harmony thereby becoming unconditionally entitled to the upside in the mineral right. The agreement to purchase AVRDs 26% interest during the 2010 financial year is therefore considered to be a repurchase of the option (equity interest). The difference between the value of the shares issued of US$20.5 million (see note 27), the liability to African Vanguard Resources (Proprietary) Limited and transaction costs, have been taken directly to equity.
29 | PROVISION FOR ENVIRONMENTAL REHABILITATION |
The groups mining and exploration activities are subject to extensive environmental laws and regulations. These laws and regulations are continually changing and are generally becoming more restrictive. The group has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements. The following is a reconciliation of the total liability for environmental rehabilitation:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Provision raised for future rehabilitation |
||||||||
Balance at beginning of year |
238 | 198 | ||||||
Disposal of assets |
(16 | ) | (6 | ) | ||||
Change in estimate Balance sheet |
15 | 7 | ||||||
Change in estimate Income statement |
8 | 4 | ||||||
Acquisition of assets |
| 17 | ||||||
Time value of money and inflation component of rehabilitation costs (a) |
18 | 16 | ||||||
Translation |
30 | 2 | ||||||
Balance at end of year |
293 | 238 | ||||||
Net classification to held for sale |
(2 | ) | (16 | ) | ||||
Total provision for environmental rehabilitation |
291 | 222 | ||||||
(a) | 2010 includes both continuing and discontinued operations. The group recognised time value of money credit adjustments of US$2.2 million relating to both the sale of Big Bell and reclassification of Mount Magnet to held for sale. |
While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, the group has estimated that, based on current environmental and regulatory requirements, the total cost for the mines, in the current monetary terms, is approximately US$405.4 million (2010: US$346.6 million). Kalgold is working closely with the DMR to endorse the conversion of the D-zone pit into a strategic water source and not to backfill.
Refer to note3.4 for the estimations and judgments used in the calculations.
F-50
Notes to the consolidated financial statements
For the years ended 30 June 2011
The group intends to finance the ultimate rehabilitation costs from the money invested in environmental trust funds, ongoing contributions, as well as the proceeds on sale of assets and gold from plant clean-up at the time of mine closure. The group has guarantees in place relating to the environmental liabilities. Refer to notes 21 and 38.
30 | RETIREMENT BENEFIT OBLIGATION AND OTHER PROVISIONS |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Non-current |
||||||||
Retirement benefit obligation (Refer to note 34) |
25 | 20 | ||||||
Other |
1 | 2 | ||||||
Total retirement benefit obligation and other provisions |
26 | 22 | ||||||
31 | BORROWINGS |
Pacific Premium Funding (Proprietary) Limited
During October 2010 and December 2010, Morobe Consolidated Goldfields (MCG) entered into two US dollar loans with Pacific Premium Funding (Proprietary) Limited to finance insurance payments. The loans totaling US$3.6 million were repaid during May 2011, at an average interest rate of 3.55%.
Westpac Bank
In July 2007, MCG entered into US dollar finance lease agreements with Westpac Bank for the purchase of mining fleet to be used on the Hidden Valley project. There is no debt covenant clause in the agreements.
Nedbank Limited
On 11 December 2009, the company entered into a loan facility with Nedbank Limited, comprising a term facility of US$119.4 million and a revolving credit facility of US$79.6 million. The facility was utilized to fund the acquisition of the Pamodzi FS assets (refer notes 18 and 25) as well as the groups major capital projects and working capital requirements. Interest accrues on a day to day basis over the term of the loan at a variable interest.
On 30 November 2010, the company entered into a additional loan facility with Nedbank Limited, comprising of a term facility of US$70.1 million and a revolving credit facility of US$35.0 million. Interest terms are identical to the original facility. The repayment terms of the original revolving credit facility were amended to coincide with the repayment on the new facility.
The debt covenant tests for the group are as follows:
|
The groups interest cover shall not be less than 2 (EBIT / Total interest). |
|
Current ratio shall not be less than 1 (current assets / current liabilities). |
|
Cash flow from operating activities shall be above R100 million for the last six months. |
|
Market capitalization to facilities outstanding ratio shall not be less than six, or nine times if dividends are paid. |
The debt covenant tests are performed on a quarterly basis. No breaches of the covenants were identified during the tests in the 2010 and 2011 financial years.
Terms and debt repayment schedule at 30 June 2011
Interest charge | Repayment terms | Maturity date | Security | |||||
Westpac Bank (Secured finance lease) |
US LIBOR plus 1.25% | Quarterly | 30 June 2013 | Mining fleet | ||||
Nedbank Limited (Secured loan term facility 1) |
3 month JIBAR plus 3.5%, payable quarterly | Bi-annual equal installments of R90 million (US$13.3 million) | 31 December 2014 | Cession and pledge of operating subsidiaries shares | ||||
Nedbank Limited (Secured loan term facility 2) |
3 month JIBAR plus 3.5%, payable quarterly | Bi-annual equal installments of R62.5 million (US$9.2 million) | 31 December 2014 | |||||
Nedbank Limited (Secured loan revolving credit facilities) |
1 or 3 month JIBAR plus 3.5%, payable after interest interval | Repayable on maturity | 30 November 2013 | |||||
F-51
Notes to the consolidated financial statements
For the years ended 30 June 2011
Interest-bearing borrowings
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Non-current borrowings |
||||||||
Westpac Bank (Secured finance lease) |
3 | 8 | ||||||
Balance at beginning of year |
8 | 10 | ||||||
Draw down |
| 1 | ||||||
Repayments |
(4 | ) | (4 | ) | ||||
Transfer to current portion |
| | ||||||
Translation |
(1 | ) | 1 | |||||
Nedbank Limited (Secured loan term facilities) |
112 | 82 | ||||||
Balance at beginning of year |
82 | | ||||||
Draw down |
73 | 120 | ||||||
Repayments |
(36 | ) | (12 | ) | ||||
Issue cost |
(1 | ) | (1 | ) | ||||
Amortization of issue costs |
| | ||||||
Transfer to current portion |
(22 | ) | (23 | ) | ||||
Translation |
16 | (2 | ) | |||||
Nedbank Limited (Secured loan revolving credit facilities) |
66 | 39 | ||||||
Balance at beginning of year |
39 | | ||||||
Draw down |
57 | 40 | ||||||
Repayments |
(37 | ) | | |||||
Issue cost |
| (1 | ) | |||||
Amortization of issue costs |
| | ||||||
Translation |
7 | | ||||||
Total non-current borrowings |
181 | 129 | ||||||
Current borrowings |
||||||||
Current portion of the finance lease from Westpac Bank |
4 | 4 | ||||||
Current portion of the loans from Nedbank Limited |
45 | 23 | ||||||
Total current borrowings |
49 | 27 | ||||||
Total interest-bearing borrowings |
230 | 156 | ||||||
The future minimum lease payments for the Westpac Bank finance lease are as follows:
F-52
Notes to the consolidated financial statements
For the years ended 30 June 2011
Effective rate | ||||||||
2011 | 2010 | |||||||
Westpac Bank |
2.0 | % | 2.0 | % | ||||
Nedbank Limited |
9.1 | % | 10.1 | % | ||||
The level of the Harmonys borrowing powers, as determined by its Articles of Association, shall not except with the consent of the Harmonys general meeting, exceed R40 million or the aggregate from time to time of the issued and paid-up share capital of the company, together with the aggregate of the amounts standing to the credit of all distributable and non-distributable reserves (including minority interests in subsidiary companies and provisions for deferred taxation) and any share premium accounts of the group.
32 | TRADE AND OTHER PAYABLES |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Financial liabilities: |
||||||||
Trade payables |
52 | 54 | ||||||
Other liabilities |
21 | 5 | ||||||
Non-financial liabilities: |
||||||||
Payroll accruals |
50 | 44 | ||||||
Leave liabilities (a) |
41 | 34 | ||||||
Shaft related accruals |
46 | 21 | ||||||
Other accruals (b) |
41 | 23 | ||||||
Value added tax |
7 | 4 | ||||||
258 | 185 | |||||||
Net classification to held for sale |
| | ||||||
Total trade and other payables |
258 | 185 | ||||||
(a) | Leave liability |
Employee entitlements to annual leave are recognised on an ongoing basis. An accrual is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date. The movement in the liability recognised in the balance sheet is as follows:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Balance at beginning of year |
34 | 31 | ||||||
Benefits paid |
(40 | ) | (35 | ) | ||||
Total expense per income statement |
43 | 38 | ||||||
Translation |
4 | | ||||||
41 | 34 | |||||||
Net classification to held for sale |
| | ||||||
Balance at end of year |
41 | 34 | ||||||
(b) | Other accruals |
Included in the balance is an amount of US$15.2 million relating to the sale of assets agreement with Taung. Refer to note 16.
F-53
Notes to the consolidated financial statements
For the years ended 30 June 2011
33 | CASH GENERATED BY OPERATIONS |
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
All amounts disclosed include discontinued operations. |
||||||||||||
Reconciliation of profit before taxation to cash generated by operations: |
||||||||||||
Profit before taxation |
21 | 20 | 405 | |||||||||
Adjustments for: |
||||||||||||
Amortization and depreciation |
254 | 181 | 167 | |||||||||
Impairment of assets |
39 | 43 | 61 | |||||||||
Profit on sale of property, plant and equipment |
(4 | ) | (14 | ) | (287 | ) | ||||||
Net decrease in provision for post retirement benefits |
| (3 | ) | 1 | ||||||||
Net increase in provision for environmental rehabilitation |
8 | 2 | | |||||||||
Loss/(profit) from associates |
7 | (7 | ) | (1 | ) | |||||||
Impairment of investment in associate |
20 | | 14 | |||||||||
Share-based payments |
19 | 20 | 13 | |||||||||
Net gain on financial instruments |
(20 | ) | (5 | ) | 10 | |||||||
Gain on farm-in option |
(38 | ) | | | ||||||||
(Profit)/loss on sale of investment in subsidiary |
(7 | ) | 3 | | ||||||||
Dividends received |
| | | |||||||||
Interest received |
(20 | ) | (25 | ) | (51 | ) | ||||||
Finance cost |
41 | 30 | 26 | |||||||||
Provision for doubtful debts |
3 | (2 | ) | 11 | ||||||||
Bad debts written off |
| 4 | 3 | |||||||||
Inventory adjustments |
48 | (3 | ) | | ||||||||
Other non-cash transactions |
(11 | ) | 11 | | ||||||||
Effect of changes in operating working capital items: |
||||||||||||
Receivables |
(15 | ) | (13 | ) | (15 | ) | ||||||
Inventories |
(20 | ) | (20 | ) | (20 | ) | ||||||
Payables |
21 | (8 | ) | (18 | ) | |||||||
Cash generated by operations |
346 | 214 | 319 | |||||||||
Additional cash flow information
(i) | The income and mining taxes paid in the statement of cash flow represents actual cash paid less refunds received. |
(ii) | At 30 June 2011, US$59.0 million (30 June 2010: US$39.3 million) of borrowing facilities had not been drawn down and is therefore available for future operating activities and future capital commitments. Refer to note 31. |
For the financial year ended June 2011
(a) | Acquisitions and disposals of subsidiaries/businesses |
Disposal of Mount Magnet
On 20 July 2010, the conditions precedent for the sale of Mount Magnet were fulfilled and the transaction became effective. A total purchase consideration of US$31.6 million was received from Ramelius Resources Limited in exchange for the entire issued share capital of Mount Magnet. The entire purchase consideration was settled in cash. At date of disposal, Mount Magnet had no cash and cash equivalent balances included in its net asset value. Also refer to note 16.
The aggregate fair values of assets and liabilities sold were:
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Property, plant and equipment |
27 | | | |||||||||
Inventory |
1 | | | |||||||||
Rehabilitation liability |
(16 | ) | | | ||||||||
Other liabilities |
| | | |||||||||
Profit on disposal |
18 | | | |||||||||
Proceeds received in cash |
30 | | | |||||||||
(b) | Principal non-cash transactions |
Disposal of Freegold farm-in option (refer to note 12).
Disposal of Kingsrose shares (refer to note 11).
Share-based payments (refer to note 36).
F-54
Notes to the consolidated financial statements
For the years ended 30 June 2011
For the financial year ended June 2010
(a) | Acquisitions and disposals of subsidiaries/businesses |
(i) | Disposal of Big Bell Operations |
On 10 January 2010 the group concluded the sale of Big Bell for a total consideration of US$3.2 million.
The aggregate fair values of assets and liabilities sold were:
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Property, plant and equipment |
| 8 | | |||||||||
Rehabilitation liability |
| (6 | ) | | ||||||||
Profit on disposal |
| 1 | | |||||||||
Proceeds received in cash |
| 3 | | |||||||||
(ii) | Acquisition of Pamodzi FS assets |
On 18 February 2010, the group concluded the acquisition of the Pamodzi FS assets for a total consideration of US$53 million, of which US$36 million is attributable to property, plant and equipment and US$16 million to inventories.
(b) | Principal non-cash transactions |
Issue of shares for the acquisition of 26% share of the mining titles on Doornkop South Reef from AVRD (refer to note 27).
Share based-payments (refer to note 36).
For the financial year ended June 2009
(a) | Acquisitions and disposals of subsidiaries/businesses |
(i) | Disposal of Randfontein Cooke Assets |
During the year, the group disposed of its Cooke and Old Randfontein assets to Rand Uranium, a wholly owned subsidiary. In a related transaction, 60% of Rand Uranium shares were disposed of to PRF in two tranches.
The aggregate fair value of the assets and liabilities sold were:
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Transaction one |
||||||||||||
Property, plant and equipment |
| | 42 | |||||||||
Environmental trust fund |
| | 3 | |||||||||
Rehabilitation liability |
| | (4 | ) | ||||||||
Other costs |
| | (2 | ) | ||||||||
Foreign exchange movements |
| | 5 | |||||||||
Profit on disposal |
| | 153 | |||||||||
Proceeds received in cash |
| | 197 | |||||||||
Transaction two |
||||||||||||
Property, plant and equipment |
| | 1 | |||||||||
Environmental trust fund |
| | 8 | |||||||||
Rehabilitation liability |
| | (13 | ) | ||||||||
Foreign exchange movements |
| | (2 | ) | ||||||||
Profit on disposal |
| | 18 | |||||||||
Proceeds received in cash |
| | 12 | |||||||||
F-55
Notes to the consolidated financial statements
For the years ended 30 June 2011
(ii) | MM Joint Venture |
During the year Harmony and Newcrest entered into a joint venture agreement, which provided that Newcrest would purchase a 30.01 participating interest and a further buy-out of an additional 19.99% participating interest in Harmonys MMJV gold and copper assets.
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Stage 1: 30.01% Participating interest |
||||||||||||
Property, plant and equipment |
| | 185 | |||||||||
Trade and other receivables |
| | 6 | |||||||||
Inventory |
| | 1 | |||||||||
Non-current loans |
| | (10 | ) | ||||||||
Rehabilitation liability |
| | | |||||||||
Foreign exchange movements |
| | (11 | ) | ||||||||
Profit on disposal |
| | 58 | |||||||||
Proceeds received in cash |
| | 229 | |||||||||
Stage 2: 10% Participating interest |
||||||||||||
Property, plant and equipment |
| | 52 | |||||||||
Trade and other receivables |
| | 1 | |||||||||
Inventory |
| | 1 | |||||||||
Non-current loans |
| | (3 | ) | ||||||||
Trade and other payables |
| | (5 | ) | ||||||||
Rehabilitation liability |
| | | |||||||||
Profit on disposal |
| | 44 | |||||||||
Disposal proceeds |
| | 90 | |||||||||
Proceeds received in cash |
| | | |||||||||
Proceeds received by way of the farm-in agreement |
| | 90 | |||||||||
Stage 3: 9.99% Participating interest |
||||||||||||
Property, plant and equipment |
| | 72 | |||||||||
Trade and other receivables |
| | 2 | |||||||||
Inventory |
| | 3 | |||||||||
Non-current loans |
| | (3 | ) | ||||||||
Trade and other payables |
| | (6 | ) | ||||||||
Rehabilitation liability |
| | (3 | ) | ||||||||
Profit on disposal |
| | 10 | |||||||||
Disposal proceeds |
| | 75 | |||||||||
Proceeds received in cash |
| | (6 | ) | ||||||||
Proceeds received by way of the farm-in agreement |
| | 69 | |||||||||
(b) | Principal non-cash transactions |
Acquisition of PNG royalty agreement.
Share-based payments.
Share exchange of Dioro for Avoca.
34 | RETIREMENT BENEFIT OBLIGATIONS |
(a) | Pension and provident funds: |
The group contributes to several pension and provident funds governed by the Pension Funds Act, 1956 for the employees of its South African subsidiaries. The pension funds are multi-employer industry plans. The groups liability is limited to its annually determined contributions.
The provident funds are funded on a money accumulative basis with the members and employers contributions having been fixed in the constitution of the funds.
The Australian group companies make contributions to each employees superannuation (pension) funds in accordance with the Superannuation Guarantee Scheme (SGS). The SGS is a Federal Government initiative enforced by law which compels employers to make regular payments to regulated funds providing for each employee on their retirement. The SGS were set at a minimum of 9% of gross salary and wages for the 2011 year (2010: 9%). The fund is a defined contribution plan.
The PNG Superannuation Act 2002 requires a compulsory employer contribution of 8.4% (2010: 8.4%) into an approved superannuation (pension) fund if an employee is appointed for a period of three months or more. The approved superannuation funds are defined contribution plans.
F-56
Notes to the consolidated financial statements
For the years ended 30 June 2011
Substantially all the groups employees are covered by the above mentioned retirement benefit plans. Funds contributed by the group for the 2011 financial year amounted to US$62.4 million (2010: US$55.2 million).
(b) | Post-retirement benefits other than pensions: |
Harmony inherited a post-retirement medical benefit obligation, which existed at the time of the Freegold acquisition in 2002. The groups obligation in this regard, is to pay a subsidy of 2% for every completed year of employment up to a maximum of 50% of total medical aid contributions, commencing on date of retirement. The group also contributes to the Minemed medical scheme on behalf of employees who retired prior to 31 December 1996. The annual contribution for these retired employees is fixed. Should the employee die, either in service or after retirement, this benefit will transfer to his/her dependants. The medical aid tariffs are based on the Minemed medical scheme options. Except for the pre-mentioned employees, Harmony has no other post-retirement obligation for the other group employees.
The liability is unfunded and will be settled out of cash and cash equivalent when it becomes due. The liability is based on an actuarial valuation conducted during the year ended 30 June 2011, using the projected unit credit method. The next actuarial valuation will be performed on 30 June 2012.
The principal actuarial assumptions used to determine the present value of unfunded obligations are discussed in note 3.5. In addition the following was also considered:
|
It is assumed that all Continuation and Widow Members (CAWMs) will remain on the current benefit option and income band. For employed members, post-employment contributions were assumed to be equal to the average payable for the current CAWMs membership. |
|
It is assumed that not all employed members will remain employed until retirement therefore estimated resignation and ill-health retirement rates are also taken into account. |
|
It is assumed that 90% of employed members will be married at retirement or earlier death and that wives are 4 years younger than their husbands. It is assumed that the only dependants will be spouses. |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Present value of unfunded obligations |
25 | 20 | ||||||
Current employees |
15 | 13 | ||||||
Retired employees |
10 | 7 | ||||||
Movement in the liability recognised in the balance sheet |
||||||||
Balance at beginning of year |
20 | 20 | ||||||
Contributions paid |
(1 | ) | (1 | ) | ||||
Staff costs/current service cost included under Cost of Sales |
1 | 1 | ||||||
Finance cost |
2 | 2 | ||||||
Net actuarial (gain)/loss recognised during the year (1) |
| 1 | ||||||
Curtailments (2) |
| (3 | ) | |||||
Translation |
3 | | ||||||
Balance at end of year |
25 | 20 | ||||||
(1) |
Net actuarial gains/losses are included in cost of sales in the income statement. The net actuarial loss recognised during the 2009 year was US$nil, 2008 year was US$1.5 million, and in the 2007 year a gain of US$1.7 million. |
(2) |
Curtailments are included in cost of sales in the income statement. During the 2010 financial year, the terms of employment of 124 members changed, resulting in a reduction of the liability of US$2.8 million. |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
The net liability of the defined benefit plan is as follows: |
||||||||
Present value of defined benefit obligation |
25 | 20 | ||||||
Fair value of plan assets |
| | ||||||
Net retirement benefit obligation liability |
25 | 20 | ||||||
The present value of the defined benefit obligation was US$19.7 million in 2009, US$17 million in 2008 and US$15.2 million in 2007.
F-57
Notes to the consolidated financial statements
For the years ended 30 June 2011
The effect of a one percentage point increase and decrease in the assumed medical cost trend rates is as follows:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
|
1%
Increase |
|
|
1%
Increase |
|
|||
Effect on: |
||||||||
Aggregate of service cost and interest cost |
| 1 | ||||||
Defined benefit obligation |
4 | 4 | ||||||
|
1%
Decrease |
|
|
1%
Decrease |
|
|||
Effect on: |
||||||||
Aggregate of service cost and interest cost |
| 1 | ||||||
Defined benefit obligation |
3 | 4 | ||||||
The group expects to contribute approximately US$0.7 million for this obligation in 2012.
35 | EMPLOYEE BENEFITS |
Remuneration for directors and executive management is fully disclosed in note 37.
* | No employees were attributable to the discontinued operations at 30 June 2011 (2010: 0). |
** | The total number of employees in Australia, including the Brisbane office, at 30 June 2011 was 127 (2010: 56). Of this total, no employees (2010: 12; 2009: 0) were attributable to the discontinued operations. The total for the international operations includes the joint venture employees. |
*** | These amounts have been included in production cost, corporate expenditure and capital expenditure. |
During the 2011 financial year, US$4 million (2010: US$5 million; 2009: US$2 million) was included in the payroll cost for termination costs. Termination cost excludes the cost relating to the voluntary retrenchment process as well as retrenchment due to the shaft closures (refer to note 5).
36 | SHARE OPTION SCHEME |
The group currently has the 2001, 2003 schemes and the 2006 share plan that are active. The objective of these schemes is to recognize the contributions of senior staff to the groups financial position and performance and to retain key employees.
Options granted under the 2001 and 2003 schemes
A fifth of the options granted under the 2001 and 2003 schemes are exercisable annually from the grant date with an expiry date of 10 years from the grant date. The offer price of these options equaled the closing market price of the underlying shares on the trading date immediately preceding the granting of the options. The options are equity settled.
On resignation and retirement, share options which have not yet vested will lapse and share options which have vested may be taken up at the employees election before the last day of service. Payment of shares forfeited will therefore not be required. On death, all options vest immediately and the deceased estate has a period of twelve months to exercise these options.
F-58
Notes to the consolidated financial statements
For the years ended 30 June 2011
Option allocation | ||||||||
|
10 August
2004 |
|
|
26 April
2005 |
|
|||
The share based cost is calculated using the binominal valuation model based on the following assumptions at grant date: |
||||||||
Price at date of grant (SA Rand per share) |
66.15 | 39.00 | ||||||
Risk-free interest rate: |
9.9 | % | 8.4 | % | ||||
Expected volatility: |
40.0 | % | 35.0 | % | ||||
Expected dividend yield: |
0.0 | % | 0.0 | % | ||||
Vesting period: |
5 years | 5 years |
Share-based payments are measured at the fair value of the equity instruments at the date of the grant. The cost is expensed over the vesting period, based on the groups estimate of the options that are expected to eventually vest.
The only vesting conditions for the 2001 and 2003 schemes were that the employees should be in the employment of the group, on vesting date.
The volatility measured at the standard deviation of expected share price returns were based on statistical analysis of daily share prices over the last three years before grant date.
Following the introduction of the 2006 share plan, no further options were granted in the 2011 and 2010 year for the 2001 and 2003 option schemes, and all options are vested.
Number of share options relating to the 2001 and 2003 option schemes | 2011 | 2010 | ||||||
Share options granted |
28,442,420 | 28,442,420 | ||||||
Exercised |
19,967,293 | 19,133,887 | ||||||
Vested but not exercised |
1,347,203 | 2,264,585 | ||||||
Unvested |
| | ||||||
Forfeited and lapsed |
7,127,924 | 7,043,948 |
2011 | 2010 | |||||||||||||||
Activity on share options granted but not yet exercised |
|
Number of
shares |
|
|
Weighted
average option price (SA Rand) |
|
|
Number of
shares |
|
|
Weighted
average option price (SA Rand) |
|
||||
For the year ended 30 June |
||||||||||||||||
Balance at beginning of year |
2,264,585 | 48.47 | 2,850,558 | 47.58 | ||||||||||||
Options exercised |
(833,406 | ) | 45.29 | (562,916 | ) | 44.16 | ||||||||||
Options forfeited and lapsed |
(83,976 | ) | 53.87 | (23,057 | ) | 43.75 | ||||||||||
Balance at end of year |
1,347,203 | 50.12 | 2,264,585 | 48.47 | ||||||||||||
List of options granted but not yet exercised (listed by grant date) |
|
At 30 June
2011 |
|
|
Option price
(SA Rand) |
|
|
Remaining
life (years) |
|
|||
20 November 2001 |
82,200 | 49.60 | 0.4 | |||||||||
27 March 2003 |
108,600 | 91.60 | 1.7 | |||||||||
10 August 2004 |
309,508 | 66.15 | 3.1 | |||||||||
26 April 2005 |
846,895 | 39.00 | 3.8 | |||||||||
Total option granted but not yet exercised |
1,347,203 | |||||||||||
US Dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Average market value of options traded during the year |
5 | 6 | ||||||
Gain realized by participants on options traded during the year |
5 | 3 | ||||||
Fair value of share options vested during the year |
| 8 | ||||||
Share-based cost recognised |
| | ||||||
The number of shares held by the Harmony Share Trust at year end amounted to 5 400 (2010: 63 500). This trust is considered to be an SPE and is therefore consolidated in accordance with the groups accounting policies.
F-59
Notes to the consolidated financial statements
For the years ended 30 June 2011
Options granted under the 2006 share plan
The 2006 share plan consist of share appreciation rights (SARs), performance shares (PS) and restricted shares (RS). The SARs will vest in equal thirds in year 3, 4 and 5 after grant date, subject to the performance conditions having been satisfied. The SARs have an expiry date of 6 years from the grant date and the offer price equals the closing market price of the underlying shares on the trading date immediately preceding the grant. The PS will vest after three years from the grant date, if and to the extent that the performance conditions have been satisfied. The RS will vest after three years from grant date if the participant is still employed within the group. The share plant is equity-settled.
The aggregate number of shares which may be allocated to the share plan on any day, when added to the total number of unexercised SARs, unvested performance shares, and restricted shares which have been allocated for PS, SARs and RS, and any other employee share scheme operating by the company, shall not exceed 14% of the number of issued ordinary shares of the company from time to time. On 30 June 2011, a total of 9 208 502 SARs, 5 707 308 PS and 355 528 RS had been allocated to participating employees.
Termination of employees participation in the share plan is based on No Fault and Fault definitions.
In the case of SARs, if employment is terminated for No Fault reasons, then the value of the appreciation in all unvested and un-exercised SARs is settled in shares or cash as at the date of termination of employment, after the deduction of any tax payable. The employer has no past practice of settling in cash.
In the case of PS, if employment is terminated for No Fault reasons, then
|
First the maximum number conditionally awarded is pro-rated for the period from grand date until the termination date; |
|
Then this adjusted number is reduced to a third on the assumption that Harmonys performance was a median one with one third vesting, after taking into account any portion of shares that have banked already in terms of the 2009 issue; |
|
And then settled in shares sold on the market for cash, and paid to the participant after the deduction of any tax payable. |
In the case of RS, if employment is terminated for No Fault reasons, then accelerated vesting occurs and all unvested and un-exercised RS and all un-vested matching PS are settled.
In all three cases, if employment is terminated for Fault reasons, all unvested and un-exercised SARs and all PS and RS not yet vested are lapsed and cancelled.
SARs | PS | RS | ||||||||||||||||||||||
Number of share options relating to | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||
Share options granted |
9,208,502 | 7,992,022 | 5,707,308 | 4,361,938 | 355,528 | | ||||||||||||||||||
Exercised |
186,598 | | 473,002 | | | | ||||||||||||||||||
Vested but not exercised |
651,628 | 185,473 | | | | | ||||||||||||||||||
Unvested |
6,131,192 | 6,590,110 | 3,693,583 | 3,492,402 | 347,883 | | ||||||||||||||||||
Forfeited and lapsed |
2,239,084 | 1,216,439 | 1,540,723 | 869,536 | 7,645 | | ||||||||||||||||||
Vesting periods of unvested shares |
||||||||||||||||||||||||
Within one year |
1,240,764 | 760,196 | 1,818,716 | 790,220 | | | ||||||||||||||||||
One to two years |
1,803,284 | 1,405,124 | 613,352 | 2,058,372 | | | ||||||||||||||||||
Two to three years |
1,635,420 | 2,084,520 | 1,261,515 | 643,810 | 347,883 | | ||||||||||||||||||
Three to four years |
1,078,463 | 1,492,598 | | | | | ||||||||||||||||||
Four to five years |
373,261 | 847,672 | | | | | ||||||||||||||||||
Total number of unvested shares |
6,131,192 | 6,590,110 | 3,693,583 | 3,492,402 | 347,883 | | ||||||||||||||||||
F-60
Notes to the consolidated financial statements
For the years ended 30 June 2011
SARs | PS | RS | ||||||||||||||
Activity on options granted but not yet exercised |
Number of
shares |
Weighted
average option price (SA Rand) |
Number of
shares |
Number of
shares |
||||||||||||
For the year ended 30 June 2011 |
||||||||||||||||
Balance at beginning of year |
6,775,583 | 78.47 | 3,492,402 | | ||||||||||||
Options granted |
1,216,480 | 84.81 | 1,345,370 | 355,528 | ||||||||||||
Options exercised |
(186,598 | ) | 70.54 | (473,002 | ) | | ||||||||||
Options forfeited and lapsed |
(1,022,645 | ) | 79.55 | (671,187 | ) | (7,645 | ) | |||||||||
Balance at end of year |
6,782,820 | 79.66 | 3,693,583 | 347,883 | ||||||||||||
For the year ended 30 June 2010 |
||||||||||||||||
Balance at beginning of year |
4,552,585 | 79.38 | 3,302,164 | | ||||||||||||
Options granted |
2,707,523 | 77.28 | 643,810 | | ||||||||||||
Options exercised |
| | | | ||||||||||||
Options forfeited and lapsed |
(484,525 | ) | 78.54 | (453,572 | ) | | ||||||||||
Balance at end of year |
6,775,583 | 77.65 | 3,492,402 | | ||||||||||||
List of shares granted but not yet exercised (listed by grant date) |
Number of
shares |
Option price
(SA Rand) |
Remaining
life (years) |
|||||||||
As at 30 June 2011 |
||||||||||||
Share appreciation rights |
||||||||||||
15 November 2006 |
428,036 | 112.64 | 1.4 | |||||||||
15 November 2007 |
1,402,370 | 70.54 | 2.4 | |||||||||
07 March 2008 |
46,154 | 102.00 | 2.7 | |||||||||
05 December 2008 |
1,670,874 | 77.81 | 3.4 | |||||||||
16 November 2009 |
2,115,601 | 77.28 | 4.4 | |||||||||
15 November 2010 |
1,119,785 | 84.81 | 5.4 | |||||||||
|
||||||||||||
6,782,820 | ||||||||||||
Performance shares |
||||||||||||
05 December 2008 |
1,818,716 | n/a | 0.4 | |||||||||
16 November 2009 |
613,352 | n/a | 1.4 | |||||||||
15 November 2010 |
1,261,515 | n/a | 2.4 | |||||||||
|
||||||||||||
3,693,583 | ||||||||||||
Restricted shares |
||||||||||||
15 November 2010 |
347,883 | n/a | 2.4 | |||||||||
|
||||||||||||
347,883 | ||||||||||||
|
||||||||||||
Total option granted but not yet exercised |
10,824,286 | |||||||||||
US Dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Gain realized by participants on options traded during the year |
4 | | ||||||
Fair value of share options vested during the year |
5 | 3 | ||||||
Share-based cost recognised |
19 | 19 | ||||||
The share-based cost is calculated using the Monte Carlo simulation on the market-linked PS, Black-Scholes on the SARs and spot share price on grant date for the RS. The following assumptions were applied at grant date:
F-61
Notes to the consolidated financial statements
For the years ended 30 June 2011
SARs |
Performance
shares |
Restricted
shares |
||||||||||
Price at date of grant (SA Rand per share) |
||||||||||||
15 November 2006 share allocation |
112.64 | n/a | n/a | |||||||||
15 November 2007 share allocation (valuation date 21 December 2007) |
68.44 | n/a | n/a | |||||||||
15 November 2007 share allocation (valuation date 21 April 2008) |
92.25 | n/a | n/a | |||||||||
07 March 2008 share allocation |
102.00 | n/a | n/a | |||||||||
05 December 2008 share allocation (valuation date 5 December 2008) |
77.81 | n/a | n/a | |||||||||
05 December 2008 share allocation (valuation date 16 February 2009) |
116.90 | n/a | n/a | |||||||||
16 November 2009 share allocation (valuation date 27 November 2009) |
81.50 | n/a | n/a | |||||||||
16 November 2009 share allocation (valuation date 23 December 2009) |
75.60 | n/a | n/a | |||||||||
16 November 2009 share allocation (valuation date 3 May 2010) |
72.14 | n/a | n/a | |||||||||
15 November 2010 share allocation (valuation date 15 November 2010) |
83.98 | n/a | n/a | |||||||||
Risk-free interest rate: |
||||||||||||
15 November 2006 share allocation |
8.79 | % | 9.58 | % | n/a | |||||||
15 November 2007 share allocation (valuation date 21 December 2007) |
9.84 | % | 10.81 | % | n/a | |||||||
15 November 2007 share allocation (valuation date 21 April 2008) |
10.68 | % | 11.71 | % | n/a | |||||||
07 March 2008 share allocation |
10.44 | % | 11.04 | % | n/a | |||||||
05 December 2008 share allocation (valuation date 5 December 2008) |
8.43 | % | 8.55 | % | n/a | |||||||
05 December 2008 share allocation (valuation date 16 February 2009) |
8.30 | % | 8.18 | % | n/a | |||||||
16 November 2009 share allocation (valuation date 27 November 2009) |
8.63 | % | n/a | n/a | ||||||||
16 November 2009 share allocation (valuation date 23 December 2009) |
8.57 | % | n/a | n/a | ||||||||
16 November 2009 share allocation (valuation date 3 May 2010) |
n/a | 7.29% | n/a | |||||||||
15 November 2010 share allocation (valuation date 15 November 2010) |
6.70 | % | 6.14 | % | n/a | |||||||
Expected volatility *: |
||||||||||||
15 November 2006 share allocation |
26.37 | % | 34.71 | % | n/a | |||||||
15 November 2007 share allocation (valuation date 21 December 2007) |
35.10 | % | 46.32 | % | n/a | |||||||
15 November 2007 share allocation (valuation date 21 April 2008) |
41.72 | % | 49.52 | % | n/a | |||||||
07 March 2008 share allocation |
54.50 | % | 50.49 | % | n/a | |||||||
05 December 2008 share allocation (valuation date 5 December 2008) |
48.61 | % | 56.62 | % | n/a | |||||||
05 December 2008 share allocation (valuation date 16 February 2009) |
49.03 | % | 70.86 | % | n/a | |||||||
16 November 2009 share allocation (valuation date 27 November 2009) |
49.29 | % | n/a | n/a | ||||||||
16 November 2009 share allocation (valuation date 23 December 2009) |
49.21 | % | n/a | n/a | ||||||||
16 November 2009 share allocation (valuation date 3 May 2010) |
n/a | 37.34 | % | n/a | ||||||||
15 November 2010 share allocation (valuation date 15 November 2010) |
31.16 | % | 31.16 | % | n/a | |||||||
Expected dividend yield: |
||||||||||||
for all allocations |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
Vesting period (from grant date): |
||||||||||||
for all allocations |
5 years | 3 years | 3 years |
* | The volatility is measured as an annualized standard deviation of historical share price returns, using an exponentially weighted moving average (EWMA) model, with a lambda of 0.99. The volatility is calculated on the grant date, and takes into account the previous three years of historical data. |
Share-based costs are measured at the fair value of the equity instruments at the date of the grant as defined in IFRS 2. The grant date is the date of which the entity and counterparty have a shared understanding of the terms and conditions of the share-based payment arrangement. The cost is expensed over the vesting period, based on the groups estimate of the options that are expected to eventually vest within the rules of IFRS2.
For 5 December 2008 issue:
The performance criteria imposed by the Board, and which must be satisfied before the settlement of any PS under this Award, are linked to the groups TSR (Total Shareholder Return) in comparison to the SA Gold Index (50%) and the SA Resource Index (50%).
The performance criteria imposed per the Harmony 2006 Share Plan which must be satisfied before the settlement of the SARs allocation is that the groups headline earnings per share must have grown since the allocation date by more than the CPI.
For 16 November 2009 issue:
The performance criteria imposed by the board, and which must be satisfied before the settlement of any PS under this Award, are as follows:
|
50% of the number shares awarded are to be linked to the annual gold production of the group in relation to the targets set annually. |
|
50% of the number shares awarded are linked to the groups TSR (Total Shareholder Return) in comparison to the South African Gold Index. |
F-62
Notes to the consolidated financial statements
For the years ended 30 June 2011
The performance criteria imposed per the Harmony 2006 Share Plan which must be satisfied before the settlement of the SARs allocation is that the groups headline earnings per share must have grown since the allocation date by more than the CPI.
For options granted on 16 November 2009, the following fair values were used as a basis to recognize share-based payment cost:
|
For options measured on 27 November 2009, the value is R44.52 per share for SARs. |
|
For options measured on 23 December 2009, the value is R39.26 for SARs. |
|
For options measured on 3 May 2010, the value is R38.49 for PS. |
For 15 November 2010 issue:
The performance criteria imposed by the board, and which must be satisfied before the settlement of any PS under this Award, are as follows:
|
50% (senior management) / 70% (management) of the number shares awarded are to be linked to the annual gold production of the group in relation to the targets set annually. |
|
50% (senior management) / 30% (management) of the number shares awarded are linked to the groups TSR (Total Shareholder Return) in comparison to the South African Gold Index. |
The performance criteria imposed per the Harmony 2006 Share Plan which must be satisfied before the settlement of the SARs allocation is that the groups headline earnings per share must have grown since the allocation date by more than the CPI.
For options granted during the year, the following fair values were used as a basis to recognize share-based payment cost:
|
For options measured on 15 November 2010, the value is R32.63 per share for SARs. |
|
For options measured on 15 November 2010, the value is R45.20 for PS. |
|
For options measured on 15 November 2010, the value is R83.98 for RS. |
37 | RELATED PARTIES |
None of the directors or major shareholders of Harmony or, to the knowledge of Harmony, their families, had interest, direct or indirectly, in any transaction since 1 July 2009 or in any proposed transaction that has affected or will materially affect Harmony or its subsidiaries, other than as stated below.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the group, directly or indirectly, and includes directors and executive management of the group.
Directors and executive management remuneration.
During 2011, the executive directors received remuneration of US$2.9 million, comprising of US$1.5 million for salaries, US$0.03 million for retirement contributions, US$0.8 million for bonuses and US$0.5 million from the exercising of share options. The non-executive directors received US$0.8 million in directors fees. The aggregate of remuneration received by executive management was US$6.1 million (including share options exercised).
During 2010, the executive directors received remuneration of US$1.8 million, comprising of US$1.3 million for salaries, US$0.03 million for retirement contributions and US$0.31 million for bonuses. The non-executive directors received US$0.6 million in directors fees. The aggregate of remuneration received by executive management was US$3.9 million (including share options exercised).
African Rainbow Minerals Limited (ARM) currently holds 14.8% of Harmonys shares. Patrice Motsepe, Andre Wilkens, Joaquim Chissano and Frank Abbott are directors of ARM.
Harmony currently holds 40% of the shares of Rand Uranium. Graham Briggs, Hannes Meyer and Alwyn Pretorius are directors of Rand Uranium. Dr Simo Lushaba is a member of the Rand Uranium Investment Committee. During 2010 and 2011, Fikile de Buck served as a director and member of the audit committee until 17 May 2011.
Material transactions with associates and joint ventures:
Besides the transactions disclosed below, the group concluded the following transactions with related parties:
(a) | AVRD refer to note 28. |
(b) | Pamodzi refer to notes 18 and 25. |
F-63
Notes to the consolidated financial statements
For the years ended 30 June 2011
1 |
Retained from the consideration for the Pamodzi FS acquisition pending the transfer of rehabilitation trust funds. |
Interest amounting to US$0.7 million was accrued on the subordinated loan to Rand Uranium during 2011 (2010: US$0.9 million). Refer to note 26 for detail on the items relating to the loans to associates and provisions raised against these loans.
38 | COMMITMENTS AND CONTINGENCIES |
(i) | Commitments |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Contracts for capital expenditure |
22 | 17 | ||||||
Share of joint ventures contract for capital expenditure |
6 | 27 | ||||||
Authorized by the directors but not contracted for |
222 | 132 | ||||||
Total capital commitments |
250 | 176 | ||||||
This expenditure will be financed from existing resources and where appropriate, borrowings.
The group is contractually obliged to make the following payments in respect of operating leases, including for land and buildings, and for mineral tenement leases:
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Within one year |
8 | 4 | ||||||
Between one year and five years |
8 | 1 | ||||||
Total commitments for operating leases |
16 | 5 | ||||||
This includes US$14.4 million (2010: US$0.9 million) for the MM Joint Venture. For details on the groups finance leases, refer to note 31.
(ii) | Contingent liabilities |
US dollar | ||||||||
Figures in million | 2011 | 2010 | ||||||
Guarantees and suretyships |
4 | 3 | ||||||
Environmental guarantees (1) |
55 | 67 | ||||||
59 | 70 | |||||||
(1) |
At 30 June 2011, US$3.8 million (2010: US$14.6 million) has been pledged as collateral for environmental guarantees in favor of certain financial institutions. Refer to note 20. |
Included in the balance for the 2010 financial year is an amount of US$17.0 million relating to guarantees provided for the Rand Uranium transaction. These guarantees were cancelled during 2011 financial year after Rand Uranium has put its own guarantees in place.
F-64
Notes to the consolidated financial statements
For the years ended 30 June 2011
In addition, the following contingent liabilities have been identified:
(a) | On 18 April 2008, Harmony Gold Mining Company Limited was made aware that it had been named as a defendant in a lawsuit filed in the U.S. District Court in the Southern District of New York on behalf of certain purchasers and sellers of Harmonys American Depositary Receipts (ADRs) and options with regard to certain of its business practices. Harmony has retained legal counsel. |
The company has subsequent to 30 June 2011 reached a mutually acceptable settlement with the lead plaintiff, which as at 30 June 2011, the companys insurers had undertaken to pay under a directors and officer insurance contract. The settlement requires final approval from the court and will result in the dismissal of all claims against the company.
(b) | The courts decision on Freegolds appeal regarding the South African Revenue Services (SARS) application of mining tax ring-fencing was received on 1 August 2011 and the court found in favor of SARS. The case was concluded in March 2011, but judgment was reserved at that time. The company has lodged an appeal to be heard by the Supreme Court of Appeals. Any additional income taxes payable are expected to be offset by additional deferred tax credits due to the impact this application will have on unredeemed capital. |
(c) | The case of Mr Thembekile Mankayi v AngloGold Ashanti Limited (AGA) regarding litigation in terms of the Occupational Diseases in Mines and Works Act (ODIMWA) was heard in the High Court of South Africa in June 2008, and an appeal heard in the Supreme Court of Appeals in 2010. In both instances judgment was awarded in favor of AGA. A further appeal that was lodged by Mr Manyaki was heard in the Constitutional Court in 2010. Judgment in the Constitutional Court was handed down on 3 March 2011. The judgment allows Mr Mankayis executor to proceed with the case in the High Court of South Africa. Should anyone bring similar claims against Harmony in future, those claimants would need to provide evidence proving that silicosis was contracted while in the employment of the company and that it was contracted due to negligence on the companys part. The link between the cause (negligence by the company while in its employ) and the effect (the silicosis) will be an essential part of any case. It is therefore uncertain as to whether the company will incur any costs related to silicosis claims in the future and due to the limited information available on any claims and potential claims and the uncertainty of the outcome of these claims, no estimation can be made for the possible obligation. |
(d) | On 1 December 2008, we issued 3 364 675 Harmony shares to Rio Tinto for the purchase of Rio Tintos rights to the royalty agreement entered into prior to our acquisition of the Wafi deposits in PNG. The shares were valued at US$23 million on the transaction date. An additional US$10 million in cash will be payable when the decision to mine is made, which has not been included in the commitments above. Of this amount, Harmony is responsible for paying the first US$6 million, with the balance of US$4 million being borne equally by the joint venture partners. |
(e) | The group may have a potential exposure to rehabilitate groundwater and radiation that may exist where the group has and/or continues to operate. The group has initiated analytical assessments to identify, quantify and mitigate impacts if and when (or as and where) they arise. Numerous scientific, technical and legal studies are under way to assist in determining the magnitude of the contamination and to find sustainable remediation solutions. The group has instituted processes to reduce future potential seepage and it has been demonstrated that Monitored Natural Attenuation (MNA) by the existing environment will contribute to improvement in some instances. The ultimate outcome of the matter cannot presently be determined and no provision for any liability that may result has been made in the financial statements. Should the group determine that any part of these contingencies require them being recorded and accounted for as liabilities, i.e. where they become estimable and probable it could have a material impact on the financial statements of the group. |
(f) | Due to the interconnected nature of mining operations in South Africa, any proposed solution for potential flooding and potential decant risk posed by deep groundwater needs to be a combined one, supported by all the mines located in these goldfields. As a result, the Department of Mineral Resource and affected mining companies are involved in the development of a Regional Mine Closure Strategy. Harmony operations have in the last year conducted a number of specialist studies and the risk of surface decant due to rising groundwater levels have been obviated at Evander, the entire Free State region and Kalgold. Therefore there is no potential contingency arising from these operations. Additional studies have been commissioned at Doornkop and Kusasalethu. In view of the limitation of current information for the accurate estimation of a liability, no reliable estimate can be made for these operations. |
(g) | In terms of the sale agreements entered into with Rand Uranium, Harmony retained financial exposure relating to environmental disturbances and degradation caused by it before the effective date, in excess of US$10 million of potential claims. Rand Uranium is therefore liable of all claims up to US$10 million and retains legal liability. The likelihood of potential claims cannot be determined presently and no provision for any liability has been made in the financial statements. |
39 | SUBSEQUENT EVENTS |
(a) | Refer to note 15 and 38(b) for details on the post balance sheet date event relating to the Freegold court case. |
(b) | Refer to note 38(a) for details on the post balance sheet date event relating to the US class action. |
(c) | On 11 August 2011, the group entered into a US$300 million syndicated Revolving Credit Facility. The facility has a term of four years and attracts interest at LIBOR plus 260 basis points. The facility was jointly arranged by Nedbank Limited and Firstrand Bank Limited (acting through its Rand Merchant Bank division). |
(d) | On 12 August 2011 the board approved a payment of dividend of 60 SA cents per share for the year ended 30 June 2011. |
F-65
Notes to the consolidated financial statements
For the years ended 30 June 2011
40 | SEGMENT REPORT |
The group has only one product, being gold. In order to determine operating and reportable segments, management reviewed various factors, including geographical location as well as managerial structure. It was determined that an operating segment consists of a shaft or a group of shafts managed by a single general manager and management team.
After applying the quantitative thresholds from IFRS 8, the reportable segments were determined as:
Bambanani, Doornkop, Evander, Joel, Kusasalethu, Masimong, Phakisa, Target, Tshepong, Virginia, Papua New Guinea and Mount Magnet (classified as held for sale and discontinued operation). In 2009 the Cooke operations were also classified as held for sale and discontinued operations. All other operating segments have been grouped together under All other surface operations , under their classification as either continuing or discontinued.
When assessing profitability, the chief operating decision-maker (CODM) considers the revenue and production costs of each segment. The net of these amounts is the operating profit or loss. Therefore, operating profit has been disclosed in the segment report as the measure of profit or loss.
The CODM does not consider depreciation or impairment and therefore these amounts have not been disclosed in the segment report, but does consider capital expenditure which has been disclosed.
Segment assets consist of mining properties, mine development costs and mine plant facilities, mining assets under construction and deferred stripping included under property, plant and equipment which can be attributed to the shaft or group of shafts. Current and non-current group assets that are not allocated at a shaft level, form part of the reconciliation to total assets.
A reconciliation of the segment totals to the group financial statements has been included in note 41.
F-66
Notes to the consolidated financial statements
For the years ended 30 June 2011
SEGMENT REPORT (US dollar/imperial)
(1) |
Excludes non-operational capital expenditure relating to PNG of US$8 million and exploration capitalized of US$6 million. |
* | Production statistics are unaudited. |
F-67
Notes to the consolidated financial statements
For the years ended 30 June 2011
SEGMENT REPORT (US dollar/imperial)
* | Production statistics are unaudited. |
F-68
Notes to the consolidated financial statements
For the years ended 30 June 2011
41 | RECONCILIATION OF SEGMENT INFORMATION TO CONSOLIDATED INCOME STATEMENTS AND BALANCE SHEET |
The reconciliation of segment data to consolidated financials line item in the segment reports is broken down into the following elements, to give a better understanding of the differences between the income statement, balance sheet and the segment report.
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Revenue from |
||||||||||||
Discontinued operations |
| | 69 | |||||||||
Production costs from |
||||||||||||
Discontinued operations |
| | 50 | |||||||||
Reconciliation of cash operating profit to consolidated profit/(loss) before taxation and discontinued operations |
||||||||||||
Total segment revenue |
1,781 | 1,489 | 1,346 | |||||||||
Total segment production costs |
(1,313 | ) | (1,103 | ) | (900 | ) | ||||||
Cash operating profit |
468 | 386 | 446 | |||||||||
Less discontinued operations |
| | (19 | ) | ||||||||
468 | 386 | 427 | ||||||||||
Cost of sales items other than production costs |
(351 | ) | (280 | ) | (233 | ) | ||||||
Amortization and depreciation of mining properties, mine development cost and mine plant facilities |
(244 | ) | (175 | ) | (130 | ) | ||||||
Amortization and depreciation of other than mining and mining related assets |
(10 | ) | (6 | ) | (9 | ) | ||||||
Rehabilitation expenditure |
(11 | ) | (4 | ) | (1 | ) | ||||||
Care and maintenance cost of restructured shafts |
(18 | ) | (8 | ) | (5 | ) | ||||||
Employment termination and restructuring costs |
(23 | ) | (27 | ) | (4 | ) | ||||||
Share-based payments |
(19 | ) | (20 | ) | (13 | ) | ||||||
Impairment of assets |
(39 | ) | (43 | ) | (71 | ) | ||||||
Other |
13 | 3 | | |||||||||
Gross profit |
117 | 106 | 194 | |||||||||
Corporate, administration and other expenditure |
(51 | ) | (50 | ) | (36 | ) | ||||||
Social investment expenditure |
(12 | ) | (11 | ) | (4 | ) | ||||||
Exploration expenditure |
(51 | ) | (29 | ) | (29 | ) | ||||||
Profit on sale of property, plant and equipment |
4 | 14 | 114 | |||||||||
Other expenses net |
(3 | ) | (8 | ) | (3 | ) | ||||||
Operating profit |
4 | 22 | 236 | |||||||||
(Loss)/profit from associates |
(7 | ) | 7 | 1 | ||||||||
Impairment of investment in associate |
(20 | ) | | (14 | ) | |||||||
Loss on sale of investment in subsidiary |
| (3 | ) | | ||||||||
Net gain on financial instruments |
20 | 5 | (10 | ) | ||||||||
Gain on farm-in option |
38 | | | |||||||||
Investment income |
20 | 25 | 49 | |||||||||
Finance cost |
(41 | ) | (32 | ) | (24 | ) | ||||||
Profit/(loss) before taxation and discontinued operations |
14 | 24 | 238 | |||||||||
F-69
Notes to the consolidated financial statements
For the years ended 30 June 2011
Reconciliation of total segment assets to consolidated assets includes the following:
US dollar | ||||||||||||
Figures in million | 2011 | 2010 | 2009 | |||||||||
Non-current assets |
||||||||||||
Property, plant and equipment |
897 | 794 | 744 | |||||||||
Intangible assets |
320 | 290 | 288 | |||||||||
Restricted cash |
5 | 19 | 21 | |||||||||
Restricted investments |
278 | 228 | 212 | |||||||||
Investment in associates |
| 50 | 43 | |||||||||
Deferred tax asset |
170 | 246 | 222 | |||||||||
Investment in financial assets |
27 | 2 | 7 | |||||||||
Inventories |
25 | 28 | | |||||||||
Trade and other receivables |
3 | 10 | 10 | |||||||||
Current assets |
||||||||||||
Inventories |
124 | 129 | 134 | |||||||||
Trade and other receivables |
158 | 122 | 115 | |||||||||
Income and mining taxes |
21 | 10 | 6 | |||||||||
Cash and cash equivalents |
102 | 101 | 253 | |||||||||
Assets of disposal groups classified as held for sale |
40 | 3 | | |||||||||
Total assets |
2,170 | 2,032 | 2,055 | |||||||||
F-70
Exhibit 2.1
Harmony Gold Mining Company Limited
Incorporated in the Republic of South Africa
Registration number 1950/038232/06
(Harmony or company)
JSE share code: HAR
NYSE share code: HMY
ISIN code: ZAE 000015228
Board of directors
PT Motsepe (Chairman)*
FFT De Buck*^ (Lead independent director)
GP Briggs (Chief executive officer)
HO Meyer (Financial director)
HE Mashego (Executive director)
F Abbott*
JA Chissano*^ 1
KV Dicks*^
DS Lushaba*^
CE Markus*^
MJ Motloba*^
M Msimang*^
D Noko*^
CML Savage*^
AJ Wilkens*
J Wetton*^
* Non-executive
^ Independent
1 Mozambican
J Wetton was appointed as a non-executive director of the company on 1 July 2011
1
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NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of the company will be held on Wednesday, 30 November 2011 at 11:00 (SA time) at the Country Club Johannesburg, 1 Napier Road, Auckland Park, Johannesburg, South Africa (see map on page 13), to conduct the business set out below and to consider and, if deemed fit, adopt, with or without modification, the ordinary and special resolutions set out in this notice.
The record date in terms of section 59 of the Companies Act, No 71 of 2008, as amended (Companies Act) is 17 November 2011 for purpose of determining which shareholders of the company are entitled to participate in and vote at the annual general meeting.
Presentation of annual financial statements
The consolidated audited annual financial statements of the company and its subsidiaries, incorporating the reports of the auditors, the audit committee and the directors for the year ended 30 June 2011 will be presented to the shareholders as required in terms of section 30(3)(d) of the Companies Act.
Resolutions for consideration and adoption
1. | ORDINARY RESOLUTION NUMBER 1: |
Election of director |
RESOLVED THAT M Msimang, who was appointed after the last annual general meeting of the company, whose period of office terminates in accordance with the companys memorandum of incorporation on the date of this annual general meeting and who is eligible and available for election, be and is hereby elected as a director of the company. (M Msimangs curriculum vitae appears in the integrated annual report under the heading Board of directors.)
The percentage of voting rights required for ordinary resolution number 1 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution.
2. | ORDINARY RESOLUTION NUMBER 2: |
Election of director
RESOLVED THAT D Noko, who was appointed after the last annual general meeting of the company, whose period of office terminates in
accordance with the companys memorandum of incorporation on the date of this annual general meeting and who is eligible and available for election, be and is hereby elected as a director of the company. (D Nokos curriculum vitae appears in the integrated annual report under the heading Board of directors.)
The percentage of voting rights required for ordinary resolution number 2 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution.
3. | ORDINARY RESOLUTION NUMBER 3: |
Election of director
RESOLVED THAT J Wetton, who was appointed after the last annual general meeting of the company, whose period of office terminates in accordance with the companys memorandum of incorporation on the date of this annual general meeting and who is eligible and available for election, be and is hereby elected as a director of the company. (J Wettons curriculum vitae appears in the integrated annual report under the heading Board of directors.)
The percentage of voting rights required for ordinary resolution number 3 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution.
4. | ORDINARY RESOLUTION NUMBER 4: |
Re-election of director
RESOLVED THAT F Abbott, who retires by rotation at this annual general meeting in accordance with the companys memorandum of incorporation and who is eligible and available for re-election, be and is hereby re-elected as a director of the company. (F Abbotts curriculum vitae appears in the integrated annual report under the heading Board of directors.)
The percentage of voting rights required for ordinary resolution number 4 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution.
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2
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NOTICE OF ANNUAL GENERAL MEETING CONTINUED
5. | ORDINARY RESOLUTION NUMBER 5: |
Re-election of director
RESOLVED THAT G Briggs, who retires by rotation at this annual general meeting in accordance with the companys memorandum of incorporation and who is eligible and available for re-election, be and is hereby re-elected as a director of the company. (G Briggs curriculum vitae appears in the integrated annual report under the heading Board of directors.)
The percentage of voting rights required for ordinary resolution number 5 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution.
6. | ORDINARY RESOLUTION NUMBER 6: |
Re-election of director
RESOLVED THAT K Dicks, who retires by rotation at this annual general meeting in accordance with the companys memorandum of incorporation and who is eligible and available for re-election, be and is hereby re-elected as a director of the company. (K Dicks curriculum vitae appears in the integrated annual report under the heading Board of directors.)
The percentage of voting rights required for ordinary resolution number 6 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution.
7. | ORDINARY RESOLUTION NUMBER 7: |
Election of audit committee member
RESOLVED THAT F De Buck be and is hereby elected as a member of the companys audit committee. (F De Bucks curriculum vitae appears in the integrated annual report under the heading Board of directors.)
The percentage of voting rights required for ordinary resolution number 7 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution.
8. | ORDINARY RESOLUTION NUMBER 8: |
Election of audit committee member
RESOLVED THAT S Lushaba be and is hereby elected as a member of the companys audit committee. (S Lushabas curriculum vitae appears in the integrated annual report under the heading Board of directors.)
The percentage of voting rights required for ordinary resolution number 8 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution.
9. | ORDINARY RESOLUTION NUMBER 9: |
Election of audit committee member
RESOLVED THAT M Motloba be and is hereby elected as a member of the companys audit committee. (M Motlobas curriculum vitae appears in the integrated annual report under the heading Board of directors.)
The percentage of voting rights required for ordinary resolution number 9 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution.
10. | ORDINARY RESOLUTION NUMBER 10: |
Election of audit committee member
RESOLVED THAT J Wetton be and is hereby elected as a member of the companys audit committee. (J Wettons curriculum vitae appears in the integrated annual report under the heading Board of directors.)
The percentage of voting rights required for ordinary resolution number 10 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution.
11. | ORDINARY RESOLUTION NUMBER 11: |
Re-appointment of external auditors
RESOLVED THAT PricewaterhouseCoopers Incorporated be and is hereby re-appointed as the external auditors of the company.
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The percentage of voting rights required for ordinary resolution number 11 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution.
12. | ORDINARY RESOLUTION NUMBER 12: |
Approval of remuneration policy
RESOLVED, as a non-binding advisory vote, that the remuneration policy of the company, as set out on pages 193 to 201 of the integrated annual report, be and is hereby approved.
The percentage of voting rights required for ordinary resolution number 12 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution.
13. | ORDINARY RESOLUTION NUMBER 13: |
Authority to issue shares
RESOLVED THAT the directors of the company be and are hereby authorised to allot and issue up to 43 008 462 authorised but unissued ordinary shares with a par value of R0.50 each in the share capital of the company, being 10% of the total issued share capital of the company as at 30 June 2011, at such time or times to such person or persons or bodies corporate upon such terms and conditions as the directors may from time to time in their sole discretion determine, subject to the provisions of the Companies Act and the listings requirements of the JSE Limited (JSE listings requirements).
The percentage of voting rights required for ordinary resolution number 13 to be adopted: more than 50% (fifty percent) of the voting rights exercised on the resolution.
14. | ORDINARY RESOLUTION NUMBER 14: |
Amendment to the broad-based employee share ownership plan (ESOP)
RESOLVED THAT, in accordance with Schedule 14 of the JSE listings requirements, the trust deed of the Harmony Employees Share Trust be and is hereby amended in accordance with the proposed amendments detailed in Annexure 1 to this notice.
The percentage of voting rights required for ordinary resolution number 14 to be adopted: more than 75% (seventy five percent) of the voting rights exercised on the resolution.
15. | SPECIAL RESOLUTION NUMBER 1: |
Directors remuneration
RESOLVED, as a special resolution in terms of section 66(9) of the Companies Act, that the company be and is hereby authorised to pay the following annual remuneration to its non-executive directors for their services as directors for a period of two years from the date of this annual general meeting or until such time as the non-executive directors remuneration is amended by way of special resolution of shareholders, whichever comes first:
Board | Audit committee | Social and ethics | Remuneration | |||||||||||||||||||||||||||||
Financial year |
Chairman
R000 |
Member
R000 |
Chairman
R000 |
Member
R000 |
Chairman
R000 |
Member
R000 |
Chairman
R000 |
Member
R000 |
||||||||||||||||||||||||
FY11** |
756 | 162 | 180 | 90 | 140 | 70 | 123 | 62 | ||||||||||||||||||||||||
2 years from AGM |
825 | 178 | 196 | 98 | 152 | 76 | 155 | 77.5 |
Nomination
Investment Empowerment |
Technical |
Deputy
chairman
|
||||||||||||||||||||||
Financial year |
Chairman
R000 |
Member
R000 |
Chairman
R000 |
Member
R000 |
LID*
R000 |
|||||||||||||||||||
FY11** |
123 | 62 | 140 | 70 | 243 | - | ||||||||||||||||||
2 years from AGM |
134 | 67 | 152 | 76 | 265 | 350 |
* Lead independent director
** For information purposes
Ad hoc fees:
R8 000 per ad hoc meeting / attendance to company business per day
|
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4
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NOTICE OF ANNUAL GENERAL MEETING CONTINUED
The percentage of voting rights required for special resolution number 1 to be adopted: at least 75% (seventy-five percent) of the voting rights exercised on the resolution.
16. | SPECIAL RESOLUTION NUMBER 2: |
Financial assistance to related and inter-related companies
RESOLVED, as a special resolution in terms of section 45 of the Companies Act, that the shareholders of the company hereby approve of the company providing, at any time and from time to time during the period of 2 (two) years commencing on the date of this special resolution, any direct or indirect financial assistance as contemplated in section 45 of the Companies Act to any 1 (one) or more related or inter-related companies or corporations of the company and/or to any one or more juristic persons who are members of, or are related to, any such related or inter-related company or corporation, provided that
(a) | (i) the recipient or recipients of such financial assistance, and (ii) the form, nature and extent of such financial assistance, and (iii) the terms and conditions under which such financial assistance is provided, are determined by the board of directors of the company from time to time; |
(b) | the board of directors of the company may not authorise the company to provide any financial assistance pursuant to this special resolution unless the board meets all those requirements of section 45 of the Companies Act which it is required to meet in order to authorise the company to provide such financial assistance; and |
(c) | such financial assistance to a recipient thereof is, in the opinion of the board of directors of the company, required for the purpose of (i) meeting all or any of such recipients operating expenses (including capital expenditure), and/or (ii) funding the growth, expansion, reorganisation or restructuring of the businesses or operations of such recipient, and/or (iii) funding such recipient for any other purpose which in the opinion of the board of |
directors of the company is directly or indirectly in the interests of the company. |
The percentage of voting rights required for special resolution number 2 to be adopted: at least 75% (seventy-five percent) of the voting rights exercised on the resolution.
Notice in terms of section 45(5) of the Companies Act
Notice is hereby given to shareholders of the company in terms of section 45(5) of the Companies Act of a resolution adopted by the board of directors of the company authorising the company to provide such direct or indirect financial assistance as specified in special resolution number 2 above
(a) | by the time that this notice of annual general meeting is delivered to shareholders of the company, the board of directors of the company will have adopted a resolution (Section 45 board resolution) authorising the company to provide, at any time and from time to time during the period of 2 (two) years commencing on the date on which special resolution number 2 is adopted, any direct or indirect financial assistance as contemplated in section 45 of the Companies Act to any 1 (one) or more related or inter-related companies or corporations of the company and/or to any one or more juristic persons who are members of, or are related to, any such related or inter-related company or corporation; |
(b) | the section 45 board resolution will be effective only if and to the extent that special resolution 2 is adopted by the shareholders of the company, and the provision of any such direct or indirect financial assistance by the company, pursuant to such resolution, will always be subject to the board of directors of the company being satisfied that (i) immediately after providing such financial assistance, the company will satisfy the solvency and liquidity test as referred to in section 45(3)(b) (i) of the Companies Act, and that (ii) the terms under which such financial assistance is to be given are fair and reasonable to the company as referred to in section 45(3)(b)(ii) of the Companies Act; and in as much as the section 45 board resolution contemplates that such financial assistance will in the aggregate exceed one-tenth of one percent of |
5
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the companys net worth at the date of adoption of such resolution, the company hereby provides notice of the section 45 board resolution to shareholders of the company. Such notice will also be provided to any trade union representing any employees of the company; and
(c) | in as much as the section 45 board resolution contemplates that such financial assistance will in the aggregate exceed one-tenth of one percent of the companys net worth at the date of adoption of such resolution, the company hereby provides notice of the section 45 board resolution to shareholders of the company. Such notice will also be provided to any trade union representing any employees of the company. |
Electronic participation
Should any shareholder of the company wish to participate in the annual general meeting by way of electronic participation, that shareholder shall be obliged to make application in writing (including details as to how the shareholder or its representative can be contacted) to so participate, to the transfer secretaries at the applicable address set out below at least 5 (five) business days prior to the annual general meeting in order for the transfer secretaries to arrange for the shareholder (and its representative) to provide reasonably satisfactory identification to the transfer secretaries for the purposes of section 63(1) of the Companies Act and for the transfer secretaries to provide the shareholder (or its representative) with details as to how to access any electronic participation to be provided. The company reserves the right not to provide for electronic participation at the annual general meeting in the event that it determines that it is not practical to do so. The costs of accessing any means of electronic participation provided by the company will be borne by the shareholder so accessing the electronic participation.
Identification, proxies and voting
Shareholders are reminded that
|
a shareholder entitled to attend and vote at the annual general meeting is entitled to appoint a proxy (or more than one proxy) to attend, participate in and vote at the annual general meeting in the place of the shareholder, and shareholders are referred to the proxy form attached to this notice in this regard; |
|
a proxy need not also be a shareholder of the company; and |
|
in terms of section 63(1) of the Companies Act, any person attending or participating in a general meeting of shareholders must present reasonably satisfactory identification and the person presiding at the general meeting must be reasonably satisfied that the right of any person to participate in and vote (whether as shareholder or as proxy for a shareholder) has been reasonably verified. |
All beneficial owners whose shares have been dematerialised through a central securities depository participant (CSDP) or broker other than with own name registration, must provide the CSDP or broker with their voting instructions in terms of their custody agreement should they wish to vote at the annual general meeting. Alternatively, they may request the CSDP or broker to provide them with a letter of representation, in terms of their custody agreements, should they wish to attend the annual general meeting.
Unless you advise your CSDP or broker, in terms of the agreement between you and your CSDP or broker by the cut-off time stipulated therein, that you wish to attend the annual general meeting or send a proxy to represent you at the annual general meeting, your CSDP or broker will assume that you do not wish to attend the annual general meeting or send a proxy.
Forms of proxy (as enclosed) must be dated and signed by the shareholder appointing a proxy and must be received at the offices of the transfer secretaries. Link Market Services South Africa (Proprietary) Limited or Capita Registrars by no later than 11:00 (SA time) on Monday, 28 November 2011. Before a proxy exercises any rights of a shareholder at the annual general meeting, such form of proxy must be so delivered.
In compliance with the provisions of section 58(8)(b) (i) of the Companies Act, a summary of the rights of a shareholder to be represented by proxy, as set out in section 58 of the Companies Act, is set out immediately below:
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NOTICE OF ANNUAL GENERAL MEETING CONTINUED
An ordinary shareholder entitled to attend and vote at the annual general meeting may appoint any individual (or two or more individuals) as a proxy or as proxies to attend, participate in and vote at the annual general meeting in the place of the shareholder. A proxy need not be a shareholder of the company.
A proxy appointment must be in writing, dated and signed by the shareholder appointing a proxy, and, subject to the rights of a shareholder to revoke such appointment (as set out below), remains valid only until the end of the annual general meeting.
A proxy may delegate the proxys authority to act on behalf of a shareholder to another person, subject to any restrictions set out in the instrument appointing the proxy.
The appointment of a proxy is suspended at any time and to the extent that the shareholder who appointed such proxy chooses to act directly and in person in the exercise of any rights as a shareholder.
The appointment of a proxy is revocable by the shareholder in question cancelling it in writing, or making a later inconsistent appointment of a proxy, and delivering a copy of the revocation instrument to the proxy and to the company. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxys authority to act on behalf of the shareholder as of the later of (a) the date stated in the revocation instrument, if any; and (b) the date on which the revocation instrument is delivered to the company as required in the first sentence of this paragraph.
If the instrument appointing the proxy or proxies has been delivered to the company, as long as that
appointment remains in effect, any notice that is required by the Companies Act or the companys memorandum of incorporation to be delivered by the company to the shareholder, must be delivered by the company to (a) the shareholder, or (b) the proxy or proxies, if the shareholder has (i) directed the company to do so in writing; and (ii) paid any reasonable fee charged by the company for doing so.
Attention is also drawn to the notes to the form of proxy.
Completing a form of proxy does not preclude any shareholder from attending the annual general meeting.
On a show of hands every shareholder present in person or by proxy, and if a member is a body corporate, its representative, will have one vote and on a poll every shareholder present in person or by proxy and, if the person is a body corporate, its representative, will have one vote for every share held or represented by him/her.
By order of the board
Harmony Gold Mining Company Limited
Signed
R Bisschoff
iThemba Governance and Statutory Solutions
(Proprietary) Limited
Company secretary
Randfontein
24 October 2011
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ANNUAL GENERAL MEETING EXPLANATORY NOTES
Presentation of annual financial statements
At the annual general meeting, the directors must present the annual financial statements for the year ended 30 June 2011 to shareholders as required in terms of section 30(3)(d) of the Companies Act, together with the reports of the directors, the audit committee and the auditors. These are contained in the integrated annual report.
Ordinary resolutions 1 to 6 election and re-election of directors
In accordance with the companys memorandum of incorporation, one third of the directors are required to retire at each annual general meeting and may offer themselves for re-election. In addition, the period of office of any person appointed to the board of directors by the board in terms of article 79 of the companys memorandum of incorporation, terminates at this annual general meeting.
The following directors are eligible for election or re-election:
D Noko
M Msimang
J Wetton
G Briggs
F Abbott
K Dicks
C Savage
Although C Savage is eligible for re-election, he has not made himself available as such and will be retiring as director of the board at the annual general meeting.
Ordinary resolutions 7 to 10 election of audit committee
In terms of section 94(2) of the Companies Act, a public company must at each annual general meeting elect an audit committee comprising at least three members who are directors and who meet the criteria of section 94(4) of the Companies Act. Companies regulation 42 specifies that one third of the members of the audit committee must have appropriate academic qualifications or experience in the areas as listed in the regulation.
The board of directors of the company is satisfied that the proposed members of the audit committee meet all relevant requirements.
Ordinary resolution 11 reappointment of auditors
PricewaterhouseCoopers Incorporated has indicated its willingness to continue in office and ordinary resolution 11 proposes the reappointment of that firm as the companys auditors with effect from 1 July 2011. Section 90(3) of the Companies Act requires the designated auditor to meet the criteria as set out in section 90(2) of the Act.
The board of directors of the company is satisfied that both PricewaterhouseCoopers Incorporated and the designated auditor meets all relevant requirements.
Ordinary resolution 12 remuneration policy
The King Report on Governance for South Africa, 2009 (King III) recommends that the remuneration policy of the company be submitted to shareholders for consideration and for an advisory, non-binding vote to provide shareholders with an opportunity to indicate should they not be in support of the material provisions of the remuneration philosophy and policy of the company.
Ordinary resolution 13 authority to issue shares
In terms of the Companies Act, directors are authorised to issue the unissued shares of the company, unless otherwise provided in the companys memorandum of incorporation or in instances as listed in section 41 of the Companies Act. In terms of articles 2 and 3 of the companys memorandum of incorporation, the directors are unable to issue shares without the approval of shareholders at a general meeting of shareholders. The board of directors of the company confirms that there is no specific intention to issue any shares, other than as part of and in terms of the rules of the companys share incentive schemes, as at the date of this notice.
Ordinary resolution 14 amendment to the broad-based employee share ownership plan (ESOP)
At the companys annual general meeting held on 1 December 2010, shareholders approved the implementation of the ESOP via a trust called the
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8
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ANNUAL GENERAL MEETING EXPLANATORY NOTES CONTINUED
Harmony Employees Share Trust. No awards have been made since the ESOP was approved. The reason for proposing the amendment of the ESOP is to align the scheme with industry expectations and to actively benefit employees who do not participate in any of the companys existing share incentive schemes. The salient terms of the ESOP are set out in Annexure 1 attached to this notice.
Special resolution 1 directors remuneration
In terms of section 66(8) and section 66(9) of the Companies Act, companies may pay remuneration to directors for their services as directors unless otherwise provided by the memorandum of incorporation and on approval of shareholders by way of a special resolution. Executive directors are not specifically remunerated for their services as directors but as employees of the company and as such, the resolution as included in this notice requests approval only for the remuneration paid to non-executive directors for their service as directors of the company. The proposed fees are recommended for approval for a period of two years from the date of this annual general meeting or until such time as the non-executive directors remuneration is amended by way of special resolution of shareholders, whichever comes first.
Special resolution 2 financial assistance
Section 45(2) of the Companies Act authorises the board to provide direct or indirect financial assistance to a related or inter-related company, subject to subsections (3) and (4) of section 45 of the Companies Act and unless otherwise provided in the companys memorandum of incorporation.
In terms of section 45(3) of the Companies Act, a special resolution of shareholders is required in this instance. The main purpose of this special resolution is to approve the granting of such financial assistance.
General
Shareholders and proxies attending the annual general meeting on behalf of shareholders are reminded that section 63(1) of the Companies Act requires that reasonably satisfactory identification be presented in order for such shareholder or proxy to be allowed to attend or participate in the meeting.
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ANNEXURE 1
PROPOSED AMENDMENTS TO THE BROAD-BASED EMPLOYEE SHARE OWNERSHIP PLAN (ESOP)
Salient terms of the ESOP
To enable shareholders to understand proposed amendments to the ESOP, the relevant salient terms of the ESOP are set out below.
At the companys annual general meeting held on 1 December 2010, shareholders approved the implementation of the ESOP via a trust called the Harmony Employees Share Trust (trust).
The ESOP is an equity-settled share incentive and share appreciation right (SAR) scheme in terms of which
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a total of (i) 4 288 000 ordinary shares in the share capital of the company (scheme shares) at par value and (ii) 8 576 000 SARs will be offered to 33 567 Harmony qualifying employees (qualifying employees) in the ratio of 1 scheme share: 2 SARs, subject to the terms and conditions of the deed of trust (trust deed); |
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the scheme shares and SARs will vest in qualifying employees in five equal tranches over a five-year period (ie one-fifth each year); |
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upon the vesting of SARs, each qualifying employee will be entitled to exercise the vested SARs (exercise); and |
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following the exercise of the vested SARs by a qualifying employee, the qualifying employee will be entitled to receive a number of ordinary shares in the share capital of the company (shares). The number of shares which a qualifying employee will be entitled to receive will be determined by reference to the appreciation of the share price between the offer date of the SARs (offer date) and the date of exercise (exercise date). To the extent that the share price depreciates between the offer date and the exercise date, the qualifying employee will not be entitled to any shares in respect of the vested SARs and the vested SARs will be cancelled. |
Rationale for the proposed amendments to the ESOP
Following approval of the ESOP by shareholders, the ESOP was not implemented given concerns raised by the majority union, the National Union of Mineworkers (NUM), over the risk attached to the SAR component of the ESOP. The concern lies in the fact that, currently, the only guaranteed value transfer to qualifying employees is in the form of the free scheme shares component of the ESOP. As a result the value of the SAR component of the ESOP is not certain since it is entirely dependent on the performance of the companys share price in future (ie in the event that the share price depreciates between the offer date and exercise date, qualifying employees will not receive any value for their SARs).
Recognising that one of the purposes of the ESOP is to align the interests of employees with that of shareholders, and in the interests of maintaining good labour relations, management has consulted with NUM to address this concern. The negotiations have culminated in a proposal which, if implemented, will not result in further dilution to shareholders and will ensure that qualifying employees realise a reasonable minimum benefit in respect of the SAR component of their ESOP. To reduce the cost impact of the proposed minimum benefit, the proposal further envisages that potential upside on the SAR component should also be capped by introducing a maximum benefit payout by placing a ceiling on the share price appreciation.
Proposed amendments to the ESOP
To give effect to the above proposal, the board hereby proposes that the following amendments be made to the trust deed
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in the event that there is a depreciation of the share price between the offer date and exercise date, qualifying employees will not receive any shares in respect of their vested SARs (as is currently the case) and the trust deed will be amended to provide that the company will make a minimum cash pay-out of R18 per SAR to each qualifying employee; |
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10
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ANNEXURE 1 CONTINUED
PROPOSED AMENDMENTS TO THE BROAD-BASED EMPLOYEE SHARE OWNERSHIP PLAN (ESOP)
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in the event that the share price appreciation between the offer date and exercise date is less than R18, then qualifying employees will receive shares equal in value to the appreciation of the share price and the trust deed will be amended to provide that the company will make an additional top-up cash payment to qualifying employees to ensure that a minimum value of R18 per SAR accrues to each qualifying employee; and |
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in the event that the share price appreciation is more than R32 between the offer date and exercise date, the trust deed will be amended to provide that the number of shares which a qualifying employee will be entitled to receive will be capped at share appreciation amount of R32 (in other words, the share price appreciation will be capped at R32 per SAR). |
The proposed amended trust deed will be available for inspection by shareholders from the date of this notice to the date of the annual general meeting, during normal business hours at the companys registered office.
11
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FORM OF PROXY
HARMONY GOLD MINING COMPANY LIMITED Incorporated in the Republic of South Africa Registration number: 1950/038232/06 (Harmony or company) JSE Share code: HAR NYSE Share code: HMY ISIN code: ZAE 000015228 |
TO BE COMPLETED BY CERTIFICATED SHAREHOLDERS AND DEMATERIALISED SHAREHOLDERS WITH OWN NAME REGISTRATION ONLY
For completion by registered members of Harmony who are unable to attend the annual general meeting of the company to be held at the Country Club Johannesburg, 1 Napier Road, Auckland Park, Johannesburg, South Africa (see map on page 13), on Wednesday, 30 November 2011 at 11:00 (SA time) or at any adjournment thereof.
I/We
of |
address) |
being the holder/s of |
address) |
1 |
or, failing him/her |
2 |
or, failing him/her |
the chairman of the annual general meeting, as my/our proxy to attend, speak and, on a poll, vote on my/our behalf at the above mentioned annual general meeting of members or at any adjournment thereof, and to vote or abstain from voting as follows on the ordinary and special resolutions to be proposed at such meeting:
For | Against | Abstain | ||||
1. Ordinary resolution 1: To elect Mavuso Msimang as a director |
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2. Ordinary resolution 2: To elect David Noko as a director |
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3. Ordinary resolution 3: To elect John Wetton as a director |
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4. Ordinary resolution 4: To re-elect Frank Abbott as a director |
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5. Ordinary resolution 5: To re-elect Graham Briggs as a director |
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6. Ordinary resolution 6: To re-elect Ken Dicks as a director |
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7. Ordinary resolution 7: To elect Fikile De Buck as a member of the audit committee |
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8. Ordinary resolution 8: To elect Simo Lushaba as a member of the audit committee |
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9. Ordinary resolution 9: To elect Modise Motloba as a member of the audit committee |
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10. Ordinary resolution 10: To elect John Wetton as a member of the audit committee |
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11. Ordinary resolution 11: To reappoint external auditors |
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12. Ordinary resolution 12: To approve the remuneration policy |
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13. Ordinary resolution 13: To authorise the issue of shares |
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14. Ordinary resolution 14: To amend the broad-based employee share ownership plan (ESOP) |
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15. Special resolution 1: To approve directors remuneration |
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16. Special resolution 2: To approve financial assistance |
Please indicate with an X in the appropriate spaces provided above how you wish your vote to be cast. If no indication is given, the proxy may vote or abstain as he/she sees fit.
Signed at |
this | day of | 2011 |
Signature |
Assisted by me, where applicable (name and signature) |
Completed forms of proxy must be lodged with:
1. | Link Market Services South Africa (Pty) Limited by no later than 11:00 (SA time) on Monday 28 November 2011; or |
2. | Capita Registrars, England by no later than 11:00 (SA time) on Monday, 28 November 2011 |
Please read the notes and instructions on the reverse side.
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12
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NOTES
1. | A form of proxy is only to be completed by those ordinary shareholders who are: |
1.1 | registered holders of ordinary shares in certificated form; or |
1.2 | holders of dematerialised shares of the company in their own name. |
2. | If you have already dematerialised your ordinary shares through a central securities depository participant (CSDP) or broker and wish to attend the annual general meeting, you must request your CSDP or broker to provide you with a letter of representation or you must instruct your CSDP or broker to vote by proxy on your behalf in terms of the agreement entered into between yourself and your CSDP or broker. |
3. | A member may insert the name of a proxy or the names of two alternative proxies of the members choice in the space. The person whose name stands first on the form of proxy and who is present at the annual general meeting of shareholders will be entitled to act to the exclusion of those whose names follow. |
4. | On a show of hands a member of the company present in person or by proxy will have one (1) vote irrespective of the number of shares he/she holds or represents, provided that a proxy will, irrespective of the number of members he/she represents, have only one (1) vote. On a poll a member who is present in person or represented by proxy will be entitled to that proportion of the total votes in the company, which the aggregate amount of the nominal value of the shares held by him/her bears to the aggregate amount of the nominal value of all the shares issued by the company. |
5. | A members instructions to the proxy must be indicated by the insertion of the relevant numbers of votes exercisable by the member in the appropriate box provided. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting as he/she deems fit in respect of all the members votes exercisable thereat. A member or |
the proxy is not obliged to use all the votes exercisable by the member or by the proxy, but the total of the votes cast and in respect of which abstention is recorded may not exceed the total of the votes exercisable by the member or by the proxy. |
6. | Forms of proxy (as enclosed) must be dated and signed by the shareholder appointing a proxy and must be received at the offices of the transfer secretaries, Link Market Services South Africa (Proprietary) Limited, 11 Diagonal Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000, Fax number: 086 674 2450) or Capita Registrars, the Registry, 39 Beckenham Road, Beckenham, Kent, BR3 4TU, England, by no later than 11:00 (SA time) on Monday, 28 November 2011. Before a proxy exercises any rights of a shareholder at the special general meeting, such form of proxy must be so delivered. |
7. | The completion and lodging of this form of proxy will not preclude the relevant member from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof. |
8. | Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity or other legal capacity must be attached to this form of proxy, unless previously recorded by the transfer secretaries or waived by the chairman of the annual general meeting. |
9. | The completion of blank spaces overleaf need not be initialled. Any alteration or correction made to this form of proxy must be initialled by the signatory/ies. |
10. | Notwithstanding the aforegoing, the chairman of the annual general meeting may waive any formalities that would otherwise be a prerequisite for a valid proxy. |
11. | If any shares are jointly held, all joint members must sign this form of proxy. If more than one of those members is present at the annual general meeting either in person or by proxy, the person whose name appears first in the register shall be entitled to vote. |
DIRECTIONS
The Country Club, Johannesburg Auckland Park |
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GPS coordinates: |
26°1059.00 South 28°0046.26 East | |
Telephone: |
+27 11 710 6400 | |
Directions from the east: |
Proceed west on Empire Road (under M1 Highway) | |
Over Barry Hertzog Right into Menton Left into Napier Straight into the Country Club entrance |
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Directions from the west: |
Proceed down Kingsway | |
Follow the road Left into Stanley Left into Cedar Left into Napier Straight into the Country Club entrance |
Exhibit 2.2
EXECUTION VERSION
AMENDED AND RESTATED DEPOSIT AGREEMENT
by and among
HARMONY GOLD MINING COMPANY LIMITED
as Issuer,
DEUTSCHE BANK TRUST COMPANY AMERICAS
as Depositary,
AND
OWNERS AND HOLDERS
OF AMERICAN DEPOSITARY RECEIPTS
Dated as of October 7, 2011
CONTENTS
ARTICLE I |
DEFINITIONS. |
1 | ||||||
SECTION 1.1 |
American Depositary Shares. |
1 | ||||||
SECTION 1.2 |
Article; Section. |
2 | ||||||
SECTION 1.3 |
Commission. |
2 | ||||||
SECTION 1.4 |
Custodian. |
2 | ||||||
SECTION 1.5 |
Deposit Agreement. |
2 | ||||||
SECTION 1.6 |
Depositary; Corporate Trust Office. |
2 | ||||||
SECTION 1.7 |
Deposited Securities. |
2 | ||||||
SECTION 1.8 |
Dollars. |
2 | ||||||
SECTION 1.9 |
Foreign Registrar. |
2 | ||||||
SECTION 1.10 |
Issuer. |
3 | ||||||
SECTION 1.11 |
Owner. |
3 | ||||||
SECTION 1.12 |
Receipts. |
3 | ||||||
SECTION 1.13 |
Registrar. |
3 | ||||||
SECTION 1.14 |
Restricted Securities. |
3 | ||||||
SECTION 1.15 |
Securities Act of 1933. |
3 | ||||||
SECTION 1.16 |
Shares. |
3 | ||||||
ARTICLE II |
FORM OF RECEIPTS, DEPOSIT OF SHARES, EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS. |
3 | ||||||
SECTION 2.1 |
Form and Transferability of Receipts. |
3 | ||||||
SECTION 2.2 |
Deposit of Shares. |
4 | ||||||
SECTION 2.3 |
Execution and Delivery of Receipts. |
5 | ||||||
SECTION 2.4 |
Transfer of Receipts; Combination and Split-up of Receipts. |
5 | ||||||
SECTION 2.5 |
Surrender of Receipts and Withdrawal of Shares. |
6 | ||||||
SECTION 2.6 |
Limitations on Execution and Delivery, Transfer and Surrender of Receipts. |
7 | ||||||
SECTION 2.7 |
Lost Receipts, etc. |
7 | ||||||
SECTION 2.8 |
Cancellation and Destruction of Surrendered Receipts. |
8 | ||||||
SECTION 2.9 |
Pre-Release of Receipts. |
8 | ||||||
ARTICLE III |
CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS. |
8 | ||||||
SECTION 3.1 |
Filing Proofs, Certificates and Other Information. |
8 | ||||||
SECTION 3.2 |
Liability of Owner for Taxes. |
8 | ||||||
SECTION 3.3 |
Warranties on Deposit of Shares. |
9 | ||||||
ARTICLE IV |
THE DEPOSITED SECURITIES. |
9 | ||||||
SECTION 4.1 |
Cash Distributions. |
9 | ||||||
SECTION 4.2 |
Distributions Other Than Cash, Shares or Rights. |
9 | ||||||
SECTION 4.3 |
Distributions in Shares. |
10 | ||||||
SECTION 4.4 |
Rights. |
10 | ||||||
SECTION 4.5 |
Conversion of Foreign Currency. |
11 | ||||||
SECTION 4.6 |
Fixing of Record Date. |
12 | ||||||
SECTION 4.7 |
Voting of Deposited Securities. |
12 | ||||||
SECTION 4.8 |
Changes Affecting Deposited Securities. |
13 | ||||||
SECTION 4.9 |
Reports. |
13 | ||||||
SECTION 4.10 |
Lists of Owners. |
13 | ||||||
SECTION 4.11 |
Withholding. |
14 |
(i)
ARTICLE V |
THE DEPOSITARY, THE CUSTODIANS AND THE ISSUER. |
14 | ||||||
SECTION 5.1 |
Maintenance of Office and Transfer Books by the Depositary. |
14 | ||||||
SECTION 5.2 |
Prevention or Delay in Performance by the Depositary or the Issuer. |
14 | ||||||
SECTION 5.3 |
Obligations of the Depositary, the Custodian and the Issuer. |
15 | ||||||
SECTION 5.4 |
Resignation and Removal of the Depositary. |
15 | ||||||
SECTION 5.5 |
The Custodians. |
16 | ||||||
SECTION 5.6 |
Notices and Reports. |
16 | ||||||
SECTION 5.7 |
Distribution of Additional Shares, Rights, etc. |
17 | ||||||
SECTION 5.8 |
Indemnification. |
17 | ||||||
SECTION 5.9 |
Charges of Depositary. |
17 | ||||||
SECTION 5.10 |
Retention of Depositary Documents. |
18 | ||||||
SECTION 5.11 |
Exclusivity. |
18 | ||||||
SECTION 5.12 |
List of Restricted Securities Owners. |
18 | ||||||
ARTICLE VI |
AMENDMENT AND TERMINATION. |
18 | ||||||
SECTION 6.1 |
Amendment. |
18 | ||||||
SECTION 6.2 |
Termination. |
19 | ||||||
ARTICLE VII |
MISCELLANEOUS. |
20 | ||||||
SECTION 7.1 |
Counterparts. |
20 | ||||||
SECTION 7.2 |
No Third Party Beneficiaries. |
20 | ||||||
SECTION 7.3 |
Severability. |
20 | ||||||
SECTION 7.4 |
Holders and Owners as Parties; Binding Effect. |
20 | ||||||
SECTION 7.5 |
Notices. |
20 | ||||||
SECTION 7.6 |
Governing Law. |
21 | ||||||
SECTION 7.7 |
Compliance with U.S. Securities Laws. |
21 | ||||||
EXHIBIT A | 23 |
(ii)
AMENDED AND RESTATED DEPOSIT AGREEMENT
AMENDED AND RESTATED DEPOSIT AGREEMENT dated as of October 7, 2011, among HARMONY GOLD MINING COMPANY LIMITED, incorporated under the laws of the Republic of South Africa (herein called the Issuer ), DEUTSCHE BANK TRUST COMPANY AMERICAS, a New York banking corporation (herein called the Depositary ), and all Owners and holders from time to time of American Depositary Receipts issued hereunder.
W I T N E S S E T H T H A T:
WHEREAS, the Company and the Depositary have entered into a Deposit Agreement dated as of August 12, 1996 (as amended and restated as of October 2, 1996 and as further amended and restated as of September 15, 1998 the Original Deposit Agreement ) for the purposes set forth therein;
WHEREAS, this amended and restated deposit agreement (this Deposit Agreement ) amends and restates the Original Deposit Agreement;
WHEREAS, this Deposit Agreement is dated as of the date set forth above and shall be effective as of the date hereof;
WHEREAS, the Issuer desires to provide, as hereinafter set forth in this Deposit Agreement, for the deposit of Shares (as hereinafter defined) of the Issuer from time to time with the Depositary or with the Custodian (as hereinafter defined) as agent of the Depositary for the purposes set forth in this Deposit Agreement, for the creation of American Depositary Shares representing the Shares so deposited and for the execution and delivery of American Depositary Receipts evidencing the American Depositary Shares; and
WHEREAS, the American Depositary Receipts are to be substantially in the form of Exhibit A annexed hereto, with appropriate insertions, modifications and omissions, as hereinafter provided in this Deposit Agreement;
NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties hereto as follows:
ARTICLE I
DEFINITIONS.
The following definitions shall for all purposes, unless otherwise clearly indicated, apply to the respective terms used in this Deposit Agreement:
SECTION 1.1 American Depositary Shares . The term American Depositary Shares shall mean the securities representing the interests in the Deposited Securities and evidenced by the Receipts issued hereunder. Each American Depositary Share shall represent one (1) Share, until there shall occur a distribution upon Deposited Securities covered by Section 4.3 or a change in Deposited Securities covered by Section 4.8 with respect to which additional Receipts are not executed and delivered, and thereafter American Depositary Shares shall evidence the amount of Shares or Deposited Securities specified in such Sections.
SECTION 1.2 Article; Section . Wherever references are made in this Deposit Agreement to an Article or Articles or to a Section or Sections, such references shall mean an article or articles or a section or sections of this Deposit Agreement, unless otherwise required by the context.
SECTION 1.3 Commission . The term Commission shall mean the Securities and Exchange Commission of the United States or any successor governmental agency in the United States.
SECTION 1.4 Custodian . The term Custodian shall mean Computershare Custodial Services Ltd., having its principal office at 13th Floor, 70 Marshall Street, Johannesburg 2001, Republic of South Africa, as agent of the Depositary for the purposes of this Deposit Agreement, and any other firm or corporation which may hereafter be appointed by the Depositary pursuant to the terms of Section 5.5, as substitute or additional custodian or custodians hereunder, as the context shall require and shall also mean all of them collectively.
SECTION 1.5 Deposit Agreement . The term Deposit Agreement shall mean this Agreement, as the same may be amended from time to time in accordance with the provisions hereof.
SECTION 1.6 Depositary; Corporate Trust Office . The term Depositary shall mean Deutsche Bank Trust Company Americas, a New York banking corporation and any successor as depositary hereunder. The term Corporate Trust Office, when used with respect to the Depositary, shall mean the office of the Depositary which at the date of this Agreement is 60 Wall Street, New York, New York, 10005.
SECTION 1.7 Deposited Securities . The term Deposited Securities as of any time shall mean Shares at such time deposited or deemed to be deposited under this Deposit Agreement and any and all other securities, property and cash received by the Depositary or the Custodian in respect thereof and at such time held hereunder, subject as to cash to the provisions of Section 4.5.
SECTION 1.8 Dollars . The term Dollars shall mean United States dollars. The term Rand or R shall mean South African rand.
SECTION 1.9 DRS/Profile . The term DRS/Profile shall mean the system for the uncertificated registration of ownership of securities pursuant to which ownership of ADSs is maintained on the books of the Depositary without the issuance of a physical certificate and transfer instructions may be given to allow for the automated transfer of ownership between the books of DTC and the Depositary. Ownership of ADSs held in DRS/Profile are evidenced by periodic statements issued by the Depositary to the Holders entitled thereto. With respect to DRS/Profile ADRs, the terms execute , issue , register , surrender , transfer or cancel refer to applicable entries or movements to or within DRS/Profile.
SECTION 1.10 Foreign Registrar . The term Foreign Registrar shall mean the entity that presently carries out the duties of registrar for the Shares or any successor as registrar for the Shares and any other appointed agent of the Issuer for the transfer and registration of Shares.
2
SECTION 1.11 Issuer . The term Issuer shall mean Harmony Gold Mining Company Limited, incorporated under the laws of the Republic of South Africa, and its successors.
SECTION 1.12 Owner . The term Owner shall mean the person in whose name a Receipt is registered on the books of the Depositary maintained for such purpose.
SECTION 1.13 Receipts . The term Receipts shall mean the certificate(s) or DRS/Profile statements issued by the Depositary evidencing the American Depositary Shares issued under the terms of this Deposit Agreement, as such Receipts may be amended from time to time in accordance with the provisions of this Deposit Agreement. References to Receipts shall include physical certificated Receipts as well as ADSs issued through DRS/Profile, unless the context otherwise requires.
SECTION 1.14 Registrar . The term Registrar shall mean any bank or trust company having an office in the Borough of Manhattan, The City of New York, which shall be appointed to register Receipts and transfers of Receipts as herein provided.
SECTION 1.15 Restricted Securities . The term Restricted Securities shall mean Shares, or Receipts representing such Shares, which are acquired directly or indirectly from the Issuer or its affiliates (as defined in Rule 144 under the Securities Act of 1933) in a transaction or chain of transactions not involving any public offering or which are subject to resale limitations under Regulation D under that Act or both, or which are held by an officer, director (or persons performing similar functions) or other affiliate of the Issuer, or which are subject to other restrictions on sale or deposit under the laws of the United States or the Republic of South Africa, or under a shareholder agreement or the Articles of Association and By-laws of the Issuer.
SECTION 1.16 Securities Act of 1933 . The term Securities Act of 1933 shall mean the United States Securities Act of 1933, as from time to time amended.
SECTION 1.17 Shares . The term Shares shall mean ordinary shares in registered form of the Issuer, par value 0.50 Rand each, heretofore validly issued and outstanding and fully paid, non-assessable and free of any pre-emptive rights of the holders of outstanding Shares or hereafter validly issued and outstanding and fully paid, non-assessable and free of any pre-emptive rights of the holders of outstanding Shares or interim certificates representing such Shares.
ARTICLE II
FORM OF RECEIPTS, DEPOSIT OF SHARES, EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS.
SECTION 2.1 Form and Transferability of Receipts . Definitive Receipts shall be substantially in the form set forth in Exhibit A annexed to this Deposit Agreement, with appropriate insertions, modifications and omissions, as hereinafter provided. No Receipt shall be entitled to any benefits under this Deposit Agreement or be valid or obligatory for any purpose, unless such Receipt shall have been executed by the Depositary by the manual or facsimile signature of a duly authorized signatory of the Depositary and, if a Registrar for the Receipts shall have been appointed, countersigned by the manual or facsimile signature of a duly authorized officer of the Registrar. The Depositary shall maintain books on which
3
each Receipt so executed and delivered, including each Receipt issued through the DRS/Profile, as hereinafter provided and the transfer of each such Receipt shall be registered. Receipts bearing the manual or facsimile signature of a duly authorized signatory of the Depositary who was at any time a proper signatory of the Depositary shall bind the Depositary, notwithstanding that such signatory has ceased to hold such office prior to the execution and delivery of such Receipts by the Registrar or did not hold such office on the date of issuance of such Receipts.
The Receipts may be endorsed with or have incorporated in the text thereof such legends or recitals or modifications not inconsistent with the provisions of this Deposit Agreement as may be required by the Depositary or required to comply with any applicable law or regulations thereunder or with the rules and regulations of any securities exchange upon which American Depositary Shares may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receipts are subject by reason of the date of issuance of the underlying Deposited Securities or otherwise.
Notwithstanding anything in this Deposit Agreement or in the Receipt to the contrary, to the extent available by the Depositary, American Depositary Shares shall be evidenced by Receipts issued through DRS/Profile unless certificated Receipts are specifically requested by the Holder. Holders and Beneficial Owners shall be bound by the terms and conditions of this Deposit Agreement and of the form of Receipt, regardless of whether their Receipts are certificated or issued through DRS/Profile.
Title to a Receipt (and to the American Depositary Shares evidenced thereby), when properly endorsed or accompanied by proper instruments of transfer, shall be transferable by delivery with the same effect as in the case of a negotiable instrument; provided, however, that the Depositary, notwithstanding any notice to the contrary, may treat the Owner thereof as the absolute owner thereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in this Deposit Agreement and for all other purposes.
SECTION 2.2 Deposit of Shares . Subject to the terms and conditions of this Deposit Agreement, Shares or evidence of rights to receive Shares may be deposited by delivery thereof to any Custodian hereunder, accompanied by any appropriate instrument or instruments of transfer, or endorsement, in form satisfactory to the Custodian, together with all such certifications as may be required by the Depositary or the Custodian in accordance with the provisions of this Deposit Agreement, and, if the Depositary requires, together with a written order directing the Depositary to execute and deliver to, or upon the written order of, the person or persons stated in such order, a Receipt or Receipts for the number of American Depositary Shares representing such deposit. No Share shall be accepted for deposit unless accompanied by evidence satisfactory to the Depositary that any necessary approval has been granted by any governmental body in the Republic of South Africa which is then performing the function of the regulation of currency exchange. If required by the Depositary, Shares presented for deposit at any time, whether or not the transfer books of the Issuer or the Foreign Registrar, if applicable, are closed, shall also be accompanied by an agreement or assignment, or other instrument satisfactory to the Depositary, which will provide for the prompt transfer to the Custodian of any dividend, or right to subscribe for additional Shares or to receive other property which any person in whose name the Shares are or have been recorded may thereafter receive upon or in respect of such deposited Shares, or
4
in lieu thereof, such agreement of indemnity or other agreement as shall be satisfactory to the Depositary.
At the request and risk and expense of any person proposing to deposit Shares, and for the account of such person, the Depositary may receive certificates for Shares to be deposited, together with the other instruments herein specified, for the purpose of forwarding such Share certificates to the Custodian for deposit hereunder.
Upon each delivery to a Custodian of a certificate or certificates for Shares to be deposited hereunder, together with the other documents above specified, such Custodian shall, as soon as transfer and recordation can be accomplished, present such certificate or certificates to the Issuer or the Foreign Registrar, if applicable, for transfer and recordation of the Shares being deposited in the name of the Depositary or its nominee or such Custodian or its nominee.
Deposited Securities shall be held by the Depositary or by a Custodian for the account and to the order of the Depositary or at such other place or places as the Depositary shall determine.
SECTION 2.3 Execution and Delivery of Receipts . Upon receipt by any Custodian of any deposit pursuant to Section 2.2 hereunder (and in addition, if the transfer books of the Issuer or the Foreign Registrar, if applicable, are open, the Depositary may in its sole discretion require a proper acknowledgment or other evidence from the Issuer that any Deposited Securities have been recorded upon the books of the Issuer or the Foreign Registrar, if applicable, in the name of the Depositary or its nominee or such Custodian or its nominee), together with the other documents required as above specified, such Custodian shall notify the Depositary of such deposit and the person or persons to whom or upon whose written order a Receipt or Receipts are deliverable in respect thereof and the number of American Depositary Shares to be evidenced thereby. Such notification shall be made by letter or, at the request, risk and expense of the person making the deposit, by cable, telex or facsimile transmission. Upon receiving such notice from such Custodian, or upon the receipt of Shares by the Depositary, the Depositary, subject to the terms and conditions of this Deposit Agreement, shall execute and deliver at its Corporate Trust Office, to or upon the order of the person or persons entitled thereto, a Receipt or Receipts, registered in the name or names and evidencing any authorized number of American Depositary Shares requested by such person or persons, but only upon payment to the Depositary of the fees of the Depositary for the execution and delivery of such Receipt or Receipts as provided in Section 5.9, and of all taxes and governmental charges and fees payable in connection with such deposit and the transfer of the Deposited Securities.
SECTION 2.4 Transfer of Receipts; Combination and Split-up of Receipts . The Depositary, subject to the terms and conditions of this Deposit Agreement, shall register transfers of Receipts on its transfer books from time to time, upon any surrender of a Receipt, by the Owner in person or by a duly authorized attorney, properly endorsed in the case of a certificated Receipt or accompanied by, or in the case of DRS/Profile Receipts receipt by the Depositary of, proper instruments of transfer (including signature guarantees in accordance with standard industry practice) and duly stamped as may be required by the laws of the State of New York and of the United States of America. Thereupon the Depositary shall execute a new Receipt or Receipts and deliver the same to or upon the order of the person entitled thereto.
The Depositary, subject to the terms and conditions of this Deposit Agreement, shall upon surrender of a Receipt or Receipts for the purpose of effecting a split-up or combination of
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such Receipt or Receipts, execute and deliver a new Receipt or Receipts for any authorized number of American Depositary Shares requested, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered.
The Depositary may appoint one or more co-transfer agents for the purpose of effecting transfers, combinations and split-ups of Receipts at designated transfer offices on behalf of the Depositary. In carrying out its functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and other requirements by Owners or persons entitled to Receipts and will be entitled to protection and indemnity to the same extent as the Depositary.
At the request of a Holder, the Depositary shall, for the purpose of substituting a certificated Receipt with a Receipt issued through DRS/Profile, or vice versa, execute and deliver a certificated Receipt or DRS/Profile statement, as the case may be, for any authorized number of American Depositary Shares requested, evidencing the same aggregate number of American Depositary Shares as those evidenced by the certificated Receipt or DRS/Profile statement, as the case may be, substituted.
SECTION 2.5 Surrender of Receipts and Withdrawal of Shares . Upon surrender at the Corporate Trust Office of the Depositary of a Receipt for the purpose of withdrawal of the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, and upon payment of the fee of the Depositary for the surrender of Receipts as provided in Section 5.9 and payment of all taxes and governmental charges payable in connection with such surrender and withdrawal of the Deposited Securities, and subject to the terms and conditions of this Deposit Agreement, the Owner of such Receipt shall be entitled to delivery, to him or upon his order, of the amount of Deposited Securities at the time represented by the American Depositary Shares evidenced by such Receipt. Delivery of such Deposited Securities may be made by the delivery of (a) certificates in the name of such Owner or as ordered by him or by certificates properly endorsed or accompanied by proper instruments of transfer to such Owner or as ordered by him and (b) any other securities, property and cash to which such Owner is then entitled in respect of such Receipts to such Owner or as ordered by him. Such delivery shall be made, as hereinafter provided, without unreasonable delay.
A Receipt surrendered for such purposes may be required by the Depositary to be properly endorsed in blank or accompanied by proper instruments of transfer in blank, and if the Depositary so requires, the Owner thereof shall execute and deliver to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to be delivered to or upon the written order of a person or persons designated in such order. Thereupon the Depositary shall direct the Custodian to deliver at the office of such Custodian, subject to Sections 2.6, 3.1 and 3.2 and to the other terms and conditions of this Deposit Agreement, to or upon the written order of the person or persons designated in the order delivered to the Depositary as above provided, the amount of Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, except that the Depositary may make delivery to such person or persons at the Corporate Trust Office of the Depositary of any dividends or distributions with respect to the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, or of any proceeds of sale of any dividends, distributions or rights, which may at the time be held by the Depositary.
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At the request, risk and expense of any Owner so surrendering a Receipt, and for the account of such Owner, the Depositary shall direct the Custodian to forward any cash or other property (other than rights) comprising, and forward a certificate or certificates and other proper documents of title for, the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt to the Depositary for delivery at the Corporate Trust Office of the Depositary. Such direction shall be given by letter or, at the request, risk and expense of such Owner, by cable, telex or facsimile transmission.
SECTION 2.6 Limitations on Execution and Delivery, Transfer and Surrender of Receipts . As a condition precedent to the execution and delivery, registration of transfer, split-up, combination or surrender of any Receipt or withdrawal of any Deposited Securities, the Depositary, Custodian or Registrar may require payment from the depositor of Shares or the presentor of the Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as herein provided, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary may establish consistent with the provisions of this Deposit Agreement, including, without limitation, this Section 2.6.
The delivery of Receipts against deposits of Shares generally or against deposits of particular Shares may be suspended, or the transfer of Receipts in particular instances may be refused, or the registration of transfer of outstanding Receipts generally may be suspended, during any period when the transfer books of the Depositary are closed, or if any such action is deemed necessary or advisable by the Depositary or the Issuer at any time or from time to time because of any requirement of law or of any government or governmental body or commission, or under any provision of this Deposit Agreement, or for any other reason, subject to the provisions of Section 7.7 hereof. Notwithstanding any other provision of this Deposit Agreement or the Receipts, the surrender of outstanding Receipts and withdrawal of Deposited Securities may not be suspended subject only to (i) temporary delays caused by closing the transfer books of the Depositary or the Issuer or the deposit of Shares in connection with voting at a shareholders meeting, or the payment of dividends, (ii) the payment of fees, taxes and similar charges, and (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities. Without limitation of the foregoing, the Depositary shall not knowingly accept for deposit under this Deposit Agreement any Shares required to be registered under the provisions of the Securities Act of 1933, unless a registration statement is in effect as to such Shares.
SECTION 2.7 Lost Receipts, etc . In case any Receipt shall be mutilated, destroyed, lost or stolen, the Depositary shall execute and deliver a new Receipt of like tenor in exchange and substitution for such mutilated Receipt upon cancellation thereof, or in lieu of and in substitution for such destroyed, lost or stolen Receipt. Before the Depositary shall execute and deliver a new Receipt (which, in the discretion of the Depositary may be issued through DRS/Profile unless specifically requested otherwise) in substitution for a destroyed, lost or stolen Receipt, the Owner thereof shall have (a) filed with the Depositary (i) a request for such execution and delivery before the Depositary has notice that the Receipt has been acquired by a bona fide purchaser and (ii) a sufficient indemnity bond and (b) satisfied any other reasonable requirements imposed by the Depositary.
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SECTION 2.8 Cancellation and Destruction of Surrendered Receipts . All Receipts surrendered to the Depositary shall be cancelled by the Depositary. The Depositary is authorized to destroy Receipts so cancelled.
SECTION 2.9 Pre-Release of Receipts . Notwithstanding Section 2.3 hereof, the Depositary may execute and deliver Receipts prior to the receipt of Shares pursuant to Section 2.2 (Pre-Release of Receipts) and may deliver Shares prior to the receipt and cancellation of Receipts if the person to whom such Shares are to be delivered is a banking institution organized pursuant to the laws of The Republic of South Africa (South African Bank) (Pre-Release of Shares). (Pre-Release of Receipts and Pre-Release of Shares are collectively referred to herein as Pre-Release). The Depositary may, pursuant to Section 2.5, deliver Shares upon the receipt and cancellation of Receipts which have been Pre-Released, whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that such Receipt has been Pre-Released. The Depositary may receive Receipts in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release will be (a) preceded or accompanied by a written representation from the person to whom Receipts or Shares are to be delivered (Pre-Releasee) that such Pre-Releasee, or its customer, owns the Shares or Receipts to be remitted, as the case may be, (b) at all times fully collateralized with cash or such other collateral as the Depositary deems appropriate and, in connection with the Pre-Release of Shares, preceded or accompanied by an unconditional guaranty by the Pre-Releasee to deliver Receipts for cancellation on the same calendar day on which the Shares are delivered to the Pre-Releasee (or, if such Receipts are not so delivered, to return the Shares), (c) terminable by the Depositary on not more than five (5) business days notice, and (d) subject to such further indemnities and credit regulations as the Depositary deems appropriate. The number of American Depositary Shares which are outstanding at any time as a result of Pre-Releases will not normally exceed thirty percent (30%) of the Shares deposited hereunder; provided, however, that the Depositary reserves the right to change or disregard such limit from time to time as it deems appropriate.
The Depositary may retain for its own account any compensation received by it in connection with the foregoing.
ARTICLE III
CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS.
SECTION 3.1 Filing Proofs, Certificates and Other Information . Any person presenting Shares for deposit or any Owner of a Receipt may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, or such information relating to the registration on the books of the Issuer or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Depositary may deem necessary or proper. The Depositary may withhold the delivery or registration of transfer of any Receipt or the distribution of any dividend or sale or distribution of rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made.
SECTION 3.2 Liability of Owner for Taxes . If any tax or other governmental charge shall become payable with respect to any Receipt or any Deposited Securities represented by any Receipt, such tax or other governmental charge shall be payable by the Owner of such Receipt to the Depositary. The Depositary may refuse to effect any transfer of such Receipt
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or any withdrawal of Deposited Securities represented by American Depositary Shares evidenced by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner thereof any part or all of the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such tax or other governmental charge and the Owner of such Receipt shall remain liable for any deficiency.
SECTION 3.3 Warranties on Deposit of Shares . Every person depositing Shares under this Deposit Agreement shall be deemed thereby to represent and warrant that such Shares and each certificate therefor are validly issued, fully paid, non-assessable and free of any pre-emptive rights of the holders of outstanding Shares and that the person making such deposit is duly authorized so to do. Every such person shall also be deemed to represent that the deposit of such Shares and the sale of Receipts evidencing American Depositary Shares representing such Shares by that person are not restricted under the Securities Act of 1933. Such representations and warranties shall survive the deposit of Shares and issuance of Receipts.
ARTICLE IV
THE DEPOSITED SECURITIES.
SECTION 4.1 Cash Distributions . Whenever the Depositary shall receive any cash dividend or other cash distribution on any Deposited Securities, the Depositary shall, subject to the provisions of Section 4.5, convert such dividend or distribution into Dollars and shall distribute the amount thus received (net of the fees of the Depositary as provided in Section 5.9 hereof, if applicable) to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by them respectively; provided, however, that in the event that the Issuer or the Depositary shall be required to withhold and does withhold from such cash dividend or such other cash distribution an amount on account of taxes, the amount distributed to the Owner of the Receipts evidencing American Depositary Shares representing such Deposited Securities shall be reduced accordingly. The Depositary shall distribute only such amount, however, as can be distributed without attributing to any Owner a fraction of one cent. Any such fractional amounts shall be rounded to the nearest whole cent and so distributed to Owners entitled thereto. The Issuer or its agent will remit to the appropriate governmental agency in the Republic of South Africa all amounts withheld and owing to such agency. The Depositary will forward to the Issuer or its agent such information from its records as the Issuer may reasonably request to enable the Issuer or its agent to file necessary reports with governmental agencies, and the Depositary or the Issuer or its agent may file any such reports necessary to obtain benefits under the applicable tax treaties for the Owners of Receipts.
SECTION 4.2 Distributions Other Than Cash, Shares or Rights . Subject to the provisions of Section 4.11 and Section 5.9, whenever the Depositary shall receive any distribution other than a distribution described in Sections 4.1, 4.3 or 4.4, the Depositary shall cause the securities or property received by it to be distributed to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by them respectively, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution; provided, however, that if in the opinion of the Depositary such distribution cannot be made proportionately among the Owners entitled thereto, or if for any other reason (including, but not limited to, any requirement that
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the Issuer or the Depositary withhold an amount on account of taxes or other governmental charges or that such securities must be registered under the Securities Act of 1933 in order to be distributed to Owners or holders) the Depositary deems such distribution not to be feasible, the Depositary may adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale (net of the fees of the Depositary as provided in Section 5.9) shall be distributed by the Depositary to the Owners entitled thereto as in the case of a distribution received in cash.
SECTION 4.3 Distributions in Shares . If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares, the Depositary may, and shall if the Issuer shall so request, distribute to the Owners of outstanding Receipts entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by them respectively, additional Receipts evidencing an aggregate number of American Depositary Shares representing the amount of Shares received as such dividend or free distribution, subject to the terms and conditions of the Deposit Agreement with respect to the deposit of Shares and the issuance of American Depositary Shares evidenced by Receipts, including the withholding of any tax or other governmental charge as provided in Section 4.11 and the payment of fees of the Depositary as provided in Section 5.9. In lieu of delivering Receipts for fractional American Depositary Shares in any such case, the Depositary shall sell the amount of Shares represented by the aggregate of such fractions and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.1. If additional Receipts are not so distributed, each American Depositary Share shall thenceforth also represent the additional Shares distributed upon the Deposited Securities represented thereby.
SECTION 4.4 Rights . In the event that the Issuer shall offer or cause to be offered to the holders of any Deposited Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary shall have discretion as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net proceeds available to such Owners or, if by the terms of such rights offering or for any other reason, the Depositary may not either make such rights available to any Owners or dispose of such rights and make the net proceeds available to such Owners, then the Depositary shall allow the rights to lapse. If at the time of the offering of any rights the Depositary determines in its discretion that it is lawful and feasible to make such rights available to all Owners or to certain Owners but not to other Owners, the Depositary may distribute to any Owner to whom it determines the distribution to be lawful and feasible, in proportion to the number of American Depositary Shares held by such Owner, warrants or other instruments therefor in such form as it deems appropriate.
In circumstances in which rights would otherwise not be distributed, if an Owner of Receipts requests the distribution of warrants or other instruments in order to exercise the rights allocable to the American Depositary Shares of such Owner hereunder, the Depositary will make such rights available to such Owner upon written notice from the Issuer to the Depositary that (a) the Issuer has elected in its sole discretion to permit such rights to be exercised and (b) such Owner has executed such documents as the Issuer has determined in its sole discretion are reasonably required under applicable law.
If the Depositary has distributed warrants or other instruments for rights to all or certain Owners, then upon instruction from such an Owner pursuant to such warrants or other
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instruments to the Depositary from such Owner to exercise such rights, upon payment by such Owner to the Depositary for the account of such Owner of an amount equal to the purchase price of the Shares to be received upon the exercise of the rights, and upon payment of the fees of the Depositary and any other charges as set forth in such warrants or other instruments, the Depositary shall, on behalf of such Owner, exercise the rights and purchase the Shares, and the Issuer shall cause the Shares so purchased to be delivered to the Depositary on behalf of such Owner. As agent for such Owner, the Depositary will cause the Shares so purchased to be deposited pursuant to Section 2.2 of this Deposit Agreement, and shall, pursuant to Section 2.3 of this Deposit Agreement, execute and deliver Receipts to such Owner. In the case of a distribution pursuant to the second paragraph of this section, such Receipts shall be legended in accordance with applicable U.S. laws, and shall be subject to the appropriate restrictions on sale, deposit, cancellation, and transfer under such laws.
If the Depositary determines in its discretion that it is not lawful and feasible to make such rights available to all or certain Owners, it may sell the rights, warrants or other instruments in proportion to the number of American Depositary Shares held by the Owners to whom it has determined it may not lawfully or feasibly make such rights available, and allocate the net proceeds of such sales (net of the fees of the Depositary as provided in Section 5.9 and all taxes and governmental charges payable in connection with such rights and subject to the terms and conditions of this Deposit Agreement) for the account of such Owners otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any Receipt or otherwise.
The Depositary will not offer rights to Owners unless both the rights and the securities to which such rights relate are either exempt from registration under the Securities Act of 1933 with respect to a distribution to Owners or are registered under the provisions of such Act. If an Owner of Receipts requests distribution of warrants or other instruments, notwithstanding that there has been no such registration under such Act, the Depositary shall not effect such distribution unless it has received an opinion from recognized counsel in the United States for the Issuer upon which the Depositary may rely that such distribution to such Owner is exempt from such registration.
The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular.
SECTION 4.5 Conversion of Foreign Currency . Whenever the Depositary shall receive foreign currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the foreign currency so received can in the judgment of the Depositary be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall convert or cause to be converted, by sale or in any other manner that it may determine, such foreign currency into Dollars, and such Dollars shall be distributed to the Owners entitled thereto or, if the Depositary shall have distributed any warrants or other instruments which entitle the holders thereof to such Dollars, then to the holders of such warrants and/or instruments upon surrender thereof for cancellation. Such distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners on account of exchange restrictions, the date of delivery of any Receipt or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary as provided in Section 5.9.
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If such conversion or distribution can be effected only with the approval or license of any government or agency thereof, the Depositary shall file such application for approval or license, if any, as it may deem desirable.
If at any time the Depositary shall determine that in its judgment any foreign currency received by the Depositary is not convertible on a reasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof which is required for such conversion is denied or in the reasonable opinion of the Depositary is not obtainable, or if any such approval or license is not obtained within a reasonable period as determined by the Depositary, the Depositary may, but if requested by the Owner shall, distribute the foreign currency (or an appropriate document evidencing the right to receive such foreign currency) received by the Depositary to, or, if not so requested by the Owner, in its discretion may hold such foreign currency uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled to receive the same.
If any such conversion of foreign currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, the Depositary may in its discretion make such conversion and distribution in Dollars to the extent permissible to the Owners entitled thereto and may, but if requested by the Owner shall, distribute the balance of the foreign currency (or an appropriate document evidencing the right to receive such foreign currency) received by the Depositary to, or, if not so requested by the Owner, hold such balance uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled thereto.
SECTION 4.6 Fixing of Record Date . Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each American Depositary Share, or whenever the Depositary shall receive notice of any meeting of holders of Shares or other Deposited Securities, the Depositary shall fix a record date (a) for the determination of the Owners who shall be (i) entitled to receive such dividend, distribution or rights or the net proceeds of the sale thereof or (ii) entitled to give instructions for the exercise of voting rights at any such meeting, or (b) on or after which each American Depositary Share will represent the changed number of Shares. Subject to the provisions of Sections 4.1 through 4.5 and to the other terms and conditions of this Deposit Agreement, the Owners on such record date shall be entitled, as the case may be, to receive the amount distributable by the Depositary with respect to such dividend or other distribution or such rights or the net proceeds of sale thereof in proportion to the number of American Depositary Shares held by them respectively and to give voting instructions and to act in respect of any other such matter.
SECTION 4.7 Voting of Deposited Securities . Upon receipt of notice of any meeting of holders of Shares or other Deposited Securities, if requested in writing by the Issuer the Depositary shall, as soon as practicable thereafter, mail to the Owners a notice, the form of which notice shall be in the sole discretion of the Depositary, which shall contain (a) such information as is contained in such notice of meeting, and (b) a statement that the Owners as of the close of business on a specified record date will be entitled, subject to any applicable provision of South African law and of the Articles of Association of the Issuer, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the amount of Shares or other Deposited Securities represented by their respective American Depositary Shares and (c) a statement as to the manner in which such instructions may be given , including an
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express indication that such instructions may be given or deemed given in accordance with the last sentence of this paragraph if no instruction is received, to the Depositary to give a discretionary proxy to a person designated by the Issuer. Upon the written request of an Owner on such record date, received on or before the date established by the Depositary for such purpose, (the Instruction Date ) the Depositary shall endeavor, in so far as practicable, to vote or cause to be voted the amount of Shares or other Deposited Securities represented by the American Depositary Shares evidenced by such Receipt in accordance with the instructions set forth in such request. The Depositary shall not vote or attempt to exercise the right to vote that attaches to the Shares or other Deposited Securities, other than in accordance with such instructions or deemed instructions. If no instructions are received by the Depositary from any Owner with respect to any of the Deposited Securities represented by the American Depositary Shares evidenced by such Owners Receipts on or before the date established by the Depositary for such purpose, the Depositary shall deem such Owner to have instructed the Depositary to give a discretionary proxy to a person designated by the Issuer with respect to such Deposited Securities and the Depositary shall give a discretionary proxy to a person designated by the Issuer to vote such Deposited Securities, provided , that no such instruction shall be given with respect to any matter as to which the Issuer informs the Depositary (and the Issuer agrees to provide such information as promptly as practicable in writing) that (x) the Issuer does not wish such proxy given, (y) substantial opposition exists or (z) such matter materially and adversely affects the rights of holders of Shares.
There can be no assurance that Owners generally or any Owner in particular will receive the notice described in the preceding paragraph sufficiently prior to the Instruction Date to ensure that the Depositary will vote the Shares or Deposited Securities in accordance with the provisions set forth in the preceding paragraph.
SECTION 4.8 Changes Affecting Deposited Securities . In circumstances where the provisions of Section 4.3 do not apply, upon any change in nominal value, change in par value, split-up, consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the Issuer or to which it is a party, any securities which shall be received by the Depositary or a Custodian in exchange for or in conversion of or in respect of Deposited Securities, shall be treated as new Deposited Securities under this Deposit Agreement, and American Depositary Shares shall thenceforth represent the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered pursuant to the following sentence. In any such case the Depositary may, and shall if the Issuer shall so request, execute and deliver additional Receipts as in the case of a dividend in Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited Securities.
SECTION 4.9 Reports . The Depositary shall make available for inspection by Owners at its Corporate Trust Office any reports and communications, including any proxy soliciting material, received from the Issuer which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Issuer. The Depositary shall also, upon written request, send to the Owners copies of such reports furnished by the Issuer pursuant to Section 5.6.
SECTION 4.10 Lists of Owners . Promptly upon request by the Issuer, the Depositary shall, at the expense of the Issuer, furnish to it a list, as of a recent date, of the
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names, addresses and holdings of American Depositary Shares by all persons in whose names Receipts are registered on the books of the Depositary.
SECTION 4.11 Withholding . In the event that the Depositary determines that any distribution in property (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge which the Depositary is obligated to withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems necessary and practicable to pay any such taxes or charges and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners entitled thereto in proportion to the number of American Depositary Shares held by them respectively.
ARTICLE V
THE DEPOSITARY, THE CUSTODIANS AND THE ISSUER.
SECTION 5.1 Maintenance of Office and Transfer Books by the Depositary . Until termination of this Deposit Agreement in accordance with its terms, the Depositary shall maintain in the Borough of Manhattan, The City of New York, facilities for the execution and delivery, registration, registration of transfers and surrender of Receipts in accordance with the provisions of this Deposit Agreement.
The Depositary shall keep books for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners, provided that such inspection shall not be for the purpose of communicating with Owners in the interest of a business or object other than the business of the Issuer or a matter related to this Deposit Agreement or the Receipts.
The Depositary may close the transfer books, at any time or from time to time, when deemed expedient by it in connection with the performance of its duties hereunder.
If any Receipts or the American Depositary Shares evidenced thereby are listed on one or more stock exchanges in the United States, the Depositary shall act as Registrar or appoint a Registrar or one or more co-registrars for registry of such Receipts in accordance with any requirements of such exchange or exchanges.
SECTION 5.2 Prevention or Delay in Performance by the Depositary or the Issuer . Neither the Depositary nor the Issuer shall incur any liability to any Owner or holder of any Receipt, if by reason of any provision of any present or future law or regulation of the United States or any other country, or of any governmental or regulatory authority or stock exchange, or by reason of any provision, present or future, of the Articles of Association of the Issuer, or by reason of any act of God or war or other circumstances beyond its control, the Depositary or the Issuer shall be prevented or forbidden from, or be subject to any civil or criminal penalty on account of, doing or performing any act or thing which by the terms of this Deposit Agreement it is provided shall be done or performed; nor shall the Depositary or the Issuer incur any liability to any Owner or holder of any Receipt by reason of any non-performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of this Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement. Where, by the terms of a distribution pursuant to Sections 4.1, 4.2, or 4.3 of the
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Deposit Agreement, or an offering or distribution pursuant to Section 4.4 of the Deposit Agreement, or for any other reason, such distribution or offering may not be made available to Owners, and the Depositary may not dispose of such distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the Depositary shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse.
SECTION 5.3 Obligations of the Depositary, the Custodian and the Issuer . The Issuer assumes no obligation nor shall it be subject to any liability under this Deposit Agreement to Owners or holders of Receipts, except that it agrees to perform its obligations specifically set forth in this Deposit Agreement without negligence or bad faith.
The Depositary assumes no obligation nor shall it be subject to any liability under this Deposit Agreement to any Owner or holder of any Receipt (including, without limitation, liability with respect to the validity or worth of the Deposited Securities), except that it agrees to perform its obligations specifically set forth in this Deposit Agreement without negligence or bad faith.
Neither the Depositary nor the Issuer shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability shall be furnished as often as may be required, and the Custodian shall not be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary.
Neither the Depositary nor the Issuer shall be liable for any action or non-action by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or any other person believed by it in good faith to be competent to give such advice or information.
The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with any matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary.
The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or non-action is in good faith.
No disclaimer of liability under the Securities Act of 1933 is intended by any provision of this Deposit Agreement.
Neither the Depositary, the Custodian or the Company shall incur any liability for any special, consequential, indirect or punitive damages for any breach of the terms of this Deposit Agreement or otherwise.
SECTION 5.4 Resignation and Removal of the Depositary . The Depositary may at any time resign as Depositary hereunder by written notice of its election so to do delivered to the Issuer, such resignation to take effect upon the appointment of a successor depositary and its acceptance of such appointment as hereinafter provided.
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The Depositary may at any time be removed by the Issuer by written notice of such removal effective upon the appointment of a successor depositary and its acceptance of such appointment as hereinafter provided.
In case at any time the Depositary acting hereunder shall resign or be removed, the Issuer shall use its best efforts to appoint a successor depositary, which shall be a bank or trust company having an office in the Borough of Manhattan, The City of New York. Every successor depositary shall execute and deliver to its predecessor and to the Issuer an instrument in writing accepting its appointment hereunder, and thereupon such successor depositary, without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor; but such predecessor, nevertheless, upon payment of all sums due it and on the written request of the Issuer shall execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest in the Deposited Securities to such successor, and shall deliver to such successor a list of the Owners of all outstanding Receipts. Any such successor depositary shall promptly mail notice of its appointment to the Owners.
Any corporation into or with which the Depositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of any document or any further act.
SECTION 5.5 The Custodians . The Custodian shall be subject at all times and in all respects to the directions of the Depositary and shall be responsible solely to it. Any Custodian may resign and be discharged from its duties hereunder by notice of such resignation delivered to the Depositary at least 30 days prior to the date on which such resignation is to become effective. If upon such resignation there shall be no Custodian acting hereunder, the Depositary shall, promptly after receiving such notice, appoint a substitute custodian or custodians, each of which shall thereafter be a Custodian hereunder. Whenever the Depositary in its discretion determines that it is in the best interest of the Owners to do so, it may appoint substitute or additional custodian or custodians, which shall thereafter be one of the Custodians hereunder. Upon demand of the Depositary any Custodian shall deliver such of the Deposited Securities held by it as are requested of it to any other Custodian or such substitute or additional custodian or custodians. Each such substitute or additional custodian shall deliver to the Depositary, forthwith upon its appointment, an acceptance of such appointment satisfactory in form and substance to the Depositary.
Upon the appointment of any successor depositary hereunder, each Custodian then acting hereunder shall forthwith become, without any further act or writing, the agent hereunder of such successor depositary and the appointment of such successor depositary shall in no way impair the authority of each Custodian hereunder; but the successor depositary so appointed shall, nevertheless, on the written request of any Custodian, execute and deliver to such Custodian all such instruments as may be proper to give to such Custodian full and complete power and authority as agent hereunder of such successor depositary.
SECTION 5.6 Notices and Reports . On or before the first date on which the Issuer gives notice, by publication or otherwise, of any meeting of holders of Shares or other Deposited Securities, or of any adjourned meeting of such holders, or of the taking of any action in respect of any cash or other distributions or the offering of any rights, the Issuer
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agrees to transmit to the Depositary and the Custodian a copy of the notice thereof in the form given or to be given to holders of Shares or other Deposited Securities.
The Issuer will arrange for the translation into English and the prompt transmittal by the Issuer to the Depositary and the Custodian of such notices and any other reports and communications which are made generally available by the Issuer to holders of its Shares. If requested in writing by the Issuer, the Depositary will arrange for the mailing, at the Issuers expense, of copies of such notices, reports and communications to all Owners. The Issuer will timely provide the Depositary with the quantity of such notices, reports, and communications, as requested by the Depositary from time to time, in order for the Depositary to effect such mailings.
SECTION 5.7 Distribution of Additional Shares, Rights, etc . The Issuer agrees that in the event of any issuance or distribution of (1) additional Shares, (2) rights to subscribe for Shares, (3) securities convertible into Shares, or (4) rights to subscribe for such securities, (each a Distribution) the Issuer will promptly furnish to the Depositary a written opinion from U.S. counsel for the Issuer, which counsel shall be satisfactory to the Depositary, stating whether or not the Distribution requires a Registration Statement under the Securities Act of 1933 to be in effect prior to making such Distribution available to Owners entitled thereto. If in the opinion of such counsel a Registration Statement is required, such counsel shall furnish to the Depositary a written opinion as to whether or not there is a Registration Statement in effect which will cover such Distribution.
The Issuer agrees with the Depositary that neither the Issuer nor any company controlled by, controlling or under common control with the Issuer will at any time deposit any Shares, either originally issued or previously issued and reacquired by the Issuer or any such affiliate, unless a Registration Statement is in effect as to such Shares under the Securities Act of 1933.
SECTION 5.8 Indemnification . The Issuer agrees to indemnify the Depositary, its directors, employees, agents and affiliates and any Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited to, the fees and expenses of counsel) which may arise out of acts performed or omitted, in accordance with the provisions of this Deposit Agreement and of the Receipts, as the same may be amended, modified or supplemented from time to time, (i) by either the Depositary or a Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, or (ii) by the Issuer or any of its directors, employees, agents and affiliates.
The Depositary agrees to indemnify the Issuer, its directors, employees, agents and affiliates and hold them harmless from any liability or expense which may arise out of acts performed or omitted by the Depositary or its Custodian or their respective directors, employees, agents and affiliates due to their negligence or bad faith.
SECTION 5.9 Charges of Depositary . The Issuer agrees to pay the fees, reasonable expenses and out-of-pocket charges of the Depositary and those of any Registrar only in accordance with agreements in writing entered into between the Depositary and the Issuer from time to time. The Depositary shall present its statement for such charges and expenses to the Issuer once every three months. The charges and expenses of the Custodian are for the sole account of the Depositary.
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The following charges shall be incurred by any party depositing or withdrawing Shares or by any party surrendering Receipts or to whom Receipts are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Issuer or an exchange of stock regarding the Receipts or Deposited Securities or a distribution of Receipts pursuant to Section 4.3), whichever is applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Issuer or Foreign Registrar and applicable to transfers of Shares to the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder, (3) such cable, telex and facsimile transmission expenses as are expressly provided in this Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign currency pursuant to Section 4.5 (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the execution and delivery of Receipts pursuant to Section 2.3, 4.3 or 4.4, and the surrender of Receipts pursuant to Section 2.5 or 6.2, (6) a fee of $.02 or less per American Depositary Share (or portion thereof) for any cash distribution made pursuant to the Deposit Agreement including, but not limited to, Sections 4.1 through 4.4 hereof and (7) a fee for the distribution of securities pursuant to Section 4.2, such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a result of the deposit of such securities (for purposes of this clause (7) treating all such securities as if they were Shares), but which securities are instead distributed by the Depositary to Owners.
The Depositary, subject to Section 2.9 hereof, may own and deal in any class of securities of the Issuer and its affiliates and in Receipts.
SECTION 5.10 Retention of Depositary Documents . The Depositary is authorized to destroy those documents, records, bills and other data compiled during the term of this Deposit Agreement at the times permitted by the laws or regulations governing the Depositary unless the Issuer requests that such papers be retained for a longer period or turned over to the Issuer or to a successor depositary.
SECTION 5.11 Exclusivity . The Issuer agrees not to appoint any other depositary for issuance of American Depositary Receipts so long as Deutsche Bank Trust Company Americas is acting as Depositary hereunder.
SECTION 5.12 List of Restricted Securities Owners . From time to time, the Issuer shall provide to the Depositary a list setting forth, to the actual knowledge of the Issuer, those persons or entities who beneficially own Restricted Securities and the Issuer shall update that list on a regular basis. The Issuer agrees to advise in writing each of the persons or entities so listed that such Restricted Securities are ineligible for deposit hereunder. The Depositary may rely on such a list or update but shall not be liable for any action or omission made in reliance thereon.
ARTICLE VI
AMENDMENT AND TERMINATION.
SECTION 6.1 Amendment . The form of the Receipts and any provisions of this Deposit Agreement may at any time and from time to time be amended by agreement between the Issuer and the Depositary in any respect which they may deem necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than
18
taxes and other governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or which shall otherwise prejudice any substantial existing right of Owners, shall, however, not become effective as to outstanding Receipts until the expiration of 30 days after notice of such amendment shall have been given to the Owners of outstanding Receipts. Every Owner at the time any amendment so becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to surrender such Receipt and receive therefor the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law.
SECTION 6.2 Termination . The Depositary shall at any time at the direction of the Issuer terminate this Deposit Agreement by mailing notice of such termination to the Owners of all Receipts then outstanding at least 90 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate this Deposit Agreement by mailing notice of such termination to the Issuer and the Owners of all Receipts then outstanding if at any time 90 days shall have expired after the Depositary shall have delivered to the Issuer a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in Section 5.4. On and after the date of termination, the Owner of a Receipt will, upon (a) surrender of such Receipt at the Corporate Trust Office of the Depositary, (b) payment of the fee of the Depositary for the surrender of Receipts referred to in Section 2.5, and (c) payment of any applicable taxes or governmental charges, be entitled to delivery, to him or upon his order, of the amount of Deposited Securities represented by the American Depositary Shares evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends to the Owners thereof, and shall not give any further notices or perform any further acts under this Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights as provided in this Deposit Agreement, and shall continue to deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of this Deposit Agreement, and any applicable taxes or governmental charges). At any time after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been surrendered, such Owners thereupon becoming general creditors of the Depositary with respect to such net proceeds. After making such sale, the Depositary shall be discharged from all obligations under this Deposit Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of this Deposit Agreement, and any applicable taxes or governmental charges). Upon the termination of this Deposit Agreement, the Issuer shall be discharged from all obligations under this Deposit Agreement except for its obligations to the Depositary under Sections 5.8 and 5.9 hereof.
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ARTICLE VII
MISCELLANEOUS.
SECTION 7.1 Counterparts . This Deposit Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of such counterparts shall constitute one and the same instrument. Copies of this Deposit Agreement shall be filed with the Depositary and the Custodians and shall be open to inspection by any holder or Owner of a Receipt during business hours.
SECTION 7.2 No Third Party Beneficiaries . This Deposit Agreement is for the exclusive benefit of the parties hereto and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever to any other person.
SECTION 7.3 Severability . In case any one or more of the provisions contained in this Deposit Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby.
SECTION 7.4 Holders and Owners as Parties; Binding Effect . The holders and Owners of Receipts from time to time shall be parties to this Deposit Agreement and shall be bound by all of the terms and conditions hereof and of the Receipts by acceptance thereof.
SECTION 7.5 Notices . Any and all notices to be given to the Issuer shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to Harmony Gold Mining Company Limited, Randfontein Office Park, Cnr Main Reef Road and Ward Avenue, Randfontein, 1759, P.O. Box 2, Randfontein, 1760, Johannesburg, South Africa, or any other place to which the Issuer may have transferred its principal office.
Any and all notices to be given to the Depositary shall be deemed to have been duly given if in English and personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to Deutsche Bank Trust Company Americas, 60 Wall Street, New York, New York 10005, Attention: American Depositary Receipt Administration, or any other place to which the Depositary may have transferred its Corporate Trust Office.
Any and all notices to be given to any Owner shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to such Owner at the address of such Owner as it appears on the transfer books for Receipts of the Depositary, or, if such Owner shall have filed with the Depositary a written request that notices intended for such Owner be mailed to some other address, at the address designated in such request.
Delivery of a notice sent by mail or cable, telex or facsimile transmission shall be deemed to be effected at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a cable, telex or facsimile transmission) is deposited, postage prepaid, in a post-office letter box. The Depositary or the Issuer may, however, act upon any cable, telex or facsimile transmission received by it, notwithstanding that such cable, telex or facsimile transmission shall not subsequently be confirmed by letter as aforesaid.
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SECTION 7.6 Governing Law . This Deposit Agreement and the Receipts shall be interpreted and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by the laws of the State of New York.
SECTION 7.7 Compliance with U.S. Securities Laws . Notwithstanding anything in this Deposit Agreement to the contrary, the Issuer and the Depositary each agrees that it will not exercise any rights it has under this Deposit Agreement to prevent the withdrawal or delivery of Deposited Securities in a manner which would violate the U.S. securities laws, including, but not limited to, Section I.A.(1) of the General Instructions to the Form F-6 Registration Statement, as amended from time to time, under the Securities Act of 1933.
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IN WITNESS WHEREOF, HARMONY GOLD MINING COMPANY LIMITED and DEUTSCHE BANK TRUST COMPANY AMERICAS have duly executed this agreement as of the day and year first set forth above and all Owners shall become parties hereto upon acceptance by them of Receipts issued in accordance with the terms hereof.
HARMONY GOLD MINING COMPANY LIMITED | ||||
By: |
[GRAPHIC APPEARS HERE] |
|||
Name: | Marian van der Walt and Riana Bisschoff | |||
Title: | Executive: Corporate and Investor relations and Company Secretary | |||
DEUTSCHE BANK TRUST COMPANY AMERICAS, | ||||
as Depositary | ||||
By: |
[GRAPHIC APPEARS HERE] |
|||
Name: | JEFF MARGOLICK | |||
Title: | DIRECTOR | |||
[GRAPHIC APPEARS HERE] | ||||
Laura Bonner | ||||
Vice President |
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EXHIBIT A
TO DEPOSIT AGREEMENT
No.
American Depositary Shares (Each American Depositary Share represents one (1) deposited Share) |
DEUTSCHE BANK TRUST COMPANY
AMERICAS AMERICAN DEPOSITARY RECEIPT
FOR ORDINARY SHARES OF THE
PAR VALUE OF 0.50 RAND EACH OF
HARMONY GOLD MINING COMPANY LIMITED
(Incorporated under the laws of the Republic of South Africa)
The Deutsche Bank Trust Company Americas as depositary (hereinafter called the Depositary ), hereby certifies that , or registered assigns, IS THE OWNER OF AMERICAN DEPOSITARY SHARES representing deposited Ordinary Shares (herein called Shares) of HARMONY GOLD MINING COMPANY LIMITED, incorporated under the laws of the Republic of South Africa (herein called the Company ). At the date hereof, each American Depositary Share represents one (1) Share which is either deposited or subject to deposit under the deposit agreement at Computershare Custodial Services Ltd., 13th Floor, 70 Marshall Street, Johannesburg 2001, Republic of South Africa, (herein called the Custodian ). The Depositarys Corporate Trust Office is located at 60 Wall Street, New York, N.Y. 10005.
THE DEPOSITARYS CORPORATE TRUST OFFICE ADDRESS IS
60 WALL STREET, NEW YORK, N.Y. 10005
1. The Deposit Agreement . This American Depositary Receipt is one of an issue (herein called Receipts), all issued and to be issued upon the terms and conditions set forth in the deposit agreement, dated as of August 12, 1996 (as amended and restated as of October 2, 1996 and as further amended and restated as of September 15, 1998 and as further amended and restated as of October 7, 2011 and from time to time thereafter, the Deposit Agreement ), by and among the Company, the Depositary, and all Owners and holders from time to time of Receipts issued thereunder, each of whom by accepting a Receipt agrees to become a party thereto and become bound by all the terms and conditions thereof. The Deposit Agreement sets forth the rights of Owners and holders of the Receipts and the rights and duties of the Depositary in respect of the Shares deposited thereunder and any and all other securities, property and cash from time to time received in respect of such Shares and held thereunder (such Shares, securities, property, and cash are herein called Deposited
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Securities ). Copies of the Deposit Agreement are on file at the Depositarys Corporate Trust Office in New York City and at the office of the Custodian.
The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Deposit Agreement and are qualified by and subject to the detailed provisions of the Deposit Agreement, to which reference is hereby made. Capitalized terms not defined herein shall have the meanings set forth in the Deposit Agreement.
2. Surrender of Receipts and Withdrawal of Shares . Upon surrender at the Corporate Trust Office of the Depositary of this Receipt, and upon payment of the fee of the Depositary provided in this Receipt, and subject to the terms and conditions of the Deposit Agreement, the Owner hereof is entitled to delivery, to him or upon his order, of the Deposited Securities at the time represented by the American Depositary Shares for which this Receipt is issued. Delivery of such Deposited Securities may be made by the delivery of (a) certificates in the name of the Owner hereof or as ordered by him or by the delivery of certificates properly endorsed or accompanied by proper instruments of transfer and (b) any other securities, property and cash to which such Owner is then entitled in respect of this Receipt. Such delivery will be made at the option of the Owner hereof, either at the office of the Custodian or at the Corporate Trust Office of the Depositary, provided that the forwarding of certificates for Shares or other Deposited Securities for such delivery at the Corporate Trust Office of the Depositary shall be at the risk and expense of the Owner hereof. Notwithstanding any other provision of the Deposit Agreement or this Receipt, the surrender of outstanding Receipts and withdrawal of Deposited Securities may be suspended only for (i) temporary delays caused by closing the transfer books of the Depositary or the Company or the deposit of Shares in connection with voting at a shareholders meeting, or the payment of dividends, (ii) the payment of fees, taxes and similar charges, and (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities.
3. Transfers, Split-Ups, and Combinations of Receipts . The transfer of this Receipt is registrable on the books of the Depositary at its Corporate Trust Office by the Owner hereof in person or by a duly authorized attorney, upon surrender of this Receipt properly endorsed for transfer or accompanied by proper instruments of transfer and funds sufficient to pay any applicable transfer taxes and the expenses of the Depositary and upon compliance with such regulations, if any, as the Depositary may establish for such purpose. This Receipt may be split into other such Receipts, or may be combined with other such Receipts into one Receipt, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination, or surrender of any Receipt or withdrawal of any Deposited Securities, the Depositary, the Custodian, or Registrar may require payment from the depositor of Shares or the presentor of the Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as provided in this Receipt, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary may establish consistent with the provisions of the Deposit Agreement or this Receipt.
The delivery of Receipts against deposits of Shares generally or against deposits of particular Shares may be suspended, or the transfer of Receipts in particular instances may be refused, or the registration of transfer of outstanding Receipts generally may be suspended, during any
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period when the transfer books of the Depositary are closed, or if any such action is deemed necessary or advisable by the Depositary or the Company at any time or from time to time because of any requirement of law or of any government or governmental body or commission, or under any provision of the Deposit Agreement or this Receipt, or for any other reason, subject to Article (22) hereof. Without limitation of the foregoing, the Depositary shall not knowingly accept for deposit under the Deposit Agreement any Shares required to be registered under the provisions of the Securities Act of 1933, unless a registration statement is in effect as to such Shares.
4. Liability of Owner for Taxes . If any tax or other governmental charge shall become payable with respect to any Receipt or any Deposited Securities represented hereby, such tax or other governmental charge shall be payable by the Owner hereof to the Depositary. The Depositary may refuse to effect any transfer of this Receipt or any withdrawal of Deposited Securities represented by American Depositary Shares evidenced by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner hereof any part or all of the Deposited Securities represented by the American Depositary Shares evidenced by this Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such tax or other governmental charge and the Owner hereof shall remain liable for any deficiency.
5. Warranties of Depositors . Every person depositing Shares hereunder shall be deemed thereby to represent and warrant that such Shares and each certificate therefor are validly issued, fully paid, non-assessable, and free of any pre-emptive rights of the holders of outstanding Shares and that the person making such deposit is duly authorized so to do. Every such person shall also be deemed to represent that the deposit of such Shares and the sale of Receipts evidencing American Depositary Shares representing such Shares by that person are not restricted under the Securities Act of 1933. Such representations and warranties shall survive the deposit of Shares and issuance of Receipts.
6. Filing Proofs, Certificates, and other Information . Any person presenting Shares for deposit or any Owner of a Receipt may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Depositary may deem necessary or proper. The Depositary may withhold the delivery or registration of transfer of any Receipt or the distribution of any dividend or sale or distribution of rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made. No Share shall be accepted for deposit unless accompanied by evidence satisfactory to the Depositary that any necessary approval has been granted by any governmental body in the Republic of South Africa which is then performing the function of the regulation of currency exchange.
7. Charges of Depositary . The Company agrees to pay the fees, reasonable expenses and out-of-pocket charges of the Depositary and those of any Registrar only in accordance with agreements in writing entered into between the Depositary and the Company from time to time. The Depositary shall present its statement for such charges and expenses to the Company once every three months. The charges and expenses of the Custodian are for the sole account of the Depositary.
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The following charges shall be incurred by any party depositing or withdrawing Shares or by any party surrendering Receipts or to whom Receipts are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the Receipts or Deposited Securities or a distribution of Receipts pursuant to Section 4.3 of the Deposit Agreement), whichever applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Company or Foreign Registrar and applicable to transfers of Shares to the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals under the Deposit Agreement, (3) such cable, telex and facsimile transmission expenses as are expressly provided in the Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign currency pursuant to Section 4.5 of the Deposit Agreement, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the execution and delivery of Receipts pursuant to Section 2.3, 4.3 or 4.4, and the surrender of Receipts pursuant to Section 2.5 or 6.2 of the Deposit Agreement, (6) a fee of $.02 or less per American Depositary Share (or portion thereof) for any cash distribution made pursuant to the Deposit Agreement including, but not limited to Sections 4.1 through 4.4 thereof and (7) a fee for the distribution of securities pursuant to Section 4.2 of the Deposit Agreement, such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a result of the deposit of such securities (for purposes of this clause (7) treating all such securities as if they were Shares), but which securities are instead distributed by the Depositary to Owners.
The Depositary, subject to Article (8) hereof, may own and deal in any class of securities of the Company and its affiliates and in Receipts.
8. Loans and Pre-Release of Shares and Receipts . Notwithstanding Section 2.3 of the Deposit Agreement, the Depositary may execute and deliver Receipts prior to the receipt of Shares pursuant to Section 2.2 of the Deposit Agreement (Pre-Release of Receipts) and may deliver Shares prior to the receipt and cancellation of Receipts if the person to whom such Shares are to be delivered is a banking institution organized pursuant to the laws of The Republic of South Africa (South African Bank) (Pre-Release of Shares). (Pre-Releases of Receipts and Pre-Releases of Shares are collectively referred to herein as Pre-Releases). The Depositary may, pursuant to Section 2.5 of the Deposit Agreement, deliver Shares upon the receipt and cancellation of Receipts which have been Pre-Released, whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that such Receipt has been Pre-Released. The Depositary may receive Receipts in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release will be (a) preceded or accompanied by a written representation from the person to whom Receipts or Shares are to be delivered (Pre-Releasee) that such Pre-Releasee, or its customer, owns the Shares or Receipts to be remitted, as the case may be, (b) at all times fully collateralized with cash or such other collateral as the Depositary deems appropriate and, in connection with the Pre-Release of Shares, preceded or accompanied by an unconditional guaranty by the Pre-Releasee to deliver Receipts for cancellation on the same calendar day on which the Shares are delivered to the Pre-Releasee (or, if such Receipts are not so delivered, to return the Shares), (c) terminable by the Depositary on not more than five (5) business days notice, and (d) subject to such further indemnities and credit regulations as the Depositary deems appropriate. The number of American Depositary Shares which are outstanding at any time as a result of Pre-Releases will not normally exceed 30% of the Shares deposited under the Deposit Agreement;
26
provided, however, that the Depositary reserves the right to change or disregard such limit from time to time as it deems appropriate.
The Depositary may retain for its own account any compensation received by it in connection with the foregoing.
9. Title to Receipts . It is a condition of this Receipt and every successive holder and Owner of this Receipt by accepting or holding the same consents and agrees, that title to this Receipt when properly endorsed or accompanied by proper instruments of transfer, is transferable by delivery with the same effect as in the case of a negotiable instrument, provided, however, that the Depositary, notwithstanding any notice to the contrary, may treat the person in whose name this Receipt is registered on the books of the Depositary as the absolute owner hereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in the Deposit Agreement or for all other purposes.
10. Validity of Receipt . This Receipt shall not be entitled to any benefits under the Deposit Agreement or be valid or obligatory for any purpose, unless this Receipt shall have been executed by the Depositary by the manual or facsimile signature of a duly authorized signatory of the Depositary and, if a Registrar for the Receipts shall have been appointed, countersigned by the manual or facsimile signature of a duly authorized officer of the Registrar.
11. Reports; Inspection of Transfer Books . The Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 and, accordingly, files certain reports with the Securities and Exchange Commission (hereinafter called the Commission).
Such reports and communications will be available for inspection and copying by holders and Owners at the public reference facilities maintained by the Commission located at 100 F Street, N.E., Washington D.C. 20549, U.S.A.
The Depositary will make available for inspection by Owners of Receipts at its Corporate Trust Office any reports and communications, including any proxy soliciting material, received from the Company which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Depositary will also, upon written request, send to Owners of Receipts copies of such reports when furnished by the Company pursuant to the Deposit Agreement.
The Depositary will keep books for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners of Receipts provided that such inspection shall not be for the purpose of communicating with Owners of Receipts in the interest of a business or object other than the business of the Company or a matter related to the Deposit Agreement or the Receipts.
12. Dividends and Distributions . Whenever the Depositary receives any cash dividend or other cash distribution on any Deposited Securities, the Depositary will, if at the time of receipt thereof any amounts received in a foreign currency can in the judgment of the Depositary be converted on a reasonable basis into United States dollars transferable to the United States, and subject to the Deposit Agreement, convert such dividend or distribution into dollars and will distribute the amount thus received to the Owners of Receipts entitled
27
thereto, provided, however, that in the event that the Company or the Depositary is required to withhold and does withhold from any cash dividend or other cash distribution in respect of any Deposited Securities an amount on account of taxes, the amount distributed to the Owners of the Receipts evidencing American Depositary Shares representing such Deposited Securities shall be reduced accordingly.
Subject to the provisions of Section 4.11 and 5.9 of the Deposit Agreement, whenever the Depositary receives any distribution other than a distribution described in Sections 4.1, 4.3 or 4.4 of the Deposit Agreement, the Depositary will cause the securities or property received by it to be distributed to the Owners of Receipts entitled thereto, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution; provided, however, that if in the opinion of the Depositary such distribution cannot be made proportionately among the Owners of Receipts entitled thereto, or if for any other reason the Depositary deems such distribution not to be feasible, the Depositary may adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale (net of the fees of the Depositary as provided in Section 5.9 of the Deposit Agreement) shall be distributed by the Depositary to the Owners of Receipts entitled thereto as in the case of a distribution received in cash.
If any distribution consists of a dividend in, or free distribution of, Shares, the Depositary may and shall if the Company shall so request, distribute to the Owners of outstanding Receipts entitled thereto, additional Receipts evidencing an aggregate number of American Depositary Shares representing the amount of Shares received as such dividend or free distribution subject to the terms and conditions of the Deposit Agreement with respect to the deposit of Shares and the issuance of American Depositary Shares evidenced by Receipts, including the withholding of any tax or other governmental charge as provided in Section 4.11 of the Deposit Agreement and the payment of the fees of the Depositary as provided in Section 5.9 of the Deposit Agreement. In lieu of delivering Receipts for fractional American Depositary Shares in any such case, the Depositary will sell the amount of Shares represented by the aggregate of such fractions and distribute the net proceeds, all in the manner and subject to the conditions set forth in the Deposit Agreement. If additional Receipts are not so distributed, each American Depositary Share shall thenceforth also represent the additional Shares distributed upon the Deposited Securities represented thereby.
In the event that the Depositary determines that any distribution in property (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge which the Depositary is obligated to withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems necessary and practicable to pay any such taxes or charges, and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners of Receipts entitled thereto.
13. Conversion of Foreign Currency . Whenever the Depositary shall receive foreign currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the foreign currency so received can in the judgment of the Depositary be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall convert or cause to be converted, by sale or in any other manner that it may determine, such foreign currency into Dollars, and such Dollars shall be distributed to the Owners entitled thereto or,
28
if the Depositary shall have distributed any warrants or other instruments which entitle the holders thereof to such Dollars, then to the holders of such warrants and/or instruments upon surrender thereof for cancellation. Such distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners on account of exchange restrictions, the date of delivery of any Receipt or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary as provided in Section 5.9 of the Deposit Agreement.
If such conversion or distribution can be effected only with the approval or license of any government or agency thereof, the Depositary shall file such application for approval or license, if any, as it may deem desirable.
If at any time the Depositary shall determine that in its judgment any foreign currency received by the Depositary is not convertible on a reasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof which is required for such conversion is denied or in the reasonable opinion of the Depositary is not obtainable, or if any such approval or license is not obtained within a reasonable period as determined by the Depositary, the Depositary may, but if requested by the Owner shall, distribute the foreign currency (or an appropriate document evidencing the right to receive such foreign currency) received by the Depositary to, or, if not so requested by the Owner, in its discretion may hold such foreign currency uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled to receive the same.
If any such conversion of foreign currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, the Depositary may in its discretion make such conversion and distribution in Dollars to the extent permissible to the Owners entitled thereto and may, but if requested by the Owner shall, distribute the balance of the foreign currency (or an appropriate document evidencing the right to receive such foreign currency) received by the Depositary to, or, if not so requested by the Owner, hold such balance uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled thereto.
14. Rights . In the event that the Company shall offer or cause to be offered to the holders of any Deposited Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary shall have discretion as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net proceeds available in Dollars to such Owners or, if by the terms of such rights offering or, for any other reason, the Depositary may not either make such rights available to any Owners or dispose of such rights and make the net proceeds available to such Owners, then the Depositary shall allow the rights to lapse. If at the time of the offering of any rights the Depositary determines in its discretion that it is lawful and feasible to make such rights available to all Owners or to certain Owners but not to other Owners, the Depositary may distribute, to any Owner to whom it determines the distribution to be lawful and feasible, in proportion to the number of American Depositary Shares held by such Owner, warrants or other instruments therefor in such form as it deems appropriate.
In circumstances in which rights would otherwise not be distributed, if an Owner of Receipts requests the distribution of warrants or other instruments in order to exercise the rights allocable to the American Depositary Shares of such Owner hereunder, the Depositary will make such rights available to such Owner upon written notice from the Company to the Depositary that (a) the Company has elected in its sole discretion to permit such rights to be
29
exercised and (b) such Owner has executed such documents as the Company has determined in its sole discretion are reasonably required under applicable law.
If the Depositary has distributed warrants or other instruments for rights to all or certain Owners, then upon instruction from such an Owner pursuant to such warrants or other instruments to the Depositary from such Owner to exercise such rights, upon payment by such Owner to the Depositary for the account of such Owner of an amount equal to the purchase price of the Shares to be received upon the exercise of the rights, and upon payment of the fees of the Depositary and any other charges as set forth in such warrants or other instruments, the Depositary shall, on behalf of such Owner, exercise the rights and purchase the Shares, and the Company shall cause the Shares so purchased to be delivered to the Depositary on behalf of such Owner. As agent for such Owner, the Depositary will cause the Shares so purchased to be deposited pursuant to Section 2.2 of the Deposit Agreement, and shall, pursuant to Section 2.3 of the Deposit Agreement, execute and deliver Receipts to such Owner. In the case of a distribution pursuant to the second paragraph of this Article, such Receipts shall be legended in accordance with applicable U.S. laws, and shall be subject to the appropriate restrictions on sale, deposit, cancellation, and transfer under such laws.
If the Depositary determines in its discretion that it is not lawful and feasible to make such rights available to all or certain Owners, it may sell the rights, warrants or other instruments in proportion to the number of American Depositary Shares held by the Owners to whom it has determined it may not lawfully or feasibly make such rights available, and allocate the net proceeds of such sales (net of the fees of the Depositary as provided in Section 5.9 of the Deposit Agreement and all taxes and governmental charges payable in connection with such rights and subject to the terms and conditions of this Deposit Agreement) for the account of such Owners otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any Receipt or otherwise.
The Depositary will not offer rights to Owners unless both the rights and the securities to which such rights relate are either exempt from registration under the Securities Act of 1933 with respect to a distribution to Owners or are registered under the provisions of such Act. If an Owner of Receipts requests distribution of warrants or other instruments, notwithstanding that there has been no such registration under such Act, the Depositary shall not effect such distribution unless it has received an opinion from recognized counsel in the United States for the Company upon which the Depositary may rely that such distribution to such Owner is exempt from such registration.
The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular.
15. Record Dates . Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each American Depositary Share, or whenever the Depositary shall receive notice of any meeting of holders of Shares or other Deposited Securities, the Depositary shall fix a record date (a) for the determination of the Owners of Receipts who shall be (i) entitled to receive such dividend, distribution or rights or the net proceeds of the sale thereof or (ii) entitled to give instructions for the exercise of voting rights at any such meeting, or (b) on or after which each American Depositary Share
30
will represent the changed number of Shares, subject to the provisions of the Deposit Agreement.
16. Voting of Deposited Securities . Upon receipt of notice of any meeting of holders of Shares or other Deposited Securities, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter, mail to the Owners of Receipts a notice, the form of which notice shall be in the sole discretion of the Depositary, which shall contain (a) such information as is contained in such notice of meeting, and (b) a statement that the Owners of Receipts as of the close of business on a specified record date will be entitled, subject to any applicable provision of South African law and of the Articles of Association of the Company, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the amount of Shares or other Deposited Securities represented by their respective American Depositary Shares and (c) a statement as to the manner in which such instructions may be given, including an express indication that such instructions may be given or deemed given in accordance with the last sentence of this paragraph if no instruction is received, to the Depositary to give a discretionary proxy to a person designated by the Company. Upon the written request of an Owner of a Receipt on such record date, received on or before the date established by the Depositary for such purpose, the Depositary shall endeavor in so far as practicable to vote or cause to be voted the amount of Shares or other Deposited Securities represented by such American Depositary Shares evidenced by such Receipt in accordance with the instructions set forth in such request. The Depositary shall not vote or attempt to exercise the right to vote that attaches to the Shares or other Deposited Securities, other than in accordance with such instructions or deemed instructions. If no instructions are received by the Depositary from any Owner with respect to any of the Deposited Securities represented by the American Depositary Shares evidenced by such Owners Receipts on or before the date established by the Depositary for such purpose, the Depositary shall deem such Owner to have instructed the Depositary to give a discretionary proxy to a person designated by the Company with respect to such Deposited Securities and the Depositary shall give a discretionary proxy to a person designated by the Company to vote such Deposited Securities, provided, that no such instruction shall be given with respect to any matter as to which the Company informs the Depositary (and the Company agrees to provide such information as promptly as practicable in writing) that (x) the Company does not wish such proxy given, (y) substantial opposition exists or (z) such matter materially and adversely affects the rights of holders of Shares.
There can be no assurance that Owners generally or any Owner in particular will receive the notice described in the preceding paragraph sufficiently prior to the Instruction Date to ensure that the Depositary will vote the Shares or Deposited Securities in accordance with the provisions set forth in the preceding paragraph.
17. Changes Affecting Deposited Securities . In circumstances where the provisions of Section 4.3 of the Deposit Agreement do not apply, upon any change in nominal value, change in par value, split-up, consolidation, or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation, or sale of assets affecting the Company or to which it is a party, any securities which shall be received by the Depositary or a Custodian in exchange for or in conversion of or in respect of Deposited Securities shall be treated as new Deposited Securities under the Deposit Agreement, and American Depositary Shares shall thenceforth represent the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered pursuant to the following sentence. In any such case the Depositary may, and shall if the
31
Company shall so request, execute and deliver additional Receipts as in the case of a dividend on the Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited Securities.
18. Liability of the Company and Depositary . Neither the Depositary nor the Company shall incur any liability to any Owner or holder of any Receipt, if by reason of any provision of any present or future law of the United States or any other country, or of any other governmental or regulatory authority, or by reason of any provision, present or future, of the Articles of Association of the Company, or by reason of any act of God or war or other circumstances beyond its control, the Depositary or the Company shall be prevented or forbidden from or be subject to any civil or criminal penalty on account of doing or performing any act or thing which by the terms of the Deposit Agreement it is provided shall be done or performed; nor shall the Depositary or the Company incur any liability to any Owner or holder of a Receipt by reason of any non-performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of the Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in the Deposit Agreement. Where, by the terms of a distribution pursuant to Sections 4.1, 4.2, or 4.3 of the Deposit Agreement, or an offering or distribution pursuant to Section 4.4 of the Deposit Agreement, such distribution or offering may not be made available to Owners of Receipts, and the Depositary may not dispose of such distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the Depositary shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse. Neither the Company nor the Depositary assumes any obligation or shall be subject to any liability under the Deposit Agreement to Owners or holders of Receipts, except that they agree to perform their obligations specifically set forth in the Deposit Agreement without negligence or bad faith. The Depositary shall not be subject to any liability with respect to the validity or worth of the Deposited Securities. Neither the Depositary nor the Company shall be under any obligation to appear in, prosecute or defend any action, suit, or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability shall be furnished as often as may be required, and the Custodian shall not be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary. Neither the Depositary nor the Company shall be liable for any action or non-action by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or holder of a Receipt, or any other person believed by it in good faith to be competent to give such advice or information. The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or non-action is in good faith. The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with a matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary. The Company agrees to indemnify the Depositary, its directors, employees, agents and affiliates and any Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited to, the fees and expenses of counsel) which may arise out of acts performed or omitted, in accordance with the provisions of the Deposit Agreement and of the Receipts, as the same may be amended, modified, or supplemented from time to time, (i) by either the Depositary or a
32
Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, or (ii) by the Company or any of its directors, employees, agents and affiliates. No disclaimer of liability under the Securities Act of 1933 is intended by any provision of the Deposit Agreement.
Neither the Depositary, the Custodian or the Company shall incur any liability for any special, consequential, indirect or punitive damages for any breach of the terms of this Deposit Agreement or otherwise.
19. Resignation and Removal of the Depositary . The Depositary may at any time resign as Depositary hereunder by written notice of its election so to do delivered to the Company, such resignation to take effect upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary may at any time be removed by the Company by written notice of such removal, effective upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. Whenever the Depositary in its discretion determines that it is in the best interest of the Owners of Receipts to do so, it may appoint a substitute or additional custodian or custodians.
20. Amendment . The form of the Receipts and any provisions of the Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary in any respect which they may deem necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than taxes and other governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or which shall otherwise prejudice any substantial existing right of Owners of Receipts, shall, however, not become effective as to outstanding Receipts until the expiration of thirty days after notice of such amendment shall have been given to the Owners of outstanding Receipts. Every Owner of a Receipt at the time any amendment so becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to surrender such Receipt and receive therefor the Deposited Securities represented thereby except in order to comply with mandatory provisions of applicable law.
21. Termination of Deposit Agreement . The Depositary shall at any time at the direction of the Company terminate the Deposit Agreement by mailing notice of such termination to the Owners of all Receipts then outstanding at least 90 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate the Deposit Agreement by mailing notice of such termination to the Company and the Owners of all Receipts then outstanding if at any time 90 days shall have expired after the Depositary shall have delivered to the Company a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in the Deposit Agreement. On and after the date of termination, the Owner of a Receipt, will upon (a) surrender of such Receipt at the Corporate Trust Office of the Depositary, (b) payment of the fee of the Depositary for the surrender of Receipts referred to in Section 2.5 of the Deposit Agreement, and (c) payment of any applicable taxes or governmental charges, will be entitled to delivery, to him or upon his order, of the amount of Deposited Securities represented by the American Depositary Shares evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends to the Owners thereof, and shall not give any further notices or perform any further acts under the Deposit Agreement, except that
33
the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights as provided in the Deposit Agreement, and shall continue to deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of the Deposit Agreement, and any applicable taxes or governmental charges). At any time after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities then held under the Deposit Agreement and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it thereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been surrendered, such Owners thereupon becoming general creditors of the Depositary with respect to such net proceeds. After making such sale, the Depositary shall be discharged from all obligations under the Deposit Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of the Deposit Agreement, and any applicable taxes or governmental charges). Upon the termination of the Deposit Agreement, the Company shall be discharged from all obligations under the Deposit Agreement except for its obligations to the Depositary with respect to indemnification, charges, and expenses.
22. Compliance with U.S. Securities laws . Notwithstanding anything in the Deposit Agreement or this Receipt to the contrary, the Company and the Depositary each agrees that it will not exercise any rights it has under the Deposit Agreement to prevent the withdrawal or delivery of Deposited Securities in a manner which would violate U.S. securities laws, including, but not limited to, Section I.A.(1) of the General Instructions to the Form F-6 Registration Statement, as amended from time to time, under the Securities Act of 1933.
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Exhibit 4.21
AMENDED AND RESTATED FACILITIES AGREEMENT
Amongst
NEDBANK LIMITED
and
HARMONY GOLD MINING COMPANY LIMITED
and
THE GUARANTORS LISTED IN SCHEDULE 2
T ABLE OF C ONTENTS
1. |
PARTIES |
1 | ||||
2. |
DEFINITIONS AND INTERPRETATION |
1 | ||||
3. |
INTRODUCTION |
33 | ||||
4. |
CONDITIONS TO ADVANCE |
33 | ||||
5. |
THE TERM FACILITIES |
35 | ||||
6. |
THE RCF FACILITY |
41 | ||||
7. |
VOLUNTARY PREPAYMENT |
48 | ||||
8. |
MANDATORY PREPAYMENT |
48 | ||||
9. |
PAYMENTS |
50 | ||||
10. |
BREAKAGE COSTS AND BREAKAGE GAINS |
51 | ||||
11. |
GUARANTEE AND INDEMNITY |
52 | ||||
12. |
CESSION IN SECURITY |
55 | ||||
13. |
WARRANTIES AND REPRESENTATIONS |
58 | ||||
14. |
FINANCIAL INFORMATION |
68 | ||||
15. |
POSITIVE UNDERTAKINGS |
73 | ||||
16. |
NEGATIVE UNDERTAKINGS |
75 | ||||
17. |
FINANCIAL COVENANTS |
77 | ||||
18. |
EVENTS OF DEFAULT |
79 | ||||
19. |
TAXES |
86 | ||||
20. |
TAX RECEIPTS |
88 | ||||
21. |
INCREASED COSTS |
88 | ||||
22. |
CERTIFICATE OF INDEBTEDNESS |
89 | ||||
23. |
SET-OFF |
90 | ||||
24. |
CHANGE OF PARTY |
90 | ||||
25. |
INTEREST ON ARREAR AMOUNTS AND INDEMNITY |
94 | ||||
26. |
FACILITY AGENT |
95 | ||||
27. |
CONFIDENTIALITY |
99 | ||||
28. |
FEES AND EXPENSES |
102 | ||||
29. |
NOTICES AND DOMICILIA |
104 | ||||
30. |
GOVERNING LAW |
106 | ||||
31. |
JURISDICTION |
106 | ||||
32. |
SEVERABILITY |
106 | ||||
33. |
GENERAL |
107 |
34. |
COUNTERPARTS |
108 | ||||
SCHEDULE 1 : CONDITIONS |
117 | |||||
SCHEDULE 2 : THE GUARANTORS |
124 | |||||
SCHEDULE 3 : DISCLOSED ENCUMBRANCES |
125 | |||||
SCHEDULE 4 : DISCLOSED INDEBTEDNESS |
126 | |||||
SCHEDULE 5 : DISCLOSED LOANS |
132 | |||||
SCHEDULE 6 : DISCLOSED POTENTIAL ENVIRONMENTAL CLAIM |
133 | |||||
SCHEDULE 7 : FORM OF COMPLIANCE CERTIFICATE |
134 | |||||
SCHEDULE 8 : LAST TAX RETURN YEAR |
136 | |||||
SCHEDULE 9 : FORM OF UTILISATION REQUEST |
137 | |||||
SCHEDULE 10 : FORM OF TERM FACILITY B UTILISATION REQUEST |
139 | |||||
SCHEDULE 11 : TERM FACILITY REPAYMENT SCHEDULE |
141 | |||||
SCHEDULE 12 : FORM OF LENDERS ACCESSION UNDERTAKING |
142 | |||||
SCHEDULE 13 : AGREED FORM OF CESSION AND DELEGATION AGREEMENT |
144 | |||||
SCHEDULE 14 : FORM OF CONFIDENTIALITY UNDERTAKING |
154 |
AMENDED AND RESTATED FACILITIES AGREEMENT
1. | PARTIES |
1.1 | The Parties to this Agreement are: |
1.1.1 | NEDBANK LIMITED ; |
1.1.2 | HARMONY GOLD MINING COMPANY LIMITED ; and |
1.1.3 | THE GUARANTORS AS LISTED IN SCHEDULE 2 . |
1.2 | The Parties agree as set out below. |
2. | DEFINITIONS AND INTERPRETATION |
2.1 | The headings to the clauses and schedules of this Agreement are inserted for reference purposes only and shall in no way govern or affect the interpretation hereof nor modify nor amplify the terms of this Agreement nor any clause or schedule hereof. |
2.2 | Unless inconsistent with the context, the expressions set forth below shall bear the following meanings and cognate expressions shall bear corresponding meanings: |
2.2.1 | Accession Undertaking means in relation to a New Lender an undertaking substantially in the form set out in Schedule 12 ( Form of Accession Undertakings ); |
2.2.2 | Advance means either a Term Facility Advance or an RCF Advance, as the case may be; |
2.2.3 | Advance Date means any date upon which the Lender makes an Advance hereunder; |
2.2.4 |
Agreement means the Original Facilities Agreement between the Parties dated 11 December 2009 as amended and restated by this |
Amended and Restated Facilities Agreement read together with the Schedules hereto; |
2.2.5 | Applicable RCF Margin means 3.5% (three comma five percent) nacm (if the applicable RCF Interest Period is 1 (one) month), nacq (if the applicable RCF Interest Period is 3 (three) months) or nacs (if the applicable RCF Interest Period is 6 (six) months), as specified in the Utilisation Request relating to each RCF Advance; |
2.2.6 | Applicable Term Margin means 3.5% (three comma five percent) nacq; |
2.2.7 | ARM Cession and Pledge in Security means the cession and pledge in security by African Rainbow Minerals Gold Limited ( ARMGold ) in favour of the Finance Parties of the shares held by it in ARMGold / Harmony Joint Investment Company (Proprietary) Limited and ARMGold / Harmony Freegold Joint Venture Company (Proprietary) Limited and any claims ARMGold has against such companies dated on or about the Signature Date, as amended by an addendum thereto dated on or about the New Facilities Signature Date; |
2.2.8 | Auditors means the Borrowers auditors from time to time provided that the Borrowers auditors shall only, save with the prior written consent of the Facility Agent, be any one or more of Deloitte & Touche, KPMG Inc., Ernst & Young or PricewaterhouseCoopers Inc.; |
2.2.9 | Authorised Signatory means a person or persons duly authorised to bind the Borrower in terms of this Agreement and in respect of whom the Borrower shall have delivered to the Facility Agent certified specimens of such persons or persons signature(s) together with evidence satisfactory to the Facility Agent that such person is duly authorised to bind the Borrower; |
2.2.10 | Authorisation means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration, as the case may be; |
2.2.11 | Availability Period means, in relation to the RCF Facility, the period commencing on the date of Financial Close and ending on the earlier of: |
2.2.11.1 | the date on which the Available RCF Facility is cancelled in terms of this Agreement; and |
2.2.11.2 | the date which is 1 (one) month prior to the Final Repayment Date relating to the RCF Facility; |
2.2.12 | Available RCF Facility means the RCF Facility Amount minus: |
2.2.12.1 | the amount of any outstanding RCF Loans; and |
2.2.12.2 | in relation to any proposed Utilisation under the RCF Facility, the amount of any RCF Loans that are due to be made on or before the proposed Utilisation Date, |
other than any RCF Loans that are due to be repaid or prepaid on or before the proposed Utilisation Date;
2.2.13 | Available Term Facility means the Term Facility B Amount minus: |
2.2.13.1 | the amount of any outstanding Term Loans made under Term Facility B; and |
2.2.13.2 | in relation to any proposed Advance under the Term Facility B, the amount of any Term Loans that are due to be made under Term Facility B on or before the proposed Advance Date; |
2.2.14 |
AVRD Loan Agreement means the written agreement entitled Loan Agreement concluded between Nedbank and African Vanguard Resources (Doornkop) (Proprietary) Limited ( AVRD ) on or about 30 July 2003 pursuant to which Nedbank agreed to lend and advance a loan of R116 215 000 (One Hundred and Sixteen Million Two Hundred and |
Fifteen Thousand Rand) to AVRD, as amended by the First Amending Agreement, the Second Amending Agreement, the Third Amending Agreement, the Fourth Amending Agreement and the Fifth Amending Agreement; |
2.2.15 | Base Rate means, subject to clause 6.4.1.3, JIBAR or where it is not possible to determine JIBAR on any Reset Date, SAR-JIBAR-Reference Rate, in either case converted to a nacm/nacq/nacs rate; |
2.2.16 | Borrower means Harmony Gold Mining Company Limited (Registration No. 1950/038232/06), a public company duly incorporated in accordance with the company laws of South Africa; |
2.2.17 | Breakage Costs means the amount (if any) by which: |
2.2.17.1 | the interest (excluding any margin) which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period; |
exceeds:
2.2.17.2 | the amount which a Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Johannesburg interbank market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period; |
2.2.18 | Breakage Gains means the amount (if any) by which: |
2.2.18.1 |
the amount which a Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Johannesburg interbank market |
for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period; |
exceeds:
2.2.18.2 | the interest (excluding any margin) which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period; |
2.2.19 | Business Day means any day other than a Saturday, Sunday or an official public holiday in South Africa (in accordance with the Public Holidays Act, 1994) on which banks are open for business in South Africa; |
2.2.20 | Cession and Delegation Agreement means the written agreement so titled entered into between a Lender and a New Lender substantially in the form set out in Schedule 13 ( Agreed Form of Cession and Delegation Agreement ), or any other form agreed to between the Borrower and the Facility Agent; |
2.2.21 | Confidentiality Undertaking means a confidentiality undertaking in the form set out in Schedule 14 (Form of Confidentiality Undertaking) ; |
2.2.22 | Companies Act means the Companies Act, 1973 (as amended); |
2.2.23 | Compliance Certificate means a certificate substantially in the form of the letter set out in Schedule 7 ( Form of Compliance Certificate ); |
2.2.24 |
Constitutional Documents means, in respect of any person at any time, the then current and up-to-date constitutional documents of such person at such time (including, without limitation, such persons memorandum and |
articles of association, certificate of incorporation and articles of incorporation);
2.2.25 | Control means in relation to a company the shares of which are not listed on a stock exchange where another company or legal entity or person (whether alone or pursuant to an agreement with others): |
2.2.25.1 | holds or controls more than 50% (fifty percent) of the voting rights (taking into account when such voting rights can be exercised) in that company; or |
2.2.25.2 | has the right to appoint or remove the majority of that companys board of directors; or |
2.2.25.3 | has the power to ensure the majority of that companys board of directors will act in accordance with its wishes; |
or if the shares of the company are listed on a stock exchange, Control means:
2.2.25.4 | the holding of shares or the aggregate of holdings of shares or other securities in a company entitling the holder thereof to exercise, or cause to be exercised 35% (thirty-five percent) or more of the voting rights at shareholder meetings of the company irrespective of whether such holding or holdings confers de facto control, provided that should there be other shareholders holding more than 35% (thirty-five percent), 35% (thirty-five percent) shall be read to refer to the largest percentage shareholding held at the time; or |
2.2.25.5 | the holding or control by a shareholder or member alone or pursuant to an agreement with other shareholders or members of more than 35% (thirty-five percent) of the voting rights in the company irrespective of whether such holding or holdings confers de facto control, provided that should there be other shareholders holding more than 35% (thirty-five percent), 35% (thirty-five percent) shall |
be read to refer to the largest percentage shareholding held at the time; |
2.2.26 | Current Ratio means, as at any Ratio Test Date: |
2.2.26.1 | the Borrowers total current assets; |
2.2.26.2 | divided by the Borrowers total current liabilities, |
as set out in the Borrowers balance sheet as at that date;
2.2.27 | Default means an Event of Default or any event or circumstances which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of the foregoing) be an Event of Default; |
2.2.28 | Default Interest Rate means the Interest Rate plus 3% (three percent); |
2.2.29 | Derivative Transaction means a contract, agreement or transaction which is a rate swap, basis swap, forward rate transaction, bond option, interest rate option, cap, collar or floor, or any other similar transaction and/or any combination of such transaction, in each case, whether on-exchange or otherwise; |
2.2.30 | Discharge Date means the date on which: |
2.2.30.1 | all the Liabilities (other than contingent liabilities in respect of continuing indemnities under the Finance Documents under which no claim has been made and which remain undischarged and payments which may be set aside in terms of clause 2.2.73.3) have been fully paid and discharged; and |
2.2.30.2 | the Lenders have no commitment, obligation or liability (whether actual or contingent) to lend money or provide other financial accommodation to any Obligor under any Finance Document; |
2.2.31 | Disposal means a sale, lease, licence, transfer, loan or other disposal by a person of any asset, undertaking or business (whether by a voluntary or involuntary single transaction or series of transactions); |
2.2.32 | Disposal Proceeds means any proceeds realised by the Borrower by way of a Disposal of any of its assets; |
2.2.33 | Distribution means any payment by way of interest, principal, dividend, fee, royalty or other distribution or payment by or on behalf of the Borrower to or for the account of any Shareholder or any person that directly or indirectly controls or is controlled by any Shareholder; |
2.2.34 | EBIT means, in respect of any person, and any period, the consolidated operating profit before income tax for such period: |
2.2.34.1 | (to the extent not already excluded) before interest received or receivable and interest paid or payable; |
2.2.34.2 | (to the extent not already excluded) adjusted to exclude any gain or loss realised on the disposal of fixed assets (whether tangible or intangible); |
2.2.34.3 | (to the extent not already excluded) before deducting any extraordinary costs and before including extraordinary income; and |
2.2.34.4 | plus dividends received in cash from companies consolidated by the equity method to the extent not already taken into account; |
2.2.35 | Encumbrance means any mortgage, pledge, lien, assignment or cession conferring security, hypothecation, security interest, preferential right or trust arrangement or any other agreement or arrangement, the effect of which is the creation of security; |
2.2.36 | Event of Default means any one or more of the events or circumstances described as an event of default as set out in clause 18 ( Events of Default ); |
2.2.37 | Environmental Claim means any claim or proceedings by any person pursuant to an Environmental Law; |
2.2.38 | Environmental Law means any law applicable to the business conducted by the Group at the relevant time in any jurisdiction in which the Group conducts business which relates to the pollution, degradation or protection of the environment or harm to or the protection of human health, animals or plants and including, without limitation, the National Environmental Management Act, 1998 and the National Water Act, 1998; |
2.2.39 | Environmental Permits means any permit, licence, consent, approval and other authorisation and the filing of any notification, report or assessment required under any Environmental Law for the operation of the business of the Group on or from the properties owned or used by the Group; |
2.2.40 | Existing Facilities means the Term Facility A and the RCF Facility; |
2.2.41 | Existing Facilities Advance Condition Documents means the documents listed in Part 1A of Schedule 1 ( Advance Condition Documents ); |
2.2.42 | Existing Facilities Advance Conditions means the conditions to the making of the first Advance listed in Part 2A of Schedule 1 ( Advance Conditions) ; |
2.2.43 | Facilities means the Term Facility A, Term Facility B and the RCF Facility and Facility means any of them as required by the context; |
2.2.44 | Facility Agent means Nedbank; |
2.2.45 | Facility Outstandings means the aggregate of all amounts of principal and accrued and unpaid interest due and payable to the Lenders under the Finance Documents; |
2.2.46 | Fee Letters means: |
2.2.46.1 | the First Fee Letter; and |
2.2.46.2 | the Second Fee Letter; |
setting out the fees payable to Nedbank under clause 28.1 ( Fees );
2.2.47 | Final Repayment Date means: |
2.2.47.1 | in relation to the Term Facilities, 31 December 2014; and |
2.2.47.2 |
in relation to the RCF Facility, the 3 rd (third) anniversary of the date of New Facilities Financial Close, |
or such earlier date upon which the Loans become repayable by the Borrower pursuant to the provisions of this Agreement;
2.2.48 | Finance Documents means: |
2.2.48.1 | this Agreement; |
2.2.48.2 | the Fee Letters; |
2.2.48.3 | the Security Documents; |
2.2.48.4 | and any other agreement or document that may be designated as a Finance Document by written agreement between the Facility Agent and the Borrower; and |
2.2.48.5 | any amendment agreement to any Finance Documents listed in 2.2.48.1 to 2.2.48.4, |
and Finance Document means any of them as required by the context;
2.2.49 | Finance Parties means: |
2.2.49.1 | the Lenders; and |
2.2.49.2 | the Facility Agent, |
and Finance Party means any of them as required by the context;
2.2.50 | Financial Close means 14 December 2009; |
2.2.51 | Financial Covenants means the financial covenants referred to in clause 17 ( Financial Covenants ); |
2.2.52 | Financial Indebtedness means of any person, without duplication: |
2.2.52.1 | all Indebtedness of such person for borrowed money; |
2.2.52.2 | all Indebtedness of such person under acceptance or documentary credit facilities; |
2.2.52.3 | all Indebtedness of such person in respect of receivables sold or discounted (otherwise than on a non-recourse basis); |
2.2.52.4 | all Indebtedness of such person evidenced by bonds, debentures, notes or other similar instruments; |
2.2.52.5 | all Indebtedness of such person to pay the deferred purchase price of property or services if deferred for more than 60 (sixty) days or where such deferred amount is primarily designed to raise finance, except, in any case, trade accounts payable arising in the ordinary course of business; |
2.2.52.6 | all Indebtedness of such person under any arrangements (including hire purchase and conditional sale agreements) treated as finance leases under IFRS; |
2.2.52.7 | all Indebtedness of such person in connection with any Derivative Transaction and so that the amount of such Indebtedness shall be calculated on a marked-to-market basis; |
2.2.52.8 | all Indebtedness of such person under any repurchase agreement, put options, call options or other transactions of any kind (whether or not recognised as borrowing under IFRS) which have the commercial effect of a borrowing or obtaining of credit; |
2.2.52.9 | all obligations of such person under redeemable preference shares or equivalent equity; and |
2.2.52.10 | all Indebtedness of others falling within clauses 2.2.52.1 to 2.2.52.9 above which is guaranteed by such person; |
2.2.53 | Financial Year means, at any time, the annual accounting period of the Group ending on 30 June in each calendar year; |
2.2.54 | First Fee Letter means the letter dated on or about the Signature Date between the Borrower and Nedbank; |
2.2.55 | First Term Facility A Advance means a Term Facility A Advance in the amount of R650 000 000 (Six Hundred and Fifty Million Rand); |
2.2.56 | First Term Facility A Advance Date means 15 December 2009; |
2.2.57 | Group means the Borrower and each Group Company from time to time; |
2.2.58 | Group Company means: |
2.2.58.1 | any subsidiary of the Borrower; and |
2.2.58.2 | any partnership, unincorporated joint venture or trust in which the Borrower has a, direct or indirect, partnership or beneficial interest of 50% (fifty percent) or more; and |
2.2.58.3 | any company, partnership, unincorporated joint venture or trust which is Controlled by the Borrower, |
and Group Companies means, as the context requires, all of them;
2.2.59 | Guarantee means the joint and several guarantee provided by each of the Guarantors in terms of clause 11 ( Guarantee and Indemnity ) in favour of the Finance Parties for the obligations of the Borrower hereunder; |
2.2.60 | Guarantors means the companies listed in Schedule 2 ( The Guarantors ), and Guarantor means, as the context requires, any one of them; |
2.2.61 | Harmony Cession and Pledge in Security means the cession and pledge in security by the Borrower in favour of the Finance Parties of the shares held by the Borrower in each of the Guarantors and any claims the Borrower has against the Guarantors dated on or about the Signature Date, as amended by an addendum thereto dated on or about the New Facilities Signature Date; |
2.2.62 | IFRS means international accounting standards within the meaning of IAS Regulation 1606/2002 to the extent applicable to the relevant financial statement; |
2.2.63 | Indebtedness shall be widely construed so as to include any obligation (whether incurred as principal or surety) for the payment or repayment of money, whether present or future, actual or contingent; |
2.2.64 | Intercreditor Agreement means any intercreditor agreement concluded between the Original Lender and any New Lender(s) in relation to this Agreement; |
2.2.65 | Interest Cover Ratio means, in respect of any Ratio Test Period: |
2.2.65.1 | EBIT; |
2.2.65.2 | divided by Total Interest; |
2.2.66 |
Intellectual Property Rights means any patents, trade marks, service marks, designs, trading or business names, copyrights, design rights, moral rights, inventions, confidential information, know-how, domain names, |
topographical or similar rights, database or other intellectual property rights and interests and the benefit of all applications and rights to use (including by way of licence) such assets of each Obligor, in each case whether registered or unregistered; |
2.2.67 | Interest Payment Date means: |
2.2.67.1 | in relation to the Term Facilities, each Term Interest Payment Date; and |
2.2.67.2 | in relation to the RCF Facility, the last day of each RCF Interest Period; |
2.2.68 | Interest Period means a Term Interest Period or an RCF Interest Period, as the case may be; |
2.2.69 | Interest Rate means: |
2.2.69.1 | in relation to the Term Facilities, the Base Rate plus the Applicable Term Margin; and |
2.2.69.2 | in relation to the RCF Facility, the Base Rate plus the Applicable RCF Margin; |
2.2.70 | JIBAR means, in relation to any Interest Period, the rate for the period which most closely approximates such Interest Period which appears on the Reuters Screen SAFEY Page as at 11:00 Johannesburg time on the first day of such Interest Period; |
2.2.71 | Legal Adviser means Deneys Reitz Inc. of 15 Alice Lane, Sandton; |
2.2.72 | Lenders means: |
2.2.72.1 | the Original Lender; |
2.2.72.2 | any person who has become a Party as a Lender in accordance with the terms of clause 24 ( Change of Party ); |
which in each case has not ceased to be a Party in accordance with the terms of this Agreement and Lender means, as the context requires, any one of them;
2.2.73 | Liabilities means all present and future liabilities and obligations at any time of an Obligor to the Finance Parties under the Finance Documents, both actual and contingent and whether incurred solely or jointly or in any other capacity together with any of the following matters relating to or arising in respect of those liabilities or obligations: |
2.2.73.1 | any refinancing, novation, deferral or extension; |
2.2.73.2 | any claim for damages or restitution; and |
2.2.73.3 | any claim as a result of any recovery by that Obligor of a payment or discharge on the grounds of preference, and any amounts which would be included in any of the above but for any discharge, non-provability or unenforceability of those amounts in any insolvency or other proceedings; |
2.2.74 | Loan means a loan made or to be made under a Facility or (as the context may require) the aggregate principal amount for the time being outstanding under that loan; |
2.2.75 | Loan Claim means, in respect of each Obligor, all claims in excess of R50 000 000 (Fifty Million Rand) that such Obligor has against any Group Company (other than another Obligor) in respect of any shareholder or intercompany loan made by that Obligor to that Group Company and Loan Claims means, as the context requires, all of them; |
2.2.76 | Market Capitalisation means the number of ordinary issued shares of the Borrower listed on the JSE Securities Exchange multiplied by the 30 (thirty) day Volume Weighted Average Traded Share Price (as defined in the JSE Listing Requirements) of such shares; |
2.2.77 | Market Capitalisation to Facilities Outstanding Ratio means, at any Ratio Test Date: |
2.2.77.1 | Market Capitalisation; |
2.2.77.2 | divided by the aggregate Facility Outstandings; |
2.2.78 | Material Adverse Change means a change in the circumstances existing as at the Signature Date which in the reasonable opinion of the Facility Agent has or will have a material adverse effect on: |
2.2.78.1 | the business, assets, operations, property or condition (consolidated financial or otherwise) of any of the Obligors or the Group taken as a whole; |
2.2.78.2 | the ability of any Obligor to perform its obligations under any Finance Document to which it is a party; or |
2.2.78.3 | the validity, legality or enforceability of the material terms of any Finance Document or the rights or remedies of the Finance Parties thereunder; |
2.2.79 | Nedbank means Nedbank Limited (Registration No 1951/000009/06)), a public company and registered bank duly incorporated in accordance with the company and banking laws of South Africa; |
2.2.80 | New Companies Act means the Companies Act, 2008 (as amended); |
2.2.81 | New Facilities means Term Facility B and the increase in the RCF Facility Amount; |
2.2.82 | New Facilities Advance Condition Documents means the documents listed in Part 1B of Schedule 1 ( Advance Condition Documents ); |
2.2.83 | New Facilities Advance Conditions means the conditions to the making of the first Advance under the New Facilities listed in Part 2B of Schedule 1 ( Advance Conditions ); |
2.2.84 | New Facilities Financial Close means the date on which the Facility Agent issues the confirmation referred to in clause 4.2 ( Conditions to Advance ); |
2.2.85 | New Facilities Signature Date means the date of the signature of the Party signing this Amended and Restated Facility Agreement last in time; |
2.2.86 | New Lender has the meaning given thereto in clause 24.2 ( Assignment and Transfers by the Lenders ); |
2.2.87 | Obligors means collectively, the Borrower and the Guarantors and Obligor shall be a reference to any one of them, as required by the context; |
2.2.88 | Original Facilities Agreement means the facilities agreement entered into by the Parties on 11 December 2009; |
2.2.89 | Original Financial Statements means the consolidated financial statements of the Group for its financial year ended 30 June 2009, as provided by the Borrower to the Facility Agent on or before the Signature Date; |
2.2.90 | Original Lender means Nedbank; |
2.2.91 | Parties means the Borrower, the Lenders, the Facility Agent and the Guarantors, and Party means, as the context requires, any one of them; |
2.2.92 | Permitted Disposal means: |
2.2.92.1 | any Disposal made by any Group Company on arms length terms if that Disposal is not otherwise restricted by a term of any Finance Document; and |
2.2.92.2 | any other Disposal approved in advance in writing by the Facility Agent; |
2.2.93 | Permitted Encumbrances means: |
2.2.93.1 | Encumbrances created over any asset or property to secure Indebtedness incurred for the purpose of financing the purchase, development, improvement or construction thereof provided that such Indebtedness does not exceed R100 000 000 (One Hundred Million Rand); |
2.2.93.2 | Encumbrances created by operation of law and in the ordinary course of trading provided that the same are discharged in the ordinary course of trading or, in the reasonable opinion of the Facility Agent, are being contested in good faith; |
2.2.93.3 | any Encumbrance which is existing prior to the Signature Date and which has been disclosed (i) in Schedule 3 ( Disclosed Encumbrances ) hereto, or (ii) in the Original Financial Statements and in all circumstances securing only Indebtedness outstanding at the Signature Date if the principal amount or original facility thereby secured is not increased after the Signature Date; |
2.2.93.4 | any netting or set-off arrangement entered into by the Borrower in the normal course of its banking arrangements for the purpose of netting debit and credit balances, and only such arrangements that are in existence at the Signature Date; |
2.2.93.5 | any Encumbrance created in respect of Permitted Indebtedness; |
2.2.93.6 | any Encumbrance created in respect of Permitted Loans between Obligors; |
2.2.93.7 | any Encumbrance created in respect of Indebtedness incurred to prepay the Facilities in full in accordance with the provisions of clause 7 ( Prepayment ) below; |
2.2.93.8 | any Encumbrance as contemplated in the Finance Documents; and |
2.2.93.9 | any other Encumbrance created with the prior written approval of the Facility Agent; |
2.2.94 | Permitted Indebtedness means: |
2.2.94.1 | any Indebtedness incurred for the purpose of acquiring new plant, machinery and equipment up to the market value thereof, and which will not once incurred cause any Financial Covenant to be breached; and |
2.2.94.2 | any additional Indebtedness incurred by any of the Obligors which does not exceed R100 000 000 (One Hundred Million Rand) in aggregate per annum; |
2.2.94.3 | any Indebtedness which is existing prior to the Signature Date and which has been (i) disclosed in Schedule 4 ( Disclosed Indebtedness ) hereto, or (ii) in the Original Financial Statements; |
2.2.94.4 | any Indebtedness incurred to prepay the Facility in accordance with the provisions of clause 7 ( Prepayment ) below; |
2.2.94.5 | any Indebtedness created in respect of a Permitted Loan; |
2.2.94.6 | any Indebtedness incurred under the Finance Documents; |
2.2.94.7 | any commodity hedging transaction concluded in respect of the Groups silver production at the Hidden Valley mine in Papua New Guinea; |
2.2.94.8 | any interest rate hedging transaction in respect of any Obligors exposure under the Finance Documents, provided that the counterparty in respect thereof is Nedbank, provided that Nedbank will offer such transaction at pricing equal to the average of 3 (three) quotes obtained by the relevant Obligor (including a quote obtained from Nedbank) or, if Nedbanks quote is lower, at the pricing quoted by Nedbank; |
2.2.94.9 | any currency hedging transaction or any other Derivative Transaction, provided that the counterparty in respect thereof is Nedbank, provided that Nedbank will offer such transaction at pricing equal to the average of 3 (three) quotes obtained by the relevant Obligor (including a quote obtained from Nedbank) or, if Nedbanks quote is lower, at the pricing quoted by Nedbank; |
2.2.94.10 | any currency hedging transaction, interest rate hedging transaction or any other Derivative Transaction where Nedbank is not the counterparty, subject to a maximum aggregate exposure thereunder (calculated on a marked-to-market basis) of R100 000 000 (One Hundred Million Rand) during the Term; |
2.2.94.11 | any operational guarantees provided by any Obligor in the ordinary course of business on behalf of any Group Company; |
2.2.94.12 | any other Indebtedness made with the prior written approval of the Facility Agent (which shall not be unreasonably withheld or delayed), |
provided that the aggregate Indebtedness of the Obligors (excluding any Indebtedness in respect of clauses 2.2.94.3, 2.2.94.4 and 2.2.94.5 (in respect of Permitted Loans between Obligors only)) shall not at any time during the Term exceed R3 000 000 000 (Three Billion Rand);
2.2.95 | Permitted Loans means: |
2.2.95.1 | loans contemplated and permitted by the Finance Documents; |
2.2.95.2 | trade credit granted in the ordinary course of an Obligors day-to-day business upon terms usual for such trade; |
2.2.95.3 | loans made by an Obligor to another Obligor (but only if such loans are funded whilst no Default has occurred which is continuing); or |
2.2.95.4 | loans existing prior to the Signature Date and which have been (i) disclosed in Schedule 5 ( Disclosed Loans ) hereto, or (ii) in the Original Financial Statements; |
2.2.95.5 | loans granted by any Obligor to any and all of the Group Companies, which do not exceed R50 000 000 (Fifty Million Rand) in aggregate during the Term; |
2.2.95.6 | loans granted by any Obligor to any and all of the Group Companies, provided that the claims of the relevant Obligors thereunder in respect of such amounts in excess of R50 000 000 (Fifty Million Rand) are ceded in securitatem debiti to the Finance Parties as security for the Obligors obligations to the Finance Parties under the Finance Documents pursuant to clause 12 ( Cession in Security ); |
2.2.95.7 | any other loans made with the prior written approval of the Facility Agent; |
2.2.96 | President Steyn Acquisition means: |
2.2.96.1 | the acquisition by the Borrower of the PSGM Gold Plant from Pamodzi Gold Free State (Proprietary) Limited (in provisional liquidation) for R100 000 000 (One Hundred Million Rand); |
2.2.96.2 | the acquisition by the Borrower of the South Steyn Shafts from Pamodzi Gold Free State (Proprietary) Limited (in provisional liquidation) for R180 000 000 (One Hundred and Eighty Million Rand); and |
2.2.96.3 | the acquisition by Avgold Limited of the North Steyn Shafts from Pamodzi Gold Free State (Proprietary) Limited (in provisional liquidation) R100 000 000 (One Hundred Million Rand), |
together with all upfront capital expenditure requirements relating to the acquisition thereof;
2.2.97 | Ratio Test Date means the last day of March, June, September and December; |
2.2.98 | Ratio Test Period means each period of 12 (twelve) months ending on a Ratio Test Date; |
2.2.99 | RCF Additional Facility Amount means R250 000 000 (Two Hundred and Fifty Million Rand) which, subject to the provisions of clause 4 ( Conditions to Advance ), will be available to the Borrower from the date of New Facilities Financial Close to the Final Repayment Date; |
2.2.100 | RCF Advance means an advance made under the RCF Facility; |
2.2.101 | RCF Facility means the revolving credit facility in an amount equal to the RCF Facility Amount made available by the Original Lender to the Borrower pursuant to clause 6 ( RCF Facility ); |
2.2.102 | RCF Facility Amount means the aggregate of R600 000 000 (Six Hundred Million Rand) and the RCF Additional Facility Amount; |
2.2.103 | RCF Interest Period means each period selected by the Borrower in accordance with the provisions of clause 6.4; |
2.2.104 | RCF Facility Outstandings means the Facility Outstandings relating to the RCF Facility; |
2.2.105 | RCF Loan means a loan under the RCF Facility and RCF Loans means all of them as the context requires; |
2.2.106 | Reference Banks means FirstRand Bank Limited, The Standard Bank of South Africa Limited, Nedbank Limited and Absa Bank Limited; |
2.2.107 | Related Party means any Shareholder and any affiliate of any Shareholder; |
2.2.108 | Repeating Representations means each of those representations and warranties set out in clause 13 ( Warranties and Representations ); |
2.2.109 | Reset Date means the first day of each Interest Period, being the date in each case upon which the relevant Base Rate is to be determined for such Interest Period; |
2.2.110 | Rollover Loans means one or more RCF Loans: |
2.2.110.1 | made or to be made on the same day that a maturing RCF Loan is due to be repaid; |
2.2.110.2 | the aggregate amount of which is equal to or less than the maturing RCF Loan; and |
2.2.110.3 | made or to be made for the purpose of refinancing a maturing RCF Loan; |
2.2.111 | SAFEX Overnight Deposit Rate means: |
2.2.111.1 | on the relevant Reset Date, the overnight deposit rate designated as ( SFXROD ) which appears on the Reuters SAFEX Money Market Screen as of 11h00 Johannesburg time on that date, rounded to the third decimal point; or |
2.2.111.2 | where the SAFEX Overnight Deposit Rate cannot be determined on account of the relevant rate not appearing on the Reuters SAFEX Money Market Screen, an equivalent rate determined by the Facility Agent, acting in a commercially reasonable manner; |
2.2.112 | SAR-JIBAR-Reference Rate means the mid-market rate between deposits and loans in Rand for an Interest Period quoted by the Reference Banks at approximately 11am Johannesburg time on the relevant Reset Date. The Facility Agent will request the principal Johannesburg office of each of the Reference Banks to provide a quotation of its rate. If at least two quotations are provided, the rate for that Reset Date will be the arithmetic means of the quotations. If fewer than two quotations are provided, the rate for that Reset Date will be determined by the Facility Agent, acting in a commercially reasonable manner, using a representative rate; |
2.2.113 | Second Term Facility A Advance means a Term Facility Advance in the amount of R250 000 000 (Two Hundred and Fifty Million Rand); |
2.2.114 | Second Fee Letter means the letter dated on or about the New Facilities Signature Date between the Borrower and Nedbank; |
2.2.115 | Second Term Facility A Advance Date means 31 March 2010; |
2.2.116 | Security Documents means the Guarantee, the Harmony Cession and Pledge in Security, the ARM Cession and Pledge in Security and any other agreement or document that may be designated as a Security Document by written agreement between the Facility Agent and the Borrower; |
2.2.117 | Shareholder means any member of the Borrower from time to time; |
2.2.118 | Signature Date means 11 December 2009; |
2.2.119 | South Africa means the Republic of South Africa as constituted from time to time; |
2.2.120 | Term means the period from the first Advance Date to the Discharge Date; |
2.2.121 | Term Facility means Term Facility A or Term Facility B, as the context requires and Term Facilities means both of them; |
2.2.122 | Term Facility A means the term facility in the amount of the Term Facility A Amount made available by the Original Lender to the Borrower pursuant to clause 5 ( The Term Facility A ); |
2.2.123 | Term Facility Advance means an advance made under a Term Facility; |
2.2.124 | Term Facility Advance Date means the First Term Facility A Advance Date, the Second Term Facility A Advance Date or any date upon which an Advance is made under the Term Facility B, as the case may be; |
2.2.125 | Term Facility A Amount means R900 000 000 (Nine Hundred Million Rand); |
2.2.126 | Term Facility B means the term facility in the amount of the Term Facility B Amount made available by the Original Lender to the Borrower pursuant to clause 5 ( The Term Facility B ); |
2.2.127 | Term Facility B Amount means R500 000 000 (Five Hundred Million Rand); |
2.2.128 | Term Facility B Availability Period means, in relation to Term Facility B, the period commencing on the date of New Facilities Financial Close and ending on the earlier of: |
2.2.128.1 | the date of which the Available Term Facility is cancelled in terms of this Agreement; |
2.2.128.2 | the date falling 6 (six) months after New Facilities Financial Close; and |
2.2.128.3 | 30 April 2011; |
2.2.129 | Term Facility B Drawdown Notice means a Term Facility B Drawdown Notice substantially in the form set out in Schedule 10 ( Form of Term Facility B Drawdown Notice ); |
2.2.130 | Term Facility Outstandings means the Facility Outstandings relating to the Term Facilities; |
2.2.131 | Term Facilities Repayment Schedule means the repayment schedule set out in Schedule 11 ( Term Facility Repayment Schedule ); |
2.2.132 | Term Interest Payment Date means each 31 March, 30 June, 30 September and 31 December during the Term, commencing on 31 March 2010; |
2.2.133 | Term Interest Period means: |
2.2.133.1 | in relation to a Loan under a Term Facility each period commencing on a Term Interest Payment Date and ending on the day immediately preceding the next Term Interest Payment Date, provided that: |
2.2.133.1.1 | the first Term Interest Period for the First Term Facility A Advance commenced on 15 December 2009 and end on 31 March 2010; |
2.2.133.1.2 | the first Term Interest Period for the Second Term Facility A Advance commenced on 31 March 2010 and end on 30 June 2010; and |
2.2.133.1.3 | the first Term Interest Period in respect of each Loan made under the Term Facility B shall commence on the Advance Date of that Loan and end on the next Interest Payment Date; and |
2.2.133.1.4 | the final Term Interest Period shall end on the Final Repayment Date and commence on the Term Interest Payment Date immediately preceding the Final Repayment Date; and |
2.2.133.2 | in relation to an Unpaid Sum, successive periods of 30 (thirty) days commencing: |
2.2.133.2.1 | in the case of the first such Interest Period, on the due date on which that Unpaid Sum becomes due; and |
2.2.133.2.2 | in the case of each such Interest Period, thereafter, on the last day of the Interest Period immediately preceding such Interest Period; |
2.2.134 | Term Loan means a Loan made under the Term Facilities or the principal amount outstanding under that Loan and Term Loans means as the context requires all of them; |
2.2.135 | Total Interest means, in respect of any period, the aggregate accruing during such period (without duplication and whether or not paid or payable within such period) of, in respect of the Group on a consolidated basis (and whether or not the principal or capital obligation by reference to which any of the following are determined is an obligation of the Group): |
2.2.135.1 | all interest, acceptance commission, guarantee fees and any other continuing, regular or periodic costs and expenses in the nature of interest (whether paid, payable or capitalised) incurred in effecting, servicing or maintaining Financial Indebtedness; |
2.2.135.2 | amounts payable (as reduced by amounts receivable) in respect of any Derivatives Transaction which is an interest rate hedging arrangement entered into to hedge risks arising in the normal course of business; |
2.2.135.3 | the interest element of, and ancillary fees payable under, any finance leases; |
2.2.136 | Transaction Security means the security interest created or expressed to be created in favour of the Finance Parties pursuant to the Security Documents; |
2.2.137 | Unpaid Sum means any sum due and payable but unpaid by an Obligor under the Finance Documents; |
2.2.138 | Utilisation means a utilisation of the RCF Facility; |
2.2.139 | Utilisation Date means the date of a Utilisation being the date upon which the relevant Loan is made; |
2.2.140 | Utilisation Request means a Utilisation Request substantially in the form set out in Schedule 9 ( Form of Utilisation Request ); |
2.2.141 | VAT means value added tax including any similar tax which may be imposed in place thereof from time to time. |
2.3 | Any reference in this Agreement to: |
2.3.1 | an affiliate means, in relation to any person, a subsidiary of that person or a holding company of that person or any other subsidiary of that holding company; |
2.3.2 | a clause shall, subject to any contrary indication, be construed as a reference to a clause hereof; |
2.3.3 | continuing , in the context of an Event of Default, means: |
2.3.3.1 | where the Event of Default or its consequences are incapable of remedy that Event of Default is deemed to be continuing unless it has been expressly waived in writing by the Facility Agent and any conditions of such waiver have been fulfilled to the reasonable satisfaction of the Lender; |
2.3.3.2 | in any other case, that Event of Default is deemed to be continuing unless and until either: |
2.3.3.2.1 | it has been expressly waived in writing by the Facility Agent and any conditions of such waiver have been fulfilled to the reasonable satisfaction of the Facility Agent; or |
2.3.3.2.2 | it has been remedied within the applicable remedy period by any person and the resulting position is that which it would have been if such Event of Default had not occurred; |
2.3.4 | a holding company shall be construed in accordance with the Companies Act; |
2.3.5 | law shall be construed as any law (including common or customary law) or statute, constitution, decree, judgment, treaty, regulation, directive, by-law, order or any other legislative measure of any government, supranational, local government, statutory or regulatory body or court; |
2.3.6 | month means unless the context otherwise requires, a period starting on one day in a calendar month and ending on the numerically corresponding day in the next succeeding calendar month except that, where any such period would otherwise end on a day which is not a Business Day it shall end on the immediately preceding Business Day; provided that if a period starts on the last Business Day of a calendar month or if there is no numerically corresponding days in the month in which that period ends, that period shall end on the last Business Day in that later month (and references to months shall be construed accordingly); |
2.3.7 | nacm means nominal annual compounded monthly in arrears; |
2.3.8 | nacq means nominal annual compounded quarterly in arrears; |
2.3.9 | nacs means nominal annual compounded semi-annually in arrears; |
2.3.10 | naca means nominal annual compounded annually in arrears; |
2.3.11 | a person shall be construed as a reference to any person, firm, company, corporation, government, state or agency of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing; |
2.3.12 | repay (or any derivative form thereof) shall, subject to any contrary indication, be construed to include prepay or, as the case may be, the corresponding derivate form thereof; |
2.3.13 | a Schedule shall, subject to any contrary indication, be construed as a reference to a schedule hereof; |
2.3.14 | a subsidiary shall be construed in accordance with the Companies Act; |
2.3.15 | tax shall be construed so as to include any tax, levy, impost or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or delay in paying any of the same). |
2.4 | Unless inconsistent with the context or save where the contrary is expressly indicated: |
2.4.1 | if any provision in a definition is a substantive provision conferring rights or imposing obligations on any Party, notwithstanding that it appears only in this interpretation clause, effect shall be given to it as if it were a substantive provision of this Agreement; |
2.4.2 | when any number of days is prescribed in this Agreement, same shall be reckoned inclusively of the first and exclusively of the last day unless the last day falls on a day which is not a Business Day, in which case the last day shall be the next succeeding Business Day; |
2.4.3 | in the event that the day for payment of any amount due in terms of this Agreement should fall on a day which is not a Business Day, the relevant day for payment shall be the previous Business Day; |
2.4.4 | in the event that the day for performance of any obligation to be performed in terms of this Agreement should fall on a day which is not a Business Day, the relevant day for performance shall be the next succeeding Business Day; |
2.4.5 | any reference in this Agreement to an enactment is to that enactment as at the Signature Date and as amended or re-enacted from time to time; |
2.4.6 | any reference in this Agreement to this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as same may have been, or may from time to time be, amended, varied, novated or supplemented; |
2.4.7 | no provision of this Agreement constitutes a stipulation for the benefit of any person who is not a Party to this Agreement; |
2.4.8 | references to day/s, month/s or year/s shall be construed as Gregorian calendar day/s, month/s or year/s; |
2.4.9 | a reference to a Party includes that Partys successors-in-title and permitted assigns; |
2.4.10 | a time of day shall be construed as a reference to Johannesburg time. |
2.5 | Unless inconsistent with the context, an expression which denotes: |
2.5.1 | any one gender includes the other genders; |
2.5.2 | a natural person includes an artificial person and vice versa ; and |
2.5.3 | the singular includes the plural and vice versa . |
2.6 | The schedules or annexures to this Agreement form an integral part hereof and words and expressions defined in this Agreement shall bear, unless the context otherwise requires, the same meaning in such schedules or annexures. To the extent that there is any conflict between the schedules or annexures to this Agreement and the provisions of this Agreement, the provisions of this Agreement shall prevail. |
2.7 | Where any term is defined within the context of any particular clause in this Agreement, the term so defined, unless it is clear from the clause in question that the term so defined has limited application to the relevant clause, shall bear the same meaning as ascribed to it for all purposes in terms of this Agreement, notwithstanding that term has not been defined in this interpretation clause. |
2.8 | The rule of construction that, in the event of ambiguity, the contract shall be interpreted against the Party responsible for the drafting thereof, shall not apply in the interpretation of this Agreement. |
2.9 | The expiration or termination of this Agreement shall not affect such of the provisions of this Agreement as expressly provide that they will operate after any such expiration or termination or which of necessity must continue to have effect after such expiration or termination, notwithstanding that the clauses themselves do not expressly provide for this. |
2.10 | This Agreement shall be binding on and enforceable by the administrators, trustees, permitted assigns or liquidators of the Parties as fully and effectually as if they had signed this Agreement in the first instance and reference to any Party shall be deemed to include such Partys administrators, trustees, permitted assigns or liquidators, as the case may be. |
2.11 | The use of any expression in this Agreement covering a process available under South African law such as winding-up (without limitation eiusdem generis ) shall, if any of the Parties to this Agreement is subject to the law of any other jurisdiction, be construed as including any equivalent or analogous proceedings under the law of such other jurisdiction. |
2.12 | Where figures are referred to in numerals and in words, if there is any conflict between the two, the words shall prevail. |
3. | INTRODUCTION |
3.1 | The Borrower required finance to fund the President Steyn Acquisition, to fund the Groups general corporate costs, working costs and ongoing capital expenditure requirements and to pay all fees, costs and expenses due and payable on Financial Close. |
3.2 | The Original Lender made the Term Facility A and the RCF Facility available to the Borrower for the purposes set out in clause 3.1. |
3.3 | The Borrower wishes to raise further finance to fund the Groups general corporate costs, working costs and ongoing capital expenditure requirements in line with the Borrowers approved capital expenditure programme. |
3.4 | The Original Lender is willing to make the Term Facility B available to the Borrower and to extend the RCF Facility for the purposes set out in clause 3.3 upon the terms and conditions of this Agreement. |
4. | CONDITIONS TO ADVANCE |
4.1 | It is recorded that: |
4.1.1 | the Existing Facilities Advance Condition Documents have been received by the Facility Agent; and |
4.1.2 | the Existing Facility Advance Conditions were fulfilled or waived, as the case may be; |
4.2 | Save as provided for in clause 4.3 or as the Facility Agent may otherwise agree in writing: |
4.2.1 | no Advance shall be made under Term Facility B; and |
4.2.2 | no Advance shall be made in respect of the RCF Additional Facility Amount, |
unless the Facility Agent has confirmed to the Borrower in writing that:
4.2.3 | it has received all of the New Facilities Advance Condition Documents and that each such document is, in form and substance, satisfactory to the Facility Agent; and |
4.2.4 | all of the New Facilities Advance Conditions have been fulfilled to the satisfaction of, or waived by, the Facility Agent. |
4.3 | The Facility Agent may: |
4.3.1 | waive any of the conditions referred to in this clause 4 and in such event the Facility Agent may attach to such waiver such requirements and further or other conditions as the Facility Agent (in its sole discretion) deems fit; |
4.3.2 | agree to make an Advance on terms (express or otherwise) that any condition may be converted to a term of this Agreement and that the obligation thereunder be discharged after the date of making of such Advance, and in such event the Borrower shall ensure that such obligation is discharged within a period of 5 (five) Business Days after such Advance (or such other period as the Facility Agent may agree to in writing), and the Facility Agent shall be entitled on written notice to the Borrower to treat any failure by the Borrower to ensure the discharge of such obligation as an Event of Default. |
4.4 |
In the event that the conditions set out in clause 4.2 are not fulfilled or waived in accordance with clause 4.3 by 15 December 2010, or such later date as may be agreed in writing by the Facility Agent and the Borrower on or before that date, then this Agreement, other than this clause 4.4, shall have no force or effect and the Parties agree that the Original Facilities Agreement shall remain of full force |
and effect as if this Amended and Restated Facilities Agreement had not been concluded by the Parties. |
5. | THE TERM FACILITIES |
Subject to the provisions of clause 4 ( Conditions to Advance ), the Original Lender grants to the Borrower, upon the terms and subject to the conditions of this Agreement, the Term Facilities.
5.1 | Purpose |
5.1.1 | The Term Facility A was utilised by the Borrower to fund the President Steyn Acquisition, the settlement of the AVRD Loan, the Groups general corporate costs, working costs and ongoing capital expenditure requirements and all fees, costs and expenses due and payable in the amounts specified in the First Fee Letter on Financial Close, and accordingly, the Borrower shall continue to apply all amounts raised by it hereunder in or towards satisfaction of such purposes. |
5.1.2 | The Term Facility B is intended to fund the Groups general corporate costs, working costs and ongoing capital expenditure requirements in line with the Borrowers approved capital expenditure programme. |
5.1.3 | Without prejudice to the obligations of the Borrower under clauses 5.1.1 and 5.1.2, the Finance Parties shall not be obliged to concern themselves with the application of amounts raised by the Borrower hereunder. |
5.2 | Advance of Term Facility A |
5.2.1 | Subject to the terms of this Agreement, the First Term Facility A Amount was advanced to the Borrower by the Original Lender as follows: |
5.2.1.1 | by way of electronic transfer of an amount equal to the First Term Facility Advance on the First Term Facility A Advance Date into the following bank account: |
Bank: | Absa; | |
Branch: | Virginia; | |
Account number: | 40 4873 7227; | |
Account name: | Harmony Treasury Account; |
5.2.1.2 | by way of electronic transfer of an amount equal to the Second Term Facility A Advance on the Second Term Facility A Advance Date into the following bank account: |
Bank: | Absa; | |
Branch: | Virginia; | |
Account number: | 40 4873 7227; | |
Account name: | Harmony Treasury Account; |
5.2.2 | Provided that on each Term Facility A Advance Date: |
5.2.2.1 | the requirements of clause 4 ( Conditions to Advance ) have been satisfied; |
5.2.2.2 | no Default has occurred and is continuing; |
5.2.2.3 | the representations and warranties set out in clause 13 ( Warranties and Representations ) are true; and |
5.2.2.4 | in respect of the Second Term Facility A Advance, the Facility Agent was satisfied in its sole discretion that the AVRD Loan Agreement had been repaid. |
5.2.3 | The Borrower acknowledges and agrees that: |
5.2.3.1 | no portion of the Term Facility A repaid by the Borrower in accordance with the provisions of this Agreement or otherwise shall be available to be re-advanced to the Borrower by the Lenders; |
5.2.3.2 |
the Finance Parties shall not incur any liability to the Borrower in the event of the Term Facility A not being utilised for the purposes |
set out in clause 5.1 ( Purpose ) and in such an event, the portion of those payments made from the Term Facility A will nevertheless be regarded as constituting valid advances and form part of the Term Loan; |
5.2.3.3 | if any monies are advanced in the mistaken belief that the Advance Conditions have been fulfilled or waived in accordance with this Agreement, and it is subsequently determined that not all the Advance Conditions have been fulfilled or waived, this Agreement shall be valid and enforceable in respect of the monies advanced under the Term Facility, and the Facility Agent shall be entitled on written notice to the Borrower, to demand immediate payment of the Term Facility Outstandings, without prejudice to any other rights or remedies that the Lenders may have in law. |
5.3 | Advance of Term Facility B |
5.3.1 | Subject to clause 4 ( Conditions to Advance ), the Borrower may utilise the Term Facility B during the Term Facility B Availability Period by delivering to the Facility Agent a duly completed Term Facility B Drawdown Notice not later than 11h00 not less than 5 (five) Business Days prior to the proposed Advance Date. |
5.3.2 | Each Term Facility B Drawdown Notice is irrevocable and will not be regarded as having been duly completed unless: |
5.3.2.1 | the proposed Advance Date is a Business Day within the Term Facility B Availability Period; |
5.3.2.2 | the currency of the proposed Loan is Rand; |
5.3.2.3 | the amount of the proposed Loan is a minimum amount of R100 000 000 (One Hundred Million Rand) (or, if less, the Available Term Facility) and a multiple of R50 000 000 (Fifty Million Rand); |
5.3.2.4 | it specifies a bank account in South Africa to which the Borrower wishes the proceeds of the Loan to be credited; and |
5.3.2.5 | the proposed Loan together with the aggregate of the Loans still outstanding on the proposed Advance Date shall not exceed the Available Term Facility. |
5.3.3 | Only one Loan may be requested in each Term Facility B Drawdown Notice. |
5.3.4 | Only one Utilisation Request may be outstanding at any point in time. |
5.3.5 | The Borrower acknowledges and agrees that any Term Facility B Drawdown Notice signed by an authorised signatory on behalf of the Borrower shall be deemed to be a valid Term Facility B Drawdown Notice issued by the Borrower and any Loan made pursuant to such Term Facility B Drawdown Notice to the Borrower shall constitute a valid Term Loan to the Borrower. |
5.3.6 | If the conditions set out in this Agreement have been met, each Lender shall make its participation in each Term Loan available on the relevant Advance Date. |
5.4 | Interest on the Term Facilities |
5.4.1 | The Term Loans shall bear interest at the Interest Rate which shall: |
5.4.1.1 | accrue on a day to day basis over the Term; and |
5.4.1.2 | be calculated on the actual number of days elapsed and, for the purposes of calculation, based on a year of 365 (three hundred and sixty-five) days. |
5.4.2 | All interest accrued on the Term Loans during the Term (including capitalised interest) shall be paid by the Borrower on each Interest Payment Date to the Lenders, in accordance with clause 9 ( Payments ). |
5.4.3 | The Facility Agent shall promptly notify the Borrower of the applicable Interest Rate determined pursuant to the provisions of this Agreement promptly after ascertaining the same. |
5.5 | Repayment of Term Facilities |
5.5.1 | The Borrower shall, subject to the provisions of clauses 7 ( Voluntary Prepayment ), 8 ( Mandatory Prepayment ) and 18 ( Events of Default ), repay the Term Loan in the amounts and on the dates set out in the Term Facilities Repayment Schedule, provided that the Term Facility Advances together with all accrued but unpaid interest shall be repaid by no later than the Final Repayment Date, in accordance with clause 9 ( Payments ). |
5.5.2 | The Borrower shall not repay all or any part of the Term Loan except at the times and in the manner expressly provided for in this Agreement and shall not be entitled to reborrow any amount repaid. |
5.6 | Market disruption |
5.6.1 | If a Market Disruption Event described in clauses 5.6.3.1 or 5.6.3.2 occurs, then the rate of interest on the Term Loans for that Term Interest Period shall be the percentage rate nacq which is the sum of: |
5.6.1.1 | the Applicable Term Margin; and |
5.6.1.2 | the rate notified by the Facility Agent as soon as practicable and in any event before interest is due to be paid in respect of that Term Interest Period, to be that which expresses as a percentage rate per annum the cost to the Lenders of funding the Term Loan from whatever source it may reasonably select. |
5.6.2 | If a Market Disruption Event described in clause 5.6.3.3 occurs, then the Base Rate for that Term Interest Period shall be increased by the Market Disruption Premium. |
In this clause 5:
5.6.3 | Market Disruption Event means: |
5.6.3.1 | at or about noon on the Reset Date for the relevant Term Interest Period JIBAR is not available on the relevant screen and none or only one of the Reference Banks supplies a rate to the Facility Agent to determine the Base Rate for the relevant Term Interest Period; or |
5.6.3.2 | at or about noon on the Term Facility Advance Date the Lenders are unable to raise funding in the Johannesburg interbank market in the ordinary course of business to fund the Term Loan; or |
5.6.3.3 | the Market Disruption Premium as at any Term Facility Advance Date is in excess of 0,25% (zero comma two five percent); |
5.6.4 | Market Disruption Premium means the difference between the Nedbank Liquidity Premium 1 (one) day prior to each Term Facility Advance Date and the Nedbank Liquidity Premium as at the New Facilities Signature Date; |
5.6.5 | Nedbank Liquidity Premium means, at any date, the difference between the 1 (one) year NCD rate as quoted on the Reuters NEDMM screen, as a naca rate and converted to a nacq rate, and the 1 (one) year swap rate as quoted on the Reuters NDIRS screen, as a nacq rate (in each case at 11h00 on the relevant date). |
5.7 | Alternative basis of interest or funding |
If a Market Disruption Event occurs and the Facility Agent or the Borrower so requires, the Facility Agent and the Borrower shall enter into negotiations (for a period of not more than 30 (thirty days)) with a view to agreeing a substitute basis for determining the rate of interest, failing which the provisions of clause 5.6 shall continue to apply.
6. | THE RCF FACILITY |
The Original Lender agrees to make available to the Borrower a revolving credit facility in an aggregate amount equal to the RCF Facility Amount, on the terms and subject to the conditions of this Agreement.
6.1 | Purpose of the RCF Facility |
6.1.1 | The Borrower shall utilise the RCF Facility for the purpose of funding the ongoing general corporate costs, working costs and working capital requirements of the Group. |
6.1.2 | Without prejudice to the obligations of the Borrower under clause 6.1.1, the Lenders shall not be obliged to concern themselves with the application of amounts raised by the Borrower hereunder. |
6.2 | Utilisation of the RCF Facility |
6.2.1 | Subject to clause 4 ( Conditions to Advance ), the Borrower may utilise the RCF Facility during the Availability Period by delivering to the Facility Agent a duly completed Utilisation Request not later than 11h00 not less than 5 (five) Business Days prior to the proposed Utilisation Date. |
6.2.2 | Each Utilisation Request is irrevocable and will not be regarded as having been duly completed unless: |
6.2.2.1 | the proposed Utilisation Date is a Business Day within the Availability Period; |
6.2.2.2 | the currency of the proposed Loan is Rand; |
6.2.2.3 | the amount of the proposed Loan is a minimum amount of R50 000 000 (Fifty Million Rand) (or, if less, the Available Facility) and a maximum amount of R425 000 000 (Four Hundred and Twenty-five Million Rand); |
6.2.2.4 | it specifies an Interest Period of one, three or six Months applicable to the proposed Loan; |
6.2.2.5 | it specifies a bank account in South Africa to which the Borrower wishes the proceeds of the Loan to be credited; and |
6.2.2.6 | the proposed Loan together with the aggregate of the Loans still outstanding on the proposed Utilisation Date shall not exceed the Available RCF Facility. |
6.2.3 | Only one Loan may be requested in each Utilisation Request. |
6.2.4 | Only one Utilisation Request may be outstanding at any point in time. |
6.2.5 | A maximum of two Utilisation Requests may be delivered in any calendar month during the Availability Period. |
6.2.6 | A Borrower may not deliver a Utilisation Request if as a result of the proposed Utilisation more than 10 (ten) Loans would be outstanding at any point in time and to this effect, the Lenders will consolidate 2 (two) or more outstanding Loans made to the Borrower maturing on the same date, such that the relevant Rollover Loan made to refinance such maturing Loans will be in respect of such outstanding Loans as consolidated into 1 (one) Loan. |
6.2.7 | The Borrower acknowledges and agrees that any Utilisation Request signed by an authorised signatory on behalf of the Borrower shall be deemed to be a valid Utilisation Request issued by the Borrower and any Loan made pursuant to such Utilisation Request to the Borrower shall constitute a valid Loan to the Borrower. |
6.2.8 | If the conditions set out in this Agreement have been met, each Lender shall make its participation in each Loan available on the Utilisation Date. |
6.3 | Interest on RCF Facility |
6.3.1 | Calculation of interest |
The rate of interest on each RCF Loan for each RCF Interest Period is the Interest Rate.
6.3.2 | Payment of interest |
The Borrower shall pay accrued interest on each RCF Loan on the last day of each RCF Interest Period.
6.3.3 | Notification of rates of interest |
The Facility Agent shall promptly notify the Borrower of the determination of a rate of interest under this Agreement.
6.3.4 | Absence of quotations |
Subject to clause 6.3.5 ( Market disruption ), if the Base Rate is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by 11h00 (Johannesburg time) on the Reset Date, the applicable Base Rate shall be determined on the basis of the quotations of the remaining Reference Banks.
6.3.5 | Market disruption |
6.3.5.1 | If a Market Disruption Event described in clauses 6.3.5.3.1 or 6.3.5.3.2 occurs in relation to an RCF Loan for any RCF Interest Period, then the rate of interest on that RCF Loan for the RCF Interest Period shall be the percentage rate nacm / nacq / nacs (depending on the applicable RCF Interest Period) which is the sum of: |
6.3.5.1.1 | the Applicable RCF Margin; and |
6.3.5.1.2 | the rate notified by the Facility Agent as soon as practicable and in any event before interest is due to be paid in respect of that RCF Interest Period, to be that which expresses as a percentage rate per annum the cost to the Lenders of funding that RCF Loan from whatever source it may reasonably select. |
6.3.5.2 | If a Market Disruption Event described in clause 6.3.5.3.3 occurs in relation to any RCF Loan for any RCF Interest Period, then the Base Rate on that RCF Loan for such RCF Interest Period shall be increased by the Market Disruption Premium. |
In this clause 6:
6.3.5.3 | Market Disruption Event means: |
6.3.5.3.1 | at or about noon on the Reset Date for the relevant RCF Interest Period JIBAR is not available on the relevant screen and none or only one of the Reference Banks supplies a rate to the Facility Agent to determine the Base Rate for the relevant RCF Interest Period; or |
6.3.5.3.2 | at or about noon on a Utilisation Date the Lenders are unable to raise funding in the Johannesburg interbank market in the ordinary course of business to fund the applicable RCF Loan; or |
6.3.5.3.3 | the Market Disruption Premium as at any Utilisation Date is in excess of 0,25% (zero comma two five percent); |
6.3.5.4 | Market Disruption Premium means the difference between the Nedbank Liquidity Premium 1 (one) day prior to each Utilisation Date and the Nedbank Liquidity Premium as at the New Facilities Signature Date; |
6.3.5.5 | Nedbank Liquidity Premium means, at any date, the difference between the 1 (one) year NCD rate as quoted on the Reuters NEDMM screen, as a naca rate and converted to a nacq rate, and the 1 (one) year swap rate as quoted on the Reuters NDIRS screen, as a nacq rate (in each case at 11h00 on the relevant date). |
6.3.6 | Alternative basis of interest or funding |
If a Market Disruption Event occurs and the Facility Agent or the Borrower so requires, the Facility Agent and the Borrower shall enter into negotiations (for a period of not more than 30 (thirty days)) with a view to agreeing a substitute basis for determining the rate of interest, failing which the provisions of clause 6.3.5 shall continue to apply.
6.4 | RCF Interest Periods |
6.4.1 | Selection of RCF Interest Periods |
6.4.1.1 | The Borrower shall select an RCF Interest Period for an RCF Loan under the RCF Facility in the Utilisation Request for that RCF Loan. |
6.4.1.2 | Subject to this clause 6.4 (RCF Interest Periods) , the Borrower may select an RCF Interest Period of one, three or six Months, as specified in the Utilisation Request. |
6.4.1.3 | An RCF Interest Period for an RCF Loan shall not extend beyond the Final Repayment Date. If an RCF Interest Period for an RCF Loan selected by the Borrower would, but for this clause 6.4.1.3, extend beyond the Final Repayment Date (such RCF Interest Period, a Broken Period ), then for that Broken Period the Base Rate shall be determined in accordance with the following formula: |
r = r1 + (t- t1) x (r2-r1) / (t2-t1)
where:
r = the Base Rate to be determined,
r1 = JIBAR or where it is not possible to determine JIBAR on any Reset Date, SAR-JIBAR-Reference Banks, in either case converted to a nominal annual compounded monthly in arrear rate, for the period closest to but less than that Broken Period plus, if this would result in r1 being equal to SAFEX Overnight Deposit Rate, 0,01%;
r2 = JIBAR or where it is not possible to determine JIBAR on any Reset Date, SAR-JIBAR-Reference Banks, in either case converted to a nominal annual compounded monthly in arrear rate, for the period closest to but greater than that Broken Period;
t1 = the number of days applicable to the period for which r1 is quoted on the first day of that Broken Period;
t2 = the number of days applicable to the period for which r2 is quoted on the first day of that Broken Period;
t = the number of days in that Broken Period.
6.4.1.4 | Each RCF Interest Period for an RCF Loan shall start on the relevant Utilisation Date. |
6.4.1.5 | Subject to this clause 6.4 (RCF Interest Periods) , the Borrower may select a different RCF Interest Period for a Rollover Loan than the RCF Interest Period of the RCF Loan being refinanced by that Rollover Loan in the Utilisation Request delivered for that Rollover Loan. |
6.4.1.6 | If the Borrower fails to select an RCF Interest Period for an RCF Loan in the Utilisation Request for that RCF Loan, the RCF Interest Period for the applicable RCF Loan shall be 3 (three) Months. |
6.4.2 | Non-Business Days |
If an RCF Interest Period would otherwise end on a day which is not a Business Day, that RCF Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
6.4.3 | Consolidation of RCF Loans |
If two or more RCF Interest Periods relating to RCF Loans end on the same date, those RCF Loans will be consolidated into, and treated as, a single RCF Loan on the last day of the RCF Interest Period.
6.4.4 | Day Count Convention |
Any interest or fee accruing under a Finance Document will accrue from day to day and is calculated inclusive of the first day but exclusive of the last day of an RCF Interest Period on the basis of the actual number of days elapsed and a year of 365 days (irrespective of whether the year is a leap year) or, in any case where the practice in the Johannesburg interbank market differs, in accordance with that market practice.
6.5 | Repayments |
6.5.1 | The Borrower shall repay each RCF Loan made to it on the last day of its RCF Interest Period such that all RCF Loans outstanding under the RCF Facility (including accrued and unpaid interest thereon) shall be repaid in full by no later than the Final Repayment Date. |
6.5.2 | Any amount repaid or prepaid under the RCF Facility shall be capable of being re-borrowed by the Borrower on the terms and conditions set out in this clause 6 ( RCF Facility ). |
6.6 | Cancellation of RCF Facility |
The Borrower shall be entitled on 10 (ten) days written notice to the Facility Agent to cancel all or part of the unutilised portion of the RCF Facility Amount (the Cancelled Portion ), provided that if such cancellation takes place within 18 (eighteen) months after the date of New Facilities Financial Close the Borrower shall, on the date upon which the cancellation takes effect, pay to the Lenders an amount equal to 2% (two percent) of the Cancelled Portion.
7. | VOLUNTARY PREPAYMENT |
7.1 | At any time during the Term, and provided that no Default has occurred that is continuing, the Borrower may, subject to the provisions of clause 28.2 ( Exit Fees ), by giving to the Facility Agent not less than 5 (five) Business Days prior written notice to that effect, prepay the whole or part of the Term Facility Outstandings or the RCF Facility Outstandings on an Interest Payment Date relating to the relevant Facility; provided that no such prepayment shall be in an amount of less than R50 000 000 (Fifty Million Rand) (or a greater amount thereof in increments of R10 000 000 (Ten Million Rand)) or the Term Facility Outstandings or RCF Facility Outstandings, whichever is the lesser. |
7.2 | Any notice of prepayment pursuant to clause 7.1 shall: |
7.2.1 | be irrevocable; |
7.2.2 | specify a date upon which such prepayment is to be made, which date shall be an Interest Payment Date; |
7.2.3 | specify the amount of the prepayment; and |
7.2.4 | oblige the Borrower to make such prepayment on such date. |
8. | MANDATORY PREPAYMENT |
8.1 | Illegality |
If it becomes unlawful in any applicable jurisdiction for any Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in any Loan:
8.1.1 | that Lender shall promptly notify the Facility Agent thereof, which shall promptly notify the Borrower upon becoming aware of that event; |
8.1.2 | upon the Lender notifying the Borrower, the undrawn portion of any Facility relating to that Lender will be immediately cancelled; and |
8.1.3 | the Borrower shall repay that Lenders Facility Outstandings on the last day of the Interest Period for each Loan occurring after the Facility Agent has notified the Borrower or, if earlier, the date specified by the Facility Agent in the notice delivered to the Borrower (being no earlier than the last day of any applicable grace period permitted by law). |
8.2 | Mandatory Prepayment Change in Control |
8.2.1 | If any person or group of persons acting in concert gains Control of the Borrower: |
8.2.1.1 | the Borrower shall promptly notify the Facility Agent upon becoming aware of that event; |
8.2.1.2 | the Lenders shall not be obliged to fund a Utilisation (except for a Rollover Loan) and the Lender and the Borrower shall consult about the change of control; |
8.2.1.3 |
if the Lenders so require after a period of 45 (forty-five) days from receipt of the notice referred to in clause 8.2.1.1 above, the Facility Agent shall by notice to the Borrower, (such notice to be delivered no later than 60 (sixty) days from receipt of the notice referred to in clause 8.2.1.1 above), cancel the undrawn portion of the Facilities and declare the Facility Outstandings immediately due and payable, whereupon the undrawn portion of the Facilities will be cancelled |
and the Facility Outstandings will become immediately due and payable; |
8.2.2 | For the purpose of clause 8.2.1 above, acting in concert means, a group of persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition by any of them, either directly or indirectly, of shares in the Borrower, to obtain or consolidate control of the Borrower. |
9. | PAYMENTS |
9.1 | All payments to be made by the Obligors under any Finance Documents shall be governed by the following provisions: |
9.1.1 | all such payments shall be made to the Facility Agent, on the due date for such payment, to such account in South Africa as the Facility Agent specifies, and any such payment shall discharge, pro tanto , the corresponding liability to the Finance Parties; |
9.1.2 | all such payments shall be made for value by no later than 12h00 on the due date for such payment; |
9.1.3 | the relevant Obligor shall advise the Facility Agent in writing once such repayment has been made; and |
9.1.4 | all such payments shall be made in immediately available, freely transferable, cleared funds free and clear of set-off, deduction or counterclaim. |
9.2 | In the event of any payment not being made in full on its due date, appropriated in the first instance to the payment of any costs, charges or expenses, thereafter to interest then due and payable, and thereafter in reduction of the principal amount of the Loan. |
9.3 | The Borrower shall not have the right to defer, adjust or withhold any payment due to the Finance Parties in terms of or arising out of this Agreement or to obtain deferment of judgement for such amount or any execution of such judgement by reason of any set-off or counterclaim due to any other contractual or delictual claims or causes of whatsoever nature or howsoever arising. |
9.4 | If, at any time, it shall become impracticable (by reason of any action of any governmental authority or any change in law, exchange control regulations or any similar event) for the Borrower to make any payments hereunder in the manner specified in this clause 8 ( Payments ), then the Borrower may agree with the Facility Agent alternative arrangements for such payment to be made; provided that, in the absence of any such agreement, the Borrower shall be obliged to make all payments due to the Finance Parties in the manner specified herein. |
10. | BREAKAGE COSTS AND BREAKAGE GAINS |
10.1 | If any Lender (or any person on its behalf) receives or recovers all or any part of the Facility Outstandings otherwise than on the Interest Payment Date of the Interest Period relating to the relevant Advance: |
10.1.1 | the Borrower indemnifies and holds the Lender harmless and shall pay to the Lender on demand an amount equal to all Breakage Costs which the Lender sustains as a consequence of such receipt or recovery on a day other than an Interest Payment Date; or |
10.1.2 | provided that no Event of Default has occurred which is continuing, the Lender shall pay to the Borrower on demand an amount equal to all Breakage Gains which the Lender has actually realised as a consequence of such receipt or recovery on a day other than on an Interest Payment Date. |
10.2 |
A certificate signed by any director or manager of the Facility Agent (whose appointment need not be proved) as to the amount of any Breakage Costs or |
Breakage Gains, as the case may be, shall be prima facie proof of the amount thereof.
11. | GUARANTEE AND INDEMNITY |
11.1 | Guarantee and Indemnity |
Each Guarantor irrevocably and unconditionally jointly and severally:
11.1.1 | guarantees to the Finance Parties the punctual performance by the Borrower of all the Borrowers obligations under the Finance Documents; |
11.1.2 | undertakes to the Finance Parties that whenever the Borrower does not pay any amount when due under or in connection with any Finance Document, that Guarantor shall directly on demand pay that amount as if it was the principal obligor; and |
11.1.3 | indemnifies the Finance Parties directly on demand against any cost, loss or liability suffered by the Finance Parties if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which the Finance Parties would otherwise have been entitled to recover. |
11.2 | Continuing Guarantee |
This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by the Borrower under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.
11.3 | Reinstatement |
If any payment by the Borrower or any discharge given by the Finance Parties (whether in respect of the obligations of the Borrower or any security for those
obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event:
11.3.1 | the liability of the Borrower shall continue as if the payment, discharge, avoidance or reduction had not occurred; and |
11.3.2 | the Finance Parties shall be entitled to recover the value or amount of that security or payment from the Borrower, as if the payment, discharge, avoidance or reduction had not occurred. |
11.4 | Waiver of Defences |
The obligations of each Guarantor under this clause 11 ( Guarantee and Indemnity ) will, subject to applicable law, not be affected by an act, omission, matter or thing which, but for this clause, would reduce, release or prejudice any of its obligations under this clause 11 (without limitation and whether or not known to it or the Finance Parties) including:
11.4.1 | any time indulgence, waiver or consent granted to, or composition with, the Borrower or other person; |
11.4.2 | the release of the Borrower or any other person under the terms of any composition or arrangement with any creditor of any member of the Group; |
11.4.3 | the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, the Borrower or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security; |
11.4.4 | any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of the Borrower or any other person; |
11.4.5 | any amendment (however fundamental) or replacement of a Finance Document or any other document or security; |
11.4.6 | an unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or |
11.4.7 | any insolvency or similar proceedings. |
11.5 | Direct Recourse |
Each Guarantor waives any right it may have of first requiring the Finance Parties to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this clause 11 ( Guarantee and Indemnity ); provided that prior to making any demand on any Guarantor under this clause 11 Guarantee and Indemnity ) demand shall first have been made on the Borrower and the Borrower shall have failed to pay the sum or perform the obligation demanded within the requisite period specified in such demand. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.
11.6 | Appropriations |
Until all amounts which may be or become payable by the Borrower under or in connection with the Finance Documents have been irrevocably paid in full, the Finance Parties (or any agent on its behalf) may apply all monies, security or rights received by it on account thereof in such manner and order as it sees fit.
11.7 | Deferral of Guarantors Rights |
Until all amounts which may be or become payable by the Borrower under or in connection with the Finance Documents have been irrevocably paid in full and unless the Facility Agent (acting reasonably) otherwise directs, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents:
11.7.1 | to be indemnified by the Borrower; |
11.7.2 | to claim any contribution from any Guarantor; and/or |
11.7.3 | to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of the rights of the Finance Parties under the Finance Documents, or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by the Finance Parties. |
11.8 | Additional Security |
This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by the Finance Parties.
12. | CESSION IN SECURITY |
12.1 | As security for its obligations to the Finance Parties under the Finance Documents, each Obligor hereby cedes in securitatem debiti to the Finance Parties its right, title and interest in and to the Loan Claims (the Security Cession ). |
12.2 | The following terms and conditions shall apply to the Security Cession: |
12.2.1 | each Obligor agrees that the Security Cession shall constitute a continuing covering security and shall remain in force notwithstanding any fluctuation or the temporary extinction of each Obligors indebtedness to the Finance Parties in respect of the Finance Documents; |
12.2.2 | each Obligor warrants and represents that prior to the Security Cession, the Loan Claims have not been ceded to any other person provided that, to the extent that each Obligor has ceded the Loan Claims to any person prior to the Security Cession, the Security Cession shall constitute a cession of each Obligors reversionary rights in and to the Loan Claims; |
12.2.3 |
if an Obligor defaults and/or breaches any of its obligations under the Finance Documents and the Facility Agent has declared the Facility |
Outstandings due and payable in accordance with clause 18.3 ( Acceleration ), the Finance Parties shall, subject to applicable law, be entitled to take over and/or to realise so much of the proceeds of the Loan Claims as shall be necessary to discharge the Obligors obligations to the Finance Parties under the Finance Documents; provided that should the total amount recovered by the Finance Parties, after deducting therefrom all costs, charges and expenses incurred by the Finance Parties in exercising its rights in terms of the Finance Documents, in discharge of the Obligors obligations in respect of the Finance Documents exceed the full amount owing by the Obligors in respect of the Finance Documents, the Finance Parties shall be obliged to refund such excess to the Obligors; |
12.2.4 | if an Obligor defaults and/or breaches any of its obligations under the Finance Documents and the Facility Agent has declared the Facility Outstandings due and payable in accordance with clause 18.3 ( Acceleration ), each Obligor nominates, constitutes and appoints the Facility Agent as its true and lawful agent irrevocably and in rem suam with power of substitution to exercise all the rights of action and powers and rights accruing to it for the purpose of calling up, enforcing and collecting the Loan Claims and to institute against the relevant Group Company whatsoever legal proceedings the Facility Agent may consider necessary and to prove any claim in any insolvent estate and generally to do that which is requisite and necessary just as if each Obligor were acting therein and in particular, to recover from the relevant Group Company all monies and rights due to each Obligor in respect of the Loan Claims and to grant valid receipts and acquittances therefor in its name; |
12.3 | The Facility Agent shall be entitled without in any way limiting or affecting its rights against each Obligor or otherwise affecting each Obligors obligations to the Finance Parties, to: |
12.3.1 |
release and abandon any other form of security which it may have securing the obligations owed by each Obligor in respect of the Finance |
Documents, all such other forms of security, if any, being referred to as Other Securities ; and/or |
12.3.2 | release Other Securities or any one or more of them, in each case in whole or in part; and/or |
12.3.3 | give time, compound, compromise or make any other arrangement in respect of the extent, amount, duration, reduction or postponement of liability to or with each Obligor; and/or |
12.3.4 | allow or grant any latitude or indulgence to each Obligor and/or any other person who shall have furnished Other Securities. |
12.4 | The Security Cession shall remain of full force and effect until all of each Obligors obligations under the Finance Documents have been discharged by the Obligors in full, and notwithstanding: |
12.4.1 | any variation or amendment of, addition to or deletion from, or consensual cancellation or determination of any agreement between any Obligor and the Finance Parties; and/or |
12.4.2 | any waiver by the Finance Parties of some but not all of their rights against the Obligors; and/or |
12.4.3 | any waiver by the Finance Parties of any or all of their rights in respect of Other Securities; and/or |
12.4.4 | any latitude, indulgence or extension of time which may be allowed or shown by the Finance Parties to any Obligor or such other person who shall have furnished Other Securities; and/or |
12.4.5 | the receipt by the Finance Parties of any dividend or benefit in any liquidation or judicial management, or any compromise whether in terms of any statutory enactment or common law. |
12.5 | Each Obligor undertakes and warrants that it will do all things necessary to grant to the Finance Parties (or procure the granting to the Finance Parties of), and perfect, the security set out in this clause 12. |
13. | WARRANTIES AND REPRESENTATIONS |
13.1 | From the Signature Date, each Obligor hereby represents and warrants to the Finance Parties on a continuing basis that: |
13.1.1 | Status |
13.1.1.1 | It is a limited liability company, duly incorporated and in good standing and validly existing under the laws of South Africa. |
13.1.1.2 | It has the power to own its assets and carry on its business as it is being conducted or is contemplated to be conducted. |
13.1.2 | Power and Authority |
13.1.2.1 | It has the power to enter into and perform, and has taken all necessary action to authorise its entry into, and performance of, the Finance Documents to which it is party and the transactions contemplated by those Finance Documents. |
13.1.2.2 | No limit on its powers will be exceeded as a result of the borrowings, grant of security or giving of guarantees or indemnities contemplated by the Finance Documents to which it is a party. |
13.1.3 | Authorisations |
13.1.3.1 | All Authorisations required to enable it lawfully to enter into, exercise its rights and comply with its obligations under the Finance Documents to which it is a party and to ensure that the obligations expressed to be assumed by it thereunder are legal, valid, binding and enforceable have been obtained or effected and are in full force and effect. |
13.1.3.2 | It is not necessary that any Finance Document be filed, recorded or enrolled with any court or other authority in South Africa or that any registration or similar tax be paid on or in relation to any Finance Document. |
13.1.3.3 | All Authorisations necessary for the conduct of its business, trade and ordinary activities have been obtained or effected and are in full force and effect. |
13.1.4 | Constitutional Documents |
The execution of the Finance Documents to which it is a party and its exercise of its rights and performance of its obligations thereunder do not and will not conflict with its Constitutional Documents.
13.1.5 | Binding Obligations |
The obligations expressed to be assumed by it in each Finance Document to which it is a party are, subject to any general principles of law as at the Signature Date limiting its obligations, which are specifically referred to in any legal opinion delivered pursuant to clause 4 (Conditions to Advance) legal, valid, binding and enforceable obligations.
13.1.6 | Non-conflict with Other Obligations |
The entry into and performance by it of, and the transactions contemplated by, the Finance Documents to which it is a party and the granting of the Transaction Security pursuant to the Security Documents to which it is a party do not and will not conflict with any agreement or instrument binding upon it or any of its assets.
13.1.7 | No Default |
13.1.7.1 | No Default is continuing or might reasonably be expected to result from the making of a Loan or the entry into, the performance of, or any transaction contemplated by, any Finance Document. |
13.1.7.2 | No event or circumstance is continuing which constitutes a breach or default under, or entitles another party to call for termination of, any material agreement or material instrument which is binding on it. |
13.1.8 | No Encumbrances |
13.1.8.1 | No Encumbrance exists over any of its assets except for Permitted Encumbrances. |
13.1.8.2 | Other than the Encumbrances created or to be created under the Security Documents, no Encumbrance will arise solely as a result of the execution of and performance of its rights and obligations under the Finance Documents. |
13.1.9 | Trading Activities |
The Borrower has no material trading activities or liabilities other than those disclosed in or contemplated by the Finance Documents or the Original Financial Statements.
13.1.10 | Indebtedness |
It has not incurred any Financial Indebtedness except for Permitted Indebtedness.
13.1.11 | No Proceedings Pending or Threatened |
No investigation, litigation, arbitration or administrative proceedings of or before any court, arbitral body or government agency which, if adversely
determine, is reasonably likely to result in a Material Adverse Change have been started against it.
13.1.12 | No Winding-Up |
It has not taken any corporate action, nor have any other steps been taken or legal proceedings started against it, for its winding-up, dissolution, or administration or for the enforcement of any security interest over all or any of its revenues or assets or for the appointment of a receiver, administrator, administrative receiver, conservator, custodian, trustee or similar officer of it or of all or any of its assets.
13.1.13 | Solvency |
13.1.13.1 | No Obligor is unable or has admitted its inability to pay its debts as they fall due or has suspended making payments on any of its debts or, by reason or actual or anticipated financial difficulties, commenced negotiations with its creditors generally with a view to rescheduling its indebtedness. |
13.1.13.2 | A moratorium has not been declared in respect of any of the indebtedness of any Obligor. |
13.1.14 | Compliance with Laws |
Without detracting from any other provision of this clause 13, each Obligor is in compliance in all material respects with the laws of the Republic of South Africa.
13.1.15 | Environmental Compliance |
Each Obligor, to the extent applicable to it, has:
13.1.15.1 |
performed and observed in all material respects all Environmental Law, Environmental Permits and all other material covenants, conditions, restrictions or agreements directly or indirectly |
concerned with any contamination, pollution, degradation or waste or the release or discharge of any toxic or hazardous substance in connection with any real property which is or was at any time owned, leased, occupied or controlled by it or on which it has conducted any activity where failure to do so is likely to result in a Material Adverse Change; and |
13.1.15.2 | obtained all Environmental Permits required by it which are material to properly conduct its business. |
13.1.16 | Environmental Claims |
Save to the extent disclosed in Schedule 6 (Disclosed Potential Environmental Claim) , no Environmental Claim has been commenced against any Obligor where that claim would be reasonably likely to be adversely determined and which, if so adversely determined against that Obligor, is likely to result in a Material Adverse Change.
13.1.17 | Deduction of Tax |
It is not required to make any deduction for or on account of tax from any payment it may make under any Finance Documents to the Finance Parties.
13.1.18 | Taxation |
13.1.18.1 | Each Obligor has duly and punctually paid and discharged all taxes imposed upon it or its assets within a time period allowed without incurring penalties except to the extent that: |
13.1.18.1.1 | payment is being contested in good faith; |
13.1.18.1.2 | it has maintained adequate provisions for those taxes in accordance with IFRS; and |
13.1.18.1.3 | payment can be lawfully withheld. |
13.1.18.2 | Each Obligor is materially overdue in the filing of its tax returns since the years specified in Schedule 8 ( Last Tax Return Year ) for each Obligor. Such late filing is due to bona fide queries having been raised by each of the Obligors with the South African Revenue Service and/or by the South African Revenue Service with all or any of the Obligors, and for which proper and adequate provision has been made in the Original Financial Statements. |
13.1.19 | No Misleading Information |
13.1.19.1 | To the best of its knowledge and belief (having made due enquiry), all written information provided by it and supplied to the Facility Agent pursuant to the terms of the Finance Documents and the transactions contemplated thereby is true and accurate in all material respects as at the date it was given and is not misleading in any material respects (whether because of information actually provided or which should have been provided). |
13.1.19.2 | All written information referred to in this clause 13.1.19 ( No Misleading Information ) has been disclosed to the Facility Agent without breaching any confidentiality obligation binding upon it or its assets. |
13.1.19.3 | It has not knowingly withheld any information which, if disclosed, would reasonably be expected materially and adversely to affect the decision of the Lenders to provide finance to the Borrower. |
13.1.20 | No Breach of Finance Documents |
It is not in breach of or in Default under any Finance Document.
13.1.21 | No Material Adverse Change |
Since the Signature Date, no event or series of events has occurred, commenced or is threatened which is (or the continuation of which is) likely to result in a Material Adverse Change.
13.1.22 | Original Financial Statements |
13.1.22.1 | The Original Financial Statements were prepared in accordance with IFRS consistently applied, except to the extent expressly disclosed to the contrary therein. |
13.1.22.2 | The Original Financial Statements fairly represent each Obligors financial condition and operations (consolidated in the case of the Group) during the relevant financial period, unless expressly disclosed to the contrary therein. |
13.1.22.3 | There has been no material adverse change in the business, operations or financial condition of any of the Obligors (or the business or consolidated financial condition of the Group) since the Signature Date. |
13.1.22.4 | Upon the Original Financial Statements being audited by the Auditors, there shall be no material changes thereto, and same shall not be qualified adversely by the Auditors or in any material respect more severely than to the extent disclosed in the Original Financial Statements as at the Signature Date. |
13.1.23 | Financial Statements and Budgets |
13.1.23.1 |
The most recent financial statements delivered pursuant to clause 14.1 ( Financial Statements ) have been prepared in accordance with IFRS as applied to the Original Financial Statements and give a true and fair view of (if audited) or fairly present (if unaudited) the Groups consolidated financial condition and each Obligors |
financial condition as at the end of, and consolidated results of operations for, the period to which they relate. |
13.1.23.2 | The budgets and forecasts supplied under this Agreement were arrived at after careful consideration and have been prepared in good faith on the basis of recent historical information and on the basis of assumptions which were reasonable as at the date they were prepared and supplied. |
13.1.23.3 | Since the date of the most recent financial statements delivered pursuant to clause 14.1 ( Financial Statements ) there has been no Material Adverse Change in the business, assets or financial condition of the Group. |
13.1.24 | Insurance |
It maintains insurances on and in relation to its business and assets against those risks and to the extent as is usual for companies in South Africa carrying on substantially similar business in South Africa.
13.1.25 | Assets and Intellectual Property Rights |
13.1.25.1 | It has good title to or valid leases or licenses over all of the assets necessary and material to carry on its business. |
13.1.25.2 | It owns or has the legal right to use all the Intellectual Property Rights which are material to the conduct of its business, or are required by it in order for it to carry on its business and, as far as it is aware, it will not nor will any of its subsidiaries, in carrying on its business, infringe any Intellectual Property Rights of any third party in any way which is likely to result in a Material Adverse Change. |
13.1.25.3 |
None of the Intellectual Property Rights which are material in the context of its business are, to its knowledge, being infringed nor, to its knowledge, is there any threatened infringement of those |
Intellectual Property Rights, by any third party which in any such case is likely to result in a Material Adverse Change. |
13.1.25.4 | All registered Intellectual Property Rights owned by it (or any subsidiary of it) and which are material to the conduct of its business are subsisting, and all actions (including payment of all fees) required to maintain the same in full force and effect have been taken. |
13.1.26 | Pari Passu Ranking |
Its payment obligations under the Finance Documents to which it is a party rank, subject to any general principles of law as at the Signature Date limiting its obligations, which are specifically referred to in any legal opinion delivered pursuant to clause 4 (Conditions to Advance) , at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
13.1.27 | Security Interest |
13.1.27.1 | Subject in each case to any registration specifically required by law, and subject to any general principles of law as at the Signature Date limiting its obligations, which are specifically referred to in any legal opinion delivered pursuant to clause 4 (Conditions to Advance) : |
13.1.27.1.1 | each Security Document validly creates the security interest which is expressed to be created by that Security Document; and |
13.1.27.1.2 | the Transaction Security created by each Security Document: |
13.1.27.1.2.1 |
ranks and will rank, in respect of all other security interests granted or to be granted by any Obligor in |
favour of any person other than the Finance Parties, in the order of priority it is expressed to rank in the relevant Security Document; and |
13.1.27.1.2.2 | is not subject to avoidance in the event of any winding-up, dissolution or administration involving any Obligor. |
13.1.27.2 | Other than any assets which are either the subject of a Permitted Encumbrance or which are leased by the relevant Obligor, it is the sole, absolute, legal and, where applicable, beneficial owner of all assets made subject to the Transaction Security created by each Security Document. |
13.1.28 | No Material Industrial Action |
No industrial or similar action has been started or threatened against it which is likely to result in a Material Adverse Change.
13.1.29 | Immunity from Suit |
13.1.29.1 | In any proceedings taken against it in South Africa in relation to the Finance Documents to which it is a party, it will not be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process. |
13.1.29.2 | The execution of the Finance Documents to which it is a party constitutes, and its exercise of its rights and performance of its obligations thereunder will constitute, private and commercial acts done and performed for private and commercial purposes. |
13.2 | Each of the warranties given by each of the Obligors in terms of clause 13.1 shall: |
13.2.1 | prima facie be deemed to be a representation or fact inducing the Finance Parties to enter into the Finance Documents; |
13.2.2 | be presumed to be material unless the contrary is proved; |
13.2.3 | insofar as any of the warranties is promissory or relates to a future event, be deemed to have been given as at the due date for fulfilment of the promise or for the happening of the event, as the case may be; and |
13.2.4 | be a separate warranty and in no way be limited or restricted by reference to or inference from the terms of any other warranty. |
13.3 | The Finance Parties are entering into this Agreement and the other Finance Documents relying upon the warranties given by the Borrower in clause 13.1. |
14. | FINANCIAL INFORMATION |
14.1 | Financial Statements |
14.1.1 | The Borrower shall: |
14.1.1.1 | as soon as the same become available, but in any event within 120 (one hundred and twenty) days after the end of each Financial Year during the Term, deliver to the Facility Agent the consolidated audited annual financial statements of the Group for such Financial Year; and |
14.1.1.2 | as soon as the same become available, but in any event within 150 (one hundred and fifty) days after the end of each Financial Year during the Term, deliver to the Facility Agent the audited annual financial statements of each Guarantor for such Financial Year; |
14.1.1.3 | as soon as the same become available, but in any event within 60 (sixty) days after the end of each quarter of each Financial Year during the Term, deliver to the Facility Agent the consolidated interim quarterly financial statements of the Group (in the form as provided to the Borrowers shareholders) for such period. |
14.1.1.4 | from time to time on the written request of the Facility Agent, furnish the Facility Agent with such information about the business and financial condition of the Group and/or of each Obligor as the Facility Agent may reasonably require in order to assess the Borrowers ability to perform its obligations under the Finance Documents. |
14.1.2 | The Borrower shall ensure that: |
14.1.2.1 | each set of financial statements delivered by it pursuant to clause 14.1 ( Financial Statements ) is prepared on the same basis as was used in the preparation of the Original Financial Statements and in accordance with IFRS; |
14.1.2.2 | each set of financial statements delivered by it pursuant to this clause 14 ( Financial Statements ) is certified by the Group Managing Director or the Group Financial Director of the Borrower as giving a true and fair view, if audited, or fairly present, if unaudited, of the financial condition of the Group (and each Obligor) as at the end of the period to which those financial statements relate and of the result of its operations during such period; and |
14.1.2.3 | each set of financial statements delivered by it pursuant to clause 14.1.1.1 has been audited by the Auditors. |
14.2 | Compliance Certificate |
14.2.1 | The Borrower shall deliver to the Facility Agent with each set of financial statements delivered pursuant to clause 14.1 ( Financial Statements ), a Compliance Certificate setting out (in reasonable detail) computations as to compliance with clause 17 ( Financial Covenants ) as at the Ratio Test Date; and |
14.2.2 | Each Compliance Certificate shall be signed by the chief financial officer or the financial director of the Borrower. |
14.3 | Requirements as to Financial Statements |
14.3.1 | The Borrower shall procure that each set of financial statements delivered pursuant to clause 14.1 ( Financial Statements ) is prepared in accordance with IFRS, the requirements of the Companies Act and accounting practices and financial reference periods as promulgated by the Accounting Practices Board consistent with those applied in the preparation of the Original Financial Statements. |
14.3.2 | Clause 14.3.1 shall not apply to the extent that, in relation to any sets of financial statements, the Borrower notifies the Facility Agent that there has been a change in IFRS or the accounting practices or reference periods and the Auditors (in the case of its annual audited financial statements) or the Borrower (in the case of any of its other financial statements) delivers to the Facility Agent: |
14.3.2.1 | a description of any change necessary for those financial statements to reflect IFRS, accounting practices and reference periods upon which the Original Financial Statements were prepared; and |
14.3.2.2 | sufficient information, in form and substance as may be reasonably required by the Facility Agent to enable the Facility Agent to determine whether clause 17 ( Financial Covenants ) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and the Original Financial Statements. |
14.3.3 | If the Borrower notifies the Facility Agent of a change in accordance with clause 14.3.2, then the Borrower and Facility Agent shall enter into negotiations in good faith with a view to agreeing: |
14.3.3.1 | whether or not the change might result in material alteration in the commercial effect of any of the terms of this Agreement or any other Finance Document; and |
14.3.3.2 | if so, any amendments to this Agreement or any other Finance Document which may be necessary to ensure that the change does not result in any material alteration in the commercial effect of those terms, |
and if any amendments are agreed they shall take effect and be binding on each of the Parties in accordance with their terms.
14.3.4 | Any reference in this Agreement to financial statements shall be construed as a reference to those financial statements as the same may be adjusted under this clause 14.3 to reflect the basis upon which the Original Financial Statements were prepared. |
14.4 | Access to Records |
If a Default is continuing or the Facility Agent reasonably suspects that a Default is continuing, each Obligor shall, and the Borrower shall ensure that each Obligor will, permit the Facility Agent or any of its representatives and professional advisors free access at all reasonable times and on reasonable notice (at the Borrowers cost and expense) to that Obligors premises, records, accounts (including its general ledger), books and assets as that person may require at reasonable times and upon reasonable notice.
14.5 | Information: Miscellaneous |
The Borrower shall supply to the Facility Agent:
14.5.1 | at the same time as they are despatched, copies of all documents despatched by any Obligor to its shareholders generally (or any class of them) or despatched by any Obligor to its creditors generally (or any class of them); |
14.5.2 |
promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or |
pending against any Obligor which, if adversely determined against it, would be reasonably likely to have a Material Adverse Change; |
14.5.3 | promptly, such further information (including an extract of its general ledger) regarding the financial condition, business and operations of any Group Company as the Facility Agent may reasonably request; and |
14.5.4 | promptly upon it becoming aware of any transfer of shares in any Group Company (not being a publicly listed entity) and of any change in the beneficial ownership of any Group Company (not being a publicly listed entity) affecting the Control of that Group Company, provide details thereof and an updated list of all the shareholders of any Group Company (not being a publicly listed entity). |
14.6 | Notification of Default |
14.6.1 | The Borrower shall notify the Facility Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence. |
14.6.2 | Promptly upon a request by the Facility Agent, the Borrower shall supply to the Facility Agent a certificate signed by the chief financial officer or the financial director of the Borrower certifying that no Default is continuing (or if a Default is continuing specifying the Default and the steps, if any, being taken to remedy it). |
14.7 | Delivery of Information |
14.7.1 |
Without prejudice to clause 29 ( Notices and Domicilia ), any documents to be delivered under this clause 14 may be delivered by the Borrower to the Facility Agent (and by the Facility Agent to the Lenders) by e-mail where the Facility Agent has expressly agreed, by written notice to the Borrower, to receive such documents by e-mail and has informed the Borrower of an e-mail address pursuant to clause 29 ( Notices and Domicilia ), provided |
that, for this purpose, any such notification shall also be followed-up by telefax. |
14.7.2 | If the Finance Parties request delivery to it of a paper copy of any document to be delivered by the Borrower under this clause 14 ( Financial Information ) in place of an electronic copy of such document, it shall notify the Borrower accordingly. The Facility Agent shall request the Borrower in writing to provide such paper copies promptly upon receipt of any such notice and the Borrower shall be obliged promptly to do so. |
15. | POSITIVE UNDERTAKINGS |
Each Obligor hereby agrees and undertakes, until the Facility Outstandings have been repaid in full, that it shall:
15.1 | Authorisations |
Obtain, comply with the terms of and do all that is necessary to maintain in full force and effect all authorisations, approvals, licences and consents required in or by the laws and regulations of South Africa to enable it lawfully to undertake its business and to enter into and perform its obligations under the Finance Documents to which it is a party or to ensure the legality, validity, enforceability or admissibility in evidence in South Africa of the Finance Documents to which it is a party;
15.2 | Compliance with Laws |
Comply in all material respects with all laws to which it may be subject, and obtain and comply with all permits and licenses, in each case, to the extent the same are material to its business.
15.3 | Material Adverse Change |
Promptly inform the Facility Agent in writing of the occurrence of any Material Adverse Change forthwith upon becoming aware thereof and from time to time,
if so requested by the Facility Agent in writing, confirm to the Facility Agent in writing that, save as previously notified to the Facility Agent or as notified in such confirmation, no such Material Adverse Change has occurred and/or is continuing. |
15.4 | Representations and Warranties |
Notify the Facility Agent of the occurrence of any event which results in or may reasonably be expected to result in any of the representations and warranties contained in clause 13 ( Warranties and Representations ) being untrue.
15.5 | Insurance |
Maintain insurances on and in relation to its business and assets with reputable underwriters or insurance companies against those risks and to the extent as is usual for companies carrying on the same or substantially similar business.
15.6 | Pari Passu Ranking |
Ensure that at all times the claims of the Finance Parties against it under the Finance Documents to which it is a party rank at least pari passu with the claims of all its other unsecured creditors save those whose claims are preferred by any bankruptcy, insolvency, liquidation or other similar laws of general application.
15.7 | Environmental Compliance |
Comply in all material respects with all Environmental Law and obtain and maintain any Environmental Permits and take all reasonable steps in anticipation of known or published future changes to or obligations under the same, if failure to do so would reasonably be expected to result in a Material Adverse Change.
15.8 | Environmental Claims |
Inform the Facility Agent in writing as soon as reasonably practicable upon becoming aware of the same:
15.8.1 | if any Environmental Claim has been commenced or (to the best of that Obligors knowledge and belief) is threatened against any member of the Group; or |
15.8.2 | of any facts or circumstances which will or are reasonably likely to result in any Environmental Claim being commenced or threatened against any member of the Group, |
where the claim would, if adversely determined, be reasonably likely to result in a Material Adverse Change.
15.9 | Default |
At any time after the occurrence of a Default and for so long as it is continuing, upon the written request of the Facility Agent with reasonable prior notice, permit representatives of the Finance Parties during normal office hours, to visit and inspect any of the premises where its business is conducted, to have access to (and copies of) accounts and records and shall afford reasonable co-operation at all times to the Finance Parties and such representatives.
16. | NEGATIVE UNDERTAKINGS |
Each Obligor hereby agrees and undertakes that, until the Facility Outstandings has been repaid in full none of the Obligors shall, without the prior written consent of the Facility Agent:
16.1 | Financial Indebtedness |
16.1.1 | Assume, incur or permit to have outstanding any Financial Indebtedness other than Permitted Indebtedness. |
16.1.2 | Release or waive any material Indebtedness owed to it by any Related Party other than for valuable market consideration. |
16.2 | Loans and Credit |
Make any loans, grant any credit (save in the ordinary course of business) or give any guarantee or indemnity for any loans or credit (except as required hereby) to or for the benefit of any person or otherwise voluntarily assume any liability, whether actual or contingent, in respect of any obligation of any other person (collectively, Credit ) other than:
16.2.1 | Credit existing at the Signature Date and disclosed in the Original Financial Statements; |
16.2.2 | Permitted Loans; |
16.2.3 | any guarantee or indemnity given in respect of Permitted Indebtedness; or |
16.2.4 | Credit granted to any Obligor. |
16.3 | Disposals |
Enter into a single transaction or a series of transactions (whether related or not) and whether voluntarily or involuntarily to Dispose of any assets other than pursuant to a Permitted Disposal.
16.4 | Distributions |
The Borrower shall not pay, make or declare, or resolve to pay, make or declare, any Distribution unless:
16.4.1 | the Market Capitalisation to Facilities Outstanding Ratio is greater than 9 (nine) times; and |
16.4.2 | as at the previous Ratio Test Date, the requirements of clause 17.1.3 were satisfied. |
16.5 | Negative Pledge |
16.5.1 | Save as contemplated by the Finance Documents, not create or permit to subsist any Encumbrance over any of its assets. |
16.5.2 | Save as contemplated by the Finance Documents, not: |
16.5.2.1 | sell, transfer or otherwise dispose of any of its assets to any person who is not an Obligor on terms whereby they are or may be leased to or re-acquired by it or by any other Group Company; |
16.5.2.2 | sell, transfer or otherwise dispose of any of its receivables on recourse terms; |
16.5.2.3 | enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or |
16.5.2.4 | enter into any other preferential arrangement having a similar effect, |
in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.
16.5.3 | Clauses 16.5.1 and 16.5.2 and do not apply to Permitted Encumbrances or to Permitted Disposals. |
16.6 | Acquisitions |
Not acquire a company or any shares or securities or a business or undertaking (or, in each case, any interest in any of them) in excess of R100 000 000 (One Hundred Million Rand) in aggregate in any Financial Year, other than the President Steyn Acquisition.
16.7 | Gold Forward Sales |
Not, without the prior written consent of the Facility Agent, conclude any gold forward sales contracts.
17. | FINANCIAL COVENANTS |
17.1 | Financial Condition |
The Borrower shall ensure that for so long as any amount is outstanding under a Finance Document:
17.1.1 | the Interest Cover Ratio shall not be less than 2 (two) times; |
17.1.2 | the Current Ratio shall not be less than 1 (one) time; |
17.1.3 | as at each Ratio Test Date cash flows from operating activities (excluding capital expenditure and as stated in the Borrowers cash flow statement) for the previous 6 (six) months shall at all times have been above R100 000 000 (One Hundred Million Rand); and |
17.1.4 | the Market Capitalisation to Facilities Outstanding Ratio shall not be less than 6 (six) times. |
17.2 | Financial Testing |
The Financial Covenants shall be tested on each Ratio Test Date by reference to the unaudited and/or audited consolidated financial statements of the Group, as applicable, in respect of the relevant Ratio Test Period.
17.3 | Breach of a Financial Condition Undertaking |
17.3.1 | Immediately upon becoming aware of a breach of any of the Financial Covenants, each Obligor shall notify the Facility Agent (and provide such details about the breach as the Facility Agent may request) (unless that Obligor is aware that a notification has already been provided by another Obligor). |
17.3.2 | In the event that the requirement set out in clause 17.1.3 is breached: |
17.3.2.1 | once, the Borrower shall not be entitled to utilise the RCF Facility or any available amount under the Term Facility B until such breach is remedied; |
17.3.2.2 | on two consecutive Ratio Test Dates, such breach shall constitute an Event of Default: |
provided that in either circumstance the Borrower shall not be entitled to make, declare and/or pay any Distributions.
17.3.3 | Should the Market Capitalisation to Facilities Outstanding Ratio be less than 9 (nine) times (but greater than 6 (six) times), the Borrower shall not be entitled to make, declare and/or pay any Distributions until such time as the Market Capitalisation to Facilities Outstanding Ratio is in excess of 9 (nine) times. |
18. | EVENTS OF DEFAULT |
18.1 | Events of Default |
Each of the events set out in this clause 18.1 is an Event of Default (whether or not caused by any reason whatsoever outside the control of the Borrower, any other Obligor or any other person).
18.1.1 | Non-Payment |
The Borrower fails to pay any sum due from it hereunder at the time, in the currency and in the manner specified herein, unless:
18.1.1.1 | its failure to pay is caused by an administrative or technical error; and |
18.1.1.2 | payment is made within 2 (two) Business Days of its due date. |
18.1.2 | Financial Covenant |
Any requirement of clause 17 ( Financial Covenants ) is not satisfied.
18.1.3 | Other Obligations |
Subject to clause 18.2 ( Remedy ), an Obligor does not comply with any of its obligations when performance is due under the Finance Documents (other than those referred to in clause 18.1.1 ( Non-Payment ), clause 18.1.2 ( Financial Covenants ) and clause 18.1.4 ( Security )).
18.1.4 | Security |
18.1.4.1 | Any Obligor fails to perform or comply with any of the material obligations assumed by it in a Security Document to which it is a party. |
18.1.4.2 | Any Finance Document becomes unenforceable unless, to the extent possible, the Obligors and the Facility Agent are able to agree within a period of 30 (thirty) days after becoming aware thereof to the amendment or restructuring of such Finance Document in order to render it enforceable. |
18.1.5 | Misrepresentation |
Any representation or statement made or deemed to be made by any Obligor in the Finance Documents or any other document delivered by or on behalf of any Obligor under or in connection with any Finance Document is or proved to have been incorrect or misleading when made or deemed to be made in any material respect.
18.1.6 | Insolvency |
18.1.6.1 | Any Obligor is unable to pay its debts as they fall due, commences negotiations with any one or more of its creditors with a view to the general readjustment or rescheduling of its Indebtedness or makes a general assignment for the benefit of or a composition, or compromise with its creditors. |
18.1.6.2 | Any Obligor takes any corporate action or other steps are taken or legal proceedings are started by that Obligor for its winding-up (whether provisional or final), dissolution or administration or for the appointment of a liquidator, receiver, administrator, administrative receiver, trustee, business rescue practitioner or similar officer of it or of any or all of its revenues and assets. |
18.1.6.3 | Any execution is levied against, or an encumbrancer takes possession of the whole or any part of, the property, undertaking or assets of any Obligor and Obligor fails within 10 (ten) Business Days after becoming aware, or after it should reasonably have become aware, of such execution, and/or possession, as the case may be, to take the necessary steps to have such execution, and/or possession, as the case may be, set aside and thereafter successfully pursue such steps with due diligence. |
18.1.6.4 | Any Obligor commits an act defined in terms of Section 344 of the Companies Act or any analogous or equivalent act under the New Companies Act. |
18.1.7 | Insolvency Proceedings |
Any corporate action, legal proceedings or other similar procedure or steps are taken in relation to:
18.1.7.1 |
the suspension of payments, a moratorium of any indebtedness, winding-up, the entering into of business rescue proceedings, dissolution or administration (by way of voluntary arrangement, scheme of arrangement or otherwise) of or in relation to any Obligor other than (in respect of any service of an application, or taking of any similar step for the liquidation, bankruptcy, judicial management, winding-up, dissolution or administration of the Obligor) where such action is dismissed, withdrawn or discharged within 5 (five) Business Days of its presentation or such step being |
taken (or, if the Obligor demonstrates to the Facility Agents satisfaction within such 5 (five) Business Days period that such action is frivolous or vexatious (by way of an opinion by a Senior Counsel of at least 10 (ten) years standing, that the relevant Obligor has a reasonable prospect of defending that action)); |
18.1.7.2 | the implementation of any business rescue proceedings (or any similar proceedings in respect of it or all or a material part of its assets); |
18.1.7.3 | a composition, compromise, assignment or arrangement with the creditors of any Obligor; |
18.1.7.4 | the appointment of a liquidator, receiver, administrator, administrative receiver, judicial manager, compulsory manager, business rescue practitioner or other similar officer in respect of any Obligor or any of its assets; or |
18.1.7.5 | enforcement of any security interest over any assets of any Obligor, |
or any analogous procedure or step is taken in any jurisdiction.
18.1.8 | Failure to comply with Final Judgement |
Any Obligor fails within 10 (ten) Business Days of the due date to comply with or pay any sum due from it under any final judgement or any final order made or given by any court of competent jurisdiction.
18.1.9 | Cessation of Business |
18.1.9.1 | Any Obligor permanently suspends, is unable to or ceases for any reason whatsoever to conduct its normal line of business in the ordinary and regular manner. |
18.1.9.2 |
Any Obligor sells, transfers or otherwise disposes of in any one transaction or a series of transactions (whether or not related), a |
material portion of its business or changes its asset structure and as a result of the disposal, it would in the reasonable opinion of the Facility Agent be unable to perform or observe its obligations under any Finance Document to which it is a party. |
18.1.10 | Cross-Default |
18.1.10.1 | Any Financial Indebtedness of any Obligor is not paid when due nor within any originally applicable grace period. |
18.1.10.2 | Any Financial Indebtedness of any Obligor is declared to be or otherwise becomes due and payable prior to a specified maturity as a result of an event of default (however described). |
18.1.10.3 | Any commitment for any Financial Indebtedness of any Obligor is cancelled or suspended by a creditor of that Obligor as a result of an event of default (however described). |
18.1.10.4 | Any creditor of any Obligor becomes entitled to declare any Financial Indebtedness of any Obligor due and payable prior to its specified maturity as a result of an event of default (however described). |
18.1.11 | Governmental Intervention |
By or under the authority of any government:
18.1.11.1 | the management of any Obligor is wholly or substantially replaced or the authority of any Obligor in the conduct of its business is wholly or substantially curtailed; or |
18.1.11.2 | all or a majority of the issued shares of any Obligor, or the whole or any part of its revenues or assets is seized, nationalised, expropriated or compulsorily acquired. |
18.1.12 | Repudiation |
Any Obligor repudiates any Finance Document to which it is a party.
18.1.13 | Failure to Maintain Authorisations |
At any time any Authorisation, act, condition or thing required to be done, fulfilled or performed in order:
18.1.13.1 | to enable any Obligor lawfully conduct its business, or to enter into, exercise its rights under and perform the obligations expressed to be assumed by it in any Finance Document to which it is a party; |
18.1.13.2 | to ensure that the obligations expressed to be assumed by any Obligor in any Finance Document to which it is a party are legal, valid and binding; or |
18.1.13.3 | to make any Finance Document to which any Obligor is a party admissible in evidence in South Africa, |
is not done, fulfilled or performed.
18.1.14 | Unlawfulness |
It is or becomes unlawful for any Obligor to perform any of its obligations under the Finance Documents to which it is a party other than any obligations which the Facility Agent considers to be not material or which it is satisfied is adequately provided for in any other Finance Document (including a Finance Document which is entered into in replacement of the document under which it was unlawful for such Obligor to perform its obligations) or unless the Obligor and the Facility Agent agree within a period of 30 (thirty) days after the occurrence of such unlawfulness or such unlawfulness comes to the attention of the Facility Agent, whichever is the earlier, to the amendment or restructuring of such Finance Document in order to avoid such unlawfulness.
18.1.15 | Material Adverse Change |
Any event (or any series of events) or circumstances occurs (or any existing circumstance continued) which is likely to result in a Material Adverse Change.
18.2 | Remedy |
18.2.1 | No Event of Default under clause 18.1 ( Events of Default ) (other than those referred to in clauses 18.1.1 ( Non-Payment ), 18.1.2 ( Financial Covenants ) and 18.1.4 ( Security )) will occur if the failure to comply or circumstance giving rise to the same is capable of remedy and is remedied within 10 (ten) Business Days, or such further period as the Facility Agent may agree, of the Facility Agent giving notice to the Borrower or any Obligor becoming aware of the failure to comply. |
18.2.2 | For the purposes of clause 18.2.1, the events or circumstances referred to in clause 18.1.6 ( Insolvency ), clause 18.1.8 ( Failure to comply with Final Judgement ), clause 18.1.9 ( Cessation of Business ), clause 18.1.11 ( Governmental Intervention ), clause 18.1.14 ( Unlawfulness) and clause 18.1.15 ( Material Adverse Change ) shall be deemed to be incapable of remedy save to the extent set out therein. |
18.3 | Acceleration |
If any Event of Default occurs which is continuing, the Facility Agent shall be entitled, in its sole discretion and without prejudice to any other rights or remedies which the Finance Parties may have under any of the Finance Documents or otherwise in terms of South African law, by written notice to the Borrower:
18.3.1 |
to claim immediate payment of all Facility Outstandings (including but not limited to capital and interest and amounts in respect of duties, fees and charges owing by the Borrower to the Finance Parties under the Finance Documents) regardless of whether or not such amounts are then otherwise |
due and payable, all of which amounts shall, upon the delivery of such a notice, immediately become due and payable; and/or |
18.3.2 | to declare the Facility Outstandings to be due and payable upon demand; and/or |
18.3.3 | demand and be entitled to receive specific performance of the relevant obligation of the Finance Documents (if any) breached by the Obligor; and/or |
18.3.4 | take all steps which it regards as desirable in order to enforce, or perfect the security interest created or evidenced by any one or more Security Document; and/or |
18.3.5 | cancel the whole or part of the Facilities; and/or |
18.3.6 | claim payment from the Borrower of any and all Breakage Costs, damages, costs and other amounts incurred directly as a result of such Event of Default less the amount of any Breakage Gains. |
18.4 | If pursuant to clause 18.3.2 the Facility Agent declares the Facility Outstandings to be due and payable on demand of the Facility Agent then, and at any time thereafter, the Facility Agent may by written notice to the Borrower call for repayment of the Facility Outstandings mutatis mutandis in accordance with clause 18.3 on such date as it may specify in such notice (whereupon the same shall become due and payable on such date), or withdraw its declaration with effect from such date as it may specify in such notice. |
19. | TAXES |
19.1 |
All payments to be made by the Borrower to the Lenders under the Finance Documents shall be made free and clear of and without deduction for or on account of tax unless the Borrower is required to make such a payment subject to the deduction or withholding of tax, in which case the sum payable by the Borrower in respect of which such deduction or withholdings is required to be |
made shall be increased to the extent necessary to ensure that, after the making of the required deduction or withholding, the Finance Parties receive and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding been made or required to be made.
19.2 | Without prejudice to the provisions of clause 19.1, if the Finance Parties are required to make any payment on account of tax (not being a tax imposed on the net income of the Finance Parties by the jurisdiction in which it is incorporated) or otherwise on or in relation to any sum received or receivable by it hereunder (including, without limitation, any sum received or receivable under this clause 19) or any liability in respect of any such payment is asserted, imposed, levied or assessed against the Finance Parties, the Borrower shall, upon demand, promptly indemnify the Finance Parties against such payment or liability, together with any interest, penalties and expenses payable or incurred in connection therewith. |
19.3 | If the Finance Parties intend to make a claim pursuant to clause 19.2, it shall notify the Borrower of the event by reason of which it is entitled to make such claim; provided that nothing herein shall require the Finance Parties to disclose any confidential information relating to the organisation of its affairs. |
19.4 |
The liability of the Borrower to the Finance Parties in terms of this clause 19 ( Taxes ) will be reduced by any tax credit granted to the Finance Parties in respect of the tax liabilities referred to in this clause 19. The Finance Parties undertake to diligently pursue the granting of any such tax credits; provided that, if in the opinion of the Finance Parties they will not be successful in obtaining such tax credits, the Finance Parties will be obliged, on written request by the Borrower to obtain an opinion, at the Borrowers cost by Senior Counsel of at least 10 (ten) years standing regarding whether there is a reasonable prospect of success in any such proceedings. In the event that the aforesaid Senior Counsels opinion states that there is a reasonable prospect of success the Finance Parties shall be obliged to pursue the granting of such tax credits. The |
Borrower hereby indemnifies and holds the Finance Parties harmless against, and shall on written demand pay to the Finance Parties, all reasonable costs incurred by it in pursuing the granting of such tax credits. |
20. | TAX RECEIPTS |
20.1 | If, at any time, the Borrower is required by law to make any deduction or withholding from any sum payable by it hereunder (or if thereafter there is any change in the rates at which or the manner in which such deductions or withholdings are calculated), the Borrower shall promptly notify the Facility Agent. |
20.2 | If the Borrower makes any payment hereunder in respect of which it is required to make any deduction or withholding, it shall pay the full amount required to be deducted or withheld to the relevant taxation or other authority within the time allowed for such payment under applicable law and shall deliver to the Facility Agent, within 30 (thirty) days after it has made such payment to the applicable authority, an original receipt (or a certified copy thereof) issued by such authority evidencing the payment to such authority of all amounts so required to be deducted or withheld in respect of such payment. |
21. | INCREASED COSTS |
21.1 | Increased costs |
21.1.1 | Subject to clause 21.3 ( Exceptions ) the Borrower shall, within 5 (five) Business Days of a demand by the Facility Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the Signature Date. |
21.1.2 | In this Agreement Increased Costs means: |
21.1.2.1 | a reduction in the rate of return from a Facility or on a Finance Partys (or its affiliates) overall capital; |
21.1.2.2 | an additional or increased cost; or |
21.1.2.3 | a reduction of any amount due and payable under any Finance Document, |
which is incurred or suffered by a Finance Party or any of its affiliates to the extent that it is attributable to that Finance Party funding or performing its obligations under any Finance Document.
21.2 | Increased cost claims |
21.2.1 | A Finance Party intending to make a claim pursuant to clause 21.1 ( Increased costs ) shall notify the Facility Agent of the event giving rise to the claim, following which the Facility Agent shall promptly notify the Borrower. |
21.2.2 | Each Finance Party shall, as soon as practicable after a demand by the Facility Agent, provide a certificate in accordance with clause 22 ( Certificate of Indebtedness ) confirming the amount of its Increased Costs. |
21.3 | Exceptions |
Clause 21.1 ( Increased costs ) does not apply to the extent any Increased Cost is:
21.3.1 | attributable to a tax deduction required by law to be made by an Obligor; |
21.3.2 | compensated for by clause 19 ( Taxes ) or clause 20 (Tax Receipts) ; or |
21.3.3 | attributable to the wilful breach by the relevant Finance Party or its affiliates of any law or regulation. |
22. | CERTIFICATE OF INDEBTEDNESS |
A certificate signed by any director or manager of the Facility Agent (whose appointment need not be proved) as to the existence of and the amount of
Indebtedness by the Borrower to the Finance Parties, that such amount is due and payable, the amount of interest accrued thereon and as to any other fact, matter or thing related to the Borrowers Indebtedness to the Finance Parties in terms of this Agreement, shall be sufficient proof of the contents and correctness thereof for the purposes of provisional sentence, summary judgment or any other proceedings, shall be valid as a liquid document for such purpose and shall, in addition, be prima facie proof for purposes of pleading or trial in any action instituted by the Finance Parties arising herefrom.
23. | SET-OFF |
The Borrower authorises the Finance Parties to apply any credit balance to which an Obligor is entitled on any account of an Obligor with the Finance Parties in satisfaction of any sum due and payable by the Borrower to the Finance Parties hereunder but unpaid. The Finance Parties shall not be obliged to exercise any rights given to it by this clause 23.
24. | CHANGE OF PARTY |
24.1 | No Cession, Delegation or Assignment |
No Party may cede or assign any of its rights or delegate or transfer any of its obligations in respect of any Finance Documents or the Facility Outstandings except as permitted under this clause 24.
24.2 | Assignments and Transfers by the Lenders |
24.2.1 |
Subject to clause 24.3 ( Conditions of Cession or Delegation ), a Lender (the Existing Lender ) may (at no expense to any Obligor) cede any of its rights and/or delegate any of its obligations under this Agreement and any corresponding rights or obligations under any other Finance Document to any financial institution without the consent of any Obligor or any other Party (the New Lender ), and the Obligors hereby expressly consent to any such cession of rights and/or delegation of obligations as contemplated herein. To the extent that any splitting of claims arises as a |
consequence of any such cession, assignment and/or delegation, as the case may be, the Obligors hereby consents to such splitting of claims. |
24.3 | Conditions of Cession or Delegation |
24.3.1 | A cession or delegation as contemplated in clause 24.2 ( Assignment and Transfers by the Lenders) will only be effective if the procedure set out in clause 24.5 ( Procedure for Transfer ) is complied with. |
24.3.2 | If: |
24.3.2.1 | a Lender cedes, assigns or transfers any of its rights or obligations under the Finance Documents; and |
24.3.2.2 | as a result of circumstances existing as at the date on which the cession, assignment, transfer or change occurs, an Obligor would be obliged to make payment to the New Lender under clause 19 ( Taxes ) and clause 21 ( Increased Costs ), |
then the New Lender is only entitled to receive payment under that clause or to enforce or require performance of such obligation to the same extent as the Existing Lender would have been if the cession, assignment, transfer or change had not occurred.
24.4 | Limitation of Responsibility of Existing Lenders |
24.4.1 | Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for: |
24.4.1.1 | the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents; |
24.4.1.2 | the financial condition of any Obligor; |
24.4.1.3 | the performance and observance by any Obligor of its obligations under the Finance Documents or any other documents; or |
24.4.1.4 | the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document, |
and any representations or warranties implied by law are excluded.
24.4.2 | Each New Lender confirms to the Existing Lender and the other Finance Parties that it: |
24.4.2.1 | has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in the Finance Documents and has not relied on any information provided to it by the Existing Lender or any other Finance Party in connection with any Finance Documents; and |
24.4.2.2 | will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities whilst any amount is or may be outstanding under the Finance Documents. |
24.4.3 | Nothing in any Finance Document obliges an Existing Lender to: |
24.4.3.1 | accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this clause 24; or |
24.4.3.2 | support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Finance Documents or otherwise. |
24.5 | Procedure for Transfer |
24.5.1 | Subject to the conditions set out in clause 24.3 ( Conditions of Cession or Delegation ) a transfer is effected in accordance with clause 24.5.2 when the Facility Agent: |
24.5.1.1 | executes an otherwise duly completed Cession and Delegation Agreement delivered to it by the Existing Lender; and |
24.5.1.2 | a duly completed Accession Undertaking is delivered to it by the Existing Lender ( Transfer Date ). |
24.5.2 | On the Transfer Date: |
24.5.2.1 | to the extent that in the Cession and Delegation Agreement the Existing Lender seeks to transfer by cession and delegation its rights and obligations in whole or part ( Transferred Rights and Obligations ) under the Finance Documents, the Existing Lender shall be released from the Transferred Rights and Obligations ; |
24.5.2.2 | each of the Obligors and the New Lender shall assume the Transferred Rights and Obligations towards one another; |
24.5.2.3 | the Facility Agent, the New Lender and the other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Existing Lenders shall each be released from further obligations to each other under the Finance Documents; and |
24.5.2.4 | the New Lender shall become a party to the relevant Finance Documents as a Lender . |
24.6 | Copy of Cession and Delegation Agreement to the Borrower |
The Facility Agent shall, as soon as reasonably practicable after it has executed a Cession and Delegation Agreement, send to the Borrower a copy of that Cession and Delegation Agreement and Accession Undertaking.
24.7 | Disclosure of Information |
24.8 | Any Lender may disclose to any of its affiliates and any other person: |
24.8.1 | to (or through) whom that Lender cedes, assigns or transfers (or may potentially assign or transfer) all or any of its rights and obligations under the Finance Documents; |
24.8.2 | with (or through) whom that Lender enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, the Finance Documents or any Obligor; or |
24.8.3 | to whom, and to the extent that, information is required to be disclosed by any applicable law or regulation, |
any information about an Obligor, the Group and the Finance Documents as that Lender shall (acting reasonably) consider appropriate for the purpose of that actual or potential cession, assignment, transfer or sub-participation if, in relation to clauses 24.8.1 and 24.8.2, the person to whom the information is to be given has entered into a Confidentiality Undertaking in favour of the relevant Obligor(s) or Group Company(ies).
24.9 | No Change of Obligor |
No Obligor shall cede, assign or transfer any of its rights or delegate any of its obligations under any Finance Document.
25. | INTEREST ON ARREAR AMOUNTS AND INDEMNITY |
25.1 | Interest calculated at the Default Interest Rate shall accrue on the outstanding balance of all Unpaid Sums. Such interest shall be calculated on a daily basis from the due date of each such Unpaid Sum to (but excluding) date of payment thereof, shall be compounded monthly in arrears and shall be paid by the Borrower on demand. |
25.2 | The Borrower hereby indemnifies and holds the Finance Parties harmless against any costs, claim, loss, expense (including legal fees on the scale as between attorney and own client) or liability together with any VAT thereon, which they may sustain or incur as a consequence of the occurrence of any Default by the Borrower in the performance of any of the obligations expressed to be assumed by it in this Agreement. |
26. | FACILITY AGENT |
26.1 | Appointment of the Facility Agent |
26.1.1 | Each of the Lenders appoints the Facility Agent to act as its agent under and in connection with the Finance Documents, and authorises the Facility Agent to exercise the rights, powers, authorities and discretions specifically given to the Facility Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions. |
26.1.2 | Notwithstanding anything to the contrary in this Agreement, the Finance Parties shall, act through the Facility Agent as contemplated in this clause 26. |
26.1.3 | There shall be no change to the Facility Agent without the Borrowers written consent. |
26.2 | Duties of the Facility Agent |
26.2.1 | The Facility Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Facility Agent for that Party by any other Party. |
26.2.2 | Except where a Finance Document specifically provides otherwise, the Facility Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party. |
26.2.3 | If the Facility Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties. |
26.2.4 | If the Facility Agent is aware of the non-payment of any principal, interest or fee payable to a Finance Party (other than the Facility Agent) under this Agreement it shall promptly notify the other Finance Parties. |
26.2.5 | The Facility Agents duties under the Finance Documents are solely mechanical and administrative in nature. |
26.2.6 | Nothing in this Agreement constitutes the Facility Agent as a fiduciary of any other person. |
26.2.7 | The Facility Agent shall not be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account. |
26.3 | Business with the Group |
The Facility Agent may accept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the Group.
26.4 | Rights and discretions |
26.4.1 | The Facility Agent may rely on: |
26.4.1.1 | any representation, notice or document believed by it to be genuine, correct and appropriately authorised; and |
26.4.1.2 | any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify. |
26.5 | The Facility Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders) that: |
26.5.1 | no Default has occurred (unless it has actual knowledge of a Default); |
26.5.2 | any notice or request made by the Borrower is made on behalf of and with the consent and knowledge of all the Obligors. |
26.6 | The Facility Agent may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts. |
26.7 | The Facility Agent may act in relation to the Finance Documents through its personnel and agents. |
26.8 | The Facility Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement. |
26.9 | Notwithstanding any other provision of any Finance Document to the contrary, the Facility Agent is not obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality. |
26.10 | Majority Lenders instructions |
26.10.1 | Unless a contrary indication appears in a Finance Document, the Facility Agent shall: |
26.10.1.1 | exercise any right, power, authority or discretion vested in it as Facility Agent in accordance with any instructions given to it by the Majority Lenders (or, if so instructed by the Majority Lenders (as defined in the Intercreditor Agreement), refrain from exercising any right, power, authority or discretion vested in it as Facility Agent); and |
26.10.1.2 | not be liable for any act (or omission) if it acts (or refrains from taking any action) in accordance with an instruction of the Majority Lenders; |
26.10.2 | Until the Intercreditor Agreement is entered into, all references to Majority Lenders in clause 26.10.1 shall be deemed to be a reference to the Original Lender. |
26.10.3 | Unless a contrary indication appears in a Finance Document, any instructions given by the Majority Lenders will be binding on all the Lenders. |
26.10.4 | The Facility Agent may refrain from acting in accordance with the instructions of the Majority Lenders (or, if appropriate, the Lenders) until it has received such security as it may require for any cost, loss or liability (together with any associated VAT) which it may incur in complying with the instructions. |
26.10.5 | In the absence of instructions from the Majority Lenders, (or, if appropriate, the Lenders) the Facility Agent may act (or refrain from taking action) as it considers to be in the best interest of the Lenders. |
26.10.6 | The Facility Agent is not authorised to act on behalf of a Lender (without first obtaining that Lenders consent) in any legal or arbitration proceedings relating to any Finance Document. This clause 26.10.6 shall not apply to any legal or arbitration proceeding relating to the perfection, preservation or protection of rights under the Transaction Security Documents or enforcement of the Transaction Security or Transaction Security Documents. |
26.11 | Responsibility for documentation |
The Facility Agent is not:
26.11.1 | responsible for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Facility Agent, or an Obligor or any other person given in or in connection with any Finance Document or the transactions contemplated in the Finance Documents; or |
26.11.2 | responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or the Transaction Security or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Finance Document or the Transaction Security. |
26.12 | Exclusion of liability |
26.12.1 | The Facility Agent will not be liable for any action taken by it under or in connection with any Finance Document or the Transaction Security, unless directly caused by its gross negligence or wilful misconduct. |
26.12.2 | Nothing in this Agreement shall oblige the Facility Agent to carry out any know your customer or other checks required pursuant to the Financial Intelligence Centre Act, 2002 in relation to any person on behalf of any Lender and each Lender confirms to the Facility Agent that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Facility Agent. |
27. | CONFIDENTIALITY |
27.1 | Save with the prior written consent of the Borrower to the contrary, the Finance Parties will keep confidential and will not disclose to any person: |
27.1.1 | the details of any Finance Document, the details of the negotiations leading to any Finance Document, and the information handed over to such Party during the course of negotiations and the Term, as well as the details of all the transactions or Agreements contemplated in any Finance Document; and |
27.1.2 | all information relating to the business or the operations and affairs of the Group, |
(together Confidential Information ).
27.2 | The Finance Parties agree to keep all Confidential Information confidential and to disclose it only to its officers, directors, employees, consultants, shareholders, professional advisers and any person to whom the Finance Parties wish to cede any of its rights or delegate any of its obligations under any of the Finance Documents who: |
27.2.1 | have a need to know (and then only to the extent that each such person has a need to know); |
27.2.2 | are aware that the Confidential Information should be kept confidential; |
27.2.3 | are aware of the disclosing Partys undertaking in relation to such information in terms of this Agreement; and |
27.2.4 | have been directed by the disclosing Party to keep the Confidential Information confidential and have undertaken to keep the Confidential Information confidential. |
27.3 | The Finance Parties confirm that all employees, officers and directors are contractually bound to maintain confidentiality and shall procure that each consultant, shareholder and/or professional advisor enters in a confidentiality undertaking in favour of the Borrower on substantially the same terms and conditions as this clause 27. |
27.4 | The obligations of the Finance Parties in relation to the maintenance and non-disclosure of Confidential Information in terms of this Agreement do not extend to information that: |
27.4.1 | is disclosed to the receiving Party in terms of this Agreement but at the time of such disclosure such information is known to be in the lawful possession or control of that Party and not subject to an obligation of confidentiality; or |
27.4.2 | is or becomes public knowledge, otherwise than pursuant to a breach of this Agreement by the Finance Parties (or its offices, directors or employee) who received such Confidential Information; or |
27.4.3 | is required by the provisions of any law, statute or regulation or during any court proceedings, or by the rules or regulations of any recognised stock exchange to be disclosed and subject to the provisions of clause 27.5, the Party required to make the disclosure has taken all reasonable steps to oppose or prevent the disclosure of and to limit, as far as reasonably possible, the extent of such disclosure and has consulted with the other Parties prior to making such disclosure. |
27.5 | The Finance Parties agree to notify the Borrower in the event of a disclosure of the Confidential Information under clause 27.4.3, or upon a breach of this clause 27 coming to the Finance Parties knowledge. |
27.6 | If so requested by the Borrower in writing, the Finance Parties shall use reasonable endeavours to enforce their rights against any offices, director, employee and/or representative who breaches clause 27.2. |
27.7 | The provisions of this clause 26 shall survive the termination of this Agreement, but shall terminate 24 (twenty-four) months from the termination of this Agreement. |
27.8 | The Finance Parties acknowledge that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation relating to insider dealing, and the Finance Parties shall not use any of the Confidential Information for unlawful purposes. |
28. | FEES AND EXPENSES |
28.1 | Fees |
The Borrower shall pay to the Lenders the fees contemplated in the Fee Letters, in the amounts agreed and on the dates stipulated therein.
28.2 | Exit Fees |
28.2.1 | Should the Borrower pre-pay any sum pursuant to clause 7 ( Voluntary Prepayment ) within: |
28.2.1.1 | 24 (twenty four) months of Financial Close, where such prepayment is in respect of the Term Facility A; or |
28.2.1.2 | 24 (twenty four) months of New Facilities Financial Close, where such prepayment is in respect of the Term Facility B or the RCF Facility, |
and such prepayment is not funded by way of:
28.2.1.3 | cash generated by the business operations of the Group; and/or |
28.2.1.4 | a Permitted Disposal; and/or |
28.2.1.5 | the raising of ordinary share capital, |
the Borrower shall pay to the Lenders an exit fee in an amount equal to 2% (two percent) of the Facility Outstandings, plus VAT thereon on the date of such prepayment pursuant to clause 7 ( Prepayment ).
28.2.2 | Notwithstanding clause 28.2.1, should the Borrower elect to prepay the Facility Outstandings as contemplated by clause 28.2.1 following the occurrence of a Market Disruption Event, no exit fee will be payable by the Borrower, provided that such prepayment is financed by a financial institution on terms and conditions (including interest rates) better than those offered by the Original Lender. |
28.3 | Expenses |
28.3.1 | The Borrower shall pay to, or at the direction of, the Facility Agent all reasonable expenses (including legal expenses on the scale as between attorney and own client, printing and out-of-pocket expenses) incurred by the Finance Parties in connection with the negotiation, preparation and completion of the Finance Documents and any related documents, including without limitation all fees and expenses payable to the Legal Adviser, within 30 (thirty) days of invoice. |
28.3.2 | The Borrower shall on demand pay to, or at the direction of, the Facility Agent all expenses (including legal and out-of-pocket expenses on the attorney and own client scale), charges and disbursements and fees of a like nature, including all taxes, incurred by the Finance Parties in preserving, enforcing or defending, or attempting to preserve, enforce or defend, any of their rights under the Finance Documents or any such related documents, save where the Borrower successfully disputes that the Finance Parties are entitled to enforce any such rights. |
28.4 | Stamp Duty |
The Borrower shall pay all stamp, documentary and other similar duties and taxes to which any of the Finance Documents or any such related documents may be subject or give rise and indemnifies the Finance Parties from and against any losses or liabilities which the Finance Parties may incur as a result of any delay or omission by the Borrower to pay any such duties or taxes.
28.5 | Value Added Tax |
The amounts stated in the Finance Documents to be payable by the Borrower are exclusive of VAT and accordingly the Borrower shall pay on demand:
28.5.1 | any VAT properly chargeable in respect of services to the Borrower as contemplated by any of the Finance Documents (including any VAT chargeable by the Finance Parties under the Finance Documents); and |
28.5.2 | any VAT chargeable in the case of goods or services supplied to, or other costs, fees and expenses incurred by, the Finance Parties in connection with the Finance Documents and which are to be met by the Borrower or in respect of which the Borrower has agreed to indemnify the Finance Parties. |
29. | NOTICES AND DOMICILIA |
29.1 | Notices |
29.1.1 | Each Party chooses the addresses set out opposite its name below as its addresses to which any written notice in connection with the Finance Documents may be addressed. |
29.1.1.1 | Original Lender: |
Nedbank Limited
Block F, 4 th Floor
135 Rivonia Road
SANDOWN
2196
Telefax No: (011) 295-2746
Attention: Head of Transaction Management
29.1.1.2 | Facility Agent: |
Nedbank Limited
Block F, 4 th Floor
135 Rivonia Road
SANDOWN
2196
Telefax No: (011) 295-2746
Attention: Head of Transaction Management
29.1.1.3 | Obligors: |
Block 27
Randfontein Office Park
Cnr Main Reef Road and Ward Avenue
RANDFONTEIN
Telefax No: 011 684 0188
Attention: The Company Secretary
29.1.2 | Any notice or communication required or permitted to be given in terms of the Finance Documents shall be valid and effective only if in writing but it shall be competent to give notice by telefax transmitted to its telefax number set out opposite its name above. |
29.1.3 |
Any Party may by written notice to the other Parties change its chosen physical addresses and/or telefax number for the purposes of clause 29.1.1 to any other address(es) and/or telefax number, provided that the change shall become effective on the 14 th (fourteenth) day after the receipt of the notice by the addressee. |
29.1.4 | Any notice given in terms of this Agreement shall: |
29.1.4.1 |
if sent by a courier service be deemed to have been received by the addressee on the 7 th (seventh) Business Day following the date of such sending; |
29.1.4.2 | if delivered by hand be deemed to have been received by the addressee on the date of delivery; |
29.1.4.3 |
if transmitted by facsimile be deemed to have been received by the addressee on the 1 st (first) Business Day after the date of transmission, |
unless the contrary is proved.
29.1.5 | Notwithstanding anything to the contrary herein contained, a written notice or communication actually received by a Party shall be an adequate written notice or communication to it, notwithstanding that it was not sent to or delivered at its chosen address and/or telefax number. |
29.2 | Domicilia |
29.2.1 | Each of the Parties chooses its physical address referred to in clause 29.1.1 as its domicilium citandi et executandi at which documents in legal proceedings in connection with this Agreement may be served. |
29.2.2 |
Any Party may by written notice to the other Party change its domicilium from time to time to another address, not being a post office box or a poste restante , in South Africa; provided that any such change shall only be effective on the 14 th (fourteenth) day after deemed receipt of the notice by the other Party pursuant to clause 29.1.5. |
30. | GOVERNING LAW |
The entire provisions of this Agreement shall be governed by and construed in accordance with the laws of South Africa.
31. | JURISDICTION |
The Parties hereby irrevocably and unconditionally consent to the non-exclusive jurisdiction of the South Gauteng High Court (Johannesburg) in regard to all matters arising from this Agreement.
32. | SEVERABILITY |
Each provision in this Agreement is severable from all others, notwithstanding the manner in which they may be linked together or grouped grammatically, and if in terms of any judgment or order, any provision, phrase, sentence, paragraph or clause is found to be defective or unenforceable for any reason, the remaining provisions, phrases, sentences, paragraphs and clauses shall nevertheless continue to be of full force. In particular, and without limiting the generality of the aforegoing, the Parties hereto acknowledge their intention to continue to be bound by this Agreement notwithstanding that any provision may be found to be unenforceable or void or voidable, in which event the provision concerned shall be severed from the other provisions, each of which shall continue to be of full force.
33. | GENERAL |
33.1 | This document constitutes the sole record of the agreement between the Parties in regard to the subject matter thereof. |
33.2 | No Party shall be bound by any express or implied term, representation, warranty, promise or the like, not recorded herein. |
33.3 | No addition to, variation or consensual cancellation of this Agreement and no extension of time, waiver or relaxation or suspension of any of the provisions or terms of this Agreement shall be of any force or effect unless in writing and signed by or on behalf of all the Parties. |
33.4 | No latitude, extension of time or other indulgence which may be given or allowed by any Party to any other Party in respect of the performance of any obligation hereunder or enforcement of any right arising from this Agreement and no single or partial exercise of any right by any Party shall under any circumstances be construed to be an implied consent by such Party or operate as a waiver or a novation of, or otherwise affect any of that Partys rights in terms of or arising from this Agreement or estop such Party from enforcing, at any time and without notice, strict and punctual compliance with each and every provision or term hereof. |
33.5 | The Parties undertake at all times to do all such things, to perform all such acts and to take all such steps and to procure the doing of all such things, the performance of all such actions and the taking of all such steps as may be open to them and necessary for or incidental to the putting into effect or maintenance of the terms, conditions and import of this Agreement. |
33.6 | Save as is specifically provided in this Agreement, no Party shall be entitled to cede, assign or delegate any of its rights or obligations under this Agreement without the prior written consent of the other Parties affected by such transfer of rights or obligations, which consent may not unreasonably be withheld or delayed. |
34. | COUNTERPARTS |
This Agreement may be executed in any number of counterparts and by different Parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement.
THE NEXT PAGE IS THE SIGNATURE PAGE
SIGNED at SANDTON on this the 30 th day of NOVEMBER 2010
For and on behalf of |
NEDBANK LIMITED (acting through its NEDBANK CAPITAL division) |
|
Name: |
Capacity: |
Who warrants his authority hereto |
|
Name: |
Capacity: |
Who warrants his authority hereto |
For and on behalf of |
NEDBANK LIMITED (acting through its NEDBANK CORPORATE division) |
|
Name: |
Capacity: |
Who warrants his authority hereto |
|
Name: |
Capacity: |
Who warrants his authority hereto |
SIGNED at SANDTON on this the 30 th day of NOVEMBER 2010
For and on behalf of |
HARMONY GOLD MINING COMPANY LIMITED |
|
Name: |
Capacity: |
Who warrants his authority hereto |
SIGNED at SANDTON on this the 30 th day of NOVEMBER 2010
For and on behalf of |
AFRICAN RAINBOW MINERALS GOLD LIMITED |
|
Name: |
Capacity: |
Who warrants his authority hereto |
SIGNED at SANDTON on this the 30 th day of NOVEMBER 2010
For and on behalf of |
EVANDER GOLD MINES LIMITED |
|
Name: |
Capacity: |
Who warrants his authority hereto |
SIGNED at SANDTON on this the 30 th day of NOVEMBER 2010
For and on behalf of |
ARMGOLD/HARMONY JOINT INVESTMENT COMPANY (PROPRIETARY) LIMITED |
|
Name: |
Capacity: |
Who warrants his authority hereto |
SIGNED at SANDTON on this the 30 th day of NOVEMBER 2010
For and on behalf of |
ARMGOLD/HARMONY FREEGOLD JOINT VENTURE COMPANY (PROPRIETARY) LIMITED |
|
Name: |
Capacity: |
Who warrants his authority hereto |
SIGNED at SANDTON on this the 30 th day of NOVEMBER 2010
For and on behalf of |
RANDFONTEIN ESTATES LIMITED |
|
Name: |
Capacity: |
Who warrants his authority hereto |
SIGNED at SANDTON on this the 30 th day of NOVEMBER 2010
For and on behalf of |
AVGOLD LIMITED |
|
Name: |
Capacity: |
Who warrants his authority hereto |
SCHEDULE 1
CONDITIONS
Part 1 A: Existing Facility Advance Condition Documents
1. | The Borrower |
1.1 | A copy of a resolution of the board of directors of the Borrower: |
1.1.1 | approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving to execute those Finance Documents; |
1.1.2 | authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and |
1.1.3 | authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party. |
1.2 | A specimen of the signature of each person authorised by the resolution referred to in paragraph 1.1. |
1.3 | A certificate signed by an Authorised Signatory of the Borrower confirming that borrowing the Available Facility would not cause any borrowing or similar limit in its Constitutional Documents binding on it to be exceeded. |
1.4 | A certificate by an Authorised Signatory of the Borrower certifying that the copy of each document referred to in paragraphs 1.1 to 1.3 (both inclusive) is correct, complete and in full force and effect as at a date no earlier than the Signature Date, and certifying that the Constitutional Documents of the Borrower delivered pursuant to the Senior Facility Agreement (as defined in the Harmony Cession and Pledge in Security) remain in full force and effect and have not subsequently been amended. |
1.5 | A certificate of an Authorised signatory of the Borrower stating that: |
1.5.1 | the representations and warranties given by the Borrower in clause 13 ( Warranties and Representations ) of this Agreement shall be correct in all material respects at Financial Close; and |
1.5.2 | no Default shall have occurred at the date of Financial Close which is continuing. |
2. | The Guarantors |
2.1 | A copy of a resolution of the board of directors of each Guarantor: |
2.1.1 | approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving to execute those Finance Documents; |
2.1.2 | authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and |
2.1.3 | authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party. |
2.2 | A specimen of the signature of each person authorised by the resolution referred to in paragraph 2.1. |
2.3 | A certificate signed by an Authorised Signatory of each Guarantor confirming that guaranteeing the Facility Outstandings would not cause any guaranteeing or similar limit in its Constitutional Documents binding on it to be exceeded. |
2.4 | A certificate by an Authorised Signatory of each Guarantor certifying that the copy of each document referred to in paragraphs 2.1 to 2.3 (both inclusive) is correct, complete and in full force and effect as at a date no earlier than the Signature Date, and certifying that the Constitutional Documents of that Guarantor delivered pursuant to the Senior Facility Agreement (as defined in the ARM Cession and Pledge in Security) remain in full force and effect and have not subsequently been amended. |
2.5 | A certificate by an Authorised Signatory of each Guarantor stating that the representations and warranties given by that Guarantor in clause 13 ( Warranties and Representations ) of this Agreement shall be correct in all material respects at Financial Close. |
3. | Legal opinions |
3.1 | A legal opinion from Cliffe Dekker Inc. addressed to the Facility Agent relating, inter alia , to the due execution by each Obligor of the Finance Documents to which it is a party, and the authority of each Obligor to enter into the Finance Documents to which it is a party. |
3.2 | A legal opinion from the Legal Adviser addressed to the Facility Agent relating, inter alia , to the validity, legality and enforceability of the Finance Documents. |
4. | Finance Documents |
4.1 | A duly executed original of each of the following: |
4.1.1 | this Agreement; |
4.1.2 | the Harmony Cession and Pledge in Security; |
4.1.3 | the ARM Cession and Pledge in Security; |
4.1.4 | the First Fee Letter. |
4.2 | Each of the following in relation to shares pledged pursuant to the Security Documents: |
4.2.1 | the original share certificates in respect of such shares; |
4.2.2 | an original share transfer form duly signed by the pledgor of such shares and blank as to transferee; and |
4.2.3 | a resolution of the directors of the company, the shares of which are pledged, acknowledging such pledge and agreeing to give effect to any transfer of such shares pursuant to the terms of such pledge. |
4.3 | All notices required to be delivered and all acknowledgements required to be received under the terms of any Security Document. |
5. | Financial Information |
A copy of the Original Financial Statements.
Part 1 B: New Facility Advance Condition Documents
1. | The Borrower |
1.1 | A copy of a resolution of the board of directors of the Borrower: |
1.1.1 | approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving to execute those Finance Documents; |
1.1.2 | authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and |
1.1.3 | authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party. |
1.2 | A specimen of the signature of each person authorised by the resolution referred to in paragraph 1.1. |
1.3 | A certificate signed by an Authorised Signatory of the Borrower confirming that borrowing the Available Facility would not cause any borrowing or similar limit in its Constitutional Documents binding on it to be exceeded. |
1.4 | A certificate by an Authorised Signatory of the Borrower certifying that the copy of each document referred to in paragraphs 1.1 to 1.3 (both inclusive) is correct, complete and in full force and effect as at a date no earlier than the Signature Date, and certifying that the Constitutional Documents of the Borrower delivered pursuant to the Senior Facility Agreement (as defined in the Harmony Cession and Pledge in Security) remain in full force and effect and have not subsequently been amended. |
1.5 | A certificate of an Authorised signatory of the Borrower stating that: |
1.5.1 | the representations and warranties given by the Borrower in clause 13 ( Warranties and Representations ) of this Agreement shall be correct in all material respects at Financial Close; and |
1.5.2 | no Default shall have occurred at the date of Financial Close which is continuing. |
2. | The Guarantors |
2.1 | A copy of a resolution of the board of directors of each Guarantor: |
2.1.1 | approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving to execute those Finance Documents; |
2.1.2 | authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and |
2.1.3 | authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party. |
2.2 | A specimen of the signature of each person authorised by the resolution referred to in paragraph 2.1. |
2.3 | A certificate signed by an Authorised Signatory of each Guarantor confirming that guaranteeing the Facility Outstandings would not cause any guaranteeing or similar limit in its Constitutional Documents binding on it to be exceeded. |
2.4 | A certificate by an Authorised Signatory of each Guarantor certifying that the copy of each document referred to in paragraphs 2.1 to 2.3 (both inclusive) is correct, complete and in full force and effect as at a date no earlier than the Signature Date, and certifying that the Constitutional Documents of that Guarantor delivered pursuant to the Senior Facility Agreement (as defined in the ARM Cession and Pledge in Security) remain in full force and effect and have not subsequently been amended. |
2.5 | A certificate by an Authorised Signatory of each Guarantor stating that the representations and warranties given by that Guarantor in clause 13 ( Warranties and Representations ) of this Agreement shall be correct in all material respects at Financial Close. |
3. | Legal opinions |
3.1 | A legal opinion from Cliffe Dekker Inc. addressed to the Facility Agent relating, inter alia , to the due execution by each Obligor of the Finance Documents to which it is a party, and the authority of each Obligor to enter into the Finance Documents to which it is a party. |
3.2 | A legal opinion from the Legal Adviser addressed to the Facility Agent relating, inter alia , to the validity, legality and enforceability of the Finance Documents. |
4. | Finance Documents |
4.1 | A duly executed original of each of the following: |
4.1.1 | this Agreement; |
4.1.2 | the first addendum to the Harmony Cession and Pledge in Security; |
4.1.3 | the first addendum to the ARM Cession and Pledge in Security; |
4.1.4 | the Second Fee Letter. |
4.2 | Each of the following in relation to shares pledged pursuant to the Security Documents: |
4.2.1 | the original share certificates in respect of such shares; |
4.2.2 | an original share transfer form duly signed by the pledgor of such shares and blank as to transferee; and |
4.2.3 | a resolution of the directors of the company, the shares of which are pledged, acknowledging such pledge and agreeing to give effect to any transfer of such shares pursuant to the terms of such pledge. |
4.3 | All notices required to be delivered and all acknowledgements required to be received under the terms of any Security Document. |
5. | Financial Information |
A copy of the Original Financial Statements.
Part 2 A: Existing Facility Advance Conditions
The Lenders shall only be obliged to make the Advance in terms of this Agreement if:
1. | no Default shall have occurred or be continuing; |
2. | the warranties and representations made in clause 13 ( Warranties and Representations ) of this Agreement shall be correct and will be correct in all material respects immediately after the making of the Advance; |
3. | in the reasonable opinion of the Facility Agent there has been no Material Adverse Change in either the Borrower or any of the Obligors since the date of the Original Financial Statements which could be expected to affect the ability of the Borrower to fulfil its obligations in terms of the Finance Documents in an adverse manner; |
4. | in the reasonable opinion of the Facility Agent there has been no Material Adverse Change since the Signature Date; |
5. | the Original Lender has obtained all internal approvals necessary in order to conclude the Finance Documents, including but not limited to the approvals of the Lenders board of directors and credit committee; and |
6. | the Facility Agent is satisfied that the Borrower has obtained all relevant regulatory approvals (if any) in relation to the Finance Documents. |
Part 2 B: New Facility Advance Conditions
The Lenders shall only be obliged to make the Advance in terms of this Agreement if:
1. | no Default shall have occurred or be continuing; |
2. | the warranties and representations made in clause 13 ( Warranties and Representations ) of this Agreement shall be correct and will be correct in all material respects immediately after the making of the Advance; |
3. | in the reasonable opinion of the Facility Agent there has been no Material Adverse Change in either the Borrower or any of the Obligors since the date of the Original Financial Statements which could be expected to affect the ability of the Borrower to fulfil its obligations in terms of the Finance Documents in an adverse manner; |
4. | in the reasonable opinion of the Facility Agent there has been no Material Adverse Change since the Signature Date; |
5. | the Original Lender has obtained all internal approvals necessary in order to conclude the Finance Documents, including but not limited to the approvals of the Lenders board of directors and credit committee; and |
6. | the Facility Agent is satisfied that the Borrower has obtained all relevant regulatory approvals (if any) in relation to the Finance Documents. |
SCHEDULE 2
THE GUARANTORS
1. | African Rainbow Minerals Gold Limited (Registration No. 1997/015869/06); |
2. | Evander Gold Mines Limited (Registration No. 1963/006226/06); |
3. | ARMgold/Harmony Joint Investment Company (Proprietary) Limited (Registration No. 2002/032163/07); |
4. | ARMgold/Harmony Freegold Joint Venture Company (Proprietary) Limited (Registration No. 2001/029602/07); |
5. | Randfontein Estates Limited (Registration No. 1889/000251/06); |
6. | Avgold Limited (Registration No. 1990/007025/06). |
SCHEDULE 3
DISCLOSED ENCUMBRANCES
1. | R21 625 964 of cash is pledged as collateral to Standard Bank for other environmental guarantees issued. |
SCHEDULE 4
DISCLOSED INDEBTEDNESS
1. | Current environmental guarantees issued by Nedbank in the amount of R285 622 920. |
2. | Remainder of smaller guarantee as per attached list. |
HARMONY GOLD MINING COMPANY LIMITED
REGISTER OF GUARANTEES
Jun-09
Environmental |
Other |
|||||||||||||||||||||||
Company |
Project |
Tenement
|
Beneficiary |
Issued |
Expires |
Amount
|
Amount R |
Amount
|
Amount R | |||||||||||||||
Harmony Gold Mining Company |
85909929320 |
AECI Limited |
30-Nov-00 | 248,794.00 | ||||||||||||||||||||
Harmony Gold Mining Company |
810200502259 |
Department of Mineral and Energy |
30-Nov-02 | 40,000.00 | ||||||||||||||||||||
Harmony Gold Mining Company |
81020206926 |
Department of Mineral and Energy |
25-Jun-02 | 21,500,000.00 | ||||||||||||||||||||
Harmony Gold Mining Company |
81020206930 |
Department of Mineral and Energy |
25-Jun-02 | 3,700,000.00 | ||||||||||||||||||||
Harmony Gold Mining Company |
81020206931 |
Department of Mineral and Energy |
25-Jun-02 | 2,300,000.00 | ||||||||||||||||||||
Harmony Gold Mining Company |
NED-CON-4140(1) |
Department of Mineral and Energy |
17-Nov-09 | 201,422,436.00 | ||||||||||||||||||||
Kalplats |
81020209977 |
Department of Mineral and Energy |
28-Aug-02 | 650,000.00 | ||||||||||||||||||||
Randfontein Estates Limited |
M326752 |
Eskom |
28-Feb-98 | 31,000.00 | ||||||||||||||||||||
Randfontein Estates Limited |
M326753 |
Eskom |
02-Feb-98 | 77,000.00 | ||||||||||||||||||||
Randfontein Estates Limited |
Telkom |
31-Oct-90 | 136,332.00 | |||||||||||||||||||||
Randfontein Estates Limited |
Snyman Van Der Heever Heyns Incorporated |
20-Mar-97 | 431,399.60 | |||||||||||||||||||||
Randfontein Estates Limited |
M333565 |
Randfontein Municipality |
12-Jan-89 | 16,129.00 |
Randfontein Estates Limited |
M351158 |
South African Transport Services |
02-May-84 | 200,000.00 | ||||||||||||||||||||
Randfontein Estates Limited |
M354951 |
City of Johannesburg |
07-Jul-89 | 4,000.00 | ||||||||||||||||||||
Randfontein Estates Limited |
M359617 |
Department of Mineral and Energy |
12-Apr-99 | 20,000.00 | ||||||||||||||||||||
Randfontein Estates Limited (new) |
M432371 /M312525 |
Department of Mineral and Energy |
23-Feb-04 | 25,000.00 | ||||||||||||||||||||
Randfontein Estates Limited |
M490598 |
Department of Mineral and Energy |
23-Apr-08 | 22,427.00 | ||||||||||||||||||||
Randfontein Estates Limited |
29108209 |
Department of Mineral and Energy |
08-Jul-08 | 43,414,170.00 | ||||||||||||||||||||
Randfontein Estates Limited |
29108306 |
Department of Mineral and Energy |
08-Jul-08 | 87,027,019.00 | ||||||||||||||||||||
Randfontein Estates Limited |
NED-CON-4140(2) |
Department of Mineral and Energy |
17-Nov-09 | 11,687,387.00 | ||||||||||||||||||||
West Rand Consolidated Mines |
M300820 |
Department of Mineral and Energy |
24-Oct-96 | 10,000.00 | ||||||||||||||||||||
West Rand Consolidated Mines |
M379315 |
Department of Mineral and Energy |
05-May-00 | 30,000.00 | ||||||||||||||||||||
West Rand Consolidated Mines |
M312525 |
Department of Mineral and Energy |
28-Jul-97 | 25,000.00 | ||||||||||||||||||||
West Rand Consolidated Mines |
M312457 |
Department of Mineral and Energy |
28-Jul-97 | 10,000.00 | ||||||||||||||||||||
West Rand Consolidated Mines |
Eskom |
01-Oct-98 | 700,000.00 | |||||||||||||||||||||
Winkelhaak Mines Limited |
S13615 / MS GRV 4232957 |
Council of Nuclear Safety |
10-Jul-03 | 250,000.00 | ||||||||||||||||||||
Winkelhaak Mines Limited |
S13616 / MS GRV 4232987 |
Eskom |
10-Jul-03 | 246,500.00 | ||||||||||||||||||||
Winkelhaak Mines Limited |
S13617 / MS GRV 4232983 |
Eskom |
10-Jul-03 | 268,900.00 | ||||||||||||||||||||
Winkelhaak Mines Limited |
S13618 / MS GRV 4233989 |
Eskom |
10-Jul-03 | 64,000.00 | ||||||||||||||||||||
Winkelhaak Mines Limited |
S13619 /MS GRV 4233002 |
Eskom |
10-Jul-03 | 1,117,450.00 | ||||||||||||||||||||
Winkelhaak Mines Limited |
S13620 / MS GRV 4233009 |
Eskom |
10-Jul-03 | 301,050.00 | ||||||||||||||||||||
Winkelhaak Mines Limited |
S13621 / MS GRV 4233013 |
Eskom |
10-Jul-03 | 1,346,600.00 | ||||||||||||||||||||
Winkelhaak Mines Limited |
S13622 / MS GRV |
Eskom |
10-Jul-03 | 868,850.00 |
4233018 |
||||||||||||||||||||||||
Winkelhaak Mines Limited |
S13623 / MS GRV 4233021 |
Eskom |
10-Jul-03 | 272,000.00 | ||||||||||||||||||||
Winkelhaak Mines Limited |
S13624 / MS GRV 4233048 |
Eskom |
10-Jul-03 | 45,500.00 | ||||||||||||||||||||
Winkelhaak Mines Limited* |
208617 / S15065 |
Eskom |
25-Apr-02 | 370,600.00 | ||||||||||||||||||||
Winkelhaak Mines Limited* |
208618 / S15064 |
Eskom |
25-Apr-02 | 1,269,818.00 | ||||||||||||||||||||
Leslie Golg Mines Limited |
S13625 / MS GRV 4233050 |
Eskom |
10-Jul-03 | 624,400.00 | ||||||||||||||||||||
Leslie Golg Mines Limited |
S13626 / MS GRV 4233053 |
Eskom |
10-Jul-03 | 334,100.00 | ||||||||||||||||||||
Leslie Golg Mines Limited |
S13627 / MS GRV 4233055 |
Eskom |
10-Jul-03 | 89,800.00 | ||||||||||||||||||||
Leslie Golg Mines Limited |
S13628 / MS GRV 4233067 |
Eskom |
10-Jul-03 | 371,460.00 | ||||||||||||||||||||
Leslie Golg Mines Limited |
S13629 / MS GRV 4233070 |
Eskom |
10-Jul-03 | 2,019,750.00 | ||||||||||||||||||||
Leslie Golg Mines Limited |
S13630 / MS GRV 4233074 |
Eskom |
10-Jul-03 | 1,750,000.00 | ||||||||||||||||||||
Leslie Golg Mines Limited |
S13631 / MS GRV 4233080 |
Eskom |
10-Jul-03 | 558,700.00 | ||||||||||||||||||||
Leslie Golg Mines Limited* |
75B0296 |
Council of Nuclear Safety |
14-Nov-95 | 250,000.00 | ||||||||||||||||||||
Evander Gold Mining Company |
S13632 / MS GRV 4233083 |
Els Chester & Louw |
10-Jul-03 | 170,894.09 | ||||||||||||||||||||
Evander Gold Mining Company |
20650708534 |
Department of Minerals & Energy |
20-Nov-07 | 120,000.00 | ||||||||||||||||||||
Evander Gold Mining Company |
NED-CON-4140(3) |
Department of Minerals & Energy |
17-Nov-09 | 27,194,482.00 | ||||||||||||||||||||
Kalahari Goldridge Mining Company Ltd |
M486532 |
Department of Minerals & Energy |
06-Dec-07 | 4,182,379.00 | ||||||||||||||||||||
Kalahari Goldridge Mining Company Ltd |
M489674 |
Department of Minerals & Energy |
25-Mar-08 | 55,000.00 | ||||||||||||||||||||
Kalahari Goldridge Mining Company Ltd |
M489663 |
Department of Minerals & Energy |
26-Mar-08 | 100,505.00 | ||||||||||||||||||||
Kalahari Goldridge Mining Company Ltd |
8920806641 |
Department of Minerals & Energy |
04-Feb-08 | 8,617,864.66 | ||||||||||||||||||||
Kalahari Goldridge Mining Company Ltd |
NED-CON-4140 (4) |
Department of Minerals & Energy |
17-Nov-09 | 10,123,630.00 |
Avgold Ltd |
Barberton Municipality |
3,570.00 | ||||||||||||||||||||||
Avgold Ltd |
Barberton Municipality |
3,380.00 | ||||||||||||||||||||||
Avgold Ltd |
Barberton Municipality |
2,780.00 | ||||||||||||||||||||||
Avgold Ltd |
ESKOM |
629,650.00 | ||||||||||||||||||||||
Avgold Ltd |
ESKOM |
2,450,000.00 | ||||||||||||||||||||||
Avgold Ltd |
ESKOM |
1,220,000.00 | ||||||||||||||||||||||
Avgold Ltd |
ESKOM |
610,000.00 | ||||||||||||||||||||||
Avgold Ltd |
ESKOM |
19,000.00 | ||||||||||||||||||||||
Avgold Ltd |
ESKOM |
4,050.00 | ||||||||||||||||||||||
Avgold Ltd |
ESKOM |
2,000,000.00 | ||||||||||||||||||||||
Avgold Ltd |
NED-CON-4140(7) |
Department of Minerals & Energy |
17-Nov-09 | 7,944,938.00 | ||||||||||||||||||||
African Rainbow Minerals Golg Ltd |
M486531 |
Department of Minerals & Energy |
07-Dec-07 | 17,743,585.00 | ||||||||||||||||||||
African Rainbow Minerals Golg Ltd |
93045812784 |
Department of Minerals & Energy |
2,600,000.00 | |||||||||||||||||||||
African Rainbow Minerals Golg Ltd |
80559924348 |
ESKOM |
3,085,043.00 | |||||||||||||||||||||
African Rainbow Minerals Golg Ltd |
NED-CON-4140(6) |
Department of Minerals & Energy |
17-Nov-09 | 13,883,259.00 | ||||||||||||||||||||
Armgold/ Harmony Freegold Joint Venture Co [Pty] Ltd |
Free State prospecting rights |
20650707075 |
Department of Minerals and Energy |
27-Oct-07 | 80,000.00 | |||||||||||||||||||
Armgold/ Harmony Freegold Joint Venture Co [Pty] Ltd |
Free State prospecting rights |
8920903737 |
Department of Minerals and Energy |
01-Jul-09 | 20,000.00 | |||||||||||||||||||
Armgold/ Harmony Freegold Joint Venture Co [Pty] Ltd |
NED-CON-4140(5) |
Department of Minerals and Energy |
17-Nov-09 | 13,366,788.00 | ||||||||||||||||||||
Musuku Beneficiation Systems (Pty) Ltd |
81020409661 |
SARS - CUSTOMS AND EXCISE |
600,000.00 |
Free Gold - St Helena (new) |
81020211331 |
Department of Mineral and Energy |
35,000,000.00 | |||||||||||||||||||
Free Gold - St Helena (new) |
81020211331 |
Department of Mineral and Energy |
13,400,000.00 | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
| 526,315,869.66 | | 25,062,499.69 | |||||||||||||||||||
|
|
|
|
|
|
SCHEDULE 5
DISCLOSED LOANS
1. | Rand Uranium (Proprietary) Limited shareholder loan. Balance of R62 941 146 at the end of September 2009. The loan bears interest at JIBAR plus 250 basis points and is repayable within 7 years. |
2. | Pamodzi Gold Limited (in liquidation) Loan of R115 724 554. Fully written off in the Borrowers accounts. |
3. | Intergroup loan from the Borrower to Harmony Gold Australia of R480 528 619 as at 30 November 2009. |
SCHEDULE 6
DISCLOSED POTENTIAL ENVIRONMENTAL CLAIM
1. | The Borrower has been advised that the Department of Water Affairs ( DWA ) may issue a directive in terms of the National Water Act, 1998 to entities who are conducting or who have conducted mining activities in the Wonderfontein Catchment area, which entities may include the Borrower and/or one or more Group Companies, relating to the alleged contamination of Wonderfontein Spruit and the rehabilitation and remediation thereof. |
2. | Dispute between the Group and Mr Pitas in the Free State. Mr Pitas has lodged an application to revoke one of the Groups mining rights in the Free State and has claimed R45m damages, arising out of an alleged failure by the Group to comply with its rehabilitation obligations. |
3. | A group of farmers have indicated that they may institute a claim against the Group arising out of alleged pollution in the Dankbaarpan area resulting in the farmers allegedly not being able to use surface or groundwater for irrigation. |
SCHEDULE 7
FORM OF COMPLIANCE CERTIFICATE
To: | Nedbank Limited (as Lender ) | |
135 Rivonia Road | ||
Sandown | ||
2196 | ||
Attention: [ ] |
[Date]
Dear Sirs
AMENDED AND RESTATED FACILITIES AGREEMENT ENTERED INTO BETWEEN inter alia NEDBANK LIMITED, HARMONY GOLD MINING COMPANY LIMITED (BORROWER) AND VARIOUS SUBSIDIARIES OF THE BORROWER DATED [ ] 2010 (the Facilities Agreement)
1. | We refer to the Facilities Agreement. This is a Compliance Certificate, and terms used in this Compliance Certificate have the same meaning as in the Facilities Agreement. |
2. | This Compliance Certificate is in respect of the Ratio Test Period ended [ ] (being the Ratio Test Date), pursuant to clause 17 ( Financial Covenants ) of the Facilities Agreement. |
3. | We confirm that in respect of the Ratio Test Date: |
As Calculated | Covenant |
Compliance
(Yes/No) |
||||
Interest Cover Ratio |
||||||
Current Ratio |
||||||
Cash Flows |
||||||
Market Capitalisation to Facilities Outstanding |
4. | We confirm that the representations and warranties given by the Borrower in clause 13 ( Warranties and Representations ) of the Facilities Agreement are true and correct. |
5. |
[We confirm that no Default is continuing.] * |
For and on behalf of |
HARMONY GOLD MINING COMPANY LIMITED |
|
Name: |
Capacity: |
Who warrants his authority hereto |
* | If this statement cannot be made, the Certificate should identify any Default that is continuing and the steps, if any, being taken to remedy it. |
SCHEDULE 8
LAST TAX RETURN YEAR
Company |
Latest submitted returns | |||||
1 Harmony Gold Mining Company Limited |
2007 | |||||
2 ARMgold |
2008 | |||||
3 Evander |
2008 | |||||
4 ARMgold / Harmony Joint Investment Company |
2009 | |||||
5 ARMgold / Harmony Freegold Joint Venture Company |
2008 | |||||
6 Avgold Limited |
2008 | |||||
7 Randfontein Estate Limited |
2006 |
SCHEDULE 9
RCF FORM OF UTILISATION REQUEST
(To appear on the letterhead of a Borrower)
To: | Nedbank Limited (as Lender ) | |
135 Rivonia Road | ||
Sandown | ||
2196 |
Date:
Attention: [insert]
Dear Sirs
AMENDED AND RESTATED FACILITIES AGREEMENT DATED [INSERT DATE] (the FACILITIES AGREEMENT): UTILISATION REQUEST
1. | We refer to the Facilities Agreement. |
2. | This is a Utilisation Request. |
3. | The terms defined in the Facility Agreement shall have the same meanings where used in this Utilisation Request. |
4. | This Utilisation Request is irrevocable. |
5. | We hereby give you notice that, pursuant to the Facility Agreement and on [insert date], we wish to borrow a Loan in an amount of R[insert] ([insert] Rand) upon the terms and subject to the conditions contained therein. |
6. | We elect an Interest Period of [insert] months. |
7. | We confirm that as of the date hereof : |
7.1 | the Repeating Representations set out in the Facility Agreement are true and correct in all material respects; and |
7.2 | no Default has occurred and/or is continuing. |
8. | The proceeds of the Loan must be credited to the following bank account: |
8.1 | Bank: | [insert] ; | ||
8.2 | Branch: | [insert] ; | ||
8.3 | Account Name: | [insert] ; | ||
8.4 | Account Number: | [insert] ; | ||
8.5 | Branch Code: | [insert] . |
Yours faithfully
For and on behalf of |
HARMONY GOLD MINING COMPANY LIMITED |
|
Name: |
Capacity: |
Who warrants his authority hereto |
SCHEDULE 10
FORM OF TERM FACILITY B DRAWDOWN NOTICE
(To appear on the letterhead of a Borrower)
To: | Nedbank Limited (as Lender ) | |
135 Rivonia Road | ||
Sandown | ||
2196 |
Date:
Attention: [insert]
Dear Sirs
AMENDED AND RESTATED FACILITIES AGREEMENT DATED [INSERT DATE] (the FACILITIES AGREEMENT): TERM FACILITY B DRAWDOWN NOTICE
1. | We refer to the Facilities Agreement. |
2. | This is a Term Facility B Drawdown Notice. |
3. | The terms defined in the Facility Agreement shall have the same meanings where used in this Term Facility B Drawdown Notice. |
4. | This Term Facility B Drawdown Notice is irrevocable. |
5. | We hereby give you notice that, pursuant to the Facility Agreement and on [insert date], we wish to borrow a Loan in an amount of R[insert] ([insert] Rand) upon the terms and subject to the conditions contained therein. |
6. | We confirm that as of the date hereof : |
6.1 | the Repeating Representations set out in the Facility Agreement are true and correct in all material respects; and |
6.2 | no Default has occurred and/or is continuing. |
7. | The proceeds of the Loan must be credited to the following bank account: |
7.1 | Bank: | [insert] ; | ||
7.2 | Branch: | [insert] ; | ||
7.3 | Account Name: | [insert] ; | ||
7.4 | Account Number: | [insert] ; | ||
7.5 | Branch Code: | [insert] . |
Yours faithfully
For and on behalf of |
HARMONY GOLD MINING COMPANY LIMITED |
|
Name: |
Capacity: |
Who warrants his authority hereto |
SCHEDULE 11
TERM FACILITIES REPAYMENT SCHEDULE
Date | Capital payment | |||
30 June 2010 |
90,000,000 | |||
31 December 2010 |
90,000,000 | |||
30 June 2011 |
152,500,000 | |||
31 December 2011 |
152,500,000 | |||
30 June 2012 |
152,500,000 | |||
31 December 2012 |
152,500,000 | |||
30 June 2013 |
152,500,000 | |||
31 December 2013 |
152,500,000 | |||
30 June 2014 |
152,500,000 | |||
31 December 2014 |
152,500,000 |
SCHEDULE 12
FORM OF LENDERS ACCESSION UNDERTAKING
ACCESSION UNDERTAKING
To: | Nedbank Limited | |
(as Facility Agent ) | ||
135 Rivonia Road | ||
Sandown | ||
2196 | ||
Attention: [ ] | ||
From: |
[Insert full name of New Lender] (the New Lender ) | |
[Date] |
Dear Sirs
AMENDED AND RESTATED FACILITIES AGREEMENT ENTERED INTO BETWEEN inter alia NEDBANK LIMITED, HARMONY GOLD MINING COMPANY LIMITED (BORROWER) AND VARIOUS SUBSIDIARIES OF THE BORROWER DATED [ ] 2010 (the Facility Agreement)
1. | We refer to the Facility Agreement. |
2. | This is an Accession Undertaking, and terms used in this Accession Undertaking have the same meaning as in the Facility Agreement. |
3. | This Accession Undertaking is delivered to Nedbank as the Facility Agent pursuant to clause 24 ( Change of Party ) of the Facility Agreement. |
4. | In consideration of the New Lender being accepted as a Lender for the purposes of the Facility Agreement, and the other relevant Finance Documents (if any) pursuant to the Facility Agreement, the New Lender hereby confirms that, as from the date of acceptance of this Accession Undertaking by the Existing Lenders, it: |
4.1 | intends to be Party to the Facility Agreement and the other relevant Finance Documents as a Lender; |
4.2 |
undertakes to perform all the obligations expressed in the Facility Agreement, |
and the other relevant Finance Documents (if any) to be assumed by a Lender to the extent that such obligations have been delegated to the New Lender as described in the Cession and Delegation Agreement relating to this Accession Undertaking; |
4.3 | agrees that it shall be bound by all the provisions of the Facility Agreement and the other relevant Finance Documents (if any) as if it had been an original party to those Finance Documents as a Lender; and |
4.4 | accepts the benefits conferred upon the Lenders under the Finance Documents, including in particular the Security Documents. |
5. | This Accession Undertaking may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Accession Undertaking. |
6. | This Accession Undertaking shall be governed by and construed in accordance with the laws of South Africa. |
For and on behalf of |
[NEW LENDER] |
|
Name: |
Capacity: |
Who warrants his authority hereto |
For and on behalf of |
NEDBANK LIMITED |
(as Facility Agent) |
|
Name: |
Capacity: |
Who warrants his authority hereto |
DRAFT FOR DISCUSSION PURPOSES ONLY
SCHEDULE 13
AGREED FORM OF CESSION AND DELEGATION AGREEMENT
THIS SALE, CESSION AND DELEGATION AGREEMENT is dated and made BETWEEN:
(1) | [ ] (the Existing Lender ); and |
(2) | [ ] (the New Lender ); and |
(3) | NEDBANK LIMITED (as Facility Agent ). |
IT IS AGREED as follows:
1. | INTERPRETATION |
1.1 | In this Agreement, unless inconsistent with the context, all capitalised terms shall have the respective meanings assigned to such terms below, all capitalised terms for which no meanings have been assigned herein shall have the meanings assigned to them in the Facilities Agreement, and cognate terms shall have corresponding meanings: |
1.1.1 | this Agreement means this Agreement, together with all schedules and appendices hereto and any written and signed amendments to the aforementioned; |
1.1.2 | the Borrower means Harmony Gold Mining Company Limited (Registration No. 1950/038232/06), a public company, incorporated under the laws of South Africa; |
1.1.3 | the Effective Date means, notwithstanding the Signature Date [ ]; |
1.1.4 | Effective Date Facility Outstandings means the aggregate principal amount owing by the Borrower to the Existing Lender under the Facilities Agreement as at the Effective Date which has not been prepaid or repaid irrevocably, unconditionally and in full; |
1.1.5 | Existing Lender means [ ], (Registration No. [INSERT] ), a [public] company incorporated under the laws of South Africa; |
1.1.6 | Facilities Agreement means the written agreement titled the Facilities Agreement , entered into between Nedbank, the Borrower and the Guarantors as listed in Schedule 2 thereto on or about [ ] 2009; |
1.1.7 | Facility Agent means Nedbank; |
1.1.8 | nacm means nominal annual compounded monthly in arrear; |
1.1.9 | Nedbank means Nedbank Limited (Registration No. 1951/000009/06), a public company incorporated under the laws of South Africa, which is registered as a bank in terms of the Banks Act, 1990; |
1.1.10 | the New Lender means [ ] (Registration No. [ ]), a [public] company incorporated under the laws of South Africa; |
1.1.11 | Parties means the Existing Lender and the New Lender and Party means, as the context requires, either of them; |
1.1.12 | the Prime Rate means the nacm prime overdraft rate of interest from time to time publicly quoted as such by Nedbank, calculated on a 365 (three hundred and sixty five) day factor, irrespective of whether or not the year is a leap year, as certified by any manager of Nedbank, whose appointment as such it shall not be necessary to prove, which certificate shall serve as prima facie proof of its contents; |
1.1.13 | the Signature Date means the date of last signature of this Agreement; |
1.1.14 | the Sold Rights and Obligations means that amount of the Existing Lenders right, title and interest: |
1.1.14.1 | under the Finance Documents insofar as they relate to the Facility; |
1.1.14.2 | to the Effective Date Facility Outstandings; |
as stipulated in Annexure A as being sold by the Existing Lender to the New Lender;
1.1.15 | South Africa means the Republic of South Africa; |
1.1.15.1 | any reference to the singular includes the plural and vice versa; |
1.1.15.2 | any reference to natural persons includes legal persons and vice versa; |
1.1.15.3 | any reference to a gender includes the other genders; |
1.1.15.4 | any reference to an enactment is to that enactment as at the Signature Date and as amended or re-enacted from time to time. |
1.2 | If any definition contains a substantive provision conferring rights or imposing obligations on any party, effect shall be given to it as if it were a substantive provision in the body of this Agreement, notwithstanding that it is only in the definition clause. |
1.3 | Words and expressions defined in any sub-clause shall, for the purposes of the clause of which that sub-clause forms part, bear the meaning assigned to such words and expressions in that sub-clause. |
1.4 | The headnotes to the clauses of this Agreement have been inserted for reference purposes only and shall in no way govern or affect the interpretation hereof. |
1.5 | When any number of days is prescribed, same shall be reckoned inclusively of the first and exclusively of the last day. |
1.6 | Reference to day/s shall be construed as any day, irrespective of whether or not it is a Business Day. |
1.7 | Reference to month/s means a period starting on one day in a calendar month and ending on the day preceding the numerically corresponding day in the next calendar month, except that: |
1.7.1 | if the day preceding such numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that next calendar month if there is one, or if there is not, on the immediately preceding Business Day; and |
1.7.2 | if there is no numerically corresponding day in the next calendar month, that period shall end on the last Business Day in such next calendar month; |
1.8 | Reference to calendar month/s shall be construed as one or more of the twelve named periods into which a year is divided in terms of the Gregorian calendar. |
1.9 | Where any act is to be performed on a day which is not a Business Day, such act shall be performed on the Business Day immediately preceding such day. |
1.10 | Where figures are referred to in numerals and in words, if there is any conflict between the two, the words shall prevail. |
2. | SALE AND PURCHASE |
The Existing Lender hereby sells to the New Lender, which hereby purchases from the Existing Lender, with effect from the Effective Date, the Sold Rights and Obligations.
3. | PURCHASE PRICE |
3.1 | As consideration for the sale of the Sold Rights and Obligations, the New Lender shall pay to the Existing Lender the amount of R [insert] ( [insert] ) ( the purchase price ) which shall be paid by the New Lender to the Existing Lender on the Effective Date in immediately available funds, free of any deductions, exchange or other charges by electronic transfer into the following bank account: |
Account name | : |
Bank | : | |
Branch | : | |
Code | : | |
Account Number | : . |
3.2 | The purchase price shall, if it is not paid on the Effective Date, bear interest from the Effective Date to the date of payment at the Prime Rate. |
3.3 | The Parties record that the sale of the Sold Rights and Obligations pursuant to this Agreement is the transfer of a debt security (as defined in Section 2(2) of the VAT Act) and is accordingly exempt from VAT under Section 12(a) of the VAT Act. |
3.4 | Notwithstanding the provisions of clause 3.3, if the sale of the Sold Rights and Obligations is subject to VAT, the purchase price shall be deemed to be exclusive of VAT, which shall be payable by the New Lender to the Existing Lender against delivery by the Existing Lender to the New Lender of a valid tax invoice in respect thereof. |
4. | DELIVERY |
4.1 | Against payment by the New Lender to the Existing Lender of the purchase price as provided for in clause 3, and with effect on the Effective Date, the Existing Lender hereby: |
4.1.1 | cedes, assigns and transfers the Sold Rights and Obligations to the New Lender; and |
4.1.2 | delegates to the New Lender all of the Existing Lenders obligations under the Finance Documents to the extent related to the Sold Rights and Obligations, |
without recourse to the Existing Lender.
4.2 | The New Lender hereby accepts: |
4.2.1 | the cession, assignment and transfer of the Sold Rights and Obligations to the New Lender; and |
4.2.2 | the delegation to the New Lender of the Existing Lenders obligations under the Finance Documents to the extent related to the Sold Rights and Obligations, which obligations the New Lender hereby assumes; |
without recourse to the Existing Lender.
4.3 |
The New Lender hereby irrevocably binds itself in favour of the parties to each of the Finance Documents to the terms of the Finance Documents, as if it had been a party thereto and any Finance Party shall be entitled to accept the benefit |
of this clause 4.3 and any other benefits conferred on it in terms of this Agreement at any time. |
4.4 | It is recorded that the Obligors have, in terms of clause 24.2 ( Change of Party ) of the Facilities Agreement, consented to the cession and delegation herein recorded. |
5. | DELIVERY OF NOTICE |
The Facility Agent shall, within 5 (five) Business Days from the Effective Date, despatch written notices to the Obligors and to any Lender which is not a party hereto of the sale, cession, assignment and transfer of the Sold Rights and Obligations pursuant to this Agreement.
6. | REPRESENTATIONS AND WARRANTIES |
6.1 | Each party represents and warrants to the other party on the Signature Date, the Effective Date and on each day between those dates that: |
6.1.1 | it is a company duly organised and existing under the laws of the jurisdiction in which it is incorporated; |
6.1.2 | it has the power to enter into and to exercise its rights and perform its obligations under this Agreement; |
6.1.3 | all corporate and other actions required to authorise the execution of this Agreement by it and the performance by it of its obligations under this Agreement have been duly taken; |
6.1.4 | the obligations expressed to be assumed by it in this Agreement are legal and valid obligations binding on it in accordance with the respective terms thereof; |
6.1.5 | the execution of this Agreement and the exercise by it of its rights and the performance of its obligations under this Agreement do not and will not conflict with: |
6.1.5.1 | any agreement to which it is a party or which is binding on it or any of its assets; |
6.1.5.2 | its constitutive documents and rules and regulations; or |
6.1.5.3 | any applicable law, regulation or official or judicial order. |
6.2 | The Existing Lender hereby represents and warrants to the New Lender on the Signature Date, the Effective Date and on each day between those dates that: |
6.2.1 | to the best of its knowledge and belief, the Finance Documents have not been terminated or cancelled and are of full force and effect; it has the right to sell and cede, assign and transfer the Sold Rights and Obligations to the New Lender; |
6.2.2 | the Sold Rights and Obligations are capable of being sold and ceded, assigned and transferred to the New Lender free of any encumbrances; |
6.2.3 | prior to the cession, assignment and transfer of the Sold Rights and Obligations recorded in this Agreement, it has not ceded, assigned or transferred any of the Sold Rights and Obligations to any person; |
6.2.4 | no Obligor has been released by it from its obligations under the Finance Documents, |
provided that, save as set out in this clause 6.2, the Existing Lender gives no representations or warranties express or implied in connection with the sale of the Sold Rights and Obligations pursuant to this Agreement.
7. | LIMITATIONS |
7.1 | Unless expressly agreed to the contrary in this Agreement, the Existing Lender makes no representation or warranty and assumes no responsibility to the New Lender for: |
7.1.1 | the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents; |
7.1.2 | the financial condition or creditworthiness of any Obligor; |
7.1.3 | the performance and observance by any Obligor of its obligations under the Finance Documents or any other documents; |
7.1.4 | the accuracy of any representations, warranties or statements (whether written or oral) by any Obligor made in or in connection with any of the Finance Documents or any other document. |
and any representations or warranties implied by law are excluded.
7.2 | The New Lender confirms to the Existing Lender that it: |
7.2.1 | has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of the Obligors in connection with its participation in the Finance Documents and has not relied on any information provided to it by the Existing Lender in connection with any of the Finance Documents or on any representation or warranty made by the Existing Lender other than those set out in clause 6; and |
7.2.2 | will continue to make its own independent appraisal of the creditworthiness of the Obligors whilst any amount is or may be outstanding under the Finance Documents. |
7.3 | Nothing in any of the Finance Documents or this Agreement obliges the Existing Lender to: |
7.3.1 | accept a re-transfer from the New Lender of any of the rights ceded, assigned and transferred and obligations delegated under this Agreement; |
7.3.2 | support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Finance Documents or otherwise; or |
7.3.3 | provide the New Lender with any credit or other information concerning the affairs, financial condition or business of any Obligor or any other third party. |
8. | NOTICES AND DOMICILIA |
8.1 | The parties choose domicilia citandi et executandi for all purposes under this Agreement, whether in respect of court process, notices or other documents or communications of whatsoever nature, the following, addresses: |
8.1.1 | the Existing Lender at [ |
];
8.1.2 | the New Lender at [ ]. |
8.2 | A party may change that partys address for this purpose to another physical address in South Africa, by notice in writing. |
8.3 | All notices shall be in writing and be deemed (unless the contrary is proved) to have been duly given - |
8.3.1 | on delivery, if delivered to the addressees physical address; on the Business Day after dispatch, if sent to the partys then telefax number; |
8.3.2 | 1 (one) Business Day after delivery, if delivered by a recognised international courier service to the addressees physical address. |
8.4 | Notwithstanding anything to the contrary contained in this Agreement, a written notice or communication actually received by one of the parties from another including by way of telex or facsimile transmission shall be adequate written notice or communication to such party. |
9. | GENERAL |
9.1 | No variation of this Agreement shall be of any force and effect unless reduced to writing and signed by the parties or their authorised Facility Agents. |
9.2 | No failure or delay on the part of a party to exercise any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise by a party of any power, right or remedy preclude other or further exercise thereof or the exercise of any power, right or remedy. The remedies provided in this Agreement are cumulative and are not exclusive of any remedies provided by law. |
9.3 | This Agreement, together with all the annexures and schedules thereto, constitutes the whole agreement between the parties and there are no warranties, promises, representations or inducements, whatsoever, which have been made by or on behalf of any party regarding the subject matter hereof, unless such warranties, promises, representations are contained herein. |
9.4 | All legal costs, charges and disbursements incurred by any party in successfully enforcing or defending any provisions of this Agreement or any claim or action thereunder, shall be payable by the unsuccessful party on the scale as between attorney and his own client. |
9.5 | Each party shall bear its own costs and expenses in connection with the negotiation and drafting of this Agreement. |
10. | GOVERNING LAW |
This Agreement and all matters or disputes incidental thereto or arising therefrom shall in all respects be governed by and construed in accordance with the laws of South Africa, including all matters of construction, validity and performance.
11. | COUNTERPARTS |
If any of the parties or the signatories of any of the parties signs this Agreement in counterparts, the counterparts, taken together, shall constitute one agreement.
12. | SEVERABILITY |
Each phrase, sentence, paragraph and clause in this Agreement is severable, the one from the other, notwithstanding the manner in which they may be linked together or grouped grammatically and if in terms of any judgment or order any phrase, sentence, paragraph or clause is found to be defective or unenforceable for any reason the remaining phrases, sentences, paragraphs and clauses as the case may be, shall nevertheless be and continue to be of full force and effect.
13. | COSTS |
13.1 | If, in any legal or arbitration proceedings relating to the enforcement by either party of its rights in terms of this Agreement, a court or arbitrator awards costs to any party, such costs shall be determined and recoverable on the scale as between an attorney and own client and shall include collection charges, the costs incurred by such party in endeavouring to enforce such rights prior to the institution of legal or arbitration proceedings and the costs incurred in connection with the satisfaction or enforcement of any judgment or arbitration award in favour of such party in relation to its rights in terms of or arising out of this Agreement. |
13.2 | Each of the parties shall bear its own costs of and incidental to the negotiation, preparation and signature of this Agreement. |
SIGNED at on this the day of 2010
|
Name: |
Capacity: |
Who warrants his authority hereto |
SIGNED at on this the day of 2010
|
Name: |
Capacity: |
Who warrants his authority hereto |
DRAFT FOR DISCUSSION PURPOSES ONLY
ANNEXURE A
ANNEXURE A TO CESSION AND DELEGATION AGREEMENT
Effective Date Facility Outstandings : R [ ]
Sold Rights and Obligations to New Lender : R [ ]
Commitment of Existing Lender after the Effective Date : R [ ]
DRAFT FOR DISCUSSION PURPOSES ONLY
SCHEDULE 14
FORM OF CONFIDENTIALITY UNDERTAKING
To: | [Insert name of Potential New Lender.] | |
Re: |
The Agreement: |
|
Borrower: |
||
Date: |
||
Amount: |
||
Agent: |
Dear Sirs
AMENDED AND RESTATED FACILITY AGREEMENT (the FACILITY AGREEMENT) ENTERED INTO BETWEEN inter alia NEDBANK LIMITED, HARMONY GOLD MINING COMPANY LIMITED (the BORROWER) AND VARIOUS SUBSIDIARIES OF THE BORROWER DATED [ ] 2010
We understand that you are considering [acquiring] 1 /[arranging the acquisition of] 2 an interest in the Facility Agreement (the Acquisition). In consideration of us agreeing to make available to you certain information, by your signature of a copy of this letter you agree as follows:
1. | In this letter, terms defined in the Facility Agreement shall, unless the context otherwise requires, have the same meaning and the words and expressions set forth below shall bear the following meanings and cognate expressions shall bear corresponding meanings: |
1.1 | Confidential Information means any information relating to the Borrower, the Group, the Facility Agreement and/or the Acquisition provided to you by us or any of our affiliates or advisers, in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that: |
1.1.1 | is or becomes public knowledge other than as a direct or indirect result of any breach of this letter; or |
1 | Delete if addressee is acting as broker or agent. |
2 | Delete if addressee is acting as principal. |
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1.1.2 | is known by you before the date the information is disclosed to you by us or any of our affiliates or advisers or is lawfully obtained by you thereafter, other than from a source which is connected with the Group and which, in either case, as far as you are aware, has not been obtained in violation of, and is not otherwise subject to, any obligation of confidentiality; |
1.2 |
Permitted Purpose means [subject to the terms of this letter, passing on information to a prospective purchaser for the purpose of] 3 considering and evaluating whether to enter into the Acquisition; and |
1.3 | Purchaser Group means you, and each of your affiliates. |
2. | Confidentiality Undertaking |
You undertake:
2.1 | to keep the Confidential Information confidential and not to disclose it to anyone except as provided for by paragraph 2.2 and to ensure that the Confidential Information is protected with security measures and a degree of care that would apply to your own confidential information; |
2.2 | to use the Confidential Information only for the Permitted Purpose; |
2.3 |
to use all reasonable endeavours to ensure that any person to whom you pass any Confidential Information (unless disclosed under paragraph [2.2 or] 4 2.3) acknowledges and complies with the provisions of this letter as if that person were also a party to I;, and |
2.4 | to confirm that all of your employees, officers and directors are contractually bound to maintain confidentiality and shall procure that should any employee, officer or director not be so bound that such employee enters into a confidentiality undertaking in favour of the Borrower on substantially the same terms and conditions set out in this letter; |
2.5 | to procure that each professional advisor, shareholder and/or consultant enters into a confidentiality undertaking in favour of the Borrower on substantially the same terms and conditions as set out in this letter. |
3. | Permitted Disclosure |
We agree that you may disclose Confidential Information:
3.1 | to members of the Purchaser Group and their officers, directors, employees and professional advisers to the extent necessary for the Permitted Purpose and to |
3 | Delete if addressee is acting as principal. |
4 | Delete as applicable. |
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DRAFT FOR DISCUSSION PURPOSES ONLY
any auditors of members of the Purchaser Group, to the extent that they have undertaken to keep the Information Confidential; |
3.2 | [subject to the requirements of the Facility Agreement, in accordance with the Permitted Purpose so long as any prospective purchaser has delivered a letter to you in equivalent form to this letter.] |
3.3 | subject to the requirements of the Facility Agreement, to any person to (or through) whom you assign or transfer (or may potentially assign or transfer) all or any of the rights, benefits and obligations which you may acquire under the Facility Agreement or with (or through) whom you enter into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, the Facility Agreement or the Borrower or any member of the Group so long as that person has delivered a letter to you in equivalent form to this letter; and |
3.4 | where requested or required by any court of competent jurisdiction or any competent judicial, governmental, supervisory or regulatory body; |
3.5 | where required by the rules of any stock exchange on which the shares or other securities of any member of the Purchaser Group are listed or; |
3.6 | where required by the laws or regulations of any country with jurisdiction over the affairs of any member of the Purchaser Group. |
4. | Notification of Required or Unauthorised Disclosure |
You agree (to the extent permitted by law) to inform us of the full circumstances of any disclosure under paragraph 2.4 or upon becoming aware that Confidential Information has been disclosed in breach of this letter.
5. | Return of Copies |
If we so request in writing, you shall return all Confidential Information supplied to you by us and destroy or permanently erase all copies of Confidential Information made by you and use all reasonable endeavours to ensure that anyone to whom you have supplied any Confidential Information destroys or permanently erases such Confidential Information and any copies made by them, in each case save to the extent that you or the recipients are required to retain any such Confidential Information by any applicable law, rule or regulation or by any competent judicial, governmental, supervisory or regulatory body or in accordance with internal policy, or where the Confidential Information has been disclosed under paragraph 2.4.
6. | Continuing Obligations |
The obligations in this letter are continuing and, in particular, shall survive the termination of any discussions or negotiations between you and us. Notwithstanding the previous sentence, the obligations in this letter shall cease:
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DRAFT FOR DISCUSSION PURPOSES ONLY
6.1 | if you become a party to or otherwise acquire (by assignment or sub-participation) an interest, direct or indirect, in the Facility Agreement; |
6.2 | 24 (twenty-four) months from the date of this letter. |
7. | No Representation, Consequences of Breach, etc |
You acknowledge and agree that neither we [nor our principal] 5 nor any member of the Group nor any of our or their respective officers, employees or advisers (each a Relevant Person ):
7.1 | make any representation or warranty, express or implied, as to, or assume any responsibility for the accuracy, reliability or completeness of any of the Confidential Information or any other information supplied by us or the assumptions on which it is based or |
7.2 | shall be under any obligation to update or correct any inaccuracy in the Confidential Information or any other information supplied by us or be otherwise liable to you or any other person in respect to the Confidential Information or any such information; and |
7.3 |
we [or our principal] 6 or members of the Group may be irreparably harmed by the breach of the terms hereof and damages may not be an adequate remedy; each Relevant Person may be granted an injunction or specific performance for any threatened or actual breach of the provisions of this letter by you. |
8. | Sole Agreement, No Implied Terms, No Variation, Extensions and Waivers |
8.1 | This letter constitutes the sole record of the agreement between us and you (each, a Party , and collectively the Parties ) in regard to the subject matter hereof. |
8.2 | No Party shall be bound by any express or implied term, representation, warranty, promise or the like, not recorded in this letter. |
8.3 | No addition to, variation or consensual cancellation of this letter and no extension of time, waiver or relaxation or suspension of any of the provisions or terms hereof shall be of any force or effect unless in writing and signed by or on behalf of all the Parties. |
8.4 | No latitude, extension of time or other indulgence which may be given or allowed by any Party to any other Party in respect of the performance of any obligation hereunder or enforcement of any right arising from this letter and no single or partial exercise of any right by any Party shall under any circumstances be construed to be an implied consent by such Party or operate as a waiver or a |
5 | Delete if letter is sent out by the Seller rather than the Sellers broker or agent. |
6 |
Delete if letter is sent out by the Seller rather than the Sellers broker or agent. |
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DRAFT FOR DISCUSSION PURPOSES ONLY
novation of, or otherwise affect any of that Partys rights in terms of or arising from this letter or estop such Party from enforcing, at any time and without notice, strict and punctual compliance with each and every provision or term hereof. |
9. | Inside Information |
You acknowledge that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation relating to insider dealing and you undertake not to use any Confidential Information for any unlawful purpose.
10. | Nature of Undertakings |
The undertakings given by you under this letter are given to us and (without implying any fiduciary obligations on our part) are also given by the benefit of [ our principal ] 7 the Borrower and each other member of the Group.
11. | Governing Law and Jurisdiction |
11.1 | This letter (including the agreement constituted by your acknowledgment of its terms) shall be governed by and construed in accordance with the laws of South Africa and the parties submit to the non-exclusive jurisdiction of the South Gauteng High Court (Johannesburg) (or any successor to that Division) in regard to all matters arising from this letter. |
11.2 | Please acknowledge your agreement to the above by signing and returning the enclosed copy. |
Yours faithfully | ||
|
||
For and on behalf of | ||
[Seller/Sellers agent/broker] |
To: | [Seller] | |
[Sellers agent/broker] | ||
The Borrower and each other member of the Group | ||
We acknowledge and agree to the above. |
7 | Delete if letter is sent out by the Seller rather than the Sellers broker or agent. |
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|
For and on behalf of |
[Potential Purchaser/Purchasers agent/broker] |
Page 159.
Exhibit 4.22
SALE AGREEMENT
between
EVANDER GOLD MINES LIMITED
and
HARMONY GOLD MINING COMPANY LIMITED
and
PLURICLOX (PROPRIETARY) LIMITED
and
TAUNG GOLD LIMITED
and
CLIDET NO. 790 (PROPRIETARY) LIMITED
and
CLIDET NO. 791 (PROPRIETARY) LIMITED
TABLE OF CONTENTS
1 |
PARTIES |
1 | ||||
2 |
INTERPRETATION |
1 | ||||
3 |
INTRODUCTION |
12 | ||||
4 |
TERMINATION |
12 | ||||
5 |
CONDITIONS PRECEDENT |
13 | ||||
6 |
SALE |
17 | ||||
7 |
DEPOSIT |
17 | ||||
8 |
PAYMENT OF THE PURCHASE CONSIDERATION |
18 | ||||
9 |
INTEREST |
18 | ||||
10 |
CLOSING |
19 | ||||
11 |
SALE LIABILITIES |
19 | ||||
12 |
DEED OF CESSION AND DEED OF AMENDMENT |
21 | ||||
13 |
SURFACE RIGHT PERMITS |
21 | ||||
14 |
SASOL AGREEMENT |
21 | ||||
15 |
FLOODING |
22 | ||||
16 |
ELECTRICITY |
23 | ||||
17 |
INTERIM PERIOD ACTIVITIES |
24 | ||||
18 |
WARRANTIES |
25 | ||||
19 |
LIMITATION OF LIABILITY |
26 | ||||
20 |
GENERAL WARRANTIES |
28 | ||||
21 |
GUARANTEE BY TAUNG |
29 | ||||
22 |
CONFIDENTIALITY |
29 | ||||
23 |
PUBLICITY |
31 | ||||
24 |
SUPPORT |
32 | ||||
25 |
BREACH |
32 | ||||
26 |
DISPUTE RESOLUTION |
33 | ||||
27 |
NOTICES AND DOMICILIA |
34 | ||||
28 |
BENEFIT OF THE AGREEMENT |
35 | ||||
29 |
APPLICABLE LAW AND JURISDICTION |
35 | ||||
30 |
NEW LAWS |
36 | ||||
31 |
GENERAL |
36 | ||||
32 |
COSTS |
38 | ||||
33 |
SIGNATURE |
38 |
ANNEXURES
ANNEXURE 1: DEED OF AMENDMENT
ANNEXURE 2: DEED OF CESSION
ANNEXURE 3: PURCHASERS POWER OF ATTORNEY
ANNEXURE 4: SELLERS POWER OF ATTORNEY
ANNEXURE 5: SPECIFIED MINING AREA DIAGRAM
ANNEXURE 6: WARRANTIES
1 | PARTIES |
1.1 | The Parties to this Agreement are |
1.1.1 | Evander Gold Mines Limited; |
1.1.2 | Harmony Gold Mining Company Limited; |
1.1.3 | Pluriclox (Proprietary) Limited; |
1.1.4 | Taung Gold Limited; |
1.1.5 | Clidet No. 790 (Proprietary) Limited; and |
1.1.6 | Clidet No. 791 (Proprietary) Limited. |
1.2 | The Parties agree as set out below. |
2 | INTERPRETATION |
2.1 | In this Agreement, unless the context indicates a contrary intention, the following words and expressions bear the meanings assigned to them and cognate expressions bear corresponding meanings |
2.1.1 | 2008 Agreements means |
2.1.1.1 | the sale of assets agreement entered into between the Seller and Clidet No. 790 (Proprietary) Limited on 29 February 2008; |
2.1.1.2 | the sale of assets agreement entered into between the Seller and Clidet No. 791 (Proprietary) Limited on 29 February 2008; |
2.1.1.3 | the right of access and use agreement entered into between the Seller, Taung and Clidet No. 790 (Proprietary) Limited on 29 September 2008; |
2.1.1.4 | the right of access and use agreement entered into between the Seller, Taung and Clidet No. 791 (Proprietary) Limited on 29 September 2008; |
2.1.1.5 | the subscription agreement entered into between the Seller, Taung and Clidet No. 790 (Proprietary) Limited on 29 February 2008; |
2.1.1.6 | the subscription agreement entered into between the Seller, Taung and Clidet No. 791 (Proprietary) Limited on 29 February 2008; |
1
2.1.1.7 | the shareholders agreement entered into between the Seller, Taung and Clidet No. 790 (Proprietary) Limited on 29 February 2008; |
2.1.1.8 | the shareholders agreement entered into between the Seller, Taung and Clidet No. 791 (Proprietary) Limited on 29 February 2008; and |
2.1.1.9 | the joint venture agreement entered into between the Seller and Taung on 29 February 2008; |
2.1.2 | AFSA means the Arbitration Foundation of Southern Africa; |
2.1.3 | Agreement means this sale agreement; |
2.1.4 | Conditions Precedent means the conditions precedent set out in clause 5; |
2.1.5 | Consent means the approval of the Minister for the transfer of the Specified Portion from the Seller to the Purchaser in terms of section 11 of the MPRDA; |
2.1.6 | Deed of Amendment means a notarial deed of amendment giving effect to the Mining Right Amendment, substantially similar to the draft attached hereto as annexure 1; |
2.1.7 | Deed of Cession means a notarial deed of cession in respect of the Specified Portion, substantially similar to the draft attached hereto as annexure 2; |
2.1.8 | Deposit means an amount of R20,000,000 (twenty million rand); |
2.1.9 | DMR means the Department of Mineral Resources, formerly the Department of Minerals and Energy; |
2.1.10 |
Effective Date means the 5 th (fifth) business day after the date on which the last of the Conditions Precedent is fulfilled or waived, as the case may be; |
2.1.11 | Environment means the surroundings within which humans exist and that are made up of the land, water and atmosphere of the earth, all forms of life, ecological systems and the physical, chemical, aesthetic and cultural properties and conditions of the foregoing that influence human health and well-being; |
2.1.12 | Environmental Law means and includes all - |
2.1.12.1 | common law duties and rules, national, provincial and municipal legislation |
2
(including regulations and other subsidiary legislation) and self-executing provisions of international agreements approved by the Parliament of the Republic of South Africa, that are concerned with the protection or rehabilitation of the Environment, the use of natural resources (including land), and the maintenance of an Environment conducive to human health and well-being; |
2.1.12.2 | directives, orders or other instructions lawfully given by an organ of state or state functionary exercising powers under any provision referred to in clause 2.1.12.1; and |
2.1.12.3 | permits, authorisations and exemptions issued under any provision referred to in clause 2.1.12.1; |
2.1.13 | Environmental Liabilities means all and any liabilities and obligations in relation to |
2.1.13.1 | all environmental disturbances and degradation, including the reclamation and remediation of all such environmental disturbances and degradation of whatsoever nature or kind, whether existing within or outside the Specified Mining Area, arising pursuant to or in connection with the conduct of mining and/or prospecting operations within the Specified Mining Area, of whatsoever nature or kind and whether the cause of action in respect thereof arose prior to or after the Effective Date; |
2.1.13.2 | water, whether existing within or outside the Specified Mining Area, arising pursuant to or in connection with the conduct of mining and/or prospecting operations within the Specified Mining Area, of whatsoever nature or kind, and whether the cause of action in respect thereof arose prior to or after the Effective Date; and |
2.1.13.3 | all claims of third parties in relation to the Environmental Liabilities, of whatsoever nature or kind, and whether the cause of action in respect thereof arose prior to or after the Effective Date; |
2.1.14 | Eskom means Eskom Holdings Limited, registration number 2002/015527/06, a limited liability public company duly incorporated in the Republic of South Africa; |
2.1.15 | Evander 2 and/or 5 Shaft Operations means the mining operations conducted by the Seller in respect of the shafts in, on and under the areas |
3
covered by the Evander Mining Right known as Evander 2 Shaft and Evander 5 Shaft; |
2.1.16 | Evander 6 Shaft means the mine owned by the Seller shaded in pink on the Specified Mining Area Diagram, known as Evander 6 Shaft and includes the shafts described as Evander No. 6 Shaft and No. 6 Vent Shaft on the Specified Mining Area Diagram respectively and the underground excavations; |
2.1.17 | Evander 6 Shaft Surface Area means the area covered by the Evander 6 Shaft Surface Right Permits; |
2.1.18 | Evander 6 Shaft Surface Right Permits means - |
2.1.18.1 | surface right permit number 5/97 re-registered on 14 April 2005 under registration number 626/05; and |
2.1.18.2 | surface right permit number 135/93 re-registered on 14 April 2005 under registration number 627/05; |
in respect of Evander 6 Shaft; |
2.1.19 | Evander Infrastructure and Equipment means all buildings and associated fixtures and fittings and all mining related equipment on the Specified Mining Area on the Signature Date, but specifically excludes the Excluded Sale Assets; |
2.1.20 | Evander Mining Right means the mining right with file number MP30/5/1/1/2/126MR which was granted to Evander in terms of section 23 of the MPRDA, read together with item 7 of schedule II to the MPRDA, and which was notarially executed in Witbank on 29 April 2008 before William Daniel Nortje, a copy of which has been provided to the Purchaser; |
2.1.21 | Excluded Assets means the headgears and winder house on the Specified Mining Area, which have been disposed of to, and are accordingly owned by, Impala; |
2.1.22 | Excluded Assets Sale Agreements means an agreement between the Seller and |
2.1.22.1 | Impala for the sale of the Excluded Assets by Impala to the Seller; and |
4
2.1.22.2 | the Purchaser for the sale of the Excluded Assets by the Seller to the Purchaser; |
2.1.23 | Harmony means Harmony Gold Mining Company Limited, registration number 1950/038232/06, a limited liability public company duly incorporated in the Republic of South Africa, and which is the holding company of Evander; |
2.1.24 | Harmony Trust means the Harmony Gold Environmental Trust, MR No. 8785/99; |
2.1.25 | Impala means Impala Platinum Limited, registration number 1952/071942/06, a limited liability public company duly incorporated in the Republic of South Africa; |
2.1.26 | Mining Right Amendment means the amendment of the Evander Mining Right by the deletion therefrom of the Specified Portion; |
2.1.27 | Mining Titles Office means the Mining Titles Office contemplated in section 2 of the MTRA; |
2.1.28 | Minister means the Minister of Mineral Resources, and includes any person to whom the Minister has delegated powers and functions in terms of section 103 of the MPRDA; |
2.1.29 | MPRDA means the Mineral and Petroleum Resources Development Act, 2002; |
2.1.30 | MTRA means the Mining Titles Registration Act, 1967; |
2.1.31 | New Rehabilitation Trust means the new rehabilitation trust to be established by the Purchaser to make provision for the Rehabilitation Liabilities as set out in clause 11; |
2.1.32 | Parties means the parties to this Agreement; |
2.1.33 | Prime Rate means the publicly quoted basic rate of interest, compounded monthly in arrears and calculated on a 365 (three hundred and sixty five) day year irrespective of whether or not the year is a leap year, from time to time published by Absa Bank Limited as being its prime overdraft rate, as certified by any representative of that bank whose appointment and designation it shall not be necessary to prove; |
5
2.1.34 | Purchase Consideration means an amount of R225,000,000 (two hundred and twenty five million rand), plus VAT thereon, payable by the Purchaser to the Seller in accordance with the provisions of clause 8; |
2.1.35 | Purchaser means Pluriclox (Proprietary) Limited, registration number 2010/014581/07, a limited liability private company duly incorporated in the Republic of South Africa; |
2.1.36 | Purchasers Designated Account means the bank account nominated by the Purchaser, the details of which are set out below, or such other account as the Purchaser may designate in writing on 5 (five) business days notice to the Seller |
Name of Account: | Taung Gold Limited | |
Bank: | Absa Bank Limited | |
Branch: | Centurion | |
Branch Code: | 632 005 | |
Account Number: | 407 199 5648 |
2.1.37 | Purchasers Power of Attorney means a power of attorney authorising an employee of the Sellers Attorneys (on behalf of the Purchaser) to execute the Deed of Cession and all or any other document(s) necessary in order to procure the transfer of the Sale Assets from the Seller to the Purchaser, substantially in the form attached hereto as annexure 3; |
2.1.38 | Rehabilitation Guarantee means the existing guarantee issued by the Seller in favour of the DMR in respect of, inter alia , the rehabilitation of the Specified Mining Area; |
2.1.39 | Rehabilitation Liabilities means the Sellers obligations to rehabilitate all environmental disturbances, including health and pollution, and degradation existing in, on and under the Specified Mining Area and the Evander 6 Shaft Surface Right Area, whether such obligations arose prior to or after the Effective Date, and shall include - |
2.1.39.1 | all restoration, anti-pollution measures, anti-flooding measures, making safe, rehabilitation, compliance with the terms of any rehabilitation plans and/or programs approved by the DMR; |
2.1.39.2 | compliance with all Environmental Laws; and |
6
2.1.39.3 | the obtaining of the relevant certificate in terms of section 43 of the MPRDA. |
2.1.40 | Sale means the sale of the Sale Assets by the Seller to the Purchaser in terms of this Agreement; |
2.1.41 | Sale Assets means - |
2.1.41.1 | the Evander 6 Shaft; |
2.1.41.2 | the Evander Infrastructure and Equipment and all associated diagrams and plans (if any); |
2.1.41.3 | all geological data in respect of the Specified Mining Area including all available reports and drill cores; |
2.1.41.4 | the Specified Portion; |
2.1.41.5 | the Evander 6 Shaft Surface Right Permits; and |
2.1.41.6 | all plans required to be maintained by the Seller in terms of the Mine, Health and Safety Act, 1996 in respect of the Specified Mining Area (if any), |
but specifically excludes the Excluded Assets; |
2.1.42 | Sale Liabilities means the |
2.1.42.1 | Rehabilitation Liabilities; and |
2.1.42.2 | Environmental Liabilities; |
2.1.43 | Sasol means Sasol Group Services (Proprietary) Limited, registration number 2006/011591/07, a limited liability private company duly incorporated in the Republic of South Africa; |
2.1.44 | Sasol Agreement means the agreement of lease entered into between Harmony and Sasol during June 2010, a copy of which has been provided to the Purchaser; |
2.1.45 | Seller means Evander Gold Mines Limited, registration number 1963/006226/06, a limited liability public company duly incorporated in the Republic of South Africa, and which is a wholly owned subsidiary of Harmony; |
7
2.1.46 | Sellers Attorneys means Cliffe Dekker Hofmeyr Incorporated, registration number 2008/018923/21, a firm of attorneys duly incorporated as a private company in the Republic of South Africa; |
2.1.47 | Sellers Attorneys Designated Account means the following account of the Sellers Attorneys |
Name of Account: | Cliffe Dekker Hofmeyr Inc. | |
Bank: | Nedbank Limited | |
Branch: | Johannesburg | |
Branch Code: | 1979 05 | |
Account Number: | 1979 312 176 |
2.1.48 | Sellers Designated Account means the bank account nominated by the Seller, the details of which are set out below, or such other account as the Seller may designate in writing on 5 (five) business days notice to the Purchaser |
Name of Account: | Harmony Gold Mining Company Current Account | |
Bank: | Nedbank Limited | |
Branch: | Corporate Client Services | |
Branch Code: | 145405 | |
Account Number: | 1454115866 |
2.1.49 | Sellers Power of Attorney means a power of attorney authorising an employee of the Sellers Attorneys (on behalf of the Seller) to execute the Deed of Cession and Deed of Amendment and all or any other document(s) necessary in order to procure the transfer of the Sale Assets from the Seller to the Purchaser, substantially in the form attached hereto as annexure 4; |
2.1.50 | Signature Date means the date of signature of this Agreement by the Party last signing; |
2.1.51 | Specified Mining Area means the area outlined in red on the Specified Mining Area Diagram; |
2.1.52 | Specified Mining Area Diagram means the diagram attached hereto as annexure 5; |
2.1.53 |
Specified Portion means that portion of the Evander Mining Right which |
8
covers the Specified Mining Area; |
2.1.54 | Taung means Taung Gold Limited, registration number 2004/023942/06, previously known as Taung Gold Holdings (Proprietary) Limited, a limited liability public company duly incorporated in the Republic of South Africa; |
2.1.55 | TD5 Form means a TD5 form completed by or on behalf of the Purchaser and the Seller, in terms of which application is made to the South African Revenue Service for an exemption from the payment of transfer duty in regard to the transfer of the Sale Assets from the Seller to the Purchaser; |
2.1.56 | VAT means value-added tax as levied from time to time in terms of the VAT Act; |
2.1.57 | VAT Act means the Value-Added Tax Act 89 of 1991; |
2.1.58 | Warranties means the warranties in annexure 6 and otherwise expressly given by the Seller to the Purchaser in terms of this Agreement; and |
2.1.59 | Winkelhaak means Winkelhaak Mines Limited, registration number 1955/003606/06, a limited liability public company duly incorporated in the Republic of South Africa, and which is a wholly owned subsidiary of the Seller. |
2.2 | In this Agreement - |
2.2.1 | clause headings and the heading of the Agreement are for convenience only and are not to be used in its interpretation; |
2.2.2 | an expression which denotes - |
2.2.2.1 | any gender includes the other genders; |
2.2.2.2 | a natural person includes a juristic person and vice versa ; |
2.2.2.3 | the singular includes the plural and vice versa ; and |
2.2.2.4 | a Party includes a reference to that Partys successors in title and assigns allowed at law. |
2.3 | Any reference in this Agreement to |
2.3.1 |
business hours shall be construed as being the hours between 08h30 and 17h00 on any business day. Any reference to time shall be based upon South |
9
African Standard Time; |
2.3.2 | days shall be construed as calendar days unless qualified by the word business, in which instance a business day will be any day other than a Saturday, Sunday or public holiday as gazetted by the government of the Republic of South Africa from time to time; |
2.3.3 | law means any law of general application and includes the common law and any statute, constitution, decree, treaty, regulation, directive, ordinance, by-law, order or any other enactment of legislative measure of government (including local and provincial government) statutory or regulatory body which has the force of law; |
2.3.4 | person means any person, company, close corporation, trust, partnership or other entity whether or not having separate legal personality; and |
2.3.5 | writing means legible writing and in English and excludes any form of electronic communication contemplated in the Electronic Communications and Transactions Act, No 25 of 2002. |
2.4 | The words include and including mean include without limitation and including without limitation. The use of the words include and including followed by a specific example or examples shall not be construed as limiting the meaning of the general wording preceding it. |
2.5 | Any substantive provision, conferring rights or imposing obligations on a Party and appearing in any of the definitions in this clause 2 or elsewhere in this Agreement, shall be given effect to as if it were a substantive provision in the body of the Agreement. |
2.6 | The terms holding company and subsidiary shall bear the meanings assigned thereto in the Companies Act, 1973. |
2.7 | Words and expressions defined in any clause shall, unless the application of any such word or expression is specifically limited to that clause, bear the meaning assigned to such word or expression throughout this Agreement. |
2.8 | Unless otherwise provided, defined terms appearing in this Agreement in title case shall be given their meaning as defined, while the same terms appearing in lower case shall be interpreted in accordance with their plain English meaning. |
10
2.9 | A reference to any statutory enactment shall be construed as a reference to that enactment as at the Signature Date and as amended or substituted from time to time. |
2.10 | Unless specifically otherwise provided, any number of days prescribed shall be determined by excluding the first and including the last day or, where the last day falls on a day that is not a business day, the next succeeding business day. |
2.11 | if the due date for performance of any obligation in terms of this Agreement is a day which is not a business day then (unless otherwise stipulated) the due date for performance of the relevant obligation shall be the immediately succeeding business day. |
2.12 | Where figures are referred to in numerals and in words, and there is any conflict between the two, the words shall prevail, unless the context indicates a contrary intention. |
2.13 | The rule of construction that this Agreement shall be interpreted against the Party responsible for the drafting of this Agreement, shall not apply. |
2.14 | The expiration or termination of this Agreement shall not affect such of the provisions of this Agreement as expressly provide that they will operate after any such expiration or termination or which of necessity must continue to have effect after such expiration or termination, notwithstanding that the clauses themselves do not expressly provide for this. |
2.15 | No provision of this Agreement shall (unless otherwise stipulated) constitute a stipulation for the benefit of any person ( stipulatio alteri ) who is not a Party to this Agreement. |
2.16 | The use of any expression in this Agreement covering a process available under South African law, such as winding-up, shall, if any of the Parties to this Agreement is subject to the law of any other jurisdiction, be construed as including any equivalent or analogous proceedings under the law of such other jurisdiction. |
2.17 | Any reference in this Agreement to this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document, as amended, varied, novated or supplemented from time to time. |
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2.18 | This Agreement incorporates the annexures which annexures shall have the same force and effect as if set out in the body of this Agreement. In this Agreement the words clause or clauses and annexure or annexures refer to clauses of and annexures to this Agreement. |
3 | INTRODUCTION |
3.1 | The Seller is the holder of the Specified Portion and the Evander 6 Shaft Surface Right Permits and the owner of the other Sale Assets. |
3.2 | The Purchaser wishes to purchase the Sale Assets from the Seller and the Seller has agreed to sell the Sale Assets to the Purchaser with effect from the Effective Date, on the terms and subject to the conditions herein contained. |
3.3 | The Parties wish to record in writing their agreement in respect of the above and matters ancillary thereto. |
4 | TERMINATION |
4.1 | The Parties acknowledge that the implementation of both this Agreement and the 2008 Agreements will not be possible. |
4.2 | The 2008 Agreements (other than the right of access and use agreements referred to in clauses 2.1.1.3 and 2.1.1.4) are hereby suspended with effect from the Signature Date, save that Taung will still be obliged to exercise its rights, and will likewise be obliged to perform its obligations, in respect of the PFS and the BFS (as those terms are described in the 2008 Agreements) ( Taung Rights and Obligations ). |
4.3 | In the event that the date for fulfilment of the Condition Precedent contained in clause 5.1.13 is extended in terms of clause 5.8, 5.9 or 5.10, the date of implementation of the 2008 Agreements will, unless otherwise agreed in writing between the Parties, be extended for the same period. |
4.4 | In the event that this Agreement |
4.4.1 | fails to become unconditional in accordance with its terms, the suspension of the 2008 Agreements will be automatically lifted and the parties to the relevant 2008 Agreements will be obliged to forthwith comply with all of their obligations, and will be entitled to exercise all of their rights, under such agreements; or |
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4.4.2 | becomes unconditional in accordance with its terms, the 2008 Agreements will be automatically terminated with effect from the Effective Date and the parties to the 2008 Agreements will have no further rights or obligations under those agreements. |
5 | CONDITIONS PRECEDENT |
5.1 | Save for clauses 1 to 5, clause 15 and clauses 17 and 19 to 33, all of which will become effective immediately, this Agreement is subject to the fulfilment of the Conditions Precedent that |
5.1.1 |
on or before 17h00 on the 3 rd (third) business day after the Signature Date, the Purchaser has paid the Deposit into the Sellers Attorneys Designated Account; |
5.1.2 |
by not later than 17h00 on the 20 th (twentieth) business day after the Signature Date, the Seller has received a copy of resolutions of the boards of directors of the Purchaser and Taung, in a form and substance reasonably acceptable to the Seller - |
5.1.2.1 | approving and, where applicable, ratifying the entering into of this Agreement; |
5.1.2.2 | authorising a specified person or persons to execute this Agreement and, where applicable, ratifying the execution of this Agreement by such specified person or persons; and |
5.1.2.3 | authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with this Agreement, including, where applicable, the Purchasers Power of Attorney and the TD5 Form; |
5.1.3 |
by not later than 17h00 on the 20 th (twentieth) business day after the Signature Date, the Purchaser has received a copy of resolutions of the board of directors of the Seller, in a form and substance reasonably acceptable to the Purchaser - |
5.1.3.1 | approving and, where applicable, ratifying the entering into of this Agreement; |
5.1.3.2 |
authorising a specified person or persons to execute this Agreement and, where applicable, ratifying the execution of this Agreement by such |
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specified person or persons; and |
5.1.3.3 | authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with this Agreement, including the Sellers Power of Attorney and the TD5 Form; |
5.1.4 |
by not later than 17h00 on the 20 th (twentieth) business day after the Signature Date, the Purchasers Power of Attorney has been signed by the Purchasers duly appointed representative; |
5.1.5 |
by not later than 17h00 on the 20 th (twentieth) business day after the Signature Date, the Sellers Power of Attorney has been signed by the Sellers duly appointed representative; |
5.1.6 |
by not later than 17h00 on the 20 th (twentieth) business day after the Signature Date, the TD5 Form has been signed on behalf of the Seller and the Purchaser; |
5.1.7 |
by not later than 17h00 on the 60 th (sixtieth) day after the Signature Date, the Seller has procured the transfer of the Surface Right Permits from Winkelhaak to the Seller; |
5.1.8 |
by not later than 17h00 on the 60 th (sixtieth) day after the Signature Date, the Purchaser has acquired the Excluded Assets; |
5.1.9 |
by not later than 17h00 on the 120 th (one hundred and twentieth) day after the Signature Date, the Sellers certificate of registration granted under the National Nuclear Regulator Act, 1999 has been amended to exclude the Specified Mining Area; |
5.1.10 |
by not later than 17h00 on the 120 th (one hundred and twentieth) day after the Signature Date, the Purchaser has been granted a certificate of registration under the National Nuclear Regulator Act, 1999 in respect of the Specified Mining Area; |
5.1.11 |
by not later than 17h00 on 180 th (one hundred and eightieth) day after the Signature Date, the New Rehabilitation Trust has been established and letters of authority have been issued to its trustees by the Master of the High Court; |
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5.1.12 |
by not later than 17h00 on the 1 st (first) anniversary of the Signature Date, the Minister has consented to the transfer of the Rehabilitation Liabilities from the Seller to the Purchaser in terms of section 43 of the MPRDA; and |
5.1.13 |
by not later than the 1 st (first) anniversary of the Signature Date, the Consent has been granted by the Minister. |
5.2 | The Condition Precedent contained in clause 5.1.8 will be deemed to have been fulfilled and the Purchaser will be obliged to acquire the Excluded Assets from the Seller, on the same terms and conditions as those on which the Seller acquired the Excluded Assets from Impala, whether or not the Excluded Assets Sale Agreements have been entered into, provided that the purchase consideration payable by the Purchaser to the Seller for the Excluded Assets is not more than R5,000,000 (five million rand), excluding VAT. |
5.3 | The Purchaser shall use commercially reasonable endeavours to procure the fulfilment of the Conditions Precedent contained in clauses 5.1.1, 5.1.2, 5.1.4, 5.1.10 and 5.1.11 as soon as reasonably possible after the Signature Date. |
5.4 | The Seller shall use commercially reasonable endeavours to procure the fulfilment of the Conditions Precedent contained in clauses 5.1.3, 5.1.5, 5.1.7 and 5.1.9 as soon as reasonably possible after the Signature Date. |
5.5 | The Purchaser and the Seller shall use their commercially reasonable endeavours and will co-operate in good faith to procure the fulfilment of the Condition Precedent contained in clauses 5.1.6, 5.1.8, 5.1.12 and 5.1.13 as soon as reasonably possible after the Signature Date. |
5.6 | In complying with its obligation to use commercially reasonable endeavours to procure the fulfilment of the Condition Precedent contained in clause 5.1.8, the Purchaser shall endeavour to procure that the Excluded Assets Sale Agreements are entered into. However, in the event that Impala insists on a purchase consideration in excess of R5,000,000 (five million rand), excluding VAT, for the Excluded Assets, the Purchaser shall be obliged to negotiate directly with Impala for the acquisition of the Excluded Assets and the Seller shall have no further obligation to use commercially reasonable endeavours to procure the fulfilment of the said Condition Precedent. |
5.7 | The Conditions Precedent set out in |
5.7.1 |
clauses 5.1.1, 5.1.2, 5.1.9, 5.1.11 and 5.1.12 have been inserted for the |
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benefit of the Seller which will be entitled to waive fulfilment of any or all of the said Conditions Precedent, in whole or in part, on written notice to the Purchaser prior to the expiry of the relevant time period set out in those clauses (or such later date or dates as may be extended in terms of clause 5.8 and/or such later date or dates as may be agreed in writing between the Purchaser and the Seller before the aforesaid date or dates); |
5.7.2 | clauses 5.1.3, 5.1.8 and 5.1.10 have been inserted for the benefit of the Purchaser which will be entitled to waive fulfilment of either or both of the said Conditions Precedent, in whole or in part, on written notice to the Seller prior to the expiry of the relevant time period set out in those clauses (or such later date or dates as may be extended in terms of clause 5.8 and/or such later date or dates as may be agreed in writing between the Purchaser and the Seller before the aforesaid dates); |
5.7.3 | clauses 5.1.4 to 5.1.7 (both inclusive) have been inserted for the benefit of the Purchaser and the Seller who will be entitled to waive fulfilment of such Conditions Precedent, in whole or in part, by written agreement prior to the expiry of the relevant time period set out in those clauses (or such later date or dates as may be extended in terms of clause 5.8 and/or such later date or dates as may be agreed in writing between the Purchaser and the Seller before the aforesaid date or dates); and |
5.7.4 | clause 5.1.13 is not capable of being waived. |
5.8 | The Seller shall be entitled from time to time to extend the due date for fulfilment of any or all of the Conditions Precedent by written notice to that effect to the Purchaser, provided however that the aggregate of such extensions in respect of any of the Conditions Precedent shall not be more than 60 (sixty) business days. |
5.9 | The Purchaser shall be entitled from time to time to extend the due date for fulfilment of the Condition Precedent contained in clause 5.1.13 by written notice to that effect to the Seller, provided however that the aggregate of such extensions in respect of such Condition Precedent shall not be more than 60 (sixty) business days. |
5.10 |
Unless all the Conditions Precedent have been fulfilled or waived by not later than the relevant dates for fulfilment thereof set out in clause 5.1 (or such later date or dates as may be extended in terms of clause 5.8 and/or such later date or dates as may be agreed in writing between the Purchaser and the Seller |
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before the aforesaid date or dates) the provisions of this Agreement, save for clauses 1 to 5 and clauses 19 to 23 and clauses 25 to 33 which will remain of full force and effect, will never become of any force or effect and the status quo ante will be restored as near as may be possible and none of the Parties will have any claim against the others in terms hereof or arising from the failure of the Conditions Precedent, save for any claims arising from a breach of clause 5.3, 5.4 and/or clause 5.5. |
6 | SALE |
6.1 | The Seller hereby sells to the Purchaser, which hereby purchases, the Sale Assets, as one indivisible transaction, for the Purchase Consideration. |
6.2 | Notwithstanding the Signature Date, the Sale will take place on the Effective Date and ownership of and risk in, and benefit attaching to, the Sale Assets, will, against payment by the Purchaser of the Purchase Consideration in terms of clause 8 and against compliance by the Parties with the provisions of clause 10, pass to the Purchaser on the Effective Date. |
7 | DEPOSIT |
7.1 | The Deposit shall be held in trust in an interest bearing trust account pending fulfilment of the Conditions Precedent. This clause 7 constitutes the mandate to the Sellers Attorneys in terms of section 78(2A) of the Attorneys Act, 1979. |
7.2 | The Deposit shall be paid by the Purchaser by electronic transfer of immediately available and freely transferable funds into the Sellers Attorneys Designated Account. |
7.3 | In the event that the Conditions Precedent are fulfilled or, where applicable, waived, by the due dates for fulfilment thereof and the Purchaser fails to comply with its obligations under clauses 8 and 10 on the due date therefor, the Purchaser shall forfeit the Deposit and all interest accrued thereon, which shall be paid to the Seller, without prejudice to the Sellers rights in law, by way of pre-estimated liquidated damages, it being specifically recorded that, in such circumstance, the Seller shall be entitled to unilaterally instruct the Sellers Attorneys in writing to pay the Deposit, and all interest accrued thereon, to the Seller. |
7.4 | The Seller shall be obliged to provide the Purchaser with a copy of any instruction to the Sellers Attorneys given by it under the provisions of clause 7.3. |
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7.5 | The Sellers Attorneys shall be entitled to pay the Deposit, and all accrued interest, to the Seller in accordance with the Sellers written instruction, provided that the Sellers Attorneys has given the Purchaser at least 48 (forty eight) hours written notice that it intends to pay the Deposit and interest to the Seller and the Purchaser has not objected to such payment by written notice to the Sellers Attorneys prior to the expiry of the said 48 (forty eight) hours. If the Purchaser has objected as contemplated in this clause 7.5, the resultant dispute may be referred by the Purchaser or the Seller for resolution in terms of clause 26. |
7.6 | If the Sellers Attorneys receive a notice from the Purchaser in accordance with the provisions of clause 7.5, it shall be obliged to retain the Deposit and the interest accrued thereon until such time as the Sellers Attorneys receive written notification signed on behalf of both Parties to release the Deposit and interest accrued thereon to the Seller. |
7.7 | In the event that the Conditions Precedent are fulfilled or, where applicable, waived, by the due dates for fulfilment thereof and the Purchaser complies with its obligations under clauses 8 and 10 on the due date therefor, the Sellers Attorneys shall return an amount equal to the Deposit and ail interest accrued thereon to the Purchaser, within 5 (five) business days of the Effective Date, by electronic transfer of immediately available and freely transferable funds into the Purchasers Designated Account free of any deductions or set-off whatsoever, in the currency of the Republic of South Africa. |
8 | PAYMENT OF THE PURCHASE CONSIDERATION |
8.1 | The Purchase Consideration shall be paid by the Purchaser to the Seller on the Effective Date. |
8.2 | All payments to be made by the Purchaser to the Seller in terms of this Agreement will be made by electronic transfer of immediately available and freely transferable funds to the Sellers Designated Account, free of any deductions or set-off whatsoever, in the currency of the Republic of South Africa. |
9 | INTEREST |
Should any payment under or arising from this Agreement fail to be made on the due date thereof then, without prejudice to such other rights as may accrue to the payee consequent upon such failure, such overdue amounts will bear interest at the
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Prime Rate, from the due date for payment to the date of actual payment, both dates inclusive.
10 | CLOSING |
10.1 | On the Effective Date, representatives of the Purchaser and the Seller shall meet with the Sellers Attorneys at 10h00 at the offices of the Sellers Attorneys, or such other place as the Parties may agree, at which meeting |
10.1.1 | to the extent that it has not done so already, the Purchaser shall provide the Sellers Attorneys with the following |
10.1.1.1 | originals or certified copies of such board resolution(s) in respect of the Purchaser as the Sellers Attorneys may deem necessary in order to procure the transfer of the Sale Assets from the Seller to the Purchaser; |
10.1.1.2 | the original duly executed Purchasers Power of Attorney; and |
10.1.1.3 | an original duly completed and signed TD5 Form; |
10.1.2 | to the extent that it has not done so already, the Seller shall provide the Sellers Attorneys with the following |
10.1.2.1 | originals or certified copies of such board resolution(s) in respect of the Seller as the Sellers Attorneys may deem necessary in order to procure the transfer of the Specified Portion from the Seller to the Purchaser; |
10.1.2.2 | the original duly executed Sellers Power of Attorney; and |
10.1.2.3 | an original or certified copy of the Consent and any other document required by the Sellers Attorneys to procure the transfer of the Sale Assets from the Seller to the Purchaser. |
11 | SALE LIABILITIES |
11.1 | The Seller hereby delegates the Sale Liabilities to the Purchaser, and the Purchaser hereby assumes the Sale Liabilities, with effect from the Effective Date. |
11.2 | The Purchaser undertakes to discharge the Sale Liabilities as and when they fall due. |
11.3 |
The Seller will, as soon as possible after the Effective Date, and in any event by |
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no later than 60 (sixty) days thereafter, procure the transfer from the Harmony Trust to New Rehabilitation Trust, the full amount which has been provided in the Harmony Trust for the Rehabilitation Liabilities, together with any growth in such amount between the Signature Date and the date of transfer of the amount, subject to the following - |
11.3.1 | the New Rehabilitation Trust shall be a separate fund in respect of the Rehabilitation Liabilities and shall not be used for any other purpose; |
11.3.2 | the trust deed of the New Rehabilitation Trust will not be amended without the Sellers prior written approval; |
11.3.3 |
the Seller shall have the right from time to time, until the 1 st (first) anniversary of the Effective Date, to appoint a trustee to the New Rehabilitation Trust and, for so long as the Seller has an appointed trustee, no payment shall be made from the New Rehabilitation Trust unless the trustee appointed by the Seller consents thereto in writing, which consent shall not be unreasonably withheld; |
11.3.4 | the Purchaser will deposit amounts into the New Rehabilitation Trust as agreed with the DMR. To the extent that any contributions to the New Rehabilitation Trust are in arrears after the Effective Date, the Purchaser hereby undertakes that it shall not distribute any cash from its business, in any form or manner whatsoever, until such arrears have been extinguished; and |
11.3.5 | the Purchaser will provide the Seller, on an annual basis, with an estimate of the Rehabilitation Liabilities, details of all amounts paid into or by the New Rehabilitation Trust and a copy of the accounts of the New Rehabilitation Trust. |
11.4 | The Seller warrants that, as at 30 June 2010, the amount which has been provided in the Harmony Trust for the Rehabilitation Liabilities is not less than R10,339,590 (ten million three hundred and thirty nine thousand five hundred and ninety rand). |
11.5 | The Purchaser hereby indemnifies the Seller against and shall hold it harmless from all claims, liability, damage, loss, penalty, expense and cost (including legal costs on an attorney and own client scale, clean-up costs and reasonable expert fees) of any nature whatsoever which the Seller may sustain as a result of or attributable to all or any Sale Liabilities and/or in respect of the Rehabilitation Guarantee, with effect from the Effective Date. |
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12 | DEED OF CESSION AND DEED OF AMENDMENT |
The Seller shall notify the Sellers Attorneys forthwith after having received payment of the Purchase Consideration in accordance with the provisions of clause 8.2 ( Payment Date ) and shall procure that, the Deed of Cession and the Deed of Amendment are
12.1 | executed on the later of the Payment Date and the date on which the provisions of clause 10 have been fully complied with; and |
12.2 | lodged for registration in terms of the MTRA within the 30 (thirty) day period contemplated in section 11(4) of the MPRDA. |
13 | SURFACE RIGHT PERMITS |
Transfer of the Evander 6 Shaft Surface Right Permits into the name of the Purchaser shall be given to the Purchaser as soon as reasonably possible after the Effective Date, provided the Purchaser has paid the costs of and incidental to the transfer of the Evander 6 Shaft Surface Right Permits into the name of the Purchaser. Transfer shall be effected by the Sellers Attorneys. The Purchaser and the Seller shall on request from the Sellers Attorneys, sign all documents required to be signed by the Sellers Attorneys in order that transfer of the Surface Right Permits may be effected.
14 | SASOL AGREEMENT |
14.1 | It is recorded that the storage tanks which are leased to Sasol in terms of the Sasol Agreement form part of the Evander infrastructure and Equipment. |
14.2 | Harmony hereby assigns its rights and obligations under the Sasol Agreement to the Purchaser with effect from the Effective Date, which will take over and complete the Sasol Agreement for its own account. The Purchaser hereby irrevocably and unconditionally accepts such assignment. |
14.3 | The Purchaser undertakes, prior to the Effective Date, to use its reasonable endeavours to procure the consent of Sasol to the assignment of the Sasol Agreement to the Purchaser, with effect from the Effective Date. |
14.4 | The Purchaser shall fully comply with the Sasol Agreement from the Effective Date, at its cost. |
14.5 |
Should Sasol fail or refuse to give its consent as aforesaid where such consent is |
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a requirement for such assignment |
14.5.1 | Harmony hereby, with effect from the Effective Date, appoints the Purchaser as its sub-contractor on the basis that the Purchaser will indemnify and hold harmless Harmony against all and any claims which may be made against Harmony arising from any act or omission of the Purchaser in respect of such sub-contracted work. Any work so performed by the Purchaser shall be for the profit or loss of the Purchaser; and |
14.5.2 | the Sasol Agreement shall not be amended or extended without Harmonys prior written consent, it being agreed that the Sasol Agreement shall terminate on 31 March 2013, as provided for therein. |
14.6 | Should for any reason it not be possible for the Parties to implement clause 14.5, the Parties shall forthwith meet and in good faith agree an alternative solution which will achieve the same or substantially the same commercial result for the Purchaser and Harmony. |
14.7 | The Purchaser hereby indemnifies Harmony and holds it harmless against any and all claims which may be made against it and all liabilities which may be incurred by Harmony under the Sasol Agreement, but only in respect of claims, the cause of action of which arises after the Effective Date. |
15 | FLOODING |
15.1 | The Seller has closed the Evander 2 and 5 Shaft Operations, which closure has resulted in the cessation of water pumping activities in respect of the Evander 2 and 5 Shaft Operations ( Water Pumping Activities ), which may in turn cause, inter alia , the flooding of the unused underground operations in the Specified Mining Area. |
15.2 | The Purchaser shall be entitled within a period of 30 (thirty) business days commencing on the Signature Date, to investigate and/or assess the necessity of recommencing the Water Pumping Activities insofar as it relates to the Sale Assets. |
15.3 | In the event that, on or before the expiry of the aforesaid 30 (thirty) business day period, the Purchaser has requested the Seller in writing to recommence the Water Pumping Activities and has specified the duration for which the Water Pumping Activities are required to continue, which duration shall not be longer than 12 (twelve) months |
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15.3.1 | the Seller shall recommence the Water Pumping Activities for the duration specified by the Purchaser; and |
15.3.2 | the Purchaser shall be liable for all reasonable costs incurred by the Seller in connection with the Water Pumping Activities for the duration of the Water Pumping Activities, including the electricity costs referred to in clause 16, which reasonable costs shall, subject to the provisions of clause 16, be paid by the Purchaser to the Seller within 5 (five) business days of receipt of an invoice from the Seller. |
15.4 | The Purchaser hereby, irrevocably and unconditionally - |
15.4.1 | accepts all risk, insofar as it relates to the Specified Mining Area, and in particular the unused underground operations of the Specified Mining Area; |
15.4.2 | indemnifies the Seller against and shall hold it harmless from all claims, liability, damage, loss, penalty, expense and cost (including legal costs on an attorney and own client scale, clean-up costs and reasonable expert fees) of any nature whatsoever which the Purchaser may sustain as a result of the closure of the Evander 2 and 5 Shaft Operations by the Seller and/or the cessation of the Water Pumping Activities; and |
15.4.3 | undertakes not to lodge any objection, of any nature whatsoever in respect of the closure of the Evander 2 and 5 Shaft Operations by the Seller and/or the cessation of the Water Pumping Activities. |
16 | ELECTRICITY |
16.1 | As a result of the decision to close the Evander 2 and 5 Shaft Operations, the Seller intends reducing the amount of electricity supplied in respect of the Evander 2 and 5 Shaft Operations. |
16.2 | The Seller shall, in the event that the Purchaser has requested that the Seller recommence the Water Pumping Activities in accordance with clause 15.3, continue the supply of the electricity for so long as the Water Pumping Activities continue. |
16.3 | The Purchaser shall following written demand by the Seller, and for so long as the electricity supply to Evander 2 and Evander 5 Shaft continues at the request of the Purchaser, reimburse the Seller for - |
16.3.1 |
the pro rata direct cost (calculated based on the applicable number of months) |
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incurred by the Seller in maintaining the supply by Eskom of electricity to the Evander 5 Shaft point of distribution for the period from the Signature Date to the end of the calendar year during which the Effective Date falls, which direct cost shall be paid on demand made by the Seller at any time after the Signature Date; |
16.3.2 | the direct cost incurred by the Seller in maintaining the supply by Eskom of electricity to the Evander 5 Shaft point of distribution for every calendar year after the calendar year referred to in clause 16.3.1, which direct costs shall be paid annually in advance; |
16.3.3 | the costs of consumption of electricity incurred by the Seller in respect of the Evander 6 Shaft, which consumption costs shall be paid monthly in arrears; and |
16.3.4 | any additional costs payable by the Seller to Eskom in respect of the electricity supply to the Evander 2 and/or 5 Shaft Operations, including all costs in respect of the refurbishment of the electricity supply system which supplies the Evander 2 and/or 5 Shaft Operations. |
16.4 | The Seller undertakes that it shall advise the Purchaser of any notification received from Eskom of its intention to proceed with the refurbishment referred to in clause 16.3.4, within 5 (five) business days of receiving such notification. |
17 | INTERIM PERIOD ACTIVITIES |
17.1 | The Seller shall procure that from the Signature Date until the Effective Date, no activities shall be conducted on or under the Specified Mining Area (save to the extent required by law, in terms of the provisions of this Agreement, the Evander Mining Right or any mining works programme or environmental management programme in respect of the Evander Mining Right and/or the Specified Mining Area) without obtaining the prior written consent of the Purchaser, which consent may not be unreasonably withheld or delayed. |
17.2 |
The Seller and the Purchaser hereby agree not to submit any written document to the DMR, local authorities or public utilities in respect of this Agreement and/or the Sale Assets without first having furnished a draft of the document to the other Party and thereafter having consulted with the other Party at least 2 (two) business days prior to submission of the documentation to the DMR, local authorities or public utilities in order to enable them in good faith to attempt to |
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agree the content of such written document, provided that, if agreement is not reached within the said 2 (two) business day period, the Party wishing to submit the written document shall be entitled in any event to do so. |
18 | WARRANTIES |
18.1 | Subject to the limitations and qualifications set out in this clause 18, the Seller hereby gives to and in favour of the Purchaser the Warranties more fully set out in this Agreement and in annexure 6. Each Warranty will |
18.1.1 | be a separate Warranty and, except as expressly provided in this Agreement, will in no way be limited or restricted by reference to or inference from the terms of any other Warranty or by any other words in this Agreement; |
18.1.2 | insofar as it is promissory or relates to a future event, be deemed to have been given as at the date of fulfilment of the promise or future happening of the event, as the case may be; and |
18.1.3 | be given as at the Signature Date and the Effective Date. |
18.2 | The Warranties are limited and qualified |
18.2.1 | to the extent to which disclosure of any fact or circumstance giving rise to such limitation or qualification has been made in |
18.2.1.1 | any other document provided by the Seller or any of its officers, employees, agents or advisers to the Purchaser or any of its representatives in respect of the Sale Assets; and |
18.2.1.2 | any publicly available information; |
18.2.2 | by anything which arises as a result of any change in any applicable law or in its interpretation; and |
18.2.3 | by anything to the extent that it is within the actual knowledge of the Purchaser or that the Purchaser ought reasonably have known after making due enquiries. |
18.3 | The Purchaser acknowledges and warrants that |
18.3.1 | as at the Signature Date, it does not know of, or have any ground to suspect, anything which may be, or would with the lapse of time or giving of notice, or both, be likely to become, a breach of any Warranty; |
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18.3.2 | it and its representatives have been afforded the opportunity to make requests for further information, and such information has been supplied; |
18.3.3 | it has made, and relies on, its own searches, investigations and enquiries in respect of the Sale Assets; |
18.3.4 | it has had independent legal, financial and technical advice relating to the purchase of the Sale Assets and to the provisions of this Agreement and to the agreements and other documents to be executed pursuant to this Agreement; and |
18.3.5 | it has made and is relying on its own independent investigation, analysis and evaluation of the information provided by the Seller and of other information which it considers relevant. |
18.4 | Save for those Warranties and representations expressly given or made in this Agreement or in annexure 6, no warranties or representations are given or made, in respect of the Sale Assets, or any other matter whatsoever, whether express, tacit or implied, and the Sale Assets are being sold on a voetstoots basis. |
19 | LIMITATION OF LIABILITY |
19.1 | Notwithstanding the Warranties, representations, undertakings and indemnifications given by the Seller, no liability shall attach to the Seller in respect of any breach of this Agreement in relation to claims, losses or liabilities |
19.1.1 | for any loss of profit or any other indirect, special or consequential loss; |
19.1.2 | which are less than R10,000,000 (ten million rand) in aggregate, provided that when such aggregate or individual claims or loss exceed the said amount, the Seller shall, subject to clause 19.1.3 and clause 19.1.4, be liable for the full amount of such claim/s and/or loss and/or liabilities and not only for the amount in excess of the said amount; |
19.1.3 |
if the Purchaser has not issued summons or commenced arbitration proceedings against the Seller for recovery of such claims, losses or liabilities within a period of 12 (twelve) months after the Effective Date, provided that if the Purchaser has, before such date, given written notice in respect of any claim which it may have to the Seller and has within 6 (six) months after such |
26
date issued summons or commenced arbitration proceedings for the recovery thereof, the Warranties and indemnities given in respect of such notified matter shall survive as long as may be necessary to permit the final resolution of such matter; or |
19.1.4 | which in aggregate exceed an amount equal to the Purchase Consideration on the basis that the aggregate amount recoverable from the Seller, exclusive of interest and costs, from whatever cause arising, shall be limited to the aforesaid amount. |
19.2 | The Purchaser shall have no claim whatsoever against the Seller in respect of any breach of any of the Warranties or representations contained in this Agreement and annexure 6 hereto if and to the extent that |
19.2.1 | such breach or claim occurs as a result of any legislation not in force at the Signature Date which takes effect retrospectively; or |
19.2.2 | such breach or claim would not have arisen but for any voluntary act or omission on the part of the Purchaser or any person connected with it otherwise than in the ordinary course of business. |
19.3 | Any claim by the Purchaser against the Seller based on a breach of a representation, undertaking, Warranty or indemnity contained in this Agreement shall be reduced by the aggregate of |
19.3.1 | an amount equal to any tax benefit received by the Purchaser as a result thereof, based on the nominal tax rate applicable at the time; |
19.3.2 | any amount recovered from any third party in respect thereof, including all insurance proceeds recovered; and |
19.3.3 | any amount by which the subject matter of the claim has been or is made good or otherwise compensated for without cost to the Purchaser. |
19.4 | If and to the extent that the Purchaser is entitled in law to recover any amount from any third party as contemplated in clause 19.3.2, the Purchaser shall be obliged to take all reasonable steps available to it to recover such amounts before proceeding against the Seller. |
19.5 |
All amounts available for set-off or otherwise liable to be deducted pursuant to clauses 19.2 or 19.3, shall first be taken into account for the purpose of |
27
determining the amount of loss sustained in connection with the limits referred to in clause 19.1. |
19.6 | Nothing in this clause 19 shall in any way diminish the Purchasers common law obligation to mitigate its loss. |
19.7 | If any potential claim arises by reason of liability which is contingent only, then the Seller shall not be under any obligation to make any payment pursuant to such claim until such time as the contingent liability ceases to be contingent and becomes actual. |
19.8 | Subject to the Warranties, the Purchaser hereby indemnifies the Seller against and shall hold it harmless from all claims, liability, damage, loss, penalty, expense and cost (including legal costs on an attorney and own client scale) of any nature whatsoever which the Seller may sustain as a result of or attributable to any past, present or future liability(ies) incurred or to be incurred in respect of the Sale Assets, with effect from the Effective Date. |
20 | GENERAL WARRANTIES |
20.1 | Each of the Parties hereby warrants to and in favour of the other that |
20.1.1 | it has the legal capacity and has taken all necessary corporate action required to empower and authorise it to enter into this Agreement; |
20.1.2 | this Agreement constitutes an agreement valid and binding on it and enforceable against it in accordance with its terms; |
20.1.3 | the execution of this Agreement and the performance of its obligations hereunder does not and shall not |
20.1.3.1 | contravene any law or regulation to which that Party is subject; |
20.1.3.2 | contravene any provision of that Partys constitutional documents; or |
20.1.3.3 | conflict with, or constitute a breach of any of the provisions of any other agreement, obligation, restriction or undertaking which is binding on it; and |
20.1.4 | to the best of its knowledge and belief, it is not aware of the existence of any fact or circumstance that may impair its ability to comply with all of its obligations in terms of this Agreement; |
28
20.1.5 | it is entering into this Agreement as principal (and not as agent or in any other capacity); |
20.1.6 | the natural person who signs and executes this Agreement on its behalf is validly and duly authorised to do so; |
20.1.7 | no other party is acting as a fiduciary for it; and |
20.1.8 | it is not relying upon any statement or representation by or on behalf of any other party, except those expressly set forth in this Agreement. |
20.2 | Each of the representations and warranties given by the Parties in terms of this clause 20 shall |
20.2.1 | be a separate warranty and, except as expressly provided in this Agreement, will in no way be limited or restricted by inference from the terms of any other warranty or by any other words in this Agreement; |
20.2.2 | continue and remain in force notwithstanding the completion of any or all the transactions contemplated in this Agreement; and |
20.2.3 | prima facie be deemed to be material and to be a material representation inducing the other Parties to enter into this Agreement. |
21 | GUARANTEE BY TAUNG |
Taung hereby, irrevocably and unconditionally, guarantees the due and proper performance by the Purchaser of all its obligations contained herein, including the Purchasers obligation to pay the Purchase Consideration to the Seller on the Effective Date in accordance with clause 8.
22 | CONFIDENTIALITY |
22.1 | The Parties undertake that during the operation of, and after the expiration, termination or cancellation of, this Agreement for any reason, they will keep confidential |
22.1.1 | any information which any Party ( Disclosing Party ) communicates to any other Party ( Recipient ) and which is stated to be or by its nature is intended to be confidential; and |
22.1.2 |
all other information of the same confidential nature concerning the business of a Disclosing Party which comes to the knowledge of any Recipient whilst it |
29
is engaged in negotiating the terms of this Agreement or after its conclusion. |
22.2 | If a Recipient is uncertain about whether any information is to be treated as confidential in terms of this clause 22, it shall be obliged to treat it as such until written clearance is obtained from the Disclosing Party. |
22.3 | Each Party undertakes, subject to clause 22.4 and clause 23.3, not to disclose any information which is to be kept confidential in terms of this clause 21, nor to use such information for any purpose other than the performance of its obligations in terms of this Agreement. |
22.4 | Notwithstanding the provisions of clause 22.3, a Recipient shall be entitled to disclose any information to be kept confidential if and to the extent only that the disclosure is bona fide and necessary for the purposes of carrying out its duties in terms of this Agreement. |
22.5 | The obligation of confidentiality placed on the Parties in terms of this clause 22 shall cease to apply to a Recipient in respect of any information which |
22.5.1 | is or becomes generally available to the public other than by the negligence or default of the Recipient or by the breach of this Agreement by the Recipient; |
22.5.2 | the Disclosing Party confirms in writing is disclosed on a non-confidential basis; |
22.5.3 | has lawfully become known by or come into the possession of the Recipient on a non-confidential basis from a source other than the Disclosing Party having the legal right to disclose same; or |
22.5.4 | is disclosed pursuant to a requirement or request by operation of law, regulation or court order, to the extent of compliance with such requirement or request only and not for any other purpose, |
provided that
22.5.5 | the onus shall at all times rest on the Recipient to establish that information falls within the exclusions set out in clauses 22.5.1 to 22.5.4; |
22.5.6 | information will not be deemed to be within the foregoing exclusions merely because such information is embraced by more general information in the public domain or in the Recipients possession; and |
30
22.5.7 | any combination of features will not be deemed to be within the foregoing exclusions merely because individual features are in the public domain or in the Recipients possession, but only if the combination itself and its principle of operation are in the public domain or in the Recipients possession. |
22.6 | In the event that the Recipient is required to disclose confidential information of the Disclosing Party as contemplated in clause 22.5.4, the Recipient will |
22.6.1 | advise the Disclosing Party thereof in writing prior to disclosure, if possible; |
22.6.2 | take such steps to limit the disclosure to the minimum extent required to satisfy such requirement and to the extent that it lawfully and reasonably can; |
22.6.3 | afford the Disclosing Party a reasonable opportunity, if possible, to intervene in the proceedings; |
22.6.4 | comply with the Disclosing Partys reasonable requests as to the manner and terms of any such disclosure; and |
22.6.5 | notify the Disclosing Party of the recipient of, and the form and extent of, any such disclosure or announcement immediately after it is made. |
23 | PUBLICITY |
23.1 | Subject to clause 23.3 each Party undertakes to keep confidential and not to disclose to any third party, save as may be required in law (including, where applicable, by the rules of any securities exchange on which the shares of any of the Parties, or the shares of a holding company of any of the Parties, may be listed) or permitted in terms of this Agreement, the nature, content or existence of this Agreement. |
23.2 |
No announcements of any nature whatsoever will be made by or on behalf of a Party relating to this Agreement without the prior written consent of the other Parties, save for any announcement or other statement required to be made in terms of the provisions of any law (or, where applicable, by the rules of any securities exchange on which the shares of any of the Parties, or the shares of a holding company of any of the Parties, may be listed), in which event the Party obliged to make such statement will first consult with the other Parties in order to enable them in good faith to attempt to agree the content of such announcement, which (unless agreed) must go no further than is required in terms of such law or rules. This will not apply to a Party wishing to respond to one of the other Parties |
31
which has made an announcement of some nature in breach of this clause 23.2. |
23.3 | This clause 23 and the confidentiality undertakings contained in clause 22 shall not apply to any disclosure made by a Party to its employees, professional advisors or consultants, provided that they have agreed to the same confidentiality undertakings, or to any judicial or arbitral tribunal or officer, in connection with any matter relating to this Agreement or arising out of it. |
24 | SUPPORT |
The Parties undertake at all times to do all such things, perform ail such actions and take all such steps and to procure the doing of all such things, the performance of all such actions and the taking of all such steps as may be open to them and necessary for or incidental to the putting into effect or maintenance of the terms, conditions and/or import of this Agreement.
25 | BREACH |
25.1 | If a Party ( Defaulting Party ) commits any breach of this Agreement and fails to remedy such breach within 5 (five) business days ( Notice Period ) of written notice requiring the breach to be remedied, then the Party giving the notice ( Aggrieved Party ) will be entitled, at its option |
25.1.1 | to claim immediate specific performance of any of the Defaulting Partys obligations under this Agreement, with or without claiming damages, whether or not such obligation has fallen due for performance; or |
25.1.2 | subject to the provisions of clause 25.5, to cancel this Agreement, with or without claiming damages, in which case written notice of the cancellation shall be given to the Defaulting Party, and the cancellation shall take effect on the giving of the notice. |
25.2 | A Party shall not be entitled to cancel this Agreement unless the breach is a material breach. A breach will be deemed to be a material breach if - |
25.2.1 | it is capable of being remedied, but is not so remedied within the Notice Period; or |
25.2.2 | it is incapable of being remedied or is not remedied within the Notice Period, and payment in money will compensate for such breach but such payment is not made within the Notice Period. |
32
25.3 | The Parties agree that any costs awarded will be recoverable on an attorney-and-own-client scale unless the Court specifically determines that such scale shall not apply, in which event the costs will be recoverable in accordance with the High Court tariff, determined on an attorney-and-client scale. |
25.4 | The Aggrieved Partys remedies in terms of this clause 25 are without prejudice to any other remedies to which the Aggrieved Party may be entitled in law. |
25.5 | Notwithstanding the aforegoing, after the closing in full of the Sale in accordance with clause 10, neither of the Parties will have the right to cancel this Agreement as a result of a breach thereof, and the Parties only remedies thereafter will be to claim specific performance of all the Defaulting Partys obligations, together with damages, if any. |
26 | DISPUTE RESOLUTION |
26.1 | In the event of there being any dispute or difference between the Parties arising out of this Agreement, the said dispute or difference shall on written demand by any Party be submitted to arbitration in Johannesburg in accordance with the AFSA rules, which arbitration shall be administered by AFSA. |
26.2 | Should AFSA, as an institution, not be operating at that time or not be accepting requests for arbitration for any reason, then the arbitration shall be conducted in accordance with the AFSA rules for commercial arbitration (as last applied by AFSA) before an arbitrator appointed by agreement between the parties to the dispute or failing agreement within 10 (ten) business days of the demand for arbitration, then any party to the dispute shall be entitled to forthwith call upon the chairperson of the Johannesburg Bar Council to nominate the arbitrator, provided that the person so nominated shall be an advocate of not less than 10 (ten) years standing as such. The person so nominated shall be the duly appointed arbitrator in respect of the dispute. In the event of the attorneys of the parties to the dispute failing to agree on any matter relating to the administration of the arbitration, such matter shall be referred to and decided by the arbitrator whose decision shall be final and binding on the parties to the arbitration. |
26.3 | Any Party may appeal the decision of the arbitrator or arbitrators in terms of the AFSA rules for commercial arbitration. |
33
26.4 | Nothing herein contained shall be deemed to prevent or prohibit any Party from applying to the appropriate court for urgent relief or for judgment in relation to a liquidated claim. |
26.5 | Any arbitration in terms of this clause 26 (including any appeal proceedings) shall be conducted in camera and the parties to the dispute shall treat as confidential details of the dispute submitted to arbitration, the conduct of the arbitration proceedings and the outcome of the arbitration. |
26.6 | This clause 26 will continue to be binding on the Parties notwithstanding any termination or cancellation of the Agreement. |
26.7 | The Parties agree that the written demand by any Party in terms of clause 26.1 that the dispute or difference be submitted to arbitration, is to be deemed to be a legal process for the purpose of interrupting extinctive prescription in terms of the Prescription Act, 1969. |
27 | NOTICES AND DOMICILIA |
27.1 | The Parties select as their respective domicilia citandi et executandi the following physical addresses, and for the purposes of giving or sending any notice provided for or required under this Agreement, the said physical addresses as well as the following telefax numbers - |
Name |
Physical Address |
Telefax |
||||
Seller, Harmony, Clidet No. 790 (Proprietary) Limited and Clidet No. 791 (Proprietary) Limited |
Block 27 Randfontein Office Park Cnr Main Reef Road & Ward Avenue Randfontein |
+27 (0) 86 628 2332 |
Marked for the attention of: The Company Secretary
Name |
Physical Address |
Telefax |
||||
Purchaser and Taung |
Ground Floor, Block C Little Fourways Office Park 1 Leslie Avenue East Fourways |
+27 11 705 2343 |
Marked for the attention of: The Chief Operating Officer: Legal
provided that a Party may change its domicilium or its address for the purposes of notices to any other physical address or telefax number by written notice to the other Parties to that effect. Such change of address will be effective 5 (five)
34
business days after receipt of the notice of the change.
27.2 | All notices to be given in terms of this Agreement will be given in writing and will - |
27.2.1 | be delivered by hand or sent by telefax; |
27.2.2 | if delivered by hand during business hours, be presumed to have been received on the date of delivery. Any notice delivered after business hours or on a day which is not a business day will be presumed to have been received on the following business day; and |
27.2.3 | if sent by telefax during business hours, be presumed to have been received on the date of successful transmission of the telefax. Any telefax sent after business hours or on a day which is not a business day will be presumed to have been received on the following business day. |
27.3 | Notwithstanding the above, any notice given in writing, and actually received by the Party to whom the notice is addressed, will be deemed to have been properly given and received, notwithstanding that such notice has not been given in accordance with this clause 27. |
28 | BENEFIT OF THE AGREEMENT |
This Agreement will also be for the benefit of and be binding upon the successors in title and permitted assigns of the Parties or any of them.
29 | APPLICABLE LAW AND JURISDICTION |
29.1 | This Agreement will in all respects be governed by and construed under the laws of the Republic of South Africa. |
29.2 | For the purpose of clause 26.4 or for the purpose of making the arbitration award an order of court, the Parties hereby consent and submit to the non-exclusive jurisdiction of the South Gauteng High Court, Johannesburg in any dispute arising from or in connection with this Agreement. The Parties agree that any costs awarded will be recoverable on an attorney-and-own-client scale unless the Court specifically determines that such scale shall not apply, in which event the costs will be recoverable in accordance with the High Court tariff, determined on an attorney-and-client scale. |
35
30 | NEW LAWS |
If any law comes into operation subsequent to the signature of this Agreement which law affects any aspect or matter or issue contained in this Agreement, the Parties undertake to enter into negotiations in good faith regarding a variation of this Agreement in order to ensure that neither this Agreement nor its implementation constitutes a contravention of such law.
31 | GENERAL |
31.1 | Whole Agreement |
31.1.1 | This Agreement constitutes the whole of the agreement between the Parties relating to the matters dealt with herein and, save to the extent otherwise provided herein, no undertaking, representation, term or condition relating to the subject matter of this Agreement not incorporated in this Agreement shall be binding on any of the Parties. |
31.1.2 | Subject to the provisions of clause 4, this Agreement supersedes and replaces the 2008 Agreements and all other agreements between the Parties (and other persons, as may be applicable) and undertakings given to or on behalf of the Parties (and other persons, as may be applicable) in relation to the subject matter hereof. |
31.2 | Variations to be in Writing |
No addition to or variation, deletion, or agreed cancellation of all or any clauses or provisions of this Agreement will be of any force or effect unless in writing and signed by the Parties.
31.3 | No indulgences |
No latitude, extension of time or other indulgence which may be given or allowed by any Party to any other Party in respect of the performance of any obligation hereunder, and no delay or forbearance in the enforcement of any right of any Party arising from this Agreement and no single or partial exercise of any right by any Party under this Agreement, shall in any circumstances be construed to be an implied consent or election by such Party or operate as a waiver or a novation of or otherwise affect any of the Partys rights in terms of or arising from this Agreement or estop or preclude any such Party from enforcing at any time and without notice, strict and punctual compliance with each and every provision or
36
term hereof. Failure or delay on the part of any Party in exercising any right, power or privilege under this Agreement will not constitute or be deemed to be a waiver thereof, nor will any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
31.4 | No Waiver or Suspension of Rights |
No waiver, suspension or postponement by any Party of any right arising out of or in connection with this Agreement shall be of any force or effect unless in writing and signed by such Party. Any such waiver, suspension or postponement will be effective only in the specific instance and for the purpose given.
31.5 | Provisions Severable |
All provisions and the various clauses of this Agreement are, notwithstanding the manner in which they have been grouped together or linked grammatically, severable from each other. Any provision or clause of this Agreement which is or becomes unenforceable in any jurisdiction, whether due to voidness, invalidity, illegality, unlawfulness or for any other reason whatever, shall, in such jurisdiction only and only to the extent that it is so unenforceable, be treated as pro non scripto and the remaining provisions and clauses of this Agreement shall remain of full force and effect. The Parties declare that it is their intention that this Agreement would be executed without such unenforceable provision if they were aware of such unenforceability at the time of execution hereof.
31.6 | Continuing Effectiveness of Certain Provisions |
The expiration or termination of this Agreement shall not affect such of the provisions of this Agreement as expressly provide that they will operate after any such expiration or termination or which of necessity must continue to have effect after such expiration or termination, notwithstanding that the clauses themselves do not expressly provide for this.
31.7 | No Assignment |
Neither this Agreement nor any part, share or interest herein nor any rights or obligations hereunder may be ceded, delegated or assigned by any Party without the prior written consent of the other Parties.
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32 | COSTS |
Each Party will bear and pay its own legal costs and expenses of and incidental to the negotiation, drafting, preparation and implementation of this Agreement, provided that the Purchaser shall be obliged to refund the Seller in respect of all costs paid by the Seller to the Sellers Attorneys in connection with the registration of the Deed of Cession.
33 | SIGNATURE |
33.1 | This Agreement is signed by the Parties on the dates and at the places indicated below. |
33.2 | This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same Agreement as at the date of signature of the Party last signing one of the counterparts. |
33.3 | The persons signing this Agreement in a representative capacity warrant their authority to do so. |
33.4 | The Parties record that it is not required for this Agreement to be valid and enforceable that a Party shall initial the pages of this Agreement and/or have its signature of this Agreement verified by a witness. |
SIGNED at Sandton on 10 th September 2010
For and on behalf of EVANDER GOLD MINES LIMITED |
|
Signature |
|
Name of Signatory |
Executive |
Designation of Signatory |
38
SIGNED at Sandton on 10 th September 2010
For and on behalf of HARMONY GOLD MINING COMPANY LIMITED |
|
Signature |
|
Name of Signatory |
Executive |
Designation of Signatory |
SIGNED at SANDTON on 10TH SEPTEMBER 2010
For and on behalf of PLURICLOX (PROPRIETARY) LIMITED |
|
Signature |
|
Name of Signatory |
COO : LEGAL |
Designation of Signatory |
SIGNED at SANDTON on 10TH SEPTEMBER 2010
For and on behalf of TAUNG GOLD LIMITED |
|
Signature |
|
Name of Signatory |
COO : LEGAL |
Designation of Signatory |
39
SIGNED at Sandton on 10 th September 2010
For and on behalf of CLIDET NO. 790 (PROPRIETARY) LIMITED |
|
Signature |
|
Name of Signatory |
Executive |
Designation of Signatory |
SIGNED at Sandton on 10 th September 2010
For and on behalf of CLIDET NO. 791 (PROPRIETARY) LIMITED |
|
Signature |
|
Name of Signatory |
Executive |
Designation of Signatory |
40
ANNEXURE 1
DEED OF AMENDMENT
NOTARIAL AMENDMENT OF MINING RIGHT
BE IT HEREBY MADE KNOWN:
THAT on the [ ] day of [ ], before me,
[NOTARY PUBLIC]
Notary Public, duly admitted and sworn, residing and practising at Johannesburg in the Province of Gauteng, and in the presence of the subscribing witnesses, personally came and appeared -
[APPEARER]
in his/her capacity as the attorney and agent of
1. | EVANDER GOLD MINES LIMITED |
(registration number 1963/006226/06)
(hereinafter referred to as the Holder),
[s/he], the said Appearer, being duly authorised hereto under and by virtue of a power of attorney granted in [his/her] favour on the [ ] day of [ ] by [ ], in his capacity as the duly authorised representative of the Holder under and by virtue of a resolution of the directors of the Holder passed on the [ ] day of [ ],
and
2 | The Minister of Mineral Resources represented by the Regional Manager: Mpumalanga, he being duly authorised by a power of attorney signed by the Acting Deputy Director-General: Mineral Regulation, he being duly authorised by virtue of a delegation of powers dated [ ], |
which powers of attorney and certified copy of which resolution have this day been exhibited to me, the Notary, and now remain filed in my Protocol;
AND THE APPEARERS DECLARED THAT WHEREAS:
A | the Holder holds a mining right with file number MP30/5/1/1/2/126MR granted in terms of section 23 of the Mineral and Petroleum Resources Development Act, 2002 ( MPRDA ), read together with item 7 of schedule II to the MPRDA, which was notarially executed in Witbank on 29 April 2008 before William Daniel Nortje in respect of [INSERT AREA] ( Mining Right ); and |
B | the Holder wishes to amend the Mining Right, as set out below. |
1. | INTRODUCTION |
Consequent upon the grant of an application under section 11 of the MPRDA by the Minister of Mineral Resources on [ ], the Holder has transferred a portion of the Mining Right ( Cession ) with effect from the date of execution of this deed, as set out below.
2. | AMENDMENT |
The Mining Right, in accordance with the Cession is amended with effect from the date of notarial execution of this notarial amendment by excluding [ ], such that the Mining Area referred to in clause [ ] of the Mining Right, as a result of this amendment, is [ ],
THUS DONE AND EXECUTED at Sandton on the day, month and year first aforewritten in the presence of the undersigned witnesses.
AS WITNESSES
1. |
|
|
||||
q.q. HOLDER | ||||||
2. |
|
|
||||
q.q. MINISTER OF MINERALS RESOURCES | ||||||
|
||||||
QUOD ATTESTOR | ||||||
NOTARY PUBLIC |
ANNEXURE 2
DEED OF CESSION
NOTARIAL DEED OF CESSION (PORTION OF MINING RIGHT)
BE IT HEREBY MADE KNOWN:
THAT on the [ ] day of [ ] , before me,
[NOTARY PUBLIC]
Notary Public, duly admitted and sworn, residing and practising at Johannesburg in the Province of Gauteng, and in the presence of the subscribing witnesses, personally came and appeared -
[APPEARER]
in [his/her] capacity as the attorney and agent of -
1 | EVANDER GOLD MINES LIMITED |
(registration number 1963/006226/06)
(hereinafter referred to as the Cedent )
[s/he], the said Appearer, being duly authorised hereto under and by virtue of a power of attorney granted in [his/her] favour on the [ ] day of [ ] by [ ], in his capacity as the duly authorised representative of the Cedent under and by virtue of a resolution of the directors of the Cedent passed on the [ ] day of [ ];
and
2 | [ ] |
(registration number [ ])
(hereinafter referred to as the Cessionary )
[s/he], the said Appearer, being duly authorised hereto under and by virtue of a power of attorney granted in [his/her] favour on the [ ] day of [ ] by [ ], in [his/her] capacity as the duly authorised representative of the Cessionary under
and by virtue of a resolution of the directors of the Cessionary passed on the [ ] day of [ ];
which powers of attorney and certified copies of which resolutions have this day been exhibited to me, the Notary, and now remain filed in my Protocol;
AND THE APPEARERS DECLARED THAT WHEREAS:
A | the Cedent is the holder of [ ] ([ ]) portion of a mining right with file number MP30/5/1/1/2/126MR granted in terms of section 23 of the Mineral and Petroleum Resources Development Act, 2002 ( MPRDA ), read together with item 7 of schedule II to the MPRDA, which was notarially executed in Witbank on 29 April 2008 before William Daniel Nortje in respect of [INSERT AREA] ( Portion of Mining Right ); |
B | in terms of a sale agreement entered into between the Cessionary and the Cedent dated [ ], as amended from time to time ( Sale Agreement ), the Cedent agreed to cede its right, title and interest in and to the Portion of Mining Right to the Cessionary, which cession the Cessionary is prepared to accept; and |
C | the Director-General of the Department of Mineral Resources, by virtue of the powers delegated to him, consented to the cession on [ ], in terms of section 11(2) of the Mineral and Petroleum Resources Development Act, No 28 of 2002 and clause [ ] of the Mining Right. |
NOW THEREFORE THESE PRESENTS WITNESS:
4 | CESSION |
The Cedent hereby cedes, assigns, transfers and makes over its right, title and interest in the Portion of Mining Right to the Cessionary, its successors in title or assigns, subject to such terms and conditions as are mentioned or referred to in the Mining Right, and the Cessionary hereby accepts the cession and assignment of the Cedents right, title, interest and obligations in and to the Portion of Mining Right.
5 | COMPENSATION |
Compensation for the cession of the Cedents right, title and interest in and to the Portion of Mining Right, in an amount equal to R [ ] ([ ]) will be payable by the Cessionary to the Cedent in terms of the provisions of the Sale Agreement.
6 | COSTS |
Each party will bear and pay its own legal costs and expenses of and incidental to the preparation and registration of this cession.
THUS DONE AND EXECUTED at Sandton on the day, month and year first aforewritten in the presence of the undersigned witnesses.
AS WITNESSES | ||||||
1. |
|
|
||||
q.q. CEDENT | ||||||
2. |
|
|
||||
q.q. CESSIONARY | ||||||
|
||||||
QUOD ATTESTOR | ||||||
NOTARY PUBLIC |
ANNEXURE 3
SPECIAL POWER OF ATTORNEY
I, the undersigned -
[ ]
duly authorised hereto by a resolution of the Directors of
[ ]
(registration number [ ])
DO HEREBY DECLARE that I have read the attached draft notarial deed of cession in respect of the cession by Evander Gold Mines Limited of its right, title and interest in and to the portion of a mining right with file number MP30/5/1/1/2/126MR granted in terms of section 23 of the Mineral and Petroleum Resources Development Act, 2002 ( MPRDA ), read together with item 7 of schedule II to the MPRDA, which was notarially executed in Witbank on 29 April 2008 before William Daniel Nortje to Pluriclox (Proprietary) Limited, and that I am fully acquainted with the contents thereof, in witness whereof I have initialled each page thereof for identification purposes; and I nominate, constitute and appoint
MELANIE JEANETTE SPEICH or LAUREN DOREEN WILLIAMS or SIAN ROTH or MARC RICHARD FRIEDMAN or IAN KEITH HAYES or ALLAN GARTH REID or JACQUELINE DUNCAN or GIADA MASINA or ROELOF EMILE BONNET,
as my attorney and agent, irrevocably and in rem suam , jointly and severally, each with power of substitution, for me and on my behalf and in my name, place and stead to appear before a notary public anywhere in the Republic of South Africa or elsewhere, and on my behalf to sign and execute the said notarial deed, to have same registered and to amend same as may be necessary for the purpose of registration;
AND generally to do whatsoever shall be necessary or requisite in order to make the said notarial deed valid and effectual in every respect, and to fulfill the purposes of this authority as fully and effectually to all intents and purposes whatsoever as I could do if personally present, and acting herein, hereby ratifying, allowing and confirming, and promising and agreeing to ratify, allow and confirm all and whatsoever my said attorney and agent, or any of them, shall lawfully do or cause to be done by virtue of these presents.
SIGNED at [PLACE] on the [DAY] day of [MONTH] [YEAR].
AS WITNESSES |
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ANNEXURE 4
SPECIAL POWER OF ATTORNEY
I, the undersigned -
[ ]
duly authorised hereto by a resolution of the Directors of
EVANDER GOLD MINES LIMITED
(registration number 1963/006226/06)
DO HEREBY DECLARE that I have read the attached draft notarial deed of cession in respect of the cession by Evander Gold Mines Limited of its right, title and interest in and to the portion of a mining right with file number MP30/5/1/1/2/126MR granted in terms of section 23 of the Mineral and Petroleum Resources Development Act, 2002 ( MPRDA ), read together with item 7 of schedule II to the MPRDA, which was notarially executed in Witbank on 29 April 2008 before William Daniel Nortje to Pluriclox (Proprietary) Limited, and that I am fully acquainted with the contents thereof, in witness whereof I have initialled each page thereof for identification purposes; and I nominate, constitute and appoint
MELANIE JEANETTE SPEICH or LAUREN DOREEN WILLIAMS or SIAN ROTH or MARC RICHARD FRIEDMAN or IAN KEITH HAYES or ALLAN GARTH REID or JACQUELINE DUNCAN or GIADA MASINA or ROELOF EMILE BONNET,
as my attorney and agent, irrevocably and in rem suam , jointly and severally, each with power of substitution, for me and on my behalf and in my name, place and stead to appear before a notary public anywhere in the Republic of South Africa or elsewhere, and on my behalf to sign and execute the said notarial deed, to have same registered and to amend same as may be necessary for the purpose of registration;
AND generally to do whatsoever shall be necessary or requisite in order to make the said notarial deed valid and effectual in every respect, and to fulfill the purposes of this authority as fully and effectually to all intents and purposes whatsoever as I could do if personally present, and acting herein, hereby ratifying, allowing and confirming, and promising and agreeing to ratify, allow and confirm all and whatsoever my said attorney and agent, or any of them, shall lawfully do or cause to be done by virtue of these presents.
SIGNED at [PLACE] on the [DAY] day of [MONTH] [YEAR].
AS WITNESSES | ||||||
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ANNEXURE 5
SPECIFIED MINING AREA DIAGRAM
ANNEXURE 6
WARRANTIES
The Warranties contained in this annexure 6 are given by the Seller on the basis set out in clause 18 of the Agreement to which this annexure 6 is attached.
To the extent that the Agreement may have been signed on a date which results in the use of any tense being inappropriate, the Warranties shall be read in the appropriate tense.
1 | The Seller is the holder of the Evander Mining Right and the Evander 6 Shaft Surface Right Permits and the owner of the other Sale Assets. |
2 | Subject to the fulfilment of the Conditions Precedent, the Seller will be entitled and able to give free and unencumbered title in the Sale Assets to the Purchaser. |
3 | To the best of the Sellers knowledge and belief, no person has any right whatsoever (whether pursuant to any option, right of first refusal or otherwise) to acquire the Sale Assets other than the Purchaser in terms of this Agreement. |
4 | To the best of the Sellers knowledge and belief, the Seller is not subject to or party to any legal restriction, law, claim or encumbrance or any other restriction which would prevent or have an adverse affect on the transactions contemplated by this Agreement or its obligations in terms of this Agreement. |
5 | There is no pending litigation to which the Seller is a party in respect of the Sale Assets and, to the best of the Sellers knowledge and belief, no demands or other claims have been made against the Seller in respect of the Sale Assets. |
FOURTH ADDENDUM TO THE SALE AGREEMENT
between
EVANDER GOLD MINES LIMITED
and
HARMONY GOLD MINING COMPANY LIMITED
and
PLURICLOX (PROPRIETARY) LIMITED
and
TAUNG GOLD LIMITED
and
CLIDET NO. 790 (PROPRIETARY) LIMITED
and
CLIDET NO. 791 (PROPRIETARY) LIMITED
1 | PARTIES |
1.1 | The Parties to this Addendum are |
1.1.1 | Evander Gold Mines Limited; |
1.1.2 | Harmony Gold Mining Company Limited; |
1.1.3 | Pluriclox (Proprietary) Limited; |
1.1.4 | Taung Gold Limited; |
1.1.5 | Clidet No. 790 (Proprietary) Limited; and |
1.1.6 | Clidet No. 791 (Proprietary) Limited. |
1.2 | The Parties agree as set out below. |
2 | INTERPRETATION |
In this Addendum
2.1 | Addendum means this fourth addendum to the Sale Agreement; |
2.2 | Sale Agreement means the sale agreement entered into between the Parties on 10 September 2010, as amended by |
2.2.1 | the first addendum to the Sale Agreement entered into between the Parties on or about 8 November 2010; and |
2.2.2 | the second addendum to the Sale Agreement entered into between the Parties on or about 3 January 2011; and |
2.2.3 | the third addendum to the Sale Agreement entered into between the Parties on or about 9 March 2011. |
2.3 | unless otherwise defined herein or the context indicates otherwise, words and expressions defined in the Sale Agreement will have the same meanings and any reference to the word clause refers to a clause of the Sale Agreement. |
1
3 | INTRODUCTION |
3.1 | The Parties have agreed to (i) amend the terms of payment of the Purchase Consideration and (ii) extend the date for fulfilment of one of the Conditions Precedent. |
3.2 | The Parties wish to record their agreement in writing. |
4 | PAYMENT |
Clause 8.1 of the Sale Agreement shall be deleted in its entirety and replaced with the following:
The Purchaser undertakes to pay a portion of the Purchase Consideration, namely an amount of R100,000,000 (one hundred million rand) (hereinafter referred to as the Prepayment ) to the Seller on or before 29 April 2011, and further undertakes to pay the balance of the Purchase Consideration to the Seller on the Effective Date, provided that should the Condition Precedent contained in clause 5.1.13 fail to be fulfilled on or before the date specified for fulfilment of same, the Seller shall, unless otherwise agreed by the Parties in writing, forthwith refund the Prepayment to the Purchaser in full, by means of electronic transfer of immediately available and freely transferable funds in the currency of the Republic of South Africa into a bank account nominated by the Purchaser, free of any deductions or set-off whatsoever.
5 | EXTENSION |
The date for fulfilment of the Condition Precedent contained in clause 5.1.13 is hereby extended to 31 December 2011 in accordance with the provisions of clause 5.10.
6 | SAVINGS CLAUSE |
Save to the extent specifically or by necessary implication modified in or inconsistent with the provisions of this Addendum, all the terms and conditions of the Sale Agreement shall mutatis mutandis continue in full force and effect.
7 | COSTS |
Each Party will bear and pay its own legal costs and expenses of and incidental to the negotiation, drafting, preparation and implementation of this Addendum.
2
8 | SIGNATURE |
8.1 | This Addendum may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same agreement as at the date of signature of the Party last signing one of the counterparts. |
8.2 | Signed on behalf of the Parties, each signatory hereto warranting that he/she has due authority to do so. |
SIGNED at RANDFONTEIN on 21 APRIL 2011.
For and on behalf of EVANDER GOLD MINES LIMITED |
|
Signature |
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Name of Signatory |
DIRECTOR |
Designation of Signatory |
3
SIGNED at RANDFONTEIN on 21 APRIL 2011.
For and on behalf of |
HARMONY GOLD MINING COMPANY LIMITED |
|
Signature |
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Name of Signatory |
CEO |
Designation of Signatory |
SIGNED at FOURWAYS on 21 APRIL 2011.
For and on behalf of |
PLURICLOX (PROPRIETARY) LIMITED |
|
Signature |
|
Name of Signatory |
CEO |
Designation of Signatory |
SIGNED at FOURWAYS on 21 APRIL 2011.
For and on behalf of |
TAUNG GOLD LIMITED |
|
Signature |
|
Name of Signatory |
CEO |
Designation of Signatory |
SIGNED at RANDFONTEIN on 21 APRIL 2011.
For and on behalf of |
CLIDET NO. 790 (PROPRIETARY) LIMITED |
4
|
Signature |
|
Name of Signatory |
DIRECTOR |
Designation of Signatory |
SIGNED at RANDFONTEIN on 21 APRIL 2011.
For and on behalf of |
CLIDET NO. 791 (PROPRIETARY) LIMITED |
|
Signature |
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Name of Signatory |
DIRECTOR |
Designation of Signatory |
5
Exhibit 4.23
JOINT VENTURE AGREEMENT
between
EVANDER GOLD MINES LIMITED
and
TAUNG GOLD HOLDINGS (PROPRIETARY) LIMITED
TABLE OF CONTENTS
1 |
INTERPRETATION | 3 | ||||
2 |
RECITALS |
17 | ||||
3 |
CONDITIONS PRECEDENT |
18 | ||||
4 |
JOINT VENTURE |
18 | ||||
5 |
PARTICIPATION |
20 | ||||
6 |
JOINT VENTURE EXPENSES |
21 | ||||
7 |
NO PARTNERSHIP |
23 | ||||
8 |
DURATION |
24 | ||||
9 |
WARRANTIES BY THE PARTIES |
24 | ||||
10 |
FUNDING |
26 | ||||
11 |
MANAGEMENT |
29 | ||||
12 |
RESTRICTED MATTERS |
32 | ||||
13 |
ADMINISTRATION AND ACCOUNTING |
36 | ||||
14 |
PROHIBITION OF ENCUMBRANCE |
38 | ||||
15 |
PRE-EMPTIVE RIGHTS |
38 | ||||
16 |
FORCE MAJEURE |
41 | ||||
17 |
TERMINATION AND WITHDRAWAL |
42 | ||||
18 |
FAIR MARKET VALUE |
46 | ||||
19 |
CONFIDENTIALITY AND PUBLICITY |
47 | ||||
20 |
BREACH |
49 | ||||
21 |
DISPUTE RESOLUTION |
49 | ||||
22 |
NOTICES AND DOMICILIA |
50 | ||||
23 |
BENEFIT OF THE AGREEMENT |
52 | ||||
24 |
APPLICABLE LAW AND JURISDICTION |
52 | ||||
25 |
SUPPORT |
53 | ||||
26 |
FAIRNESS |
53 | ||||
27 |
GENERAL |
54 | ||||
28 |
COSTS |
55 | ||||
29 |
SIGNATURE |
56 |
ANNEXES
ANNEXE A : | EVANDER 6 SHAFT AREA | |
ANNEXE B : | TWISTDRAAI AREA |
Page 2
WHEREBY THE PARTIES AGREE AS FOLLOWS:
1 | INTERPRETATION |
1.1 | In this Agreement - |
1.1.1 | clause headings are for convenience only and are not to be used in its interpretation; |
1.1.2 | an expression which denotes - |
1.1.2.1 | any gender includes the other genders, |
1.1.2.2 | a natural person includes a juristic person and vice versa ; and |
1.1.2.3 | the singular includes the plural and vice versa . |
1.2 | In this Agreement, unless the context indicates a contrary intention, the following words and expressions bear the meanings assigned to them and cognate expressions bear corresponding meanings |
1.2.1 | AFSA means the Arbitration Foundation of Southern Africa; |
1.2.2 | Annual Budget means the annual budget of the Joint Venture referred to in clause 13.4; |
1.2.3 | Associated Companies means the holding company and all subsidiaries of the holding company of Evander or Taung, as the context may require; |
1.2.4 | Auditors means the auditors from time to time of the Joint Venture; |
1.2.5 |
BFS means a bankable feasibility study, following the PFS, in either |
Page 3
of both of the JV Areas (as determined in terms of the Subscription Agreements), comprising a comprehensive description of the design, construction, commissioning, operation, and a marketing plan for The Mine in such form and detail as is normally required by a bank or other financial institution in the Republic of South Africa engaged in project finance ( Bank ), for the purposes of determining whether the Bank shall finance and/or participate in the development of The Mine, The BFS shall include economic, legal, environmental, social, governmental studies and metallurgical studies (but shall not include a bulk sample) and shall contain estimates of both capital and operating costs and shall analyze how to proceed with the construction and operation of The Mine; |
1.2.6 | Claims means all amounts of any nature whatsoever owing by the Joint Venture to the Participants from time to time, whether by way of loan account or otherwise, whether in contract or in delict, actual or contingent, and includes any interest accrued thereon; |
1.2.7 | Company means, individually or collectively as the context may require |
1.2.7.1 | Clidet No. 790 (Proprietary) Limited, registration number 2007/027545/07, a limited liability private company duly incorporated in the Republic of South Africa, the name of which shall be changed in due course to 6 Shaft Joint Venture (Proprietary) Limited, or such other name as may be acceptable to the Parties and the appropriate registering authorities; and |
1.2.7.2 |
Clidet No. 791 (Proprietary) Limited, registration number 2007/034585/07, a limited liability private company duly incorporated |
Page 4
in the Republic of South Africa, the name of which shall be changed in due course to Twistdraai Joint Venture (Proprietary) Limited, or such other name as may be acceptable to the Parties and the appropriate registering authorities; |
1.2.8 | Company Assets means the assets of the relevant Company to be leased to and used by the Joint Venture in terms of the Company Asset Lease/s, including the New Order Mining Right, which assets are more fully described in the Sale Agreements; |
1.2.9 | Company Asset Lease means individually or collectively as the context may require the written lease agreement or agreements to be entered into between the Company or Companies and the Parties in terms of which inter alia the Company (or each of the Companies, as the case may be) will lease Company Assets to the Joint Venture for the purposes of facilitating the operation of the JV Business; |
1.2.10 | Company Equity means any and all shares in the relevant Company or Companies (being the Company or Companies that have entered into the Company Asset Lease/s as contemplated in clauses 1.2.13.2.1 and 1.2.13.2,2), and any and all claims (of any amounts of any nature whatsoever, whether by way of loan account or otherwise, whether in contract or in delict, actual or contingent, and includes any interest accrued thereon) against the relevant Company or Companies, held by a Participant; |
1.2.11 | Conditions Precedent means the suspensive conditions contemplated in clause 3.1; |
1.2.12 |
CPIX means the average annual rate of change (expressed as a |
Page 5
percentage) in the Consumer Price Index, excluding interest rates on mortgage bonds, for all metropolitan areas as published in the Government Gazette by Statistics South Africa (or its successor body), or such other index reflecting the official rate of inflation in the Republic of South Africa as may replace it, which annual change shall be determined by comparing the most recently published index with the index published in respect of the corresponding month in the previous calendar year; |
1.2.13 | Decision to Mine Date means the date on which - |
1.2.13.1 | both Evander and Taung have unanimously agreed in writing; to proceed with Mining for Minerals in either or both of the JV Areas contemplated in clauses 1.2.25.1 and 1.2.25.2 (it being acknowledged that neither of them shall be obligated to so agree); and |
1.2.13.2 | either or both of the Company Asset Leases (as the case may be) have been duly entered into between the parties thereto and have become unconditional in terms thereof (save in respect of any condition contained in the Company Asset Lease requiring that this Agreement becomes unconditional), it being recorded that |
1.2.13.2.1 | the Parties shall enter into a Company Asset Lease with the Company contemplated in clause 1.2.7.1 if it is decided (as contemplated in clause 1.2.13.1) to proceed with Mining tor Minerals in the J V Area contemplated in clause 1.2.25.1; |
1.2.13.2.2 | the Parties shall enter into a Company Asset Lease with the Company contemplated in clause 1.2.7.2 if it is decided (as contemplated in clause 1.2.13.1) to proceed with Mining for Minerals in the JV Area contemplated in clause 1.2.25.2; and |
Page 6
1.2.13.2.3 | the Company Asset Lease/s shall inter alia be conditional upon the Minister of Minerals and Energy approving the provisions thereof to the extent necessary or required in terms of the MPRDA; |
1.2.14 | Effective Date means the first business day in the month following the month in which all of the Conditions Precedent have been fulfilled or waived (as the case may be); |
1.2.15 | Evander means Evander Gold Mines Limited, registration number 1963/006226/06, a limited liability public company duly incorporated in the Republic of South Africa; |
1.2.16 | Exploration Phase means the period during which exploration and prospecting activities are conducted by Taung in respect of the relevant J V Areas in terms of the Subscription Agreements, which activities include the completion of the following studies and the preparation of reports in respect thereof in the following chronological sequence (from first to last), as more particularly described in the Subscription Agreements |
1.2.16.1 | the Scoping Study; |
1.2.16.2 | the PFS; and |
1.2.16.3 | the BFS; |
1.2.17 | Fair Market Value means, in respect of any asset or interest, the fair market value thereof as agreed or determined in accordance with clause 18; |
1.2.18 |
Financial Year means a financial year of the Joint Venture, as |
Page 7
contemplated in clause 13.1.2 (including any amendment to such financial year made in terms of this Agreement); |
1.2.19 | Gold means the metal gold, gold ore and any other gold bearing material; |
1.2.20 | IFRS means the International Financial Reporting Standards formulated by the International Accounting Standards Board (or its successor body), as updated and amended from time to time; |
1.2.21 | Independent Auditors means such independent auditors as may be agreed between the Participants, or failing agreement within 10 (ten) business days from the date of a request by a Participant for such agreement, appointed by the Chairperson (or equivalent official) for the time being of the South African Institute of Chartered Accountants (or its successor body) from one of the 4 (four) largest independent firms of auditors in the Republic of South Africa at the time; |
1.2.22 | Independent Investment Bank means an independent investment bank agreed to in writing by the Participants or, or failing agreement within 10 (ten) business days from the date of a request by a Participant for such agreement, appointed by the Chairperson (or equivalent official) of the Johannesburg Bar Association (or its successor body); |
1.2.23 |
Indexed means in relation to any sum, that sum adjusted annually at the end of each Financial Year to take account of year-on-year changes in the CPIX. In the event of a dispute between the Participants as to any adjustment, such dispute will be referred to the Independent Auditors for determination, who shall act as experts and not as arbitrators. If the basis of computation of CPIX is at any time changed from the basis of |
Page 8
computation at the Signature Date, then CPIX shall be adjusted as far as possible to take account of such differences in the basis of computation; |
1.2.24 | Joint Venture means the joint venture established in terms of this Agreement; |
1.2.25 | JV Area means, individually or collectively as the context may require |
1.2.25.1 | the Evander 6 Shaft Area, being the area indicated by the area shaded in pink on the map attached hereto as annexe A ; and |
1.2.25.2 | the Twistdraai Area, being the area indicated by the area shaded in blue on the map attached hereto as annexe B ; |
1.2.26 | JV Business means the business of Mining for Minerals within the JV Area contemplated in clause 1.2.25.1 and/or the JV Area contemplated in 1.2.25.2 (depending on which JV Area/s the Parties agree to Mine as at the Decision to Mine Date, as contemplated in clause 1.2.13.1); |
1.2.27 | Management Committee means the management committee constituted pursuant to the provisions of clause 11.1; |
1.2.28 | Mine , when used as a verb, shall bear the meaning ascribed thereto in section 1 of the MPRDA, and Mining shall have a corresponding meaning; |
1.2.29 | Minerals means all metals and minerals that the Company is or shall, as at the Effective Date, be permitted to mine in the relevant JV Area/s in terms of the New Order Mining Right, which includes or shall, as at the Effective Date, include Gold; |
Page 9
1.2.30 | MPRDA means the Mineral and Petroleum Resources Development Act, 2002; |
1.2.31 | New Order Mining Right means, individually or collectively as the context may require, the mining right or mining rights, as contemplated in the MPRDA, to be acquired by |
1.2.31.1 | the Company contemplated in clause 1.2.7.1 in respect of the JV Area contemplated in clause 1.2.25.1; and |
1.2.31.2 | the Company contemplated in clause 1.2.7.2 in respect of the JV Area contemplated in clause 1.2.25.2, |
as more particularly described in the Sale Agreements; |
1.2.32 | Net Smelter Royalty means a net smelter royalty payable by the Joint Venture to Evander (or its cessionary), in an amount equivalent to 1.5% (one point five percent) of the Net Smelter Revenue, subject to a maximum aggregate amount of R500,000,000.00 (five hundred million rand); |
1.2.33 | Net Smelter Revenue means the net amounts from time to time received by the Joint Venture from the Refinery, |
1.2.34 | Participant means any person who holds a Participation Interest in the Joint Venture from time to time; |
1.2.35 | Participation Interest means in relation to a Participant, the ownership interest, expressed as a percentage, of a Participant in the Joint Venture, including the rights and obligations associated therewith, including losses, liabilities and expenditure; |
Page 10
1.2.36 | Parties means the parties to this Agreement, initially being Evander and Taung; |
1.2.37 | PFS means a work programme in either or both of the JV Areas ( as determined in terms of the Subscription Agreements), following the Scoping Study and preceding the BFS, the objects of which work programme are |
1.2.37.1 | to define Minerals grade, processing and recovery uncertainties; |
1.2.37.2 | to conduct a comparative evaluation of the full value and risk profiles of a chosen set of feasible alternatives for the business case relating to Mining for Minerals in the relevant JV Area; and |
1.2.37.3 | to select from such alternatives a single preferred go forward alternative for further study and optimisation during the BFS |
which programme will include, but will not be limited to -
1.2.37.4 | bench scale test work; |
1.2.37.5 | the conducting of operational, environmental and financial scoping studies; and |
1.2.37.6 | the continuation of exploration work to optimise the sizing of a potential Mining operation within the relevant JV Area, |
but shall exclude a bulk sample;
1.2.38 |
Prime Rate means the publicly quoted basic rate of interest, compounded monthly in arrears and calculated on a 365 (three hundred and sixty five) day year irrespective of whether or not the year is a leap |
Page 11
year, from time to time published by ABSA Bank Limited as being its prime overdraft rate, as certified by any representative of that bank whose appointment and designation it will not be necessary to prove; |
1.2.39 | Refinery means the refinery to which Minerals Mined at The Mine are sold from time to time, as determined by the Management Committee; |
1.2.40 | Related Agreements means, collectively |
1.2.40.1 | the Sale Agreements; |
1.2.40.2 | the Shareholders Agreements; and |
1.2.40.3 | the Subscription Agreements; |
1.2.41 | Sale Agreements means |
1.2.41.1 | the written sale of assets agreement entered into or to be entered into between Evander and the Company contemplated in clause 1.2.7.1 contemporaneously with this Agreement, in terms of which inter alia Evander will sell certain assets pertaining to the JV Area contemplated in clause 1.2.25.1 to that Company; and |
1.2.41.2 | the written sale of assets agreement entered into or to be entered into between Evander and the Company contemplated in clause 1.2.7.2 contemporaneously with this Agreement, in terms of which inter alia Evander will sell certain assets pertaining to the JV Area contemplated in clause 1.2.25.2 to that Company; |
1.2.42 |
Scoping Study means separate scoping studies, preceding the PFS, to be conducted in both of the JV Areas in terms of the Subscription Agreements, the primary objective of which studies is to develop and |
Page 12
assess an investment opportunity in order to establish strategic fit and likely attractiveness of the business case relating to Mining for Minerals within the those JV Areas. Such a study shall seek inter alia to identify any possible options to be assessed in terms of the PFS, should the said business case warrant further investigation; |
1.2.43 | Shareholders Agreements means |
1.2.43.1 | the written shareholders agreement entered into or to be entered into between the Parties contemporaneously with this Agreement, in terms of which inter alia the relationship between the Parties as shareholders of the Company contemplated in clause 1.2.7.1, and between that Company and its shareholders, shall be regulated; and |
1.2.43.2 | the written shareholders agreement entered into or to be entered into between the Parties contemporaneously with this Agreement, in terms of which inter alia the relationship between the Parties as shareholders of the Company contemplated in clause 1.2.7.2, and between that Company and its shareholders, shall be regulated |
1.2.44 | Signature Date means the date of signature of this Agreement by the Party last signing; |
1.2.45 | Subscription Agreements means |
1.2.45.1 | the written subscription agreement entered into or to be entered into between the Parties contemporaneously with this Agreement, in terms of which inter alia Taung agrees to subscribe for shares in the Company contemplated in clause 1.2.7.1; and |
1.2.45.2 |
the written subscription agreement entered into or to be entered into |
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between the Parties contemporaneously with this Agreement, in terms of which inter alia Taung agrees to subscribe for shares in the Company contemplated in clause 1.2.7.2; |
1.2.46 | Taung means Taung Gold Holdings (Proprietary) Limited, registration number 2004/023942/07, a limited liability private company duly incorporated in the Republic of South Africa; and |
1.2.47 | The Mine means the mine excavations and all associated mine workings to be developed by the Joint Venture on, within and/or beneath the JV Area contemplated in clause 1.2.25.1 and/or the JV Area contemplated in 1.2.25.2 (depending on which JV Area/s the Parties agree to Mine as at the Decision to Mine Date, as contemplated in clause 1.2.13.1), including all buildings, structures, machinery, roads and appurtenances used or intended to be used for the purposes of prospecting for, winning and Mining of Minerals within the relevant JV Area/s. |
1.3 | Any substantive provision, conferring rights or imposing obligations on a Party and appearing in any of the definitions in this clause 1 or elsewhere in this Agreement, shall be given effect to as if it were a substantive provision in the body of the Agreement. |
1.4 | Words and expressions defined in any clause shall, unless the application of any such word or expression is specifically limited to that clause., bear the meaning assigned to such word or expression throughout this Agreement. |
1.5 |
Subject to clauses 1,6, 1.8, 1.13 and 1.16, defined terms appearing in this Agreement in title case shall be given their meaning as defined, while the same terms appearing in lower case shall be interpreted in accordance with |
Page 14
their plain English meaning. |
1.6 | The terms holding company and subsidiary shall bear the meanings assigned thereto in the Companies Act, 1973. |
1.7 | A reference to any statutory enactment shall be construed as a reference to that enactment as at the Signature Date and as amended or substituted from time to time. |
1.8 | Reference to days shall be construed as calendar days unless qualified by the word business, in which instance a business day will be any day other than a Saturday, Sunday or public holiday as gazetted by the government of the Republic of South Africa from time to time. Any reference to business hours shall be construed as being the hours between 08h30 and 17h00 on any business day. Any reference to lime shall be based upon South African Standard Time. |
1.9 | Unless specifically otherwise provided, any number of days prescribed shall be determined by excluding the first and including the last day or, where the last day falls on a day that is not a business day, the next succeeding business day. |
1.10 | Where figures are referred to in numerals and in words, and there is any conflict between the two, the words shall prevail, unless the context indicates a contrary intention. |
1.11 | No provision herein shall be construed against or interpreted to the disadvantage of a Party by reason of such Party having or being deemed to have structured, drafted or introduced such provision. |
1.12 |
The expiration or termination of this Agreement shall not affect such of the |
Page 15
provisions of this Agreement as expressly provide that they will operate after any such expiration or termination or which of necessity must continue to have effect after such expiration or termination, notwithstanding that the clauses themselves do not expressly provide for this. |
1.13 | The words include and including mean include without limitation and including without limitation. The use of the words include and including followed by a specific example or examples shall not be construed as limiting the meaning of the general wording preceding; it. |
1.14 | Whenever any person is required to act as an expert and not as an arbitrator in terms of this Agreement, then |
1.14.1 | the determination of the expert shall (in the absence of manifest error) be final and binding; |
1.14.2 | subject to any express provision to the contrary, the expert shall determine the liability for his or its charges, which shall be paid, accordingly; |
1.14.3 | the expert shall be entitled to determine such methods and processes as he or it may, in his or its sole discretion, deem appropriate in the circumstances provided that the expert may not adopt any process which is manifestly biased, unfair or unreasonable; |
1.14.4 | the expert shall consult with the relevant Parties (provided that the extent of the experts consultation shall be in his or its sole discretion) prior to rendering a determination; and |
1.14.5 |
having regard to the sensitivity of any confidential information, the expert shall be entitled to take advice from any person considered by him |
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or it to have expert knowledge with reference to the matter in question. |
1.15 | Any reference in this Agreement to this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document, as amended, varied, novated or supplemented from time to time. |
1.16 | This Agreement incorporates the annexes which annexes shall have the same force and effect as if set out in the body of this Agreement. In this Agreement the words clause or clauses and annexe or annexes refer to clauses of and annexes to this Agreement. |
2 | RECITALS |
2.1 | Evander carries on, inter alia , the business of Mining for Gold. |
2.2 | Taung carries on, inter alia , the business of exploration and prospecting for Gold. |
2.3 | Subject to |
2.3.1 | the successful completion of the Exploration Phase; and |
2.3.2 | the Decision to Mine Date occurring, |
the Parties wish to form a joint venture for the purpose of conducting the JV Business.
2.4 | The Companies own their respective Company Assets, which the Parties intend to lease in terms of the Company Asset Lease/s, for the purpose of facilitating the operation of the JV Business. |
2.5 |
The Parties wish to formalise their agreement regarding the Joint Venture |
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and matters ancillary thereto, by recording such agreement in writing, on the terms and conditions contained in this Agreement. |
3 | CONDITIONS PRECEDENT |
3.1 | Save for clause 1, this clause 3 and clauses 14,19 and 22 to 29 (inclusive) all of which will become effective immediately, this Agreement is subject to the fulfilment of the Conditions Precedent that |
3.1.1 | by not later than 17h00 on 31 March 2008, all of the Related Agreements are duly entered into by the parties thereto; and |
3.1.2 | within 30 (thirty) days of the completion of the last BFS (including approval of such BFS by the relevant committees) completed in terms of the Subscription Agreements, the Decision to Mine Date has occurred. |
3.2 | All or any of the Conditions Precedent may only be waived if both Parties so agree in writing. |
3.3 | Unless all the Conditions Precedent have been fulfilled or waived by not later than the relevant dates for fulfilment thereof set out in clause 3.1 (or such later date or dates as may be agreed in writing between the Parties) the provisions of this Agreement, save for clause 1, this clause 3 and clauses 14, 19 and 22 to 29 (inclusive) which will remain of full force and effect, will never become of any force or effect and the status quo ante will be restored as near as may be and neither of the Parties will have any claim against the other in terms hereof or arising from the failure of the Conditions Precedent. |
4 | JOINT VENTURE |
4.1 |
The Parties hereby enter into a joint venture, which joint venture shall be |
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known as and shall conduct its business under the name and style of The Evander Taung Twistdraai Joint Venture or such other name as the Participants may agree in writing from time to time. |
4.2 | The Joint Venture shall be deemed to have come into existence on the Effective Date and shall endure for an indefinite period until terminated in accordance with the provisions of this Agreement. |
4.3 | The objects of the Joint Venture are |
4.3.1 | to conduct the JV Business; and |
4.3.2 | all such other activities as may be necessary or desirable for or ancillary to the purposes of the successful conduct of the Joint Venture. |
4.4 | Unless the Participants unanimously otherwise agree in writing, all assets which the Management Committee agree are required for the purposes of the JV Business shall be acquired by the Joint Venture and shall, to the extent permissible in law, when so acquired |
4.4.1 | be deemed to be part of the Joint Venture operations; and |
4.4.2 | owned by each of the Participants in undivided shares in their respective Participation Interests. |
4.5 | The Mine shall be expeditiously Mined and the Minerals so Mined shall be processed and sold as determined in accordance with the BFS or as otherwise unanimously agreed in writing by the Participants from time to time. |
4.6 |
For greater clarity, the Joint Venture shall not be terminated by the admission of any new Participant to the Joint Venture, or any adjustment of |
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any Participation Interest/s agreed to by the Parties/Participants in terms of this Agreement. |
5 | PARTICIPATION |
5.1 | Unless otherwise agreed in writing by the Parties, as at the Effective Date the Participation Interests of the Participants shall be as follows - |
5.1.1 | Evander - 48% (forty-eight percent); and |
5.1.2 | Taung - 52% (fifty-two percent). |
5.2 | Unless otherwise agreed in writing between the Parties, and save as is otherwise contemplated in terms of this Agreement, the Parties shall be the only Participants in the Joint Venture. |
5.3 | The profit and/or loss of the Joint Venture shall be shared by the Participants in accordance with the Participation Interests. |
5.4 | All income generated by the Joint Venture shall be deposited into a separate bank account held at ABSA Bank Limited in the name of the Joint Venture (or such other bank account as may be unanimously agreed in writing by the Participants) and administered by the Management Committee. The profits of the Joint Venture shall be distributed to the Participants from such bank account in accordance with their respective Participation Interests, as follows - |
5.4.1 | one or more prepayments may be made during the course of the Financial Year, as determined by the Management Committee from time to time, based, inter alia , on management accounts, budgeted profits and the availability of cash; and |
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5.4.2 | the balance if any will be paid upon finalisation of the annual financial statements of the Joint Venture in respect of the relevant Financial Year, subject always to adequate provision being made for the working capital requirements of the Joint Venture, it being recorded that, unless otherwise unanimously agreed in writing by the Participants, the Participants intend for there to be a distribution of at least 50% (fifty percent) of the profits of the Joint Venture during each Financial Year. |
5.5 | In the event of any dispute between the Participants in regard to the determination of profits or losses, as to the allocation of a particular cost or expense, or as to any matter arising from the preparation or certification of the annual financial statements of the Joint Venture, such dispute shall be referred for determination by the Independent Auditors. The Independent Auditors in determining the issue shall - |
5.5.1 | act as experts and not as arbitrators; and |
5.5.2 | have regard to the basis on which such determination was made, allocation was done or accounts were prepared in previous Financial Years. |
6 | JOINT VENTURE EXPENSES |
6.1 | All the costs and expenses incurred as a result of the conduct of the JV Business shall be an expense of the Joint Venture, including - |
6.1.1 |
the costs directly attributable to the conduct of the JV Business, including the cost of salaries and wages payable to all appointed employees of the Joint Venture and all employees seconded to the Joint Venture and electricity, water and utilities costs and any other overhead costs |
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associated with the JV Business; |
6.1.2 | the Net Smelter Royalty; |
6.1.3 | the cost of managing and administering the Joint Venture and of maintaining financial records of the activities of the Joint Venture; and |
6.1.4 | interest payable under third party borrowings. |
6.2 | The Net Smelter Royalty shall be payable by the Joint Venture to Evander (or its cessionary) in arrears in respect of each completed 3 (three) month period ( Quarter ) for the duration of this Agreement, within 5 (five) business days of the end of each such Quarter. Without in any way limiting the rights of Evander (or its cessionary) in respect of the Net Smelter Royalty, any late payments of the Net Smelter Royalty shall bear interest at the rate that is 200 (two hundred) basis points higher than the Prime Rate, from (and including) the due date for payment thereof to (but excluding) the date of actual payment thereof. The Net Smelter Royalty shall be freely transferable by Evander and Evander shall be entitled to cede its rights in and to the Net Smelter Royalty at any time and to any person or third patty in its sole and absolute discretion (whether pursuant to a sale as contemplated in clause 15, or otherwise). In the event of any such cession. Evander shall notify the other Participants and the Management Committee in writing, as soon as is reasonably possible thereafter, specifying the name of and payment details for the cessionary. |
6.3 |
Notwithstanding any other provisions of this Agreement, the Net Smelter Royalty shall not exceed an amount of R500,000,000.00 (five hundred million rand) in the aggregate ( Royalty Threshold ). Accordingly, the Net Smelter Royalty payments contemplated in clause 6.2 shall cease when |
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the Royalty Threshold is reached. Any amounts that have been paid by the Joint Venture in terms of clause 6.2 and which exceed the Royalty Threshold shall be refunded by Evander to the Joint Venture within 10 (ten) business days of receipt by Evander of first written request in respect thereof by or on behalf of the Joint Venture. |
7 | NO PARTNERSHIP |
The Joint Venture is constituted for the purposes more fully described in clause 4.3 only and accordingly, save as specifically provided herein to the contrary -
7.1 | nothing herein contained shall be construed as creating a partnership between the Parties (or between the Participants); |
7.2 | each Party shall be responsible only for its obligations as set forth in this Agreement; |
7.3 | neither Party shall have any authority to incur any liability on behalf of the other of them or to pledge the credit of the other of them save as specifically otherwise provided for in this Agreement; |
7.4 | as against third parties, any Party incurring any liability in connection with the affairs of the Joint Venture shall be solely responsible for the discharge thereof. As between the Parties, each Party shall be entitled to recover from the Joint Venture any payment, debt or liability properly incurred by such Party in terms of this Agreement; and |
7.5 | neither Party shall use any money or property of, or bind the credit of the Joint Venture, for any purpose other than the JV Business and subject to the provisions of this Agreement. |
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8 | DURATION |
8.1 | The Joint Venture shall, notwithstanding the Signature Date, be deemed to have been established on the Effective Date and shall, subject to the provisions of clause 16, continue for the duration of the New Order Mining Right, as extended from time to time. |
8.2 | After the initial period of the Joint Venture as contemplated in clause 8.1, either Party may withdraw from the Joint Venture on not less than 3 (three) months written notice to the other Party. |
9 | WARRANTIES BY THE PARTIES |
9.1 | Each of the Parties hereby unconditionally gives to and in favour of the other of them the warranties more fully set out below. Each warranty shall - |
9.1.1 | be a separate warranty and shall in no way be limited or restricted by inference from the terms of any other warranty; |
9.1.2 | continue and remain in force notwithstanding the completion of any or all the transactions contemplated in this Agreement; |
9.1.3 | be deemed to be material and to be a material representation inducing the other of them to enter into this Agreement. |
9.2 | Each warranting Party will procure that the warranties set out in clause 9.3 will be true and accurate as at the Effective Date, and hereby indemnifies the other of them against any loss, damage or costs which it may suffer or incur as a result of a breach of or failure to comply with any of the warranties, representations or undertakings contained in this Agreement. |
9.3 | Each of the Parties hereby warrants to the other of them that - |
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9.3.1 | it is duly incorporated, registered and existing under the laws of the Republic of South Africa; |
9.3.2 | acceptance of this Agreement has been duly and fully authorised by it; |
9.3.3 | subject to the provisions of clause 3, this Agreement constitutes obligations that are legal, valid, binding and enforceable against it in accordance with its terms; and |
9.3.4 | the provisions of this Agreement are not in conflict with, and will not constitute a breach of the provisions of any other agreement, obligation, restriction or undertaking which is binding on it. |
9.4 | Notwithstanding anything to the contrary in this Agreement contained, should any warranty or undertaking herein contained be breached or fail to be true and correct in consequence whereof one or more further or other warranties or undertakings become untrue or incorrect, the liability of the warranting Party shall be limited to such payment or correcting action as may be required to place the other Party in the position in which it would have been had all the warranties and undertakings herein contained been true and correct. |
9.5 | Any claim by the Joint Venture in respect of any warranties or indemnities shall be reduced by the aggregate of |
9.5.1 | an amount equal to any tax benefit received as a result thereof; |
9.5.2 | any amount recovered from any third party in respect thereof; |
9.5.3 | any specific provision or reserve directly relating to the subject matter of such claim; |
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9.5.4 | to the extent that the subject matter of the claim has been or is made good or otherwise compensated for without cost to the Joint Venture or the relevant subsidiary. |
10 | FUNDING |
10.1 | It is agreed as a general principle that the Claims of the Participants must at all times he in proportion to their respective Participation Interests, and that all Claims will be repaid by the Joint Venture prior to the Joint Venture distributing any profits as contemplated in clause 5.4. |
10.2 | All working capital and cash required by the Joint Venture shall, after exploring alternative funding sources, be funded and contributed by the Participants in proportion to their respective Participation Interests. |
10.3 | In the event that a Participant ( Non-Funding Party ) should, in breach of the provisions hereof, fail to contribute its proportionate share of any required funding, and should the Non-Funding Party fail to do so within 10 (ten) business days of receipt of a written notice from the other Participant calling upon the Non-Funding Party to provide such funding then |
10.3.1 | the other Participant shall be entitled, but not obliged, to provide the funding that the Non-Funding Party was required to contribute ( Default Funding ); |
103.2 | if the other Participant provides Default Funding |
10.3.2.1 | the Non-Funding Partys Participation Interest will be recalculated, effective from the date on which the Default Funding is provided by the other Participant ( Dilution Date ), in accordance with the following formula - |
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R |
= |
((FMV(A) x D%) + F) x 100% |
||||
FMV(B) |
Where:
R |
= | The Non-Funding Partys recalculated Participation Interest expressed as a percentage. | ||||
FMV(A) |
= | the aggregate Fair Market Value of all Participation Interests, immediately prior to the Dilution Date. |
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D% |
= | the Non-Funding Partys Participation Interest expressed as a percentage, immediately prior to the Dilution Date. | ||||
F |
= | the funding provided by the Non-Funding Party, if any. | ||||
FMV(B) |
= | the aggregate Fair Market Value of all Participation interests after the Dilution Date and, for greater certainty, taking into account all funding provided; and |
10.3.2.2 | the other Participants Participation Interest, expressed as a percentage, shall be increased by the amount of the reduction in the Non-Funding Partys Participation Interest, expressed as a percentage; |
10.3.2.3 | the provisions of clauses 10.3.2.1 and 10.3.2.2 shall apply mutatis mutandis in respect of the Company Equity held by the Participants and, if required to give effect to the aforegoing, the Participants shall procure that shares in the relevant Company or Companies will be allotted and issued as appropriate. |
10.4 |
Any cost, expenses, debt or liability ( Debt ) incurred by the Joint Venture shall ultimately be the responsibility of the Participants in proportion to their respective Participation Interests and each Party indemnifies the other in respect of any payment or liability for any such Debts in excess of its proportionate share. Notwithstanding Such indemnity, should either Party not timeously pay its proportionate share of any Debt of the Joint Venture, and fail to do so within a further 10 (ten) business days of delivery of written notice from or on behalf of the other Party requiring it to do so, then to the extent that such other Party pays or procures payment of more than its own proportionate share of the Debt in consequence of such failure by the |
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remaining Party, the respective Participation interests of the Parties shall be recalculated mutatis mutandis in accordance with the provisions of clause 10.3.2. |
11 | MANAGEMENT |
11.1 | Control and management of the Joint Venture shall vest in a management committee to be constituted in accordance with the following provisions - |
11.1.1 | Evander shall be entitled at any lime and from time to time to appoint 2 (two) representatives to the Management Committee and to appoint alternates to those representatives and to remove or replace any such representative or alternate at any time and from time to time; |
11.1.2 | Taung shall be entitled at anytime and from time to time to appoint 3 (three) representatives to the Management Committee and to appoint alternates to those representatives and to remove or replace any such representative or alternate at any time and from time to time; |
11.1.3 | the chairman of the Management Committee shall be appointed by the Management Committee from amongst its members, which chairman shall not be entitled to a second or casting vote in addition to his deliberative vote; |
11.1.4 | any appointment, removal or replacement of representatives pursuant to the above provisions shall be by written notice to the other Party and shall be operative as soon as such notice is received at the relevant address determined pursuant to the provisions of clause 22. |
11.2 |
The Management Committee shall determine all matters of principle in regard to the Joint Venture, subject to the further terms and conditions |
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herein set out. The Participants shall be bound by all decisions of the Management Committee properly taken in accordance with the provisions of this Agreement. |
11.3 | Unless otherwise unanimously agreed in writing by the members or the Management Committee, there shall be at least monthly meetings of the Management Committee for the duration of the Joint Venture and, in addition, the Management Committee shall meet when requested to do so on reasonable notice by any of the Participants. The time and place for meetings shall be determined by the Management Committee. |
11.4 | Duly appointed alternate representatives shall be entitled to attend meetings of the Management Committee and shall have the right to speak thereat but no alternate shall be entitled to vote if his principal is present at that meeting. |
11.5 |
A quorum for a meeting of the Management Committee shall be one representative of each of the Participants appointed to the Management Committee, provided that there shall be no quorum unless at least one such representative appointed by each of the Participants is present and provided further that, subject to due and proper notice of the meeting (which shall include the proposed agenda and any resolution to be proposed at the meeting) having been received by all the members of the Management Committee, if within half an hour (or such longer period as those present may agree) after the time appointed for the meeting a quorum is not present, the meeting shall stand adjourned to the same day of the next week at the same time and place, and if at such adjourned meeting a quorum is not present within half an hour (or such longer period as those present may agree) after the time appointed for the meeting, those present shall be a |
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quorum. |
11.6 | Each member of the Management Committee shall be entitled to one vote at meetings of the Management Committee. |
11.7 | Subject to the provisions of clause 12, questions arising at meetings of the Management Committee shall be decided by a simple majority vote, provided that |
11.7.1 | the requisite quorum for such a meeting shall be present; |
11.7.2 | proper notice of the meeting shall have been provided to the Participants, which notice shall stipulate all matters to be considered at the relevant meeting. |
11.8 | The Management Committee shall appoint a secretary who shall keep minutes of each meeting of the Management Committee, arrange and co-ordinate each such meeting and keep records of resolutions passed by the Management Committee. The secretary need not be a member of the Management Committee. The secretary may be removed and replaced by the Management Committee. The minutes so kept shall be circulated to the members of the Management Committee within 14 (fourteen) days of each meeting and shall be signed by a member of the Management Committee representing each of the Participants. Such minute book shall at all times be available for inspection by the members of the Management Committee or their duly authorised agents who shall be entitled to take copies thereof or to make extracts therefrom. |
11.9 |
Any resolution or written decision signed by all the members of the Management Committee (or their alternates, if applicable) shall be as valid |
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and effective as if passed at a meeting of the Management Committee. All such resolutions shall, unless otherwise indicated therein, be deemed to have been passed on the date on which such resolution was signed by the last Management Committee member signing such resolution. |
11.10 | Subject to the provisions of clause 12, the powers and duties of the Management Committee may be delegated by the Management Committee to a manager, who shall carry out his or its duties in terms of and in accordance with the policies and decisions of the Management Committee. |
12 | RESTRICTED MATTERS |
12.1 | No decision of Participants and/or the Management Committee in relation to any of the matters set out in this clause 12 shall be of any force or effect unless all of the Participants first agree thereto in writing and no Participant or member/s of the Management Committee may bind or purport to bind the Joint Venture to, and/or cause the Joint Venture to undertake, any action in respect of the matters set out in this clause 12.1 unless and until such written agreement has been obtained - |
12.1.1 | the approval of and changes to the Annual Budgets and strategic and annual business plans and any modification thereof; |
12.1.2 | any individual or cumulative expenditure by the Joint Venture in excess of 15% (fifteen percent) of the total annual expenditure approved in terms of the Annual Budget; |
12.1.3 | the borrowing of any money or incurring of any debt, other than in accordance with the Annual Budget; |
12.1.4 |
the creation and modification of mortgages, liens or other charges on the |
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Joint Ventures assets; |
12.1.5 | the making of any loan to any Participant or third party or the payment of any Claims; |
12.1.6 | the issuing of guarantees, suretyships, indemnities or letters of comfort (or the like) of any nature whatsoever, other than in accordance with the Annual Budget, unless and to the extent that such guarantees, suretyships, indemnities or letters of comfort (or the like) are required to be furnished in terms of the MPRDA; |
12.1.7 | any sale, transfer or disposal of the JV Business or of any assets of the Joint Venture (in the case of assets, otherwise than in the normal course of the JV Business) or any change in the JV Business or the discontinuance of any business activities of the Joint Venture; |
12.1.8 | the establishment or the acquisition and purchase by the Joint Venture of other businesses, either directly or indirectly, or the entering into of mergers or amalgamations with other businesses or entities; |
12.1.9 | the termination, liquidation or winding-up of the Joint Venture; |
12.1.10 | the appointment of any Participant or third party to manage The Mine and/or the JV Business, or the payment of any management fees by the Joint Venture to any Participant or third party, other than in accordance with the Annual Budget; |
12.1.11 | the approval of transactions and contracts to be entered into by the Joint Venture outside the ordinary course of the JV Business (other than the Related Agreements and the Company Asset Lease); |
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12.1.12 | the appointment and removal of the Auditors; |
12.1.13 | the approval of the audited annual financial statements of the Joint Venture; |
12.1.14 | the appointment or termination of the appointment of any senior employee of the Joint Venture, being an employee earning an annual remuneration (calculated based on the cost thereof to the Joint Venture) in excess of R700,000.00 (seven hundred thousand rand) (Indexed) per annum ( Senior Employee ); |
12.1.15 | the alteration of salaries and remuneration of Senior Employees, other than in accordance with the Annual Budget or the payment of salaries, bonuses and/or profit share to the employees of the Joint Venture, other than in accordance with the Annual Budget; |
12.1.16 | the authorisation by the Joint Venture of obligations expressed in or amounts payable in foreign currency involving individual or cumulative amounts in excess of USD 100,000.00 (one hundred thousand United States dollars) (Indexed) in any Financial Year; |
12.1.17 | any change in the basis of accounting, otherwise than in accordance with IFRS, from those used by the Joint Venture during the immediately preceding Financial Year; |
12.1.18 | the purchase, sale, hiring, letting or sub-letting of any immovable property by the Joint Venture otherwise than in accordance with the Annual Budget from time to time; |
12.1.19 |
the institution of litigation or settlement of any claim by the Joint Venture in excess of R500,000.00 (five hundred thousand rand) |
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(Indexed) or any claim involving technical information or any intellectual property right or seeking relief for an order not sounding in money; |
12.1.20 | any decision not to insure the Joint Ventures assets (or to insure such assets for a lesser amount) against such risks as may be recommended by the Joint Ventures insurance brokers; |
12.1.21 | any agreement (other than the Related Agreements and the Company Asset Lease) with any of the Participants or a company, trust, close corporation or any other entity in which the shareholding of any of the Participants exceeds 25% (twenty-five percent) of the issued share capital of that Company, or the beneficial interest of any of the Participants exceeds 25% (twenty-five percent) of the total beneficial interest in that trust, close corporation or other entity, or any amendment to such agreement; |
12.1.22 | the revaluation of any assets of the Joint Venture; |
12.1.23 | a compromise generally with the Joint Ventures creditors; |
12.1.24 | the delegation of any powers, duties or function/s of the Management Committee, including the power to re-delegate and any limitations thereon; or |
12.1.25 | the decision to suspend Mining operations within the JV Area for a period of more than 6 (six) months. |
12.2 |
Should the Participants fail to reach agreement on any of the matters contemplated in clause 12.1 then such failure shall not constitute a dispute for the purposes of clause 21, nor shall it constitute a ground for winding-up of the Joint Venture and, unless and until otherwise determined in terms of |
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clause 12.1 or agreed in writing between all of the Participants, no action shall be taken in respect of such matter/s. |
13 | ADMINISTRATION AND ACCOUNTING |
13.1 | The Joint Venture shall have |
13.1.1 | as its auditors Pricewaterhouse Coopers Inc., or such other auditors as may be appointed in terms of this Agreement from time to time; and |
13.1.2 | as its financial year-end, the last day of June in each year. |
13.2 | The Management Committee shall ensure that the operations of the Joint Venture will be conducted inter alia on the following basis |
13.2.1 | the Joint Ventures books, records and accounts will be kept in compliance with IFRS; |
13.2.2 | audited accounts will be prepared as soon as is possible after each Financial Year end but in any event by not later than 90 (ninety) days thereafter; |
13.2.3 | monthly management accounts will be prepared as soon as is possible after each month end and circulated to all Participants forthwith after completion, but in any event within 15 (fifteen) business days of the relevant month end. |
13.3 | Senior accounting personnel and internal auditors of each of the Participants will have access to the books of account, records and vouchers of and pertaining to the Joint Venture at all reasonable times. |
13.4 |
An annual budget for the conduct of the JV Business during the next |
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Financial Year, in the form and level of detail determined by the Participants from time to time, shall be prepared annually by the Management Committee and submitted to the Participants for approval, by no later than 2 (two) clear calendar months prior to the month in which the new Financial Year commences. |
13.5 | The Annual Budget shall include but not be limited to |
13.5.1 | a projected income statement, balance sheet and cash flow statement for the ensuing Financial Year; and |
13.5.2 | a capital expenditure programme specifying amounts outstanding on approved capital expenditure brought forward from the prior Financial Year as well as proposed future capital expenditure commitments of the Joint Venture. |
13.6 | The Participants shall, subject to the provisions of clause 12.1.1, evaluate, amend and finalise the Annual Budget as soon as reasonably possible after receipt. Until such time as the new Annual Budget has been approved by the Management Committee, the previous Annual Budget (Indexed), will be applied by the Management Committee and will be binding on the Participants and the Joint Venture as if it had been approved in terms of clause 12. |
13.7 | The Joint Venture shall operate a banking account in the name of the Joint Venture into which all income earned by the Joint Venture shall be deposited. |
13.8 | The Joint Venture shall register as a vendor in terms of the Value-Added Tax Act, 1993, as soon as reasonably possible after the Effective Date. |
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14 | PROHIBITION OF ENCUMBRANCE |
Save as may otherwise be provided in this Agreement and unless the Parties otherwise agree in writing, no Participant shall be entitled to self, donate, lease, transfer, make available to a third party or otherwise alienate or dispose of, or to pledge, cede in security, hypothecate or otherwise encumber or grant a security interest or create a right of participation in its Company Equity, its Participation Interest its interest in any assets of the Joint Venture or my other interest it has in terms of this Agreement.
15 | PRE-EMPTIVE RIGHTS |
15.1 | Should a Party wish to sell its Participation Interest (or any other interest it has in terms of this Agreement) then it may only do so if, at the same time, it collectively sells all of the following (collectively referred to as its Sale Interest ) under one indivisible transaction |
15.1.1 | its entire Participation Interest; |
15.1.2 | all of its Claims; |
15.1.3 | its undivided share in any assets of the Joint Venture (as contemplated in clause 4.4); and |
15.1.4 | all of its Company Equity. |
15.2 | Should a Party ( Disposer ) wish to dispose of its Sale Interest, the Disposer shall offer ( Offer ) such Sale Interest by notice in wilting to the remaining Party stating |
15.2.1 | the price (in South African currency) at, and the terms and conditions upon which, the Disposer proposes to sell the Sale Interest; and |
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15.2.2 | to the extent applicable, the name of the proposed transferee to whom the Disposer intends selling and its ultimate holding company (if any), and including a copy of any offer received. |
15.3 | Should the Offer not be accepted in full in writing within 20 (twenty) business days of the date upon which the Offer is made, and |
15.3.1 | a proposed transferee has been identified as part of the Offer, then |
15.3.1.1 | the Disposer will be entitled to dispose of its Sale Interest, within a further period of 20 (twenty) business days, to the proposed transferee referred to in clause 15.2.2 at a price not lower and on terms and conditions not more favourable to such person than the price and terms stated in the Offer, provided that the giving of warranties to a third party offeror will not constitute more favourable terms, unless designed to increase the purchase price; and |
15.3.1.2 | unless the Disposer disposes of its Sale Interest to the proposed transferee within the said further period of 20 (twenty) business days, it may not thereafter dispose of its Sale Interest without again adopting the procedure referred to herein; |
15.3.2 | no proposed transferee has been identified as part of the Offer, then the Disposer may not dispose of its Sale Interest to any third party without again adopting the procedure set out above. |
15.4 |
The acceptance of any offer in terms of this clause 15 will be subject to the condition precedent that all approvals required by law or regulation to give effect thereto or to the implementation of the transaction contemplated thereby, are obtained. The Parties undertake to do all things, perform all |
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such actions and take all such steps and to procure the doing of all such things, the performance of all such actions and the taking of all such steps as may be open to them and reasonably necessary for or incidental to expediting any regulatory approval process. Any period stipulated in this clause 15 shall be increased by such number of days as may reasonably be necessary in order to obtain any required regulatory approval as aforesaid. |
15.5 | The purchaser of any Sale Interest, on successful completion of the sale, shall be deemed to have, inter alia , taken assignment of all of the lights and obligations in and to the Disposers interest in this Agreement (together with the Disposers Sale Interest). The Parties and the purchaser shall procure that any Joint Venture obligations, to the extent that they pertain to the Disposer, are delegated to the purchaser as soon as possible after, and/or on, the effective date of the sale. |
15.6 | Nothing contained in this Agreement shall preclude or be deemed to preclude a shareholder of a Party or Participant from selling or transferring or encumbering its or their shares in or claims against such Party or Participant even if that should result in a change of control of such Party or Participant. |
Page 40
16 | FORCE MAJEURE |
16.1 | If either Party is prevented or restricted directly or indirectly from carrying out all or any of its obligations under this Agreement from any cause beyond the reasonable control of that Party (including without limiting the generality of the foregoing, war, civil commotion, riot, insurrection, strikes, lock-outs, fire, explosion, flood and acts of God) ( Force Majeure ) the Party so affected shall |
16.1.1 | be relieved of its obligations hereunder during the period that such event and its consequences continue, but only to the extent so prevented; and |
16.1.2 | not be liable for any delay or failure in the performance of any obligations hereunder or any loss or damage (whether general or special, direct or indirect /consequential) which the other Party may suffer due to or resulting from such delay or failure. |
16.2 | The provisions of clause 16.1 arc subject to the proviso that written notice shall, within 48 (forty eight) hours of the occurrence constituting Force Majeure, be given of any such inability to perform by the affected Party to the other Party and provided further that the obligation to give such notice shall be suspended to the extent necessitated by such Force Majeure. |
16.3 | A Party invoking Force Majeure shall use its commercially reasonable endeavours to mitigate the effects of the Force Majeure event or occurrence and, upon termination of the such Force Majeure event or occurrence, shall forthwith give written notice thereof to the other Party. |
16.4 |
If the full and proper implementation of this Agreement is precluded by any of the events or a combination of the events contemplated in clause 16.1 for |
Page 41
a period of more than 90 (ninety) days at any one time, then the Parties shall endeavour to conclude new arrangements equitable to both of them and, should they fail to agree in writing upon any such new arrangements within a further period of 30 (thirty) days of written notice by either Party calling upon the other to do so, then either Party shall be entitled to terminate this Agreement with immediate effect upon written notice to the other Party. |
17 | TERMINATION AND WITHDRAWAL |
17.1 | Unless the Participants unanimously otherwise agree in writing, the participation of a Participant ( Terminating Party ) in the Joint Venture shall terminate - |
17.1.1 | upon the withdrawal of the Terminating Party on notice given by it in accordance with the provisions of clause 8.2, on the date on which such notice takes effect in compliance with clause 8.2; |
17.1.2 | on written notice given by the other Party if: the Terminating Party is deemed to be unable to pay its debts within the meaning of the Companies Act, 173; or if the Terminating Party should enter into or attempt to enter into a compromise with any or all of its creditors; or if the Terminating Party is placed under judicial management, whether provisionally or finally, with effect from the date stipulated in such notice; |
17.1.3 | automatically, if the Terminating Party should be liquidated or wound-up, whether provisionally or finally; |
17.1.4 |
automatically if the shareholding by HDS As in the Terminating Party is reduced for any reason in a manner that will prejudice, or may reasonably |
Page 42
be expected to prejudice, the New Order Mining Right held by the Company of which the Terminating Party is a member. For the purposes of this clause 17.1.4 |
17.1.4.1 | HDSA means - |
17.1.4.1.1 | in relation to an individual, a Historically Disadvantaged South African, qualified as such in terms of the Charter; |
17.1.4.1.2 | in relation to a company, a company qualified as such in terms of the Charter, being a company directly or indirectly controlled by one or more persons contemplated in clause 17.1.4.I.I and in which the majority of the board of directors are persons contemplated in clause 17.1.4.1.1; and |
17.1.4.1.3 | in relation to an unincorporated association or trust, an unincorporated association or trust controlled by one or more persons contemplated in clause 17.1.4.1.1; and |
17.1.4.2 | Charter means the Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry, published in the Government Gazette pursuant to the provisions of section 100(2) of the MPRDA; |
17.1.5 |
on written notice given by the other Party to the Terminating Party if the Terminating Party should commit a material breach of this Agreement or should continuously breach the provisions of this Agreement and should fail to remedy such material breach or to cease such continuous breaches of this Agreement, within 30 (thirty) business days of the other Party calling upon the Terminating Party to do so (and such notice shall be |
Page 43
without prejudice to any other claims or rights which the Party giving such notice may have against the Terminating Party), with effect from the date stipulated in such notice; or |
17.1.6 | on written notice given by a Party in terms of clause 16.4. |
17.2 | In the event of the termination of the participation of a Party in the Joint Venture, the Joint Venture shall be deemed to have dissolved on the date on which the participation of the Terminating Party ceases and, unless the other Participant ( Remaining Party ) elects to continue the JV Business on its own or in association with or in a joint venture with any other person or third party, the Joint Venture shall be wound-up in accordance with the provisions of clause 17.6. |
17.3 | The following provisions shall apply upon termination of the participation of a Party in the Joint Venture in circumstances where the Remaining Party elects to continue the Joint Venture in accordance with clause 17.2 - |
17.3.1 | the Parties shall procure the preparation of financial accounts for the Joint Venture as at the date of termination of the Terminating Partys participation; |
17.3.2 | the Remaining Party continuing the Joint Venture shall be deemed to have agreed to purchase the Terminating Partys Sale Interest (as contemplated in clause 15.1) at a purchase price equivalent to the Fair Market Value thereof, determined in accordance with the provisions of clause 18. The said purchase price shall be paid as soon as is reasonably possible after determination of the Fair Market Value, but in any event within 60 (sixty) business days thereof against constructive delivery by the Terminating Party of its Participation Interest to the Remaining Party; |
Page 44
and
17.3.3 | the Terminating Party shall, until the date of termination of its participation in the Joint Venture, be obliged to fully comply with all of its obligations in terms of this Agreement. |
17.4 | If the Remaining Party elects not to continue with the Joint Venture, it shall nevertheless have a right and option, on written notice to the Terminating Party to purchase the Terminating Party's Sale Interest (as contemplated in clause 15.1), at a purchase price equivalent to the Fair Market Value thereof, determined in accordance with the provisions of clause 18. |
17.5 | Any purchase by the Remaining Party of the Terminating Party's Sale Interest (as contemplated in clause 15.1) in accordance with the provisions of this clause 17, shall be subject to any and all required regulatory approvals being obtained, and the Parties undertake in favour of each other to cooperate fully in order to obtain the necessary approvals. |
17.6 | Unless the Parties otherwise agree in writing, the following provisions shall apply upon the winding-up of the Joint Venture in terms of this Agreement - |
17.6.1 | the liquidator of the Joint Venture shall be a partner or director of the Independent Auditors; |
17.6.2 | the liquidator, in winding-up the Joint Venture shall - |
17.6.2.1 | compile accounts reflecting the assets and liabilities of the Joint Venture; |
17.6.2.2 | collect all debts due to the Joint Venture; |
17.6.2.3 |
in consultation with the Parties, realise the assets owned by the Joint |
Page 45
Venture (if any) in whatever manner he may deem fit; |
17.6.2.4 | pay the creditors of the Joint Venture; |
17.6.2.5 | thereafter, pay the expenses of the realisation of the assets and the costs of liquidation of the Joint Venture; and |
17.6.2.6 | thereafter, distribute the remaining proceeds (if any) from the winding-up of the Joint Venture to the Parties in proportion to their respective Participation Interests as at the date of the winding-up. |
17.7 | in the event of the proceeds of the realisation of the assets of the Joint Venture proving to be insufficient to meet the liabilities of the Joint Venture, levy a contribution upon the Parties participating in the Joint Venture at the date of its winding-up to contribute to the deficit in proportion to their respective Participation Interests, but taking into account any funding shortfall by either Party or any excess funding contributed by a Party to the Joint Venture. |
18 | FAIR MARKET VALUE |
18.1 | Whenever the Fair Market Value of an asset or any interest, including any Participation Interest or Sale Interest (as contemplated in clause 15.1), is required to be determined, the Parties shall first attempt to agree such value in writing. |
18.2 | Should the Parties fail to so agree in writing the Fair Market Value of the asset or interest within 20 (twenty) business days from the date of a request by either Party for such agreement, the Fair Market Value of the asset or interest will be determined by the an Independent Investment Bank. In so certifying the Independent Investment Bank shall - |
Page 46
18.2.1 | act as an expert and not as an arbitrator; |
18.2.2 | value the asset or interest having regard to the price a willing buyer would pay in respect thereof to a willing seller negotiating at arms-length; |
18.2.3 | not take into account the illiquidity of the such asset or interest; and |
18.2.4 | not take into account the fact that the relevant interest may constitute a minority or majority holding in the Joint Venture. |
19 | CONFIDENTIALITY AND PUBLICITY |
19.1 | The Parties shall take all reasonable steps to minimise the risk of disclosure of confidential information which is proprietary to the Joint Venture or either of the Parties, by ensuring that only their employees and directors and those of the Joint Venture whose duties will require them to possess any such information shall have access thereto, and that they shall be instructed to treat the same as confidential. The foregoing shall not be applicable to the Parties with respect to - |
19.1.1 | information which enters the public domain other than as a result of this Agreement; |
19.1.2 | information which is lawfully received from a third party not subject to any duty of confidentiality to the applicable Party with respect to such information; |
19.1.3 | information which is known other than as a result of a disclosure in breach of any duty of confidentiality to the applicable Party with respect to such information; and |
Page 47
19.1.4 | disclosure made as required by law or enforceable legal process, or by the rules of any securities exchange or regulatory authority having jurisdiction over such person. |
19.2 | Notwithstanding the provisions of clause 19.1, the Parties shall be entitled to disclose to their respective consultants and advisors any information required to be kept confidential in terms of clause 19.1 for any bona fide purpose, provided that in such event the disclosing Party shall procure that such consultants and advisors keep such information strictly confidential. |
19.3 | Unless otherwise agreed in writing between the Parties, neither of the Parties shall issue or make any public announcement or statement (including any written or oral statement under circumstances where it could reasonably be expected that such statement would be published in any media) or any other disclosure to any third party regarding this Agreement or the transactions contemplated hereby, including, without limitation, any reference to their terms or conditions, unless required by law or enforceable legal process or the rules of any securities exchange or the rules governing the production and publication of audited financial statements or any regulatory authority having jurisdiction over the Parties or either of them. |
19.4 |
Should a Party wish to negotiate with a bona fide third party (not being a competitor, directly or indirectly, in relation to the Joint Venture) for the possible disposal of any Participation Interest to that bona fide third party, such Party shall be entitled to disclose confidential information concerning the Joint Venture to such bona fide third party provided that such third party has signed and executed a confidentiality undertaking on terms and conditions reasonably acceptable to the other Party and there shall be no obligation on the disclosing Party to reveal the identity of the bona fide third |
Page 48
party at that stage. |
20 | BREACH |
The Parties agree that (subject to the provisions of clause 16) the cancellation of this Agreement in the event of a breach would be an inappropriate and insufficient remedy and that irreparable damage would occur if the provisions of this Agreement were not complied with. It is accordingly agreed that, in the event of a breach, the aggrieved Party shall be entitled (without prejudice to any other rights which it may have in law, save for the right to cancel the Agreement, and the rights that it has in terms of clause 16) to an order for specific performance and/or to recover any damages which it may have suffered.
21 | DISPUTE RESOLUTION |
21.1 | In the event of there being any dispute or difference between the Parties arising out of this Agreement, the said dispute or difference shall on written demand by either Party be submitted to arbitration in Johannesburg in accordance with the AFSA rules, which arbitration shall be administered by AFSA. |
21.2 |
Should AFSA, as an institution, not be operating at that time or not be accepting requests for arbitration for any reason, then the arbitration shall be conducted in accordance with the AFSA rules for commercial arbitration (as last applied by AFSA) ( AFSA Rules ) before an arbitrator appointed by agreement between the parties to the dispute or failing agreement within 10 (ten) business days of the demand for arbitration, then any party to the dispute shall be entitled to forthwith call upon the chairperson of the Johannesburg Bar Council to nominate the arbitrator, provided that the |
Page 49
person so nominated shall be an advocate of not less than 10 (ten) years standing as such. The person so nominated shall be the duly appointed arbitrator in respect of the dispute. In the event of the attorneys of the parties to the dispute failing to agree on any matter relating to the administration of the arbitration, such matter shall be referred to and decided by the arbitrator whose decision shall be final and binding on the parties to the dispute. |
21.3 | Any party to the arbitration may appeal the decision of the arbitrator or arbitrators in terms of the AFSA Rules. |
21.4 | Nothing herein contained shall be deemed to prevent or prohibit a party to the arbitration from applying to the appropriate court for urgent relief or for judgment in relation to a liquidated claim. |
21.5 | Any arbitration in terms of this clause 21 (including any appeal proceedings) shall be conducted in camera and the Parties shall treat as confidential details of the dispute submitted to arbitration, the conduct of the arbitration proceedings and the outcome of the arbitration. |
21.6 | This clause 21 will continue to be binding on the Parties notwithstanding any termination or cancellation of the Agreement. |
21.7 | The Parties agree that the written demand by a party to the dispute in terms of clause 21.1 that the dispute or difference be submitted to arbitration, is to be deemed to be a legal process for the purpose of interrupting extinctive prescription in terms of the Prescription Act, 1969. |
22 | NOTICES AND DOMICILIA |
22.1 |
The Parties select as their respective domicilia citandi et executandi the |
Page 50
following physical addresses, and for the purposes of giving or sending any notice provided for or required under this Agreement, the said physical addresses as well as the following telefax numbers - |
Name |
Physical Address |
Telefax |
||
Taung | Suite 4A | (012) 665-3641 | ||
Manhattan Office Park | ||||
16 Pieter Street | ||||
Highveld Techno Park | ||||
Centurion |
Marked for the attention of: The Manager
Name |
Physical Address |
Telefax |
||
Evander | Block 27 | (011) 684-0188 | ||
Randfontein Office Park | ||||
Corner Main Reef Road and | ||||
Ward Avenue | ||||
Randfontein |
Marked for the attention of: The Company Secretary
provided that a Party may change its domicilium or its address for the purposes of notices to any other physical address or telefax number by written notice to the other Party to that effect. Such change of address will be effective 5 (five) business days after receipt of the notice of the change.
22.2 | All notices to be given in terms of this Agreement will be given in writing, in English, and will - |
22.2.1 | be delivered by hand or sent by telefax; |
22.2.2 | if delivered by hand during business hours, be presumed to have been received on the date of delivery. Any notice delivered after business hours or on a day which is not a business day will be presumed to have been received on the following business day; and |
Page 51
22.2.3 | if sent by telefax during business hours, be presumed to have been received on the date of successful transmission of the telefax. Any telefax sent after business hours or on a day which is not a business day will be presumed to have been received on the following business day. |
22.3 | Notwithstanding the above, any notice given in writing in English, and actually received by the Party to whom the notice is addressed, will be deemed to have been properly given and received, notwithstanding that such notice has not been given in accordance with this clause. |
22.4 | The Parties record that whilst they may correspond via email during the currency of this Agreement for operational reasons, no formal notice required in terms of this Agreement, nor any amendment of or variation to this Agreement may be given or concluded via email. |
23 | BENEFIT OF THE AGREEMENT |
This Agreement will also be for the benefit of and be binding upon the successors in title and permitted assigns of the Parties or either of them.
24 | APPLICABLE LAW AND JURISDICTION |
24.1 | This Agreement will in all respects be governed by and construed under the laws of the Republic of South Africa. |
24.2 |
For the purposes of clause 21.4 and for the purposes of making any arbitration award or expert determination an order of Court, the Parties hereby consent and submit to the non-exclusive jurisdiction of the Witwatersrand Local Division of the High Court of the Republic of South Africa in any dispute arising from or in connection with this Agreement. The Parties agree that any costs awarded will be recoverable on an attorney-and-own-client |
Page 52
scale unless the Court specifically determines that such scale shall not apply, in which event the costs will be recoverable in accordance with the High Court tariff, determined on an attorney-and-client scale. |
25 | SUPPORT |
Each of the Parties undertakes to and in favour of the other Party that it shall at all times -
25.1 | act in good faith in its dealings with such other Party in regard to this Agreement and the manner in which their future relationships will be conducted; and |
25.2 | do all such things, perform all such actions and take all such steps and procure the doing of all such steps as may reasonably be open to it and reasonably necessary for or incidental to the implementation or maintenance of the terms, conditions and import of this Agreement. In particular, Evander undertakes to make available to the Management Committee (at Evanders own cost and expense and as soon as is reasonably possible after receipt by Evander of a written request in respect thereof) such information pertaining to the Evander 2 and 5 Shafts as is reasonably required or necessary in connection with the conduct of the JV Business. |
26 | FAIRNESS |
The Parties recognise that it is impractical to make provision for every contingency which may arise during the period of operation of this Agreement, and the Parties hereby declare that their intention is that this Agreement shall operate between them with fairness and without undue hardship to either Party. Should either Party advise the other of a perceived unfairness or undue
Page 53
hardship, the Parties shall use their respective commercially reasonable endeavours in the circumstances to agree upon a suitable course of action to remove such cause of unfairness or undue hardship.
27 | GENERAL |
27.1 | This Agreement constitutes the whole of the agreement between the Parties relating to the matters dealt with herein and, save to the extent otherwise provided herein, no undertaking, representation, term or condition relating to the subject matter of this Agreement not incorporated in this Agreement shall be binding on either of the Parties. |
27.2 | No addition to or variation, deletion, or agreed cancellation of all or any clauses or provisions of this Agreement will be of any force or effect unless in writing and signed by the Parties. |
27.3 | No waiver of any of the terms and conditions of this Agreement wilt be binding or effectual for any purpose unless in writing and signed by the Party giving the same. Any such waiver will be effective only in the specific instance and for the purpose given. Failure or delay on the part of either Party in exercising any right, power or privilege hereunder will not constitute or be deemed to be a waiver thereof, nor will any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. |
27.4 |
All provisions and the various clauses of this Agreement are, notwithstanding the manner in which they have been grouped together or linked grammatically, severable from each other. Any provision or clause of this Agreement which is or becomes unenforceable in any jurisdiction, whether due to voidness, invalidity, illegality, unlawfulness or for any other |
Page 54
reason whatever, shall, in such jurisdiction only and only to the extent that it is so unenforceable, be treated as pro non scripto and the remaining provisions and clauses of this Agreement shall remain of full force and effect. The Parties declare that it is their intention that this Agreement would be executed without such unenforceable provision if they were aware of such unenforceability at the time of execution hereof. |
27.5 | Neither this Agreement nor any part, share or interest herein nor any rights or obligations hereunder may be ceded, delegated or assigned by either Party without the prior written consent of the other Party, save as otherwise provided herein. |
27.6 | This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same Agreement as at the date of signature of the Party last signing one of the counterparts. |
28 | COSTS |
Each Party will bear and pay its own legal costs and expenses of and incidental to the negotiation, drafting, preparation and implementation of this Agreement.
Page 55
29 | SIGNATURE |
Signed on behalf of the Parties, each signatory hereto warranting that he/she has due authority to do so.
SIGNED at RANDFONTEIN on 29/2/2008.
For and on behalf of EVANDER GOLD MINES LIMITED |
|
Signature |
|
Name of Signatory |
EXECUTIVE |
Designation of Signatory |
SIGNED at SANDTON on 27 FEBRUARY 2008.
For and on behalf of TAUNG GOLD HOLDINGS (PROPRIETARY) LIMITED |
|
Signature |
|
Name of Signatory |
Director |
Designation of Signatory |
Page 56
ANNEXE A
EVANDER 6 SHAFT AREA
ANNEXE B
TWISTDRAAI AREA
FIRST ADDENDUM TO THE
JOINT VENTURE AGREEMENT
between
EVANDER GOLD MINES LIMITED
and
TAUNG GOLD HOLDINGS (PROPRIETARY) LIMITED
TABLE OF CONTENTS
1 |
INTERPRETATION | 3 | ||||
2 |
RECITALS | 3 | ||||
3 |
AMENDMENT OF THE JV AGREEMENT | 3 | ||||
4 |
SAVINGS | 4 | ||||
5 |
COUNTERPARTS | 4 | ||||
6 |
COSTS | 4 | ||||
7 |
SIGNATURE | 5 |
Page 2
WHEREBY THE PARTIES AGREE AS FOLLOWS:
1 | INTERPRETATION |
In this Addendum -
1.1 | JV Agreement means the written joint venture agreement entered into between the parties hereto on 11 January 2008; and |
1.2 | words and phrases defined in the JV Agreement will bear the same meanings herein. |
2 | RECITALS |
The Parties have agreed to amend the Net Smelter Royalty provisions contained in the JV Agreement and wish to record such amendment in this Addendum.
3 | AMENDMENT OF THE JV AGREEMENT |
The JV Agreement is hereby amended by the insertion of the
3.1 | words , subject to a maximum aggregate amount of R1,281,000,000.00 (one billion two hundred and eighty one million rand) at the end of clause 1.2.32; and |
3.2 | following clause after clause 6.2 - |
6.3 | Notwithstanding any other provisions of this Agreement, the Net Smelter Royalty shall not exceed an amount of R1,281,000,000.00 (one billion two hundred and eighty one million rand) in the aggregate ( Royalty Threshold ). Accordingly, the Net Smelter Royalty payments contemplated in clause 6.2 shall cease when the Royalty Threshold is reached. Any amounts that have been paid by the Joint |
Page 3
Venture in terms of clause 6.2 and which exceed the Royalty Threshold shall be refunded by Evander to the Joint Venture within 10 (ten) business days of receipt by Evander of first written request in respect thereof by or on behalf of the Joint Venture. |
4 | SAVINGS |
Save to the extent specifically or by necessary implication modified in or inconsistent with the provisions of this Addendum, all the terms and conditions of the JV Agreement shall mutatis mutandis continue in full force and effect. Should any provision of the JV Agreement conflict with or differ from the provisions of this Addendum, then the provisions of this Addendum will prevail.
5 | COUNTERPARTS |
This Addendum may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same agreement as at the date of signature of the Party last signing one of the counterparts.
6 | COSTS |
Each Party shall bear its own costs of and in connection with this Addendum.
Page 4
7 | SIGNATURE |
Signed on behalf of the Parties as set out below, each signatory warranting that he or she has due authority to do so -
SIGNED at on 2008.
For and on behalf of |
EVANDER GOLD MINES LIMITED |
|
Signature |
|
Name of Signatory |
|
Designation of Signatory |
SIGNED at Sandton on 21 January 2008.
For and on behalf of |
TAUNG GOLD HOLDINGS (PROPRIETARY) LIMITED |
|
Signature |
|
Name of Signatory |
Director |
Designation of Signatory |
Page 5
SECOND ADDENDUM TO THE SALE OF ASSETS
AGREEMENT
between
EVANDER GOLD MINES LIMITED
and
CLIDET NO 791 (PROPRIETARY) LIMITED
and
TAUNG GOLD HOLDINGS (PROPRIETARY) LIMITED
WHEREBY THE PARTIES AGREE AS FOLLOWS -
1 | INTERPRETATION |
In this Addendum
1.1 | Sale Agreement means the sale of assets agreement entered into between Evander Gold Mines Limited and Clidet No 791 (Proprietary) Limited on 11 January 2008, as amended from time to time; and |
1.2 | words and expressions defined in the Sale Agreement will have the same meanings. |
2 | INTRODUCTION |
The Parties have agreed to make a further amendment to clause 3.1.4.1 of the Sale Agreement.
3 | AMENDMENT |
Clause 3.1.4.1 of the Sale Agreement is hereby amended by the substitution of the word Twistdraal for the words Evander 6 Shaft .
4 | TAUNG CONSENT |
Taung hereby consents to the entering into of this Addendum and to the amendment set out in clause 3.
5 | SAVINGS CLAUSE |
Save to the extent specifically or by necessary implication modified in or inconsistent with the provisions of this Addendum or unless otherwise agreed in writing between the Parties, all the terms and conditions of the Sale Agreement shall mutatis mutandis continue to apply.
Page 2
6 | COUNTERPARTS |
This Addendum may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same agreement as at the date of signature of the party last signing one of the counterparts.
7 | SIGNATURE |
Signed on behalf of the parties as set out below, each signatory warranting that he or she has due authority to do so -
SIGNED at on 2008.
For and on behalf of |
EVANDER GOLD MINES LIMITED |
|
Signature |
|
Name of Signatory |
|
Designation of Signatory |
Page 3
SIGNED at on 2008.
For and on behalf of CLIDET NO 791 (PROPRIETARY) LIMITED |
|
Signature |
|
Name of Signatory |
|
Designation of Signatory |
SIGNED at on 2008.
For and on behalf of TAUNG GOLD HOLDINGS (PROPRIETARY) LIMITED |
|
Signature |
|
Name of Signatory |
|
Designation of Signatory |
Page 4
Exhibit 4.24
EXECUTION
3 September 2010
MINING RIGHT ABANDONMENT AGREEMENT
between
HARMONY GOLD MINING COMPANY LIMITED
and
WITWATERSRAND CONSOLIDATED GOLD RESOURCES LIMITED
TABLE OF CONTENTS
1 |
PARTIES |
1 | ||||
2 |
INTERPRETATION |
1 | ||||
3 |
INTRODUCTION |
7 | ||||
4 |
CONDITIONS PRECEDENT |
7 | ||||
5 |
ESCROW AMOUNT |
10 | ||||
6 |
PAYMENT OF THE CONSIDERATION |
13 | ||||
7 |
LODGEMENT OF DEEDS |
13 | ||||
8 |
FLOODING |
15 | ||||
9 |
ACCESS TO INFORMATION |
16 | ||||
10 |
DRILLING OPERATIONS |
16 | ||||
11 |
INTEREST |
18 | ||||
12 |
GENERAL WARRANTIES |
18 | ||||
13 |
PUBLICITY |
19 | ||||
14 |
BREACH |
20 | ||||
15 |
DISPUTE RESOLUTION |
20 | ||||
16 |
NOTICES AND DOMICILIA |
21 | ||||
17 |
BENEFIT OF THE AGREEMENT |
22 | ||||
18 |
APPLICABLE LAW AND JURISDICTION |
23 | ||||
19 |
GENERAL |
23 | ||||
20 |
COSTS |
25 | ||||
21 |
SIGNATURE |
25 |
ANNEXURES
ANNEXURE 1 : DEED OF ABANDONMENT
ANNEXURE 2 : DEED OF AMENDMENT OF MINING RIGHT
ANNEXURE 3 : DEED OF AMENDMENT OF PROSPECTING RIGHT
ANNEXURE 4 : PLAN OF MERRIESPRUIT SOUTH AREA
ANNEXURE 5 : MINING RIGHT
ANNEXURE 6 : PLAN OF MINING RIGHT AREA
ANNEXURE 7 : SECTION 102 APPLICATION
1 | PARTIES |
1.1 | The Parties to this Agreement are |
1.1.1 | Harmony Gold Mining Company Limited; and |
1.1.2 | Witwatersrand Consolidated Gold Resources Limited. |
1.2 | The Parties agree as set out below. |
2 | INTERPRETATION |
2.1 | In this Agreement, unless the context indicates a contrary intention, the following words and expressions bear the meanings assigned to them and cognate expressions bear corresponding meanings |
2.1.1 | Abandonment means the abandonment by Harmony of that portion of the Mining Right pertaining to the Merriespruit South Area in terms of section 56(f) of the MPRDA; |
2.1.2 | AFSA means the Arbitration Foundation of Southern Africa; |
2.1.3 | Agreement means the agreement contained in this document, including all annexures hereto; |
2.1.4 | Balance of the Consideration means the Consideration less the Escrow Amount; |
2.1.5 | Conditions Precedent means the conditions precedent set out in clause 4; |
2.1.6 | Consent means the consent of the Minister under and pursuant to the grant of the Section 102 Application to add the Merriespruit South Area to the Wits Gold Prospecting Right; |
2.1.7 | Consideration means an amount equal to R61,000,000 (sixty one million rand) exclusive of VAT thereon; |
2.1.8 | Deeds of Amendment means the |
2.1.8.1 | Deed of Mining Right Amendment; and |
2.1.8.2 | Deed of Prospecting Right Amendment; |
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2.1.9 | Deed of Abandonment means a notarial deed of abandonment, giving effect to the Abandonment, substantially in the form of the draft attached hereto as annexure 1 , or such other form as may be agreed between the Parties; |
2.1.10 | Deed of Mining Right Amendment means a notarial deed of amendment giving effect to the Mining Right Amendment, substantially in the form of the draft attached hereto as annexure 2 , or such other form as may be agreed between the Parties; |
2.1.11 | Deed of Prospecting Right Amendment means a notarial deed of amendment giving effect to the Prospecting Right Amendment, substantially in the form of the draft attached hereto as annexure 3 , or such other form as may be agreed between the Parties; |
2.1.12 | DMR means the Department of Mineral Resources, formerly the Department of Minerals and Energy; |
2.1.13 | Drilling Operations means the drilling operations to be conducted by Wits Gold in, on or under the Merriespruit South Area which are necessary to enable Wits Gold to update its geological model in respect of the Merriespruit South Area; |
2.1.14 | Effective Date means the day on which the last in time of the Conditions Precedent to be fulfilled or waived, is fulfilled or waived, as the case may be; |
2.1.15 | Escrow Amount means an amount equal to R10,000,000 (ten million rand); |
2.1.16 | Escrow Agent means Cliffe Dekker Hofmeyr Incorporated, registration number 2008/018923/21, a firm of attorneys duly incorporated as a private company in the Republic of South Africa; |
2.1.17 | Escrow Account means the following account of the Escrow Agent |
Name of Account: | Cliffe Dekker Hofmeyr Inc Trust Account | |
Bank: | Nedbank | |
Branch: | 100 Main Street, Johannesburg | |
Branch Code: | 197905 | |
Account Number: | 1979312176 |
2.1.18 |
Freegold means ARMGold/Harmony Freegold Joint Venture Company (Proprietary) Limited, registration number 2001/029602/07, a limited liability |
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private company duly incorporated in the Republic of South Africa; |
2.1.19 | Harmony means Harmony Gold Mining Company Limited, registration number 1950/038232/06, a limited liability public company duly incorporated in the Republic of South Africa; |
2.1.20 | Harmony 3 Shaft Operations means the current mining operations conducted by Harmony in, on and under the Mining Right Area; |
2.1.21 | Harmonys Designated Account means the bank account nominated by Harmony, the details of which are set out below, or such other account as Harmony may designate in writing on 5 (five) business days notice to Wits Gold and the Escrow Agent |
Name of Account: | Harmony Gold Mining Company Current Account | |
Bank: | Nedbank | |
Branch: | Corporate Client Services | |
Branch Code: | 145405 | |
Account Number: | 1454115866 |
2.1.22 | JSE means JSE Limited, registration number 2005/022939/06, a limited liability public company duly incorporated in the Republic of South Africa and licensed as an exchange under the Securities Services Act, 2001; |
2.1.23 | Listings Requirements means the Listings Requirements of the JSE; |
2.1.24 | Merriespruit South Area means that portion of the Mining Right Area hatched in red on the plan annexed hereto marked annexure 4 and having the co-ordinates ABCDEFGHJKM as reflected on annexure 4 ; |
2.1.25 | Mining Titles Office means the Mining Titles Office contemplated in section 2 of the Mining Titles Registration Act, 1967; |
2.1.26 | Mining Right means the mining right granted to Harmony in terms of Item 7 of Schedule II to the MPRDA, read with section 23(1) of the MPRDA, entitling Harmony to mine for gold ore in, on and under the Mining Right Area executed on 11 December 2007, a copy of which is attached hereto as annexure 5 ; |
2.1.27 | Mining Right Area means the area shaded in green on the plan attached hereto marked annexure 6 , which area includes the Merriespruit South Area; |
2.1.28 |
Mining Right Amendment means the amendment of the Mining Right by |
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the deletion therefrom of the Merriespruit South Area; |
2.1.29 | Minister means the Minister of Mineral Resources, and includes any person to whom the Minister has delegated powers and functions in terms of section 103 of the MPRDA; |
2.1.30 | MPRDA means the Mineral and Petroleum Resources Development Act, 2002; |
2.1.31 | Option Cancellation Agreement means the option cancellation agreement entered into, or to be entered into, amongst Wits Gold, Freegold and Harmony, in terms of which Freegold cancels an option granted to it by Wits Gold; |
2.1.32 | Parties means the parties to this Agreement; |
2.1.33 | Prime Rate means the publicly quoted basic rate of interest, compounded monthly in arrears and calculated on a 365 (three hundred and sixty five) day year irrespective of whether or not the year is a leap year, from time to time published by Nedbank Limited as being its prime overdraft rate, as certified by any representative of that bank whose appointment and designation it shall not be necessary to prove; |
2.1.34 | Prospecting Right Amendment means the amendment of the Wits Gold Prospecting Right by the addition thereto of the Merriespruit South Area; |
2.1.35 | Section 102 Application means an application by Wits Gold to the Minister in terms of section 102 of the MPRDA to add the Merriespruit South Area to the Wits Gold Prospecting Right, substantially in the form of the draft attached hereto as annexure 7 , or such other form as may be agreed between the Parties; |
2.1.36 | Signature Date means the date of signature of this Agreement by the Party last in time signing; |
2.1.37 | VAT means value-added tax as levied from time to time in terms of the Value-Added Tax Act, 1991; |
2.1.38 | Wits Gold means Witwatersrand Consolidated Gold Resources Limited, registration number 2002/031365/06, a limited liability public company duly incorporated in the Republic of South Africa (formerly Witwatersrand Consolidated Gold Resources (Proprietary) Limited; |
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2.1.39 | Wits Golds Designated Account means the bank account nominated by Wits Gold, the details of which are set out below, or such other account as Wits Gold may designate in writing on 5 (five) business days notice to Harmony and the Escrow Agent |
Name of Account: | Witwatersrand Consolidated Gold Resources Limited | |
Bank: | ABSA Bank Limited | |
Branch: | Fourways | |
Branch Code: | 632905 | |
Account Number: | 4063800562 |
2.1.40 | Wits Gold Prospecting Right means the prospecting right FS30/5/1/1/2/76PR granted to Wits Gold in terms of section 17(1) of the MPRDA, registered in the Mining Titles Office under number MPTNO99/2006 (PR). |
2.2 | In this Agreement |
2.2.1 | clause headings and the heading of the Agreement are for convenience only and are not to be used in its interpretation; |
2.2.2 | an expression which denotes |
2.2.2.1 | any gender includes the other genders; |
2.2.2.2 | a natural person includes a juristic person and vice versa ; |
2.2.2.3 | the singular includes the plural and vice versa ; and |
2.2.2.4 | a Party includes a reference to that Partys successors in title and assigns allowed at law. |
2.3 | Any reference in this Agreement to |
2.3.1 | business hours shall be construed as being the hours between 08h30 and 17hOO on any business day. Any reference to time shall be based upon South African Standard Time; |
2.3.2 | days shall be construed as calendar days unless qualified by the word business, in which instance a business day will be any day other than a Saturday, Sunday or public holiday as gazetted by the government of the Republic of South Africa from time to time; |
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2.3.3 | law means any law of general application and includes the common law and any statute, constitution, decree, treaty, regulation, directive, ordinance, by- law, order or any other enactment of legislative measure of government (including local and provincial government) statutory or regulatory body which has the force of law; |
2.3.4 | person means any person, company, close corporation, trust, partnership or other entity whether or not having separate legal personality; and |
2.3.5 | writing means legible writing and in English, |
2.4 | The words include and including mean include without limitation and including without limitation. The use of the words include and including followed by a specific example or examples shall not be construed as limiting the meaning of the general wording preceding it. |
2.5 | Any substantive provision, conferring rights or imposing obligations on a Party and appearing in any of the definitions in this clause 2 or elsewhere in this Agreement, shall be given effect to as if it were a substantive provision in the body of the Agreement. |
2.6 | Words and expressions defined in any clause shall, unless the application of any such word or expression is specifically limited to that clause, bear the meaning assigned to such word or expression throughout this Agreement. |
2.7 | Unless otherwise provided, defined terms appearing in this Agreement in title case shall be given their meaning as defined, while the same terms appearing in lower case shall be interpreted in accordance with their plain English meaning. |
2.8 | A reference to any statutory enactment shall be construed as a reference to that enactment as at the Signature Date and as amended or substituted from time to time. |
2.9 | Unless specifically otherwise provided, any number of days prescribed shall be determined by excluding the first and including the last day or, where the last day falls on a day that is not a business day, the next succeeding business day. |
2.10 | If the due date for performance of any obligation in terms of this Agreement is a day which is not a business day then (unless otherwise stipulated) the due date for performance of the relevant obligation shall be the immediately preceding business day. |
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2.11 | Where figures are referred to in numerals and in words, and there is any conflict between the two, the words shall prevail, unless the context indicates a contrary intention. |
2.12 | The rule of construction that this Agreement shall be interpreted against the Party responsible for the drafting of this Agreement, shall not apply. |
2.13 | No provision of this Agreement shall (unless otherwise stipulated) constitute a stipulation for the benefit of any person (stipulatio alteri) who is not a Party to this Agreement. |
2.14 | The use of any expression in this Agreement covering a process available under South African law, such as winding-up, shall, if either of the Parties to this Agreement is subject to the law of any other jurisdiction, be construed as including any equivalent or analogous proceedings under the law of such other jurisdiction. |
2.15 | Any reference in this Agreement to this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document, as amended, varied, novated or supplemented from time to time. |
2.16 | In this Agreement the words clause or clauses and annexure or annexures refer to clauses of and annexures to this Agreement. |
3 | INTRODUCTION |
3.1 | Harmony is the holder of the Mining Right over the Mining Right Area. |
3.2 | Harmony has agreed to abandon that portion of the Mining Right Area referred to as the Merriespruit South Area, subject to the granting of the Section 102 Application by the Minister. |
3.3 | The Parties wish to record in writing their agreement in respect of the above and matters ancillary thereto. |
4 | CONDITIONS PRECEDENT |
4.1 | Save for clauses 1 to 5, and clauses 10,11 and 13 to 22 all of which will become effective immediately, this Agreement is subject to the fulfilment of the Conditions Precedent that |
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4.1.1 | the Option Cancellation Agreement shall have been entered into contemporaneously with this Agreement; |
4.1.2 | by not later than 17h00 on 13 September 2010, Wits Gold shall have received a certified copy of resolutions of the board of directors of Harmony |
4.1.2.1 | approving and, where applicable, ratifying the entering into of this Agreement; |
4.1.2.2 | authorising a specified person or persons to execute this Agreement and, where applicable, ratifying the execution of this Agreement by such specified person or persons; |
4.1.2.3 | authorising a specified person or persons to execute the Deed of Mining Right Amendment and the Deed of Abandonment; and |
4.1.2.4 | authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with this Agreement; |
4.1.3 | by not later than 17h00 on 13 September 2010, Harmony shall have received a certified copy of resolutions of the board of directors of Wits Gold |
4.1.3.1 | approving and, where applicable, ratifying the entering into of this Agreement; |
4.1.3.2 | authorising a specified person or persons to execute this Agreement and, where applicable, ratifying the execution of this Agreement by such specified person or persons; |
4.1.3.3 | authorising a specified person or persons to execute the Deed of Prospecting Right Amendment; and |
4.1.3.4 | authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with this Agreement; |
4.1.4 | by not later than 13 September 2010, the Section 102 Application has been signed on behalf of Wits Gold and submitted to the DMR with an unsigned Deed of Abandonment and unsigned Deeds of Amendment; |
4.1.5 |
by not later than 17h00 on 5 November 2010, the Option Cancellation |
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Agreement has become unconditional in accordance with its terms and has been fully implemented; |
4.1.6 | by not later than 31 May 2011, Wits Gold has obtained funding in an amount of at least R61,000,000 (sixty one million rand) for the purpose of paying Harmony the Consideration; |
4.1.7 | within 3 (three) business days following the later of the fulfilment or waiver, as the case may be, of the Condition Precedent contained in clause 4.1.6 and the fulfilment of the Condition Precedent contained in clause 4.1.8, Wits Gold has paid the Balance of the Consideration plus VAT on the full Consideration into the Escrow Account; |
4.1.8 | by not later than 17h00 on 31 October 2011, the Consent has been granted by the Minister, either unconditionally or subject to such further conditions as have been approved in writing between the Parties; |
4.1.9 | by not later than 10 (ten) business days following the fulfilment, or where applicable, the waiver of the last of the Conditions Precedent, the representatives of the Parties and the Escrow Agent shall have met at the offices of the regional manager of the DMR: Welkom, at which meeting |
4.1.9.1 | Harmony shall procure that the Deed of Abandonment is executed; and immediately thereafter |
4.1.9.2 | Harmony and Wits Gold shall procure that the Deed of Mining Right Amendment and the Deed of Prospecting Right Amendment respectively are executed. |
4.2 | Harmony shall use commercially reasonable endeavours to procure the fulfilment of the Condition Precedent contained in clause 4.1.2 as soon as reasonably possible and in any case prior to the expiry of the relevant time periods set out in those clauses and furnish to the other Party documents evidencing the fulfilment of such Conditions Precedent. |
4.3 | Wits Gold shall use commercially reasonable endeavours to procure the fulfilment of the Conditions Precedent contained in clauses 4.1.3,4.1.4, 4.1.6 and 4.1,7 as soon as reasonably and in any case prior to the expiry of the relevant time periods set out in those clauses and furnish to the other Party documents evidencing the fulfilment of such Conditions Precedent. |
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4.4 | The Parties shall use commercially reasonable endeavours and the Parties will co-operate in good faith to procure the fulfilment of the Conditions Precedent contained in clauses 4.1.1, 4.1.5, 4,1.8 and 4.1.9 as soon as reasonably and in any case prior to the expiry of the relevant time periods set out in those clauses. |
4.5 | The Conditions Precedent set out in |
4.5.1 | clauses 4.1.2 and 4.1.6 have been inserted for the benefit of Wits Gold which will be entitled to waive fulfilment of any of the said Conditions Precedent, in whole or in part, on written notice to the other Party prior to the expiry of the relevant time periods set out in those clauses; |
4.5.2 | clauses 4.1.3, 4.1.5, 4.1.7 have been inserted for the benefit of Harmony which will be entitled to waive fulfilment of any of the said Conditions Precedent, in whole or in part, on written notice to the other Party prior to the expiry of the relevant time periods set out in those clauses; |
4.5.3 | clauses 4.1.1 and 4.1.4 have been inserted for the benefit of the Parties who will be entitled to waive fulfilment of such Conditions Precedent, in whole or in part, by written agreement prior to the expiry of the relevant time periods set out in those clause; and |
4.5.4 | clauses 4.1.8 and 4.1.9 are not capable of being waived. |
4.6 | Unless all the Conditions Precedent have been fulfilled or waived by not later than the relevant dates for fulfilment thereof set out in clause 4.1 (or such later date or dates as may be agreed in writing between the Parties) the provisions of this Agreement, save for clauses 1 to 5, and clauses 11 and 13 to 22, which will remain of full force and effect, will never become of any force or effect and the status quo ante will be restored as near as may be and neither of the Parties will have any claim against the other in terms hereof or arising from the failure of the Conditions Precedent, save for any claims arising from a breach of clause 4.2, 4.3 and/or clause 4.4. |
5 | ESCROW AMOUNT |
5.1 | On the Signature Date, Wits Gold shall pay the Escrow Amount to the Escrow Agent, to be held in trust in an interest bearing trust account for the benefit of Wits Gold pending fulfilment of the Conditions Precedent. This clause 5 constitutes the mandate to the Escrow Agent in terms of section 78(2A) of the Attorneys Act, 1979. |
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5.2 | The Escrow Amount shall be paid by Wits Gold by electronic transfer of immediately available and freely transferable funds into the Escrow Account. |
5.3 | In the event that |
5.3.1 | either or both of the Conditions Precedent contained in clauses 4.1.6 and 4.1.7 are not fulfilled or waived by the date for fulfilment thereof set out in those clauses (or such later date as may be agreed in writing between the Parties); or |
5.3.2 | any of the other Conditions Precedent are not fulfilled as a result of any deliberate act or omission of Wits Gold intended by Wits Gold to frustrate and/or prevent such fulfilment, |
Wits Gold shall forfeit the Escrow Amount, which shall be paid to Harmony by way of pre-estimated liquidated damages, it being specifically recorded that in such circumstance, Harmony shall be entitled to unilaterally instruct the Escrow Agent in writing to pay the Escrow Amount to Harmony into Harmonys Designated Account.
5.4 | Harmony shall be obliged to provide Wits Gold with a copy of any instruction to the Escrow Agent given by it under the provisions of clause 5.3. |
5.5 | The Escrow Agent shall be entitled to pay the Escrow Amount to Harmony in accordance with Harmonys written instruction, provided that the Escrow Agent has given Wits Gold at least 48 (forty eight) hours written notice that it intends to pay the Escrow Amount to Harmony and Wits Gold has not objected to such payment by written notice to the Escrow Agent prior to the expiry of the said 48 (forty eight) hours. If Wits Gold has objected as contemplated in this clause 5.5, the resultant dispute may be referred by either Party for resolution in terms of clause 16. |
5.6 | If the Escrow Agent receives a notice from Wits Gold in accordance with the provisions of clause 5.5, it shall be obliged to retain the Escrow Amount until such time as the Escrow Agent receives written notification signed on behalf of both Parties or written notification from the arbitrator appointed in terms of clause 16 to release the Escrow Amount to Harmony. |
5.7 | In the event that Wits Gold forfeits the Escrow Amount as contemplated in clause 5.3 and the Escrow Amount is paid into Harmonys Designated Account, the interest accruing on the Escrow Amount shall be simultaneously paid by the |
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Escrow Agent into Wits Golds Designated Account. |
5.8 | In the event that the Conditions Precedent or any of them are not fulfilled (otherwise than as is contemplated in clause 5.3), the Escrow Agent shall forthwith after the date of lapse of this Agreement as a result thereof, pay the Escrow Amount together with accrued interest thereon into Wits Golds Designated Account. |
5.9 | In the event that the Conditions Precedent are all fulfilled or waived, as the case may be, by the relevant dates set out for fulfilment thereof in clause 4.1, the Escrow Agent shall pay an amount equal to - |
5.9.1 | the Escrow Amount to Harmony; and |
5.9.2 | the interest accrued on the Escrow Amount to Wits Gold, |
on the Effective Date by electronic transfer of immediately available and freely transferable funds into Harmonys Designated Account and Wits Golds Designated Account respectively, free of any deductions or set-off whatsoever, in the currency of the Republic of South Africa.
5.10 | Wits Gold shall, in fulfilment of the Condition Precedent contained in clause 4.1.7, pay the Balance of the Consideration, plus VAT on the full Consideration, to the Escrow Agent, to be held in trust in an interest-bearing trust account for the benefit of Wits Gold pending fulfilment of the remainder of the Conditions Precedent. This clause 5 constitutes the mandate to the Escrow Agent in terms of section 78(2A) of the Attorneys Act, 1979. |
5.11 | The amount referred to in clause 5.10 shall be paid by Wits Gold by electronic transfer of immediately available and freely transferable funds into the Escrow Account. |
5.12 | In the event that, after payment of the Balance of the Consideration by Wits Gold in fulfilment of the Condition Precedent contained in clause 4.1.7, any of the Conditions Precedent contained in clauses 4.1.5 or 4.1.9 are not fulfilled, then Wits Gold shall be entitled to unilaterally instruct the Escrow Agent in writing to pay the Balance of the Consideration, plus VAT on the full Consideration and accrued interest thereon, into Wits Golds Designated Account. |
5.13 |
The Escrow Agent shall be entitled to pay the Balance of the Consideration, plus VAT on the full Consideration to Wits Gold in accordance with Wits Golds written |
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instruction, provided that the Escrow Agent has given Harmony at least 48 (forty eight) hours written notice that it intends to pay the said amount to Wits Gold and Harmony has not objected to such payment by written notice to the Escrow Agent prior to the expiry of the said 48 (forty eight) hours. If Harmony has objected as contemplated in this clause 5.13, the resultant dispute may be referred by either Party for resolution in terms of clause 16. |
5.14 | If the Escrow Agent receives a notice from Harmony in accordance with the provisions of clause 5.13, it shall be obliged to retain the Escrow Amount until such time as the Escrow Agent receives written notification signed on behalf of both Parties or written notification from the arbitrator appointed in terms of clause 16 to release the Escrow Amount to Wits Gold. |
5.15 | In the event that all of the Conditions Precedent are fulfilled or waived, the Escrow Agent shall pay an amount equal to the Balance of the Consideration plus VAT on the full Consideration to Harmony on the Effective Date and the interest accrued thereon to Wits Gold. |
6 | PAYMENT OF THE CONSIDERATION |
6.1 | The Consideration shall be paid as follows, an amount equal to the |
6.1.1 | Escrow Amount held in escrow by the Escrow Agent, to Harmony by the Escrow Agent for and on behalf of Wits Gold; and |
6.1.2 | the Balance of the Consideration, plus VAT on the full Consideration, held in escrow by the Escrow Agent, to Harmony by the Escrow Agent for and on behalf of Wits Gold, |
on the Effective Date.
6.2 | All payments to be made in terms of this Agreement will be made by electronic transfer of immediately available and freely transferable funds into Harmonys Designated Account, free of any deductions or set-off whatsoever, in the currency of the Republic of South Africa. |
7 | LODGEMENT OF DEEDS |
As soon as reasonably possible after the Effective Date, and in any event by not later than 30 (thirty) days thereafter
7.1 |
Harmony shall procure that the Deed of Abandonment and the Deed of Mining |
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Right Amendment; and |
7.2 | Wits Gold shall procure that the Deed of Prospecting Right Amendment, |
are lodged simultaneously for registration in the Mining Titles Office.
8 | CERTIFICATE OF REGISTRATION |
8.1 | Harmony has been granted a certificate of registration ( COR ) in respect of the Mining Right Area in terms of the National Nuclear Regulator Act, 1999. |
8.2 | Harmony intends to request the National Nuclear Regulator to amend the COR to remove the surface of the Merriespruit South Area from the COR. It is anticipated that all operations undertaken by Harmony which are below the ground level of the Merriespruit South Area ( Underground Operations ) will remain subject to the COR. |
8.3 | Wits Gold hereby, unconditionally and irrevocably undertakes that |
8.3.1 | it will not access the Underground Operations unless and until |
8.3.1.1 | it has procured the removal of the Underground Operations from Harmonys COR, by obtaining its own COR in respect of the Underground Operations, or by any other means; |
8.3.1.2 | Harmony has been released from the COR in respect of the Underground Operations; or |
8.3.1.3 | Harmony has consented in writing to Wits Gold accessing the Underground Operations; |
8.3.2 | subject to its rights under clause 11, it shall refrain from any activity which may negatively impact Harmonys COR; |
8.3.3 | to the extent that Wits Gold accesses the Underground Operations in breach of clause 8.3.1, or Harmony consents in writing to Wits Gold accessing the Underground Operations, it shall indemnify Harmony against and hold it harmless from all claims, liability, damage, loss, penalty, expense and cost (including legal costs on an attorney and own client scale, clean-up costs and reasonable expert fees) of any nature whatsoever which Harmony or any successor in title may sustain as a result of Wits Golds access to and/or operations in respect of the Underground Operations. |
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9 | FLOODING |
9.1 | Harmony is considering the cessation or reduction of water pumping activities in respect of the Harmony 3 Shaft Operations. |
9.2 | Wits Gold acknowledges that the cessation or reduction of water pumping activities in respect of the Harmony 3 Shaft Operations may cause, inter alia, the flooding of the Underground Operations. |
9.3 | Harmony undertakes to provide Wits Gold with not less than 30 (thirty) days written notice of its intention to cease or reduce pumping activities in respect of the Harmony 3 Shaft Operations and shall consider, but shall not be obliged to adopt, any proposal made by Wits Gold in respect of, or as an alternative to, the cessation or reduction of water pumping activities in respect of the Harmony 3 Shaft Operations. |
9.4 | Harmony shall remain responsible and liable for any liabilities (including the costs in relation thereto) that would have been imposed on it by law in regard to Harmonys prior mining activities and in regard to the cessation or reduction of water pumping activities in respect of the Harmony 3 Shaft Operations, had this Agreement not been entered into. |
9.5 | Wits Gold shall be responsible and liable for all liabilities, including all pumping liabilities and obligations, (including the costs in relation thereto) which arise directly or indirectly as a result of any prospecting or mining activities by Wits Gold which take place in, on or under the Merriespruit South Area after the Signature Date. |
9.6 | Wits Gold hereby, irrevocably and unconditionally |
9.6.1 | acknowledges that any decision to cease or reduce water pumping activities in respect of the Harmony 3 Shaft Operations, will be at the sole and unfettered discretion of Harmony and accepts all risk, insofar as it relates to the Merriespruit South Area, and in particular the Underground Operations, arising directly or indirectly out of the cessation or reduction of water pumping activities in respect of the Harmony 3 Shaft Operations, subject to the provisions of clauses 9.4 and 9.5; |
9.6.2 |
indemnifies Harmony against and shall hold it harmless from all claims, liability, damage, loss, penalty, expense and cost (including legal costs on an attorney and own client scale, clean-up costs and reasonable expert fees) of |
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any nature whatsoever which Wits Gold or any successor in title may sustain as a result of the cessation or reduction of water pumping activities in respect of the Harmony 3 Shaft Operations, subject to the provisions of clauses 9.4 and 9.5; and |
9.6.3 | undertakes not to lodge any objection, of any nature whatsoever in respect of such cessation or reduction of water pumping activities in respect of the Harmony 3 Shaft Operations. |
10 | ACCESS TO INFORMATION |
10.1 | Forthwith after the Signature Date, Harmony will procure that Wits Gold and its representatives are, during business hours, given full and unrestricted access to all information, books of account, records and other documents in respect of the Merriespruit South Area as may reasonably be required by Wits Gold for the purposes of analysing the Merriespruit South Area, including but not limited to, all diamond drill cores, related geological reports, assay results, bore hole logs, survey data, maps and reports ( Information ). |
10.2 | In the event that the Agreement fails to become unconditional in accordance with the provisions of clause 4, Wits Gold will be required to forthwith |
10.2.1 | return all Information provided by Harmony in terms of clause 10.1 (whether in paper, electronic or other format) without keeping any copies or partial copies thereof; |
10.2.2 | destroy or delete, and procure the destruction or deletion of all analyses, compilations, notes, studies, memoranda or other documents prepared by Wits Gold which contain or otherwise reflect or are generated from the Information; and |
10.2.3 | confirm in writing to Harmony that Wits Gold has fully complied with the provisions of clauses 10.2.1 and 10.2.2. |
11 | DRILLING OPERATIONS |
11.1 |
From the Signature Date to the earlier of the date of completion of the Drilling Operations or the date on which this Agreement lapses in accordance with the provisions of clause 4.6, subject to a maximum period of 180 (one hundred and eighty) days, Harmony shall allow Wits Gold access to the Merriespruit South Area in order to allow Wits Gold to conduct the Drilling Operations, which Drilling |
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Operations shall be undertaken at the sole cost and expense of Wits Gold as independent contractor as contemplated by section 101 of the MPRDA. |
11.2 | Wits Gold hereby, irrevocably and unconditionally |
11.2.1 | undertakes that in performing the Drilling Operations, it will comply in all respects, with all applicable laws and regulatory obligations and/or requirements, including such obligations and/or requirements as may be imposed on Harmony, as holder of the Mining Right, were Harmony to undertake the Drilling Operations; |
11.2.2 | undertakes to and in favour of Harmony, that the Drilling Operations shall not, in any way, impact adversely on the mining operations of Harmony in respect of the Mining Right Area; |
11.2.3 | indemnifies Harmony against and shall hold it harmless from all claims, liability, damage, loss, penalty, expense and cost (including legal costs on an attorney and own client scale, clean-up costs and reasonable expert fees) of any nature whatsoever which Harmony may sustain as a result of or attributable to all or any rehabilitation costs incurred in relation to the Drilling Operations, including all costs of and incidental to the rehabilitation of the Merriespruit South Area flowing from such Drilling Operations; and |
11.2.4 | indemnifies Harmony against and shall hold it harmless from all claims, liability, damage, loss, penalty, expense and cost (including legal costs on an attorney and own client scale, clean-up costs and reasonable expert fees) of any nature whatsoever which Harmony may sustain under the COR in relation to the Drilling Operations, including all costs of and incidental to the rehabilitation of the Merriespruit South Area flowing from such Drilling Operations. |
11.3 |
Wits Gold shall be entitled to retain as its property all information and data gathered and drill core received as a result of the Drilling Operations, notwithstanding any lapse or cancellation of this Agreement. In the event that this Agreement fails to become unconditional in accordance with the provisions of clause 4, Wits Gold shall forthwith provide Harmony with copies of all such information and data gathered, provided that Harmony shall not, unless such information and/or data has become generally available to the public, use, disseminate, dispose of or distribute such information and/or data without the prior written consent of Wits Gold, which consent shall not be unreasonably |
17
withheld or delayed. |
12 | INTEREST |
Should any payment under or arising from this Agreement fail to be made on the due date thereof then, without prejudice to such other rights as may accrue to the payee consequent upon such failure, such overdue amounts will bear interest at the Prime Rate plus 300 (three hundred) basis points, from the due date for payment to the date of actual payment, both dates inclusive.
13 | GENERAL WARRANTIES |
13.1 | Each of the Parties hereby warrants to and in favour of the other that |
13.1.1 | it has the legal capacity and has taken all necessary corporate action required to empower and authorise it to enter into this Agreement; |
13.1.2 | this Agreement constitutes an agreement valid and binding on it and enforceable against it in accordance with its terms; |
13.1.3 | the execution of this Agreement and the performance of its obligations hereunder does not and shall not |
13.1.3.1 | contravene any law or regulation to which that Party is subject; |
13.1.3.2 | contravene any provision of that Partys constitutional documents; or |
13.1.3.3 | conflict with, or constitute a breach of any of the provisions of any other agreement, obligation, restriction or undertaking which is binding on it; and |
13.1.4 | to the best of its knowledge and belief, it is not aware of the existence of any fact or circumstance that may impair its ability to comply with all of its obligations in terms of this Agreement; |
13.1.5 | it is entering into this Agreement as principal (and not as agent or in any other capacity); |
13.1.6 | the natural person who signs and executes this Agreement on its behalf is validly and duly authorised to do so; |
13.1.7 | no other party is acting as a fiduciary for it; and |
13.1.8 | it is not relying upon any statement or representation by or on behalf of any |
18
other Party, except those expressly set forth in this Agreement. |
13.2 | Each of the representations and warranties given by the Parties in terms of clause 13.1 shall |
13.2.1 | be a separate warranty and will in no way be limited or restricted by inference from the terms of any other warranty or by any other words in this Agreement; |
13.2.2 | continue and remain in force notwithstanding the completion of any or all the transactions contemplated in this Agreement; and |
13.2.3 | prima facie be deemed to be material and to be a material representation inducing the other Party to enter into this Agreement. |
14 | PUBLICITY |
14.1 | Subject to clause 14.3, each Party undertakes to keep confidential and not to disclose to any third party, save as may be required in law (including by the rules of any recognised securities exchange, where applicable) or permitted in terms of this Agreement, the nature, content or existence of this Agreement and any and all information given by a Party to the other Party pursuant to this Agreement. |
14.2 | No announcements of any nature whatsoever will be made by or on behalf of a Party relating to this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed, save for any announcement or other statement required to be made in terms of the provisions of any law or by the rules of any recognised securities exchange, in which event the Party obliged to make such statement will first consult with the other Party in order to enable the Parties in good faith to attempt to agree the content of such announcement, which (unless agreed) must go no further than is required in terms of such law or rules. This will not apply to a Party wishing to respond to the other Party which has made an announcement of some nature in breach of this clause 14. |
14.3 | This clause 14 shall not apply to any disclosure made by a Party to its officers, employees, agents, professional advisors or consultants, provided that they have agreed to the same confidentiality undertakings, or to any judicial, regulatory or arbitral tribunal or officer, in connection with any matter relating to this Agreement or arising out of it. |
19
15 | BREACH |
15.1 | If a Party ( Defaulting Party ) commits any breach of this Agreement and fails to remedy such breach within 10 (ten) business days ( Notice Period ) of written notice requiring the breach to be remedied, then the Party giving the notice ( Aggrieved Party ) will be entitled, at its option |
15.1.1 | to claim immediate specific performance of any of the Defaulting Partys obligations under this Agreement, with or without claiming damages, whether or not such obligation has fallen due for performance; or |
15.1.2 | to cancel this Agreement, with or without claiming damages, in which case written notice of the cancellation shall be given to the Defaulting Party, and the cancellation shall take effect on the giving of the notice. |
15.2 | Neither Party shall be entitled to cancel this Agreement unless the breach is a material breach. A breach will be deemed to be a material breach if |
15.2.1 | it is capable of being remedied, but is not so remedied within the Notice Period; or |
15.2.2 | it is incapable of being remedied, or is not remedied within the Notice Period; and payment in money will compensate for such breach but such payment is not made within the Notice Period. |
15.3 | The Parties agree that any costs awarded will be recoverable on an attorney-and-own-client scale unless the Court specifically determines that such scale shall not apply, in which event the costs will be recoverable in accordance with the High Court tariff, determined on an attorney-and-client scale. |
15.4 | The Aggrieved Partys remedies in terms of this clause 15 are without prejudice to any other remedies to which the Aggrieved Party may be entitled in law. |
15.5 | Notwithstanding the aforegoing, from the Effective Date, neither of the Parties will have the right to cancel this Agreement as a result of a breach thereof, and the Parties only remedies thereafter will be to claim specific performance of all the Defaulting Partys obligations, together with damages, if any. |
16 | DISPUTE RESOLUTION |
16.1 | In the event of there being any dispute or difference between the Parties arising out of this Agreement, the said dispute or difference shall on written demand by |
20
either Party be submitted to arbitration in Johannesburg in accordance with the AFSA rules, which arbitration shall be administered by AFSA. |
16.2 | Should AFSA, as an institution, not be operating at that time or not be accepting requests for arbitration for any reason, then the arbitration shall be conducted in accordance with the AFSA rules for commercial arbitration (as last applied by AFSA) before an arbitrator appointed by agreement between the Parties or failing agreement within 10 (ten) business days of the demand for arbitration, then either Party shall be entitled to forthwith call upon the chairperson of the Johannesburg Bar Council to nominate the arbitrator, provided that the person so nominated shall be an advocate of not less than 15 (fifteen) years standing as such. The person so nominated shall be the duly appointed arbitrator in respect of the dispute. In the event of the attorneys of the Parties failing to agree on any matter relating to the administration of the arbitration, such matter shall be referred to and decided by the arbitrator whose decision shall be final and binding on the Parties. |
16.3 | Either Party may appeal the decision of the arbitrator or arbitrators in terms of the AFSA rules for commercial arbitration. |
16.4 | Nothing herein contained shall be deemed to prevent or prohibit a Party from applying to the appropriate court for urgent relief or for judgment in relation to a liquidated claim. |
16.5 | Any arbitration in terms of this clause 16 (including any appeal proceedings) shall be conducted in camera and the Parties shall treat as confidential details of the dispute submitted to arbitration, the conduct of the arbitration proceedings and the outcome of the arbitration. |
16.6 | This clause 16 will continue to be binding on the Parties notwithstanding any termination or cancellation of the Agreement. |
16.7 | The Parties agree that the written demand by a Party in terms of clause 16.1 that the dispute or difference be submitted to arbitration, is to be deemed to be a legal process for the purpose of interrupting extinctive prescription in terms of the Prescription Act, 1969. |
17 | NOTICES AND DOMICILIA |
17.1 | The Parties select as their respective domicilia citandi et executandi the following physical addresses, and for the purposes of giving or sending any notice |
21
provided for or required under this Agreement, the said physical addresses as well as the following telefax numbers - |
Name |
Physical Address |
Telefax |
||
Harmony |
Block 27 Randfontein Office Park Cnr Main Reef Road and Ward Avenue Randfontein |
+27 (0)86 628 2332 |
Marked for the attention of: The Chief Executive Officer
Name |
Physical Address |
Telefax |
||
Wits Gold |
12 th Floor 70 Fox Street Johannesburg |
(011) 838 3208 |
Marked for the attention of: The Company Secretary
provided that a Party may change its domicilium or its address for the purposes of notices to any other physical address or telefax number by written notice to the other Party to that effect. Such change of address will be effective 5 (five) business days after receipt of the notice of the change.
17.2 | All notices to be given in terms of this Agreement will be given in writing and will - |
17.2.1 | be delivered by hand or sent by telefax; |
17.2.2 | if delivered by hand during business hours, be presumed to have been received on the date of delivery. Any notice delivered after business hours or on a day which is not a business day will be presumed to have been received on the following business day; and |
17.2.3 | if sent by telefax during business hours, be presumed to have been received on the date of successful transmission of the telefax. Any telefax sent after business hours or on a day which is not a business day will be presumed to have been received on the following business day. |
17.3 | Notwithstanding the above, any notice given in writing, and actually received by the Party to whom the notice is addressed, will be deemed to have been properly given and received, notwithstanding that such notice has not been given in accordance with this clause 17. |
18 | BENEFIT OF THE AGREEMENT |
This Agreement will also be for the benefit of and be binding upon the successors in
22
title and permitted assigns of the Parties or either of them.
19 | APPLICABLE LAW AND JURISDICTION |
19.1 | This Agreement will in all respects be governed by and construed under the laws of the Republic of South Africa. |
19.2 | For the purpose of clause 16.4 or for the purpose of making the arbitration award an order of court, the Parties hereby consent and submit to the non-exclusive jurisdiction of the South Gauteng High Court, Johannesburg in any dispute arising from or in connection with this Agreement. The Parties agree that any costs awarded will be recoverable on an attorney-and-own-client scale unless the Court specifically determines that such scale shall not apply, in which event the costs will be recoverable in accordance with the High Court tariff, determined on an attorney-and-client scale. |
20 | GENERAL |
20.1 | Whole Agreement |
20.1.1 | This Agreement constitutes the whole of the agreement between the Parties relating to the matters dealt with herein and, save to the extent otherwise provided herein, no undertaking, representation, term or condition relating to the subject matter of this Agreement not incorporated in this Agreement shall be binding on either of the Parties. |
20.1.2 | This Agreement supersedes and replaces any and all agreements between the Parties (and other persons, as may be applicable) and undertakings given to or on behalf of the Parties (and other persons, as may be applicable) in relation to the subject matter hereof. |
20.2 | Variations to be in Writing |
No addition to or variation, deletion, or agreed cancellation of all or any clauses or provisions of this Agreement will be of any force or effect unless in writing and signed by the Parties.
20.3 | No Indulgences |
No latitude, extension of time or other indulgence which may be given or allowed by any Party to the other Party in respect of the performance of any obligation hereunder, and no delay or forbearance in the enforcement of any right of any
23
Party arising from this Agreement and no single or partial exercise of any right by any Party under this Agreement, shall in any circumstances be construed to be an implied consent or election by such Party or operate as a waiver or a novation of or otherwise affect any of the Partys rights in terms of or arising from this Agreement or estop or preclude any such Party from enforcing at any time and without notice, strict and punctual compliance with each and every provision or term hereof. Failure or delay on the part of any Party in exercising any right, power or privilege under this Agreement will not constitute or be deemed to be a waiver thereof, nor will any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
20.4 | No Waiver or Suspension of Rights |
No waiver, suspension or postponement by any Party of any right arising out of or in connection with this Agreement shall be of any force or effect unless in writing and signed by such Party. Any such waiver, suspension or postponement will be effective only in the specific instance and for the purpose given.
20.5 | Provisions Severable |
All provisions and the various clauses of this Agreement are, notwithstanding the manner in which they have been grouped together or linked grammatically, severable from each other. Any provision or clause of this Agreement which is or becomes unenforceable in any jurisdiction, whether due to voidness, invalidity, illegality, unlawfulness or for any other reason whatever, shall, in such jurisdiction only and only to the extent that it is so unenforceable, be treated as pro non scripto and the remaining provisions and clauses of this Agreement shall remain of full force and effect. The Parties declare that it is their intention that this Agreement would be executed without such unenforceable provision if they were aware of such unenforceability at the time of execution hereof.
20.6 | Continuing Effectiveness of Certain Provisions |
The expiration or termination of this Agreement shall not affect such of the provisions of this Agreement as expressly provide that they will operate after any such expiration or termination or which of necessity must continue to have effect after such expiration or termination, notwithstanding that the clauses themselves do not expressly provide for this.
24
20.7 | No Assignment |
Neither this Agreement nor any part, share or interest herein nor any rights or obligations hereunder may be ceded, delegated or assigned by either Party without the prior written consent of the other Party, save as otherwise provided herein.
21 | COSTS |
Each Party will bear and pay its own legal costs and expenses of and incidental to the negotiation, drafting, preparation and implementation of this Agreement.
22 | SIGNATURE |
22.1 | This Agreement is signed by the Parties on the dates and at the places indicated below. |
22.2 | This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same Agreement as at the date of signature of the Party last in time signing one of the counterparts. |
22.3 | The persons signing this Agreement in a representative capacity warrant their authority to do so. |
22.4 | The Parties record that it is not required for this Agreement to be valid and enforceable that a Party shall initial the pages of this Agreement and/or have its signature of this Agreement verified by a witness. |
SIGNED at Sandton on 3 September 2010
For and on behalf of |
HARMONY GOLD MINING COMPANY LIMITED |
|
Signature |
A.J. Boshoff |
Name of Signatory |
Executive |
Designation of Signatory |
25
SIGNED at SANDTON on 3 SEPTEMBER 2010
For and on behalf of |
WITWATERSRAND CONSOLIDATED GOLD RESOURCES LIMITED |
|
Signature |
D M URQUHART |
Name of Signatory |
CFO |
Designation of Signatory |
26
ANNEXURE 1
DEED OF ABANDONMENT
Protocol
NOTARIAL ABANDONMENT OF A CERTAIN PORTION OF
A MINING RIGHT
BE IT HEREBY MADE KNOWN:
THAT on the [ ] day of [ ], before me,
[NOTARY PUBLIC]
Notary Public, duly admitted and sworn, residing and practising at Johannesburg in the Province of Gauteng, and in the presence of the subscribing witnesses, personally came and appeared -
[APPEARER]
in his/her capacity as the attorney and agent of
HARMONY GOLD MINING COMPANY LIMITED
(registration number 1950/038232/06)
(hereinafter referred to as the Holder ),
[s/he], the said Appearer, being duly authorised hereto under and by virtue of a power of attorney granted in [his/her] favour on the [ ] day of [ ] by [ ], in his capacity as the duly authorised representative of the Holder under and by virtue of a resolution of the directors of the Holder passed on the [ ] day of [ ], which power of attorney and certified copy of which resolution has this day been exhibited to me, the Notary, and now remain filed in my Protocol;
AND THE APPEARERS DECLARED THAT WHEREAS:
A |
the Holder holds mining right number FS 30/5/1/2/2/82 MR granted in terms of section 23(1) of the Mineral and Petroleum Resources Development Act, 2002 ( MPRDA ) which was notarially executed on [INSERT DATE] before Notary Public, [INSERT NOTARY], and duly registered in the Mining Titles Office in |
[INSERT PLACE] on [INSERT DATE] under registration number [ ] in respect [INSERT AREA] [ CDH Note: Details to be inserted ] ( Mining Right ); and |
B | the Holder wishes to abandon a portion of the Mining Right, subject to the terms and conditions set out below. |
1. | ABANDONMENT |
The Holder, in accordance with section 56(f) of the MPRDA and in accordance with clause [ ] of the Mining Right hereby abandons [ ].
2. | BALANCE OF MINING RIGHT |
The remaining portions of the Mining Right not abandoned as set out above shall remain of full force and effect.
THUS DONE AND EXECUTED at Sandton on the day, month and year first aforewritten in the presence of the undersigned witnesses.
AS WITNESSES
1. |
|
|
||||
q.q. HOLDER | ||||||
2. |
|
|||||
|
||||||
QUOD ATTESTOR NOTARY PUBLIC |
ANNEXURE 2
DEED OF AMENDMENT OF MINING RIGHT
Protocol
NOTARIAL AMENDMENT OF MINING RIGHT
BE IT HEREBY MADE KNOWN:
THAT on the [ ] day of [ ], before me,
[NOTARY PUBLIC]
Notary Public, duly admitted and sworn, residing and practising at Johannesburg in the Province of Gauteng, and in the presence of the subscribing witnesses, personally came and appeared
[APPEARER]
in his/her capacity as the attorney and agent of
1. | HARMONY GOLD MINING COMPANY LIMITED |
(registration number 1950/038232/06)
(hereinafter referred to as the Holder ),
[s/he], the said Appearer, being duly authorised hereto under and by virtue of a power of attorney granted in [his/her] favour on the [ ] day of [ ] by [ ], in his capacity as the duly authorised representative of the Holder under and by virtue of a resolution of the directors of the Holder passed on the [ ] day of [ ],
and
2 | The Minister of Mineral Resources represented by the Regional Manager: Free State, he being duly authorised by a power of attorney signed by the Acting Deputy Director-General: Mineral Regulation, he being duly authorised by virtue of a delegation of powers dated [ ], |
which powers of attorney and certified copy of which resolution have this day been exhibited to me, the Notary, and now remain filed in my Protocol;
AND THE APPEARERS DECLARED THAT WHEREAS:
A | the Holder holds mining right number FS 30/5/1/2/2/82 MR granted in terms of section 23(1) of the Mineral and Petroleum Resources Development Act, 2002 which was notarially executed on [INSERT DATE] before Notary Public, [INSERT NOTARY], and duly registered in the Mining Titles Office in [INSERT PLACE] on [INSERT DATE] under registration number [ ] in respect of [INSERT AREA] [ CDH Note: Details to be inserted ] ( Mining Right ); and |
B | the Holder wishes to amend the Mining Right, as set out below. |
1. | INTRODUCTION |
Consequent upon the grant of an application under section 102(1) of the MPRDA by the Minister of Mineral Resources on [ ], the Holder has abandoned a portion of the Mining Area of the Mining Right ( Abandonment ) with effect from the date of execution of this deed, as set out below.
2. | AMENDMENT |
The Mining Right, in accordance with the Abandonment is amended with effect from the date of notarial execution of this notarial amendment by excluding [ ], such that the Mining Area referred to in clause [ ] of the Mining Right, as a result of this amendment, is [ ],
THUS DONE AND EXECUTED at Sandton on the day, month and year first aforewritten in the presence of the undersigned witnesses.
AS WITNESSES
1. |
|
|
||||
q.q. HOLDER | ||||||
2. |
|
|
||||
q.q. MINISTER OF MINERALS RESOURCES | ||||||
|
||||||
QUOD ATTESTOR NOTARY PUBLIC |
ANNEXURE 3
DEED OF AMENDMENT OF PROSPECTING RIGHT
Protocol
NOTARIAL AMENDMENT OF PROSPECTING RIGHT
BE IT HEREBY MADE KNOWN:
THAT on the [ ] day of [ ], before me,
[NOTARY PUBLIC]
Notary Public, duly admitted and sworn, residing and practising at Johannesburg in the Province of Gauteng, and in the presence of the subscribing witnesses, personally came and appeared
[APPEARER]
in his/her capacity as the attorney and agent of
1. | WITWATERSRAND CONSOLIDATED GOLD RESOURCES LIMITED |
(registration number 2002/031361/06)
(hereinafter referred to as the Holder ),
[s/he], the said Appearer, being duly authorised hereto under and by virtue of a power of attorney granted in [his/her] favour on the [ ] day of [ ] by [ ], in his capacity as the duly authorised representative of the Holder under and by virtue of a resolution of the directors of the Holder passed on the [ ] day of [ ],
and
2 | The Minister of Mineral Resources represented by the Regional Manager: Free State, he being duly authorised by a power of attorney signed by the Acting Deputy Director-General: Mineral Regulation, he being duly authorised by virtue of a delegation of powers dated [ ], |
which powers of attorney and certified copy of which resolution have this day been exhibited to me, the Notary, and now remain filed in my Protocol;
AND THE APPEARERS DECLARED THAT WHEREAS:
A | the Holder holds prospecting right number FS30/5/1/1/2/76 PR granted in terms of section 17(1) of the Mineral and Petroleum Resources Development Act, 2002 which was notarially executed on [INSERT DATE] before Notary Public, [INSERT NOTARY], and duly registered in the Mining Titles Office in [INSERT PLACE] on [INSERT DATE] under registration number [ ] in respect of [INSERT AREA] [ CDH Note: Details to be inserted ] ( Prospecting Right ); |
B | Harmony Gold Mining Company Limited has abandoned, in accordance with section 56(f) of the MPRDA ( Abandonment ), the following portion of its mining right [ ] ( Abandoned Portion ); and |
C | the Holder wishes to amend the Prospecting Right, as set out below. |
1. | INTRODUCTION |
Consequent upon the Abandonment of the Abandoned Portion, the Abandoned Portion will be added to the Prospecting Right with effect from the date of execution of this deed, as set out below.
2. | AMENDMENT |
The Prospecting Right is amended with effect from the date of notarial execution of this notarial amendment by including the Abandoned Portion, such that the Prospecting Area referred to in clause [ ] of the Prospecting Right, as a result of this amendment, is [ ].
THUS DONE AND EXECUTED at Sandton on the day, month and year first aforewritten in the presence of the undersigned witnesses.
AS WITNESSES
1. |
|
|
||||
q.q. HOLDER |
2. |
|
|
||||
q.q. MINISTER OF MINERALS RESOURCES | ||||||
|
||||||
QUOD ATTESTOR NOTARY PUBLIC |
ANNEXURE 4
PLAN OF MERRIESPRUIT SOUTH AREA
ANNEXURE 5
MINING RIGHT
DME 388
FS 30/5/1/2/2/82 MR C/2005/12/20/001 |
DEPARTMENT OF MINERALS AND ENERGY
REPUBLIC OF SOUTH AFRICA
CONVERTED MINING RIGHT
Converted in terms of Item 7 of Schedule II of the Mineral and Petroleum Resources Development Act,
2002 (Act No. 28 of 2002)
Minerals and Energy for Development and Prosperity
TABLE OF CONTENTS
Heading |
Clause |
|||
Preamble |
||||
Definitions |
||||
Description of the Mining Area |
1 | |||
Conversion of Mining Right |
2 | |||
Commencement, Duration and Renewal |
3 | |||
Amendment, Variation and Abandonment |
4 | |||
Payment of Royalties |
5 | |||
Payment of Interest |
6 | |||
Restrictions and Obligations Imposed on the Holder |
7 | |||
Conditions on Disposal of Minerals and or Products Derived from Mining |
8 | |||
Mortgage, Cession, Transfer, and Alienation |
9 | |||
Protection of Boreholes, Shafts, Adits, Openings and Excavations |
10 | |||
Holders liability for Compensation for Loss or damage |
11 | |||
Inspection of Mining Area |
12 | |||
Cancellation or Suspension of Mining Right |
13 | |||
Records and Returns |
14 | |||
Ministers liability for payment of Compensation |
15 | |||
Compliance with the Laws of the Republic of South Africa |
16 | |||
Provisions relating to Section 2(d) and (f) of the Act |
17 | |||
Social and Labour Plan |
18 | |||
Severability |
19 | |||
Domicilia citandi et executandi |
20 | |||
Costs |
21 |
Converted Mining Right:: Converted in terms of item 7 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002
2
Protocol No 294/2007 | ||||
File No | ||||
[FS] 30/5/1/2/2/82 MR | ||||
Application No | ||||
C/2005/12/20/001 |
LET IT HEREBY BE MADE KNOWN:
THAT on this 11 th day of DECEMBER in the year 2007, before me, ADOLPH JOHANNES DE LA REY a Notary Public, duly sworn and admitted, residing and practising at WELKOM, in the FREE STATE Province of South Africa, and in the presence of the subscribing competent witnesses, personally came and appeared:
KALIPA KEWUTI , Acting Regional Manager, FREE STATE Region of the Department of Minerals and Energy, and as such in his / her capacity as the duty authorised representative of:
THE MINISTER OF MINERALS AND ENERGY |
Converted Mining Right:: Converted in terms of item 7 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002
3
The said Regional Manager, being duly authorised thereto under and by virtue of a Power of Attorney granted by the DIRECTOR-GENERAL: MINERALS AND ENERGY of the Department of Minerals and Energy on the 27 TH day of SEPTEMBER in the year 2007 in terms of the powers delegated by the Minister on the 12 th day of May 2004 in terms of section 103 (1) of the Act.
AND GEORGE EDWARD WARREN DE WIT
(REPRESENTATIVES SURNAME AND INITIALS) in his/her personal capacity or as the companys (POSITION OF REPRESENTATIVE) and as such, the duly authorised representative of HARMONY GOLD MINING COMPANY LIMITED, Registration number:
1
|
9 | 5 | 0 | / | 0 | 3 | 8 | 2 | 3 | 2 | / | 0 | 6 |
(Hereinafter together with his/her/its successors in title and assigns referred to as the Holder, he/she, the said representative, being duly authorised thereto under and by virtue of a power of attorney/resolution of directors of the Holder, signed or passed at JOHANNES BURG on the 10 th day of DECEMBER in the year 2007 which power of attorney or a certified copy of a resolution has this day been exhibited to me, the notary, and remain filed of record in my protocol with the minutes hereof.)
AND THE MINISTER AND HOLDER DECLARED THAT:
WHEREAS | The State is the custodian of the Nations mineral and petroleum resources in terms of section 3 of the Act. | |
AND WHEREAS | The Holder has applied for conversion of an old order mining right in terms of Item 7 of Schedule 2 to the Act, | |
AND WHEREAS | The DIRECTOR-GENERAL: MINERALS AND ENERGY of the Department of Minerals and Energy has by virtue of powers delegated to him, converted the Holders old order, mining right in terms of Item 7 of the Schedule to the Act. |
NOW THEREFORE THE MINISTER CONVERTS THE HOLDERS OLD ORDER MINING RIGHT SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS:
Converted Mining Right:: Converted in terms of item 7 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002
4
Definitions
In this mining right, the following words and expressions shall have the following meanings:
Act means the Mineral and Petroleum Resources Development Act, 2002 (Act 28 of 2002) and includes the Regulations, guidelines, circulars, directives and orders made in terms of that Act;
Environmental Management Programme is as defined in the Act and includes any other Environmental Management Programme approved in terms of the previous mining legislation;
Financial year means a complete financial year of the Holder which, at the time of the granting of this mining right, commences on 1 st day of JULY in the year 2007; and ends on 30 th day of JUNE in the year 2008;
Holder is as defined in the Act, and specifically in relation to this right, it means HARMONY GOLD MINING COMPANY LIMITED , Registration No 195003823206;
Mineral is as defined in the Act, and specifically in relation to this right means GOLD ORE ;
Mining Area is as defined in the Act and includes any additional area of environmental liability as may be reflected on the Environmental Management Programme relating to this right;
Mining right is as defined in the Act and includes all the Annexures to it, agreements and inclusions by reference;
Mining Work Programme is as defined in the Act and as reflected in the attached Annexure A to this mining right;
Minister means the Minister of Minerals and Energy and includes the successors in title, the assignee or any person duly authorised to act in the Ministers place and stead;
Old order mining right is as defined in the Schedule to the Act.
Regional Manager is as defined in the Act and specifically in relation to this right means the Regional Manager for the FREE STATE Region of the Department of Minerals and Energy;
Social and Labour Plan , is as contemplated in regulation 46 of the Regulations to the Act and is as reflected in the attached Annexure B to this mining right; and
Converted Mining Right:: Converted in terms of item 7 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002
5
1. | Description of the Mining Area |
The Mining Area shall comprise the following:
Certain: | VARIOUS PROPERTIES | |
Situated: |
Magisterial District of WELKOM AND VIRGINIA [FREE STATE PROVINCE] |
|
Measuring: |
2 2582,9876 hectares in extent. |
(In the case of various farms being involved, a list can be attached and referred to as Annexure C); Which Mining Area is described in detail on the attached Diagram/plan marked Annexure D.
2. | Conversion of Old Order Mining Right |
Without detracting from the provisions of Item 7 of the schedule to the Act, sections 5 and 25 of the Act, the Minister converts the holders old order right and grants to the Holder the sole and exclusive right to mine, and recover the mineral/s in, on and under the mining area for the Holders own benefit and account, and to deal with, remove and sell or otherwise dispose of the mineral/s, subject to the terms and conditions of this mining right, the provisions of the Act and any other relevant law in force for the duration of this right.
3. | Commencement, Duration and Renewal |
3.1. |
This mining right shall commence on 11 th DECEMBER 2007 and, unless cancelled or suspended in terms of clause 13 of this right and or section 47 of the Act, will continue to be in force for a period of 22 [TWENTY-TWO] years ending on 10 th DECEMBER, 2029 . |
3.2. | The Holder must continue to conduct mining operations failing which this right may be cancelled or suspended. |
3.3. | Any application for renewal must be submitted to the Regional Manger not later than 60 working days prior to the date of expiry of this right. |
4. | Amendments, Variation and Abandonment |
4.1. | The terms of this right (including by extension of the area covered by it or by the addition of minerals or a share or shares or seams, mineralized bodies, or strata, which are not at the time the subject thereof) may not be amended or varied without the written consent of the Minister. |
4.2. | The Holder shall be entitled to abandon or relinquish the right or the area covered by the right entirely or in part. Upon abandonment or relinquishment of the mining area or any portion thereof, the Holder must: |
Converted Mining Right:: Converted in terms of item 7 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002
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4.2.1. | Furnish the Regional Manager with all prospecting and /or mining results and/or information, as well as the general evaluation of the geological, geophysical and borehole data in respect of such abandoned area in so far as it applies to the mineral or any other mineral/s obtained in respect of this right and, |
4.2.2. | Apply for a closure certificate in terms of section 43 (3) of the Act. |
4.3 | With effect from the date the Holder has abandoned or relinquished a portion or portions of the mining area, and subject to section 43 of the Act, the Minister is entitled to grant any right, permit, or permission referred to in the Act in, on, or under the portion/s, so abandoned or relinquished, to any person/s. |
5. | Payment of Royalties and other Monies |
5.1. | The Holder shall as contemplated in section 25 (2) (g) pay to the State throughout the duration of this mining right, any royalties payable in terms of any Act or Amendment to an Act of Parliament implemented. |
5.2. | If, prior to the commencement of the Act, the Holder of this right paid any royalties, levies, fees, or consideration to the state, the Holder shall continue to pay same applicable to such old order mining right until such time a relevant Act of parliament is implemented. |
6. | Payment of Interest |
If mining fees, any fees, any levy, royalties or consideration referred to in clause 5 are not paid punctually, the Holder shall be in mora and shall pay interest thereon at the rate prescribed in terms of section 80 of the Public Finance Management Act, 1999(Act 1 of 1999) reckoned from the date on which payment is due and payable, to the date of actual payment.
7. | Restrictions and Obligations Imposed on the Holder |
7.1 | The Holder is entitled to the rights referred to in section 5(2), (3) and section 25 of the Act, and such other rights as may be contained in this mining right or such other right as may be granted to, acquired by or conferred upon the Holder by any other applicable law. |
7.2 | Mining operations in the mining area must be conducted in accordance with the Mining Work Programme and any amendment to such Mining Work Programme and an approved Environmental Management Plan. |
7.3 | The Holder shall not trespass or enter into any homestead, house or its curtilage nor interfere with or prejudice the interests of the occupiers and/or owners of the surface of the Mining Area except to the extent to which such interference or prejudice is necessary for the purposes of enabling the Holder to properly exercise the Holders rights under this mining right. |
Converted Mining Right:: Converted in terms of item 7 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002
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8. | Conditions on disposal of Minerals and/ or Products Derived from Mining |
It is a condition of the conversion of this old order mining right that the Holder shall dispose of all minerals and/ or products derived from the exploitation of the mineral at competitive market prices which shall mean in all cases, non-discriminatory prices or non-export parity prices. If the minerals are sold to any entity, which is an affiliate or non-affiliated agent or subsidiary of the Holder, or is directly or indirectly controlled by the Holder, such purchaser must unconditionally undertake in writing to dispose of the minerals and any products produced from the minerals, at competitive market prices.
9. | Mortgage, Cession, Transfer, and Alienation |
This mining right, a shareholding, an equity, an interest or participation in the right or joint venture, or a controlling interest in a company, close corporation or joint venture, may not be encumbered, ceded, transferred, mortgaged, let, sublet, assigned, alienated or otherwise disposed of without the written consent of the Minister, except in the case of a change of controlling interest in listed companies.
10. | Protection of Boreholes, Shafts, Adits and Openings. |
All boreholes, shafts, Adits, excavations, and openings sunk or made, by the Holder during the currency of this mining right shall be sealed, closed, fenced, made safe by the Holder in accordance with the approved Environmental Management Programme, the Mine Health and Safety Act, 1996 or any other applicable laws and Regulations.
11. | Holders Liability for payment of Compensation for Loss or Damage |
11.1. | Subject to section 43 of the Act, the Holder shall, during the tenure of this right while carrying out the mining operations under this right, take alt such necessary and reasonable steps to adequately safeguard and protect the environment, the mining area and any person/s using or entitled to use the surface of the mining area from any possible damage or injury associated with any activities on the mining area. |
11.2. | Should holder fail to take reasonable steps referred to above, and to the extent that there is legal liability, the holder shall compensate such person or persons for any damage or losses, including but not limited to damage to the surface, to any crops or improvements, which such person or persons may suffer as a result of, arising from or in connection with the exercise of his/her rights under this mining right or of any act or omission in connection therewith. |
Converted Mining Right:: Converted in terms of item 7 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002
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12. | Inspection of Mining Area |
The Minister and/or any person duly authorised thereto in writing by the Minister shall be entitled to inspect the mining area, the Holders mining operations and the execution of the approved Environmental Management Programme on the Mining Area as provided for in the Act, and any instruction conveyed in writing by the Minister to the Holder requiring the proper performance by the Holder of the Holder's obligations under this mining right shall be put into effect by the Holder in terms of the Act.
13. | Cancellation or Suspension |
13.1 | Subject to section 47 of the Act, this mining right may be cancelled or suspended if the Holder: |
13.1.1 | Submits inaccurate, incorrect and or misleading information in connection with any matter required to be submitted under the Act; |
13.1.2 | Fails to honour or carry out any agreement, arrangement, or undertaking, including the undertaking made by the Holder in terms of the Broad Based Socio Economic Empowerment Charter and Social and Labour plan, on which the Minister relied for the conversion of this right; |
13.1.3 | Breaches any material term and condition of this mining right; |
13.1.4 | Conducts mining operations in contravention of the provisions of the Act; |
13.1.5 | Contravenes the requirement of the approved Environmental Management Programme; or |
13.1.6 | Contravenes any provisions of this Act in any other manner. |
13.2 | Before the Minister cancels or suspends this right, the Minister shall: |
13.2.1 | Give written notice to the Holder indicating the intention to suspend or cancel this right; |
13.2.2 | Give reason/s why the Minister is considering the suspension or cancellation of this right; |
13.2.3 | Give the Holder 30 days to show reasons why the right should not be suspended or cancelled; |
13.2.4 | Notify, the mortgagee [if any], of the intention to suspend or cancel this right; and |
13.2.5 | Direct the Holder, where it is possible to remedy any contravention, breach or failure, to comply or to take such specified measures to remedy any contravention, breach or failure to comply. |
13.3 | If the Holder does not take the measures as specified by the Minister to remedy a contravention, breach or failure, the Minister may cancel or suspend this right after considering representations made by the Holder in terms of clause 13.2.3. |
14. | Records and Returns |
14.1 | The Holder shall maintain all such books, plans and records in regard to mining on the Mining Area as may be required by the Act and shall furnish to the office of the Regional Manager such reports and documents as may be relevant under this right. |
Converted Mining Right:: Converted in terms of item 7 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002
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14.2. |
The Holder shall furnish to the Regional Manager all such monthly returns contemplated in section 28 (2) A of the Act not later than the 15 th day of the month following the month in respect of which it was reported. |
14.3 | The Holder shall furthermore at the end of each year following commencement of this mining right, inform the Regional Manager in writing of any new developments and of the future mining activities planned in connection with the exploitation/mining of the minerals on the Mining Area. |
15. | Ministers liability for Payment of Compensation |
The Minister shall not at any time be liable or responsible for the payment of compensation of whatever nature to the Holder, the Holders successors-in-title or assignee, or any person whomsoever as a result of the conversion of this right.
16. | Compliance with the Laws of the Republic of South Africa |
The conversion of this Right, does not exempt the Holder and its successors in title and/or assigns from complying with the relevant provisions of the Mine Health and Safety Act, (Act No.29 of 1996) and any other law in force in the Republic of South Africa.
17. | Provisions relating to section 2(d) and (f) of the Act |
In the furthering of the objects of this Act, the Holder is bound by the provisions of an agreement or arrangement dated 5 th APRIL 2002 entered into between the Holder/ empowering partner and AFRICAN RAINBOW MINERALS (PROPRIETARY) LIMITED (the empowerment partner) which agreement or arrangement was taken into consideration for purposes of compliance with the requirements of the Act and or Broad Based Economic Empowerment Charter developed in terms of the Act and such agreement shall form part of this right.
18. | Social and Labour Plan |
18.1 | The holder must annually, not later than three months before the end of its financial year, submit a detailed implementation plan to give effect to Regulation 46(e) (i), (ii) and (iii) in line with the Social and Labour Plan. |
18.2 | The holder must annually, not later than three months after finalisation of its audited annual report, submit a detailed report on the implementation of the previous years social and labour plan. |
Converted Mining Right:: Converted in terms of item 7 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002
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19. | Severability |
Notwithstanding anything to the contrary, any provision of this mining right which is contrary to any provision of the Act or which is otherwise ultra vires, null and void, voidable, or unenforceable, shall be severable from the rest of this right, such rest thus being and remaining of full force, effect and enforceable.
20. | Domicilia citandi et executandi |
20.1. | The parties hereto choose the following addresses as their domicilia citandi et executandi and for all purposes arising from this mining right, in particular for the purposes of serving of any notice in terms of this mining right, and any notice properly addressed to the under mentioned postal addresses of the parties shall be deemed to have been received by the addressee within 14 days if given in writing and posted by prepaid registered post addressed to the addressee at the relevant postal address: |
20.1.1. | In the case of the Minister . |
Physical Address | Postal Address | |
DME BUILDING | PRIVATE BAG X33 | |
C/O RYK AND DE KAAP STREETS, WELKOM | WELKOM | |
Code 9460 | 9460 | |
Tel [057] 391 1300 | ||
Fax [057] 357 6003/357 1241 |
20.1.2. | In the case of the Holder . |
Physical Address | Postal Address | |
RANDFONTEIN PARK OFFICE | P.O. BOX 2 | |
C/O MAIN REEF AND WARD STREET RANDFONTEIN |
RANDFONTEIN | |
Code 1760 | 1760 | |
Tel [011] 411 2259 | ||
Fax [011] 412 1203 |
20.2. |
Notwithstanding anything to the contrary herein contained, a written notice or communication actually received by a party at any place other than the chosen domicilia citandi et executandi |
Converted Mining Right:: Converted in terms of item 7 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002
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shall constitute adequate notice or communication to the party notwithstanding that it was not sent to or delivered at such partys chosen domicilium citandi et executandi . |
20.3 | Either party shall be entitled from time to time to change the domicilia citandi et executandi or postal address furnished above after giving at least 14 days prior written notice of such change to the other party, failing which the above mentioned addresses will remain in force. |
20.4. | Any written notice or communication contemplated in this clause which is forwarded by one party to the other by registered post will be presumed to have been received by the addressee on the fourteenth day following the date of posting from an address within the Republic of South Africa to the addressee at the postal address of the addressee for the time being as determined in accordance with the provisions of this clause. |
21. | Costs |
The Holder shall pay all costs and charges incurred in connection with the execution and registration of this prospecting right.
Thus done and signed at WELKOM on the 11 th day of DECEMBER in the year 2007 in the presence of the undersigned witnesses:
AS WITNESS:
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For and on behalf of the Minister |
AS WITNESS:
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For and on behalf of the Holder | ||
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Notary Public |
Converted Mining Right:: Converted in terms of item 7 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002
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ANNEXURE 6
PLAN OF MINING RIGHT AREA
ANNEXURE 7
SECTION 102 APPLICATION
APPLICATION IN TERMS OF SECTION 102 OF THE MINERAL AND PETROLEUM
RESOURCES DEVELOPMENT ACT, 28 OF 2002
1 | INTRODUCTION |
1.1 | Witwatersrand Consolidated Gold Resources Limited (registration number 2002/031365/06, a limited liability public company duly incorporated in the Republic of South Africa ( Wits Gold ) is the holder of a prospecting right granted by the Minister of Mineral Resources ( the Minister ) granted in terms of section 17(1) of the Mineral and Petroleum Resources Development Act, 28 of 2002 ( MPRDA ) over [description of farms covered by the right to be inserted] ( the Current Prospecting Area ) for [details of mineral covered by the right to be inserted] and bearing the Department of Mineral Resources ( DMR ) reference number FS30/5/1/1/2/76PR, currently registered in the Mineral and Petroleum Titles Registration Office in the name of Wits Gold under MPT No. 99/2006 (PR) ( Wits Gold Prospecting Right ) |
1.2 | Clause 4.1 of the Wits Gold Prospecting Right provides that |
The terms of this right (including by extension of the area covered by it or by the addition of minerals or a share or seams, mineralised bodies, or strata, which are not at the time the subject thereof) may not be amended or varied without the written consent of the Minister.
1.3 | Likewise, section 102 of the MPRDA provides that a prospecting right may not be amended or varied, including by extension of the area covered by it, without the consent of the Minister. |
2 | THE CURRENT PROSPECTING AREA AND THE ADDITIONAL AREA |
2.1 | The Current Prospecting Area comprises an aggregate of [ ] hectares extending over [a description of the farms to be inserted] . |
2.2 | The additional area, to which this application relates is 100% (one hundred percent) of an area known as the Merriespruit South Area, being that area shaded in green on the plan annexed hereto marked Annexure 1, measuring approximately [ ] hectares and situated on [description of farms on which the Merriespruit South Area falls to be inserted] ( Additional Area ). |
2.3 | The Additional Area currently forms part of a mining right granted to Harmony Gold Mining Company Limited (registration number 1950/03823/06) a limited liability company duly incorporated in the Republic of South Africa ( Harmony ) in terms of item 7 of Schedule II to the MPRDA, read with section 23(1) of the MPRDA, entitling Harmony to mine for gold ore in, on and under the mining right area executed on 11 December 2007 ( Mining Right ). |
3 | THE PURPOSE OF THIS APPLICATION AND WITS GOLDS MOTIVATION FOR IT |
3.1 | The purpose of this application is to obtain the written consent of the Minister, or her authorised delegate, under section 102 of the MPRDA, to incorporate the Additional Area into the Current Prospecting Area of the Wits Gold Prospecting Right. |
3.2 | A motivation letter addressed to the Regional Manager, the Free State Region, dated [ ] 2010 and which followed a meeting between representatives of Harmony and Wits Gold on [ ] 2010 and which explains the rationale for this transaction is annexed hereto as Annexure 2. It has now been agreed between Harmony, Wits Gold and certain representatives of the DMR that the Additional Area effectively be transferred to Wits Gold by way of section 102 of the MPRDA, Harmony agreeing to sign an unconditional deed of abandonment of the Additional Area in terms of section 56(f) of the MPRDA which it is entitled to do in terms of the terms of the Mining Right and which will be signed contemporaneously with the DMRs granting of this application under section 102 of the MPRDA. |
3.3 | In further motivation of this application it should be noted that the Additional Areas is contiguous to the Current Prospecting Area and upon grant of the amendment under section 102 of the MPRDA, Wits Gold shall amend its prospecting work programme and environmental management plan to incorporate the Additional Area. Wits Gold shall furthermore consult with interested and affected parties in relation to the Additional Area in regard to the incorporation of the Additional Area within the ambit of the Wits Gold Prospecting Right. |
4 | EFFECT OF THE GRANTING OF THE CONSENT BY THE MINISTER UNDER SECTION 102 OF THE MPRDA |
4.1 |
If the Minister consents under section 102 of the MPRDA to amend the Wits Gold |
Prospecting Right to include the Additional Area, the reference to Prospecting Area as defined in the definitions part of the Wits Gold prospecting right, will be amended to read as follows [Description of area and measurement to be included by reference to the farm portions] |
4.2 | The Wits Gold Prospecting Right will be amended as anticipated in 4.1, by the execution of a notarial deed of amendment to the Wits Gold Prospecting Right, which notarial amendment will, after such notarial execution, be registered in the Mineral and Petroleum Titles Registration Office. |
5 | APPLICATION |
Wits Gold hereby applies, in accordance with the provisions of section 102 of the MPRDA for the consent of the Minister to the amendment of the Wits Gold Prospecting Right (DMR reference FS30/5/1/1/2/76PR, registered in the Mineral and Petroleum Titles Registration Office as 99/2006PR), to include the Additional Area identified in paragraph 2.2 above.
6 | Please do not hesitate to contact Mr. Marc Watchorn from Wits Gold on [ ] should you require any further information. |
SIGNED ON THE DAY OF 2010.
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For and on behalf of Wits Gold |
FIRST ADDENDUM TO MINING RIGHT
ABANDONMENT AGREEMENT
between
HARMONY GOLD MINING COMPANY LIMITED
and
WITWATERSRAND CONSOLIDATED GOLD RESOURCES LIMITED
1 | INTERPRETATION |
In this Addendum
1.1 | Addendum means this first addendum to the Mining Right Abandonment Agreement; |
1.2 | Mining Right Abandonment Agreement means the agreement headed Mining Right Abandonment Agreement entered into between the parties hereto on 3 September 2010; and |
1.3. | words and expressions defined in the Mining Right Abandonment Agreement will have the same meanings and any reference to the words clause or clauses will refer to clauses of the Mining Right Abandonment Agreement. |
2 | INTRODUCTION |
2.1 | The Mining Right Abandonment Agreement is subject to the fulfilment of a number of Conditions Precedent. |
2.2 | The Condition Precedent contained in clause 4.1.5 was not fulfilled by the required date and time for fulfilment thereof and accordingly the Mining Right Abandonment Agreement has failed to become of any force or effect and has lapsed. |
2.3 | The Parties have agreed to revive the Mining Right Abandonment Agreement on the same terms and conditions save for extending the date for fulfilment of the Condition Precedent contained in clause 4.1.5. |
3 | REVIVAL AND AMENDMENT |
The Parties hereby revive the Mining Right Abandonment Agreement (and to the extent required hereby re-enter into the Mining Right Abandonment Agreement) and agree that it shall again be of full force and effect on the same terms and conditions, save that the Mining Right Abandonment Agreement is hereby amended by substituting 10 November 2010 for 5 November 2010 where it appears in clause 4.1.5.
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4 | SAVINGS CLAUSE |
Save to the extent specifically or by necessary implication modified in or inconsistent with the provisions of this Addendum or unless otherwise agreed in writing between the Parties, all the terms and conditions of the Mining Right Abandonment Agreement shall mutatis mutandis continue to apply.
5 | COSTS |
Each Party will bear and pay its own legal costs and expenses of and incidental to the negotiation, drafting, preparation and implementation of this Addendum.
6 | SIGNATURE |
6.1 | This Addendum is signed by the Parties on the dates and at the places indicated below. |
6.2 | This Addendum may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same Agreement as at the date of signature of the Party last signing one of the counterparts. |
6.3 | The persons signing this Addendum in a representative capacity warrant their authority to do so. |
SIGNED at Johannesburg on 11/11/10 2010.
For and on behalf of |
HARMONY GOLD MIMING COMPANY LIMlTED |
|
Signature |
A.J. Boshoff |
Name of Signatory |
Executive |
Designation of Signatory |
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SIGNED at Johannesburg on 9 November 2010.
For and on behalf of |
WITWATERSRAND CONSOLIDATED
GOLD RESOURCES LIMITED |
|
Signature |
D M URQUHART |
Name of Signatory |
CHIEF FINANCIAL OFFICER |
Designation of Signatory |
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Exhibit 4.25
EXECUTION 3 September 2010 |
OPTION CANCELLATION AGREEMENT
amongst
ARMGOLD/HARMONY FREEGOLD JOINT VENTURE (PROPRIETARY) LIMITED
and
WITWATERSRAND CONSOLIDATED GOLD RESOURCES LIMITED
and
HARMONY GOLD MINING COMPANY LIMITED
TABLE OF CONTENTS
1 |
PARTIES | 1 | ||||
2 |
INTERPRETATION | 1 | ||||
3 |
INTRODUCTION | 6 | ||||
4 |
CONDITIONS PRECEDENT | 7 | ||||
5 |
CANCELLATION | 10 | ||||
6 |
DISCHARGE OF THE CONSIDERATION | 10 | ||||
7 |
LOCK-UP | 11 | ||||
8 |
WAIVER | 11 | ||||
9 |
INTEREST | 12 | ||||
10 |
GENERAL WARRANTIES | 12 | ||||
11 |
PUBLICITY | 13 | ||||
12 |
BREACH | 14 | ||||
13 |
DISPUTE RESOLUTION | 14 | ||||
14 |
NOTICES AND DOMICILIA | 16 | ||||
15 |
BENEFIT OF THE AGREEMENT | 17 | ||||
16 |
APPLICABLE LAW AND JURISDICTION | 17 | ||||
17 |
GENERAL | 17 | ||||
18 |
COSTS | 19 | ||||
19 |
SIGNATURE | 19 |
ANNEXURES
ANNEXURE 1 : DIAGRAM DEPICTING THE EXPLORATION ASSETS
ANNEXURE 2 : REGISTERED DESCRIPTION OF THE EXPLORATION ASSETS
ANNEXURE 3 : DIAGRAM DEPICTING THE MILLO AREA
ANNEXURE 4 : REGISTERED DESCRIPTION OF THE MILLO AREA
ANNEXURE 5 : DIAGRAM DEPICTING THE TWEEPAN AREA
ANNEXURE 6 : REGISTERED DESCRIPTION OF THE TWEEPAN AREA
ANNEXURE 7 : OPTION AGREEMENT
ANNEXURE 8 : WAIVER
1 | PARTIES |
1.1 | The Parties to this Agreement are |
1.1.1 | ARMGold/Harmony Freegold Joint Venture Company (Proprietary) Limited; |
1.1.2 | Witwatersrand Consolidated Gold Resources Limited; and |
1.1.3 | Harmony Gold Mining Company Limited. |
1.2 | The Parties agree as set out below. |
2 | INTERPRETATION |
2.1 | In this Agreement, unless the context indicates a contrary intention, the following words and expressions bear the meanings assigned to them and cognate expressions bear corresponding meanings |
2.1.1 | AFSA means the Arbitration Foundation of Southern Africa; |
2.1.2 | Agreement means the agreement contained in this document, including all annexures hereto; |
2.1.3 | Companies Act means the Companies Act, No 61 of 1973; |
2.1.4 | Conditions Precedent means the conditions precedent set out in clause 4; |
2.1.5 | Consideration means an amount equal to R275.000.000 (two hundred and seventy five million rand) exclusive of VAT thereon; |
2.1.6 | Consideration Shares means such number of Wits Gold Shares as may be allotted and issued to Freegold by Wits Gold in terms of the provisions of clause 6; |
2.1.7 | Dispose means sell, lease, licence, transfer, loan or otherwise dispose (whether by a voluntary or involuntary single transaction or series of transactions); |
2.1.8 |
Effective Date means the 3 rd (third) business day after the date on which the last in time of the Conditions Precedent to be fulfilled or waived, is fulfilled or waived, as the case may be; |
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2.1.9 | Exploration Assets means the prospecting right held by Wits Gold in and to a certain prospecting area bearing DMR reference number FS 30/5/1/1/2/76 PR, as depicted by the area shaded in yellow on the diagram attached hereto as annexure 1 , the registered description of which is listed in annexure 2 ; |
2.1.10 | Freegold means ARMGold/Harmony Freegold Joint Venture Company (Proprietary) Limited, registration number 2001/029602/07, a limited liability private company duly incorporated in the Republic of South Africa; |
2.1.11 | Freegolds Designated Account means the bank account nominated by Freegold, the details of which are set out below, or such other account as Freegold may designate in writing on 5 (five) business days notice to Wits Gold |
Name of Account: | Harmony Gold Mining Company Current Account | |
Bank: | Nedbank Limited | |
Branch: | Corporate Client Services | |
Branch Code: | 145405 | |
Account Number: | 454115866 |
2.1.12 | Freegold Option means the option granted by Wits Gold to Freegold in terms of clause 9 of the Option Agreement; |
2.1.13 | Harmony means Harmony Gold Mining Company Limited, registration number 1950/038232/06, a limited liability public company duly incorporated in the Republic of South Africa; |
2.1.14 | JSE means JSE Limited, registration number 2005/022939/06, a limited liability public company duly incorporated in the Republic of South Africa and licensed as an exchange under the Securities Services Act, 2001; |
2.1.15 | Listings Requirements means the Listings Requirements of the JSE; |
2.1.16 | Lydex means Lydenburg Exploration Limited, registration number 1998/001853/06, a limited liability public company duly incorporated in the Republic of South Africa; |
2.1.17 | Merriespruit South Area means the Merriespruit South Area as that term is defined in the Mining Right Abandonment Agreement; |
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2.1.18 | Milio Area means the area shaded in pink on the diagram attached hereto as annexure 3 , the registered description of which is listed in annexure 4 ; |
2.1.19 | Mining Right Abandonment Agreement means the mining right abandonment agreement entered into, or to be entered into, between Harmony and Wits Gold, in terms of which Harmony abandons that portion of its mining right pertaining to the Merriespruit South Area; |
2.1.20 | Option Agreement means the memorandum of agreement entered into between Wits Gold and Freegold on 29 April 2004, in terms of which, inter alia, Wits Gold granted the Freegold Option to Freegold, a copy of which agreement is attached hereto as annexure 7 ; |
2.1.21 | Participation Rights means all forms of economic and financial participation in the form of participation rights, subscription rights, net vendor consideration rights or royalty rights in or to the Exploration Assets, the Merriespruit South Area, the Tweepan Area and/or the Millo Area; |
2.1.22 | Parties means the parties to this Agreement; |
2.1.23 | Prime Rate means the publicly quoted basic rate of interest, compounded monthly in arrears and calculated on a 365 (three hundred and sixty five) day year irrespective of whether or not the year is a leap year, from time to time published by Nedbank Limited as being its prime overdraft rate, as certified by any representative of that bank whose appointment and designation it shall not be necessary to prove; |
2.1.24 | Signature Date means the date of signature of this Agreement by the Party last in time signing; |
2.1.25 | Tweepan Area means the area shaded in blue, on the diagram attached hereto as annexure 5 , the registered description of which is listed in annexure 6 ; |
2.1.26 | VAT means value-added tax as levied from time to time in terms of the Value-Added Tax Act, 1991; |
2.1.27 | VWAP means R62.84 (sixty two rand and eighty four cents) per Wits Gold Share; |
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2.1.28 | Wits Gold means Witwatersrand Consolidated Gold Resources Limited, registration number 2002/031365/06, a limited liability public company duly incorporated in the Republic of South Africa (formerly Witwatersrand Consolidated Gold Resources (Proprietary) Limited); and |
2.1.29 | Wits Gold Shares means ordinary shares in the share capital of Wits Gold with a par value of R0.01 (one cent) each. |
2.2 | In this Agreement |
2.2.1 | clause headings and the heading of the Agreement are for convenience only and are not to be used in its interpretation; |
2.2.2 | an expression which denotes |
2.2.2.1 | any gender includes the other genders; |
2.2.2.2 | a natural person includes a juristic person and vice versa ; |
2.2.2.3 | the singular includes the plural and vice versa ; and |
2.2.2.4 | a Party includes a reference to that Partys successors in title and assigns allowed at law. |
2.3 | Any reference in this Agreement to |
2.3.1 | business hours shall be construed as being the hours between 08h30 and 17h00 on any business day. Any reference to time shall be based upon South African Standard Time; |
2.3.2 | days shall be construed as calendar days unless qualified by the word business, in which instance a business day will be any day other than a Saturday, Sunday or public holiday as gazetted by the government of the Republic of South Africa from time to time; |
2.3.3 | law means any law of general application and includes the common law and any statute, constitution, decree, treaty, regulation, directive, ordinance, by- law, order or any other enactment of legislative measure of government (including local and provincial government) statutory or regulatory body which has the force of law; |
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2.3.4 | person means any person, company, close corporation, trust, partnership or other entity whether or not having separate legal personality; and |
2.3.5 | writing means legible writing and in English. |
2.4 | The words include and including mean include without limitation and including without limitation. The use of the words include and including followed by a specific example or examples shall not be construed as limiting the meaning of the general wording preceding it. |
2.5 | Any substantive provision, conferring rights or imposing obligations on a Party and appearing in any of the definitions in this clause 2 or elsewhere in this Agreement, shall be given effect to as if it were a substantive provision in the body of the Agreement. |
2.6 | Words and expressions defined in any clause shall, unless the application of any such word or expression is specifically limited to that clause, bear the meaning assigned to such word or expression throughout this Agreement. |
2.7 | Unless otherwise provided, defined terms appearing in this Agreement in title case shall be given their meaning as defined, while the same terms appearing in lower case shall be interpreted in accordance with their plain English meaning. |
2.8 | A reference to any statutory enactment shall be construed as a reference to that enactment as at the Signature Date and as amended or substituted from time to time. |
2.9 | Unless specifically otherwise provided, any number of days prescribed shall be determined by excluding the first and including the last day or, where the last day falls on a day that is not a business day, the next succeeding business day. |
2.10 | If the due date for performance of any obligation in terms of this Agreement is a day which is not a business day then (unless otherwise stipulated) the due date for performance of the relevant obligation shall be the immediately preceding business day. |
2.11 | Where figures are referred to in numerals and in words, and there is any conflict between the two, the words shall prevail, unless the context indicates a contrary intention. |
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2.12 | The rule of construction that this Agreement shall be interpreted against the Party responsible for the drafting of this Agreement, shall not apply. |
2.13 | No provision of this Agreement shall (unless otherwise stipulated) constitute a stipulation for the benefit of any person ( stipulatio alteri ) who is not a Party to this Agreement. |
2.14 | The use of any expression in this Agreement covering a process available under South African law, such as winding-up, shall, if either of the Parties to this Agreement is subject to the law of any other jurisdiction, be construed as including any equivalent or analogous proceedings under the law of such other jurisdiction. |
2.15 | Any reference in this Agreement to this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document, as amended, varied, novated or supplemented from time to time. |
2.16 | In this Agreement the words clause or clauses and annexure or annexures refer to clauses of and annexures to this Agreement. |
3 | INTRODUCTION |
3.1 | Freegold was granted the Freegold Option by Wits Gold in terms of the provisions of the Option Agreement. |
3.2 | In terms of the Option Agreement, Wits Gold was to conduct at its sole cost, an appropriate exploration programme over the Properties (as that term is defined in the Option Agreement) with the intention of establishing a mine or mines on such Properties ( Mine(s) ). |
3.3 | The Freegold Option entitled Freegold, or its nominee, to acquire a beneficial interest of up to 40% (forty percent) in the Mine(s). |
3.4 | Upon the exercise of the Freegold Option, Freegold and Wits Gold would have been deemed to have concluded a joint venture in respect of the Mine(s) ( Joint Venture ), on the basis that, inter alia : |
3.4.1 |
Freegold would reimburse Wits Gold in cash for 40% (forty percent) of the actual cost of the exploration programme and feasibility study plus VAT |
6
thereon, incurred by Wits Gold, in consideration for Freegolds 40% (forty percent) interest in the Joint Venture; and |
3.4.2 | all costs and profits related to the Joint Venture would be shared by Freegold and Wits Gold in proportion to their respective interests in the Joint Venture from time to time. |
3.5 | Wits Gold wishes to be able, on establishment of the Mine(s), to conduct mining operations on a basis other than in joint venture with Freegold as contemplated in the Option Agreement which would not be possible if Freegold exercised the Freegold Option. |
3.6 | The Parties have agreed to the cancellation of the Freegold Option, with effect from the Effective Date, on the terms and subject to the conditions herein contained. |
3.7 | The Parties wish to record in writing their agreement in respect of the above and matters ancillary thereto. |
4 | CONDITIONS PRECEDENT |
4.1 | Save for clauses 1 to 4, and clauses 10 to 19 all of which will become effective immediately, this Agreement is subject to the fulfilment of the Conditions Precedent that |
4.1.1 | the Mining Right Abandonment Agreement shall have been entered into contemporaneously with this Agreement; |
4.1.2 | by not later than 17h00 on 13 September 2010, Wits Gold shall have received a certified copy of resolutions of the board of directors of Freegold |
4.1.2.1 | approving and, where applicable, ratifying the entering into of this Agreement; |
4.1.2.2 | authorising a specified person or persons to execute this Agreement and, where applicable, ratifying the execution of this Agreement by such specified person or persons; and |
4.1.2.3 | authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with this Agreement; |
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4.1.3 | by not later than 17h00 on 13 September 2010, Freegold shall have received a certified copy of resolutions of the board of directors of Wits Gold |
4.1.3.1 | approving and, where applicable, ratifying the entering into of this Agreement; |
4.1.3.2 | allotting and issuing the Consideration Shares to Freegold on the Effective Date, conditional on the fulfilment of the Condition Precedent contained in clause 4.1.5 and on Wits Gold electing to discharge the Consideration, wholly or in part, by the allotment and issue of the Consideration Shares; |
4.1.3.3 | authorising a specified person or persons to execute this Agreement and, where applicable, ratifying the execution of this Agreement by such specified person or persons; and |
4.1.3.4 | authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with this Agreement, including the allotment and issue, if so decided by Wits Gold, of the Consideration Shares to Freegold; |
4.1.4 | by not later than 17h00 on 13 September 2010, Harmony and Lydex shall have waived any Participation Rights which they have by signing a waiver substantially similar to the waiver attached hereto as annexure 8 ; and |
4.1.5 | by not later than 17h00 on 5 November 2010, the shareholders of Wits Gold have passed resolutions in general meeting in accordance with the provisions of the Companies Act and the Listings Requirements |
4.1.5.1 | placing at least 4,376,194 (four million three hundred and seventy six thousand and one hundred and ninety four) Wits Gold Shares under the control of the directors of Wits Gold; and |
4.1.5.2 | authorising the directors of Wits Gold to allot and issue a maximum of 4,376,194 (four million three hundred and seventy six thousand one hundred and ninety four) Wits Gold Shares |
4.1.5.2.1 | to Freegold in accordance with the provisions of this Agreement, as a specific approval in terms of section 221 of the Companies Act; or |
4.1.5.2.2 | pursuant to a rights offer or a vendor consideration placing in terms of the Listings Requirements; and |
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4.1.6 | by not later than 17h00 on 5 November 2010, the Toronto Stock Exchange has, to the extent required in terms of the rules of the Toronto Stock Exchange, approved the allotment and issue of the Consideration Shares. |
4.2 | Freegold shall use commercially reasonable endeavours to procure the fulfilment of the Condition Precedent contained in clause 4.1.2, as soon as reasonably possible and in any event prior to the expiry of the relevant time period set out in that clause and furnish to Wits Gold documents evidencing the fulfilment of such Condition Precedent. |
4.3 | Harmony shall use commercially reasonable endeavours to procure the fulfilment of the Condition Precedent contained in clause 4.1.4 as soon as reasonably possible and in any event prior to the expiry of the relevant time period set out in that clause and furnish to Wits Gold documents evidencing the fulfilment of such Condition Precedent; |
4.4 | Wits Gold shall use commercially reasonable endeavours to procure the fulfilment of the Conditions Precedent contained in clauses 4.1.3, 4.1.5 and 4.1.6 as soon as reasonably possible and in any event prior to the expiry of the relevant time periods set out in those clauses and furnish to Freegold documents evidencing the fulfilment of such Conditions Precedent. |
4.5 | All Parties shall use commercially reasonable endeavours and the Parties will co- operate in good faith to procure the fulfilment of the Condition Precedent contained in clause 4.1.1 on the Signature Date. |
4.6 | The Conditions Precedent set out in |
4.6.1 | clauses 4.1.2, 4.1.4 and 4.1.6 have been inserted for the benefit of Wits Gold which will be entitled to waive fulfilment of any of the said Conditions Precedent, in whole or in part, on written notice to Freegold prior to the expiry of the relevant time periods set out in those clauses; |
4.6.2 | clause 4.1.3 has been inserted for the benefit of Freegold which will be entitled to waive fulfilment of such Condition Precedent, in whole or in part, on written notice to Wits Gold prior to the expiry of the relevant time period set out in that clause; and |
4.6.3 |
clauses 4.1.1 and 4.1.5 have been inserted for the benefit of the Parties who will be entitled to waive fulfilment of any of the said Conditions Precedent, in |
9
whole or in part, by written agreement prior to the expiry of the relevant time period set out in those clauses. |
4.7 | Unless all the Conditions Precedent have been fulfilled or waived by not later than the relevant dates for fulfilment thereof set out in clause 4.1 (or such later date or dates as may be agreed in writing amongst the Parties) the provisions of this Agreement, save for clauses 1 to 4, and clauses 10 to 19, which will remain of full force and effect, will never become of any force or effect and the status quo ante will be restored as near as may be and neither of the Parties will have any claim against the other in terms hereof or arising from the failure of the Conditions Precedent, save for any claims arising from a breach of clause 4.2, or clause 4.4 and/or clause 4.5. |
5 | CANCELLATION |
For the reasons set out in clauses 3.2 to 3.6, the Parties hereby agree to the cancellation of the Freegold Option, with effect from the Effective Date, against discharge of the Consideration and the payment of VAT by Wits Gold in accordance with the provisions of clause 6.
6 | DISCHARGE OF THE CONSIDERATION |
6.1 | The Consideration shall be discharged by Wits Gold on the Effective Date at Wits Golds election by |
6.1.1 | payment to Freegold of an amount in cash equal to the Consideration; or |
6.1.2 | way of the allotment and issue to Freegold by Wits Gold of 4,376,194 (four million three hundred and seventy six thousand and one hundred and ninety four) Wits Gold Shares, and the delivery to Freegold of a share certificate in respect thereof; or |
6.1.3 | payment to Freegold of an amount equal to such amount in cash as may be determined by Wits Gold ( Cash Amount ) and by way of the allotment and issue to Freegold by Wits Gold of such number of Wits Gold Shares as is determined by dividing the sum of R275.000.000 (two hundred and seventy five million rand) less the Cash Amount, by the VWAP and the delivery to Freegold of a share certificate in respect thereof. |
6.2 |
Wits Gold shall at the same time as the Consideration is discharged in accordance with the provisions of clause 6.1, pay to Freegold an amount equal to |
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the VAT payable on the Consideration against presentation by Freegold to Wits Gold of a VAT invoice in respect thereof. |
6.3 | Wits Gold undertakes to update the share register of Wits Gold to reflect Freegold as the registered holder of the Consideration Shares within 24 (twenty four) hours from the Effective Date. |
6.4 | All cash payments to be made in terms of this Agreement will be made by electronic transfer of immediately available and freely transferable funds to Freegolds Designated Account, free of any deductions or set-off whatsoever, in the currency of the Republic of South Africa. |
7 | LOCK-UP |
7.1 | In the event that any portion of the Consideration is settled by the allotment and issue of Wits Gold Shares to Freegold, Freegold shall not be entitled to Dispose of all or any of the Consideration Shares |
7.1.1 | for a period of 180 (one hundred and eighty) days after the Effective Date ( Lock-Up Period ), without the prior written consent of Wits Gold; and |
7.1.2 | until the first anniversary of the expiration of the Lock-Up Period, without having first consulted with Wits Gold in regard to such intended Disposal at least 15 (fifteen) business days prior to Disposing of the said Consideration Shares. For the avoidance of doubt, it is agreed that Freegold shall have complied with its obligations to consult with Wits Gold in terms of this clause 7.1.2 if it has informed Wits Gold of its intention to Dispose of the said Consideration Shares within the prescribed period and has considered any alternative proposals which may be made by Wits Gold. |
7.2 | Freegold shall not be entitled to pledge and cede the Consideration Shares to a third party as security during the Lock-Up Period, without the prior written consent of Wits Gold. |
8 | WAIVER |
8.1 | Harmony hereby warrants to and in favour of Wits Gold that, as at the Signature Date, none of its subsidiaries, other than Lydex, holds any Participation Rights. |
8.2 |
If it transpires at any time after the Signature Date that any subsidiary of Harmony does in fact hold any Participation Rights, Harmony hereby undertakes |
11
to procure, to the extent that it is within its power, that such subsidiary waives all such Participation Rights by signing a waiver substantially similar to the waiver attached hereto as annexure 8 . |
9 | INTEREST |
Should any payment under or arising from this Agreement fail to be made on the due date thereof then, without prejudice to such other rights as may accrue to the payee consequent upon such failure, such overdue amounts will bear interest at the Prime Rate plus 300 (three hundred) basis points, from the due date for payment to the date of actual payment, both dates inclusive.
10 | GENERAL WARRANTIES |
10.1 | Each of the Parties hereby warrants to and in favour of the other that |
10.1.1 | it has the legal capacity and has taken all necessary corporate action required to empower and authorise it to enter into this Agreement; |
10.1.2 | this Agreement constitutes an agreement valid and binding on it and enforceable against it in accordance with its terms; |
10.1.3 | the execution of this Agreement and the performance of its obligations hereunder does not and shall not |
10.1.3.1 | contravene any law or regulation to which that Party is subject; |
10.1.3.2 | contravene any provision of that Partys constitutional documents; or |
10.1.3.3 | conflict with, or constitute a breach of any of the provisions of any other agreement, obligation, restriction or undertaking which is binding on it; and |
10.1.4 | to the best of its knowledge and belief, it is not aware of the existence of any fact or circumstance that may impair its ability to comply with all of its obligations in terms of this Agreement; |
10.1.5 | it is entering into this Agreement as principal (and not as agent or in any other capacity); |
10.1.6 | the natural person who signs and executes this Agreement on its behalf is validly and duly authorised to do so; |
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10.1.7 | no other party is acting as a fiduciary for it; and |
10.1.8 | it is not relying upon any statement or representation by or on behalf of any other Party, except those expressly set forth in this Agreement. |
10.2 | Each of the representations and warranties given by the Parties in terms of clause 10.1 shall |
10.2.1 | be a separate warranty and will in no way be limited or restricted by inference from the terms of any other warranty or by any other words in this Agreement; |
10.2.2 | continue and remain in force notwithstanding the completion of any or all the transactions contemplated in this Agreement; and |
10.2.3 | prima facie be deemed to be material and to be a material representation inducing the other Parties to enter into this Agreement. |
11 | PUBLICITY |
11.1 | Subject to clause 11.3, each Party undertakes to keep confidential and not to disclose to any third party, save as may be required in law (including by the rules of any recognised securities exchange, where applicable) or permitted in terms of this Agreement, the nature, content or existence of this Agreement and any and all information given by a Party to the other Parties pursuant to this Agreement. |
11.2 | No announcements of any nature whatsoever will be made by or on behalf of a Party relating to this Agreement without the prior written consent of the other Parties, which consent shall not be unreasonably withheld or delayed, save for any announcement or other statement required to be made in terms of the provisions of any law or by the rules of any recognised securities exchange, in which event the Party obliged to make such statement will first consult with the other Parties in order to enable the Parties in good faith to attempt to agree the content of such announcement, which (unless agreed) must go no further than is required in terms of such law or rules. This will not apply to a Party wishing to respond to the other Party which has made an announcement of some nature in breach of this clause 11. |
11.3 |
This clause 11 shall not apply to any disclosure made by a Party to its officers, employees, agents, professional advisors or consultants, provided that they have agreed to the same confidentiality undertakings, or to any judicial, regulatory or |
13
arbitral tribunal or officer, in connection with any matter relating to this Agreement or arising out of it. |
12 | BREACH |
12.1 | If a Party ( Defaulting Party ) commits any breach of this Agreement and fails to remedy such breach within 5 (five) business days ( Notice Period ) of written notice requiring the breach to be remedied, then the Party giving the notice ( Aggrieved Party ) will be entitled, at its option |
12.1.1 | to claim immediate specific performance of any of the Defaulting Partys obligations under this Agreement, with or without claiming damages, whether or not such obligation has fallen due for performance; or |
12.1.2 | subject to clause 12.2, to cancel this Agreement, with or without claiming damages, in which case written notice of the cancellation shall be given to the Defaulting Party, and the cancellation shall take effect on the giving of the notice. |
12.2 | No Party shall be entitled to cancel this Agreement unless the breach is a material breach. A breach will be deemed to be a material breach if |
12.2.1 | it is capable of being remedied, but is not so remedied within the Notice Period; |
12.2.2 | it is incapable of being remedied or is not remedied within the Notice Period, and payment in money will compensate for such breach but such payment is not made within the Notice Period. |
12.3 | The Parties agree that any costs awarded will be recoverable on an attorney-and- own-client scale unless the Court specifically determines that such scale shall not apply, in which event the costs will be recoverable in accordance with the High Court tariff, determined on an attorney-and-client scale. |
12.4 | The Aggrieved Partys remedies in terms of this clause 12 are without prejudice to any other remedies to which the Aggrieved Party may be entitled in law. |
13 | DISPUTE RESOLUTION |
13.1 |
In the event of there being any dispute or difference amongst the Parties arising out of this Agreement, the said dispute or difference shall on written demand by |
14
any party to the dispute be submitted to arbitration in Johannesburg in accordance with the AFSA rules, which arbitration shall be administered by AFSA. |
13.2 | Should AFSA, as an institution, not be operating at that time or not be accepting requests for arbitration for any reason, then the arbitration shall be conducted in accordance with the AFSA rules for commercial arbitration (as last applied by AFSA) before an arbitrator appointed by agreement between the parties to the dispute or failing agreement within 10 (ten) business days of the demand for arbitration, then any party to the dispute shall be entitled to forthwith call upon the chairperson of the Johannesburg Bar Council to nominate the arbitrator, provided that the person so nominated shall be an advocate of not less than 15 (fifteen) years standing as such. The person so nominated shall be the duly appointed arbitrator in respect of the dispute. In the event of the attorneys of the parties to the dispute failing to agree on any matter relating to the administration of the arbitration, such matter shall be referred to and decided by the arbitrator whose decision shall be final and binding on the Parties. |
13.3 | Any party to the arbitration may appeal the decision of the arbitrator or arbitrators in terms of the AFSA rules for commercial arbitration. |
13.4 | Nothing herein contained shall be deemed to prevent or prohibit a Party from applying to the appropriate court for urgent relief or for judgment in relation to a liquidated claim. |
13.5 | Any arbitration in terms of this clause 13 (including any appeal proceedings) shall be conducted in camera and the Parties shall treat as confidential details of the dispute submitted to arbitration, the conduct of the arbitration proceedings and the outcome of the arbitration. |
13.6 | This clause 13 will continue to be binding on the Parties notwithstanding any termination or cancellation of the Agreement. |
13.7 | The Parties agree that the written demand by a Party in terms of clause 13.1 that the dispute or difference be submitted to arbitration, is to be deemed to be a legal process for the purpose of interrupting extinctive prescription in terms of the Prescription Act, 1969. |
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14 | NOTICES AND DOMICILIA |
14.1 | The Parties select as their respective domicilia citandi et executandi the following physical addresses, and for the purposes of giving or sending any notice provided for or required under this Agreement, the said physical addresses as well as the following telefax numbers |
Name |
Physical Address |
Telefax |
||
Freegold & Harmony | Block 27 | (011) 834 1708 | ||
Randfontein Office Park | ||||
Cnr Main Reef Road and | ||||
Ward Avenue | ||||
Randfontein |
Marked for the attention of: The Company Secretary
Name |
Physical Address |
Telefax |
||
Wits Gold | 12 th Floor | (011) 838 3208 | ||
70 Fox Street | ||||
Johannesburg |
Marked for the attention of: The Company Secretary
provided that a Party may change its domicilium or its address for the purposes of notices to any other physical address or telefax number by written notice to the other Parties to that effect. Such change of address will be effective 5 (five) business days after receipt of the notice of the change.
14.2 | All notices to be given in terms of this Agreement will be given in writing and will |
14.2.1 | be delivered by hand or sent by telefax; |
14.2.2 | if delivered by hand during business hours, be presumed to have been received on the date of delivery. Any notice delivered after business hours or on a day which is not a business day will be presumed to have been received on the following business day; and |
14.2.3 | if sent by telefax during business hours, be presumed to have been received on the date of successful transmission of the telefax. Any telefax sent after business hours or on a day which is not a business day will be presumed to have been received on the following business day. |
14.3 |
Notwithstanding the above, any notice given in writing, and actually received by the Party to whom the notice is addressed, will be deemed to have been properly |
16
given and received, notwithstanding that such notice has not been given in accordance with this clause 14. |
15 | BENEFIT OF THE AGREEMENT |
This Agreement will also be for the benefit of and be binding upon the successors in title and permitted assigns of the Parties or any of them.
16 | APPLICABLE LAW AND JURISDICTION |
16.1 | This Agreement will in all respects be governed by and construed under the laws of the Republic of South Africa. |
16.2 | For the purpose of clause 13.4 or for the purpose of making the arbitration award an order of court, the Parties hereby consent and submit to the non-exclusive jurisdiction of the South Gauteng High Court, Johannesburg in any dispute arising from or in connection with this Agreement. The Parties agree that any costs awarded will be recoverable on an attorney-and-own-client scale unless the Court specifically determines that such scale shall not apply, in which event the costs will be recoverable in accordance with the High Court tariff, determined on an attorney-and-client scale. |
17 | GENERAL |
17.1 | Whole Agreement |
17.1.1 | This Agreement constitutes the whole of the agreement amongst the Parties relating to the matters dealt with herein and, save to the extent otherwise provided herein, no undertaking, representation, term or condition relating to the subject matter of this Agreement not incorporated in this Agreement shall be binding on any of the Parties. |
17.1.2 | This Agreement supersedes and replaces any and all agreements amongst the Parties (and other persons, as may be applicable) and undertakings given to or on behalf of the Parties (and other persons, as may be applicable) in relation to the subject matter hereof. |
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17.2 | Variations to be in Writing |
No addition to or variation, deletion, or agreed cancellation of all or any clauses or provisions of this Agreement will be of any force or effect unless in writing and signed by the Parties.
17.3 | No indulgences |
No latitude, extension of time or other indulgence which may be given or allowed by any Party to the other Parties in respect of the performance of any obligation hereunder, and no delay or forbearance in the enforcement of any right of any Party arising from this Agreement and no single or partial exercise of any right by any Party under this Agreement, shall in any circumstances be construed to be an implied consent or election by such Party or operate as a waiver or a novation of or otherwise affect any of the Partys rights in terms of or arising from this Agreement or estop or preclude any such Party from enforcing at any time and without notice, strict and punctual compliance with each and every provision or term hereof. Failure or delay on the part of any Party in exercising any right, power or privilege under this Agreement will not constitute or be deemed to be a waiver thereof, nor will any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
17.4 | No Waiver or Suspension of Rights |
No waiver, suspension or postponement by any Party of any right arising out of or in connection with this Agreement shall be of any force or effect unless in writing and signed by such Party. Any such waiver, suspension or postponement will be effective only in the specific instance and for the purpose given.
17.5 | Provisions Severable |
All provisions and the various clauses of this Agreement are, notwithstanding the manner in which they have been grouped together or linked grammatically, severable from each other. Any provision or clause of this Agreement which is or becomes unenforceable in any jurisdiction, whether due to voidness, invalidity, illegality, unlawfulness or for any other reason whatever, shall, in such jurisdiction only and only to the extent that it is so unenforceable, be treated as pro non scripto and the remaining provisions and clauses of this Agreement shall remain of full force and effect. The Parties declare that it is their intention that this
18
Agreement would be executed without such unenforceable provision if they were aware of such unenforceability at the time of execution hereof.
17.6 | Continuing Effectiveness of Certain Provisions |
The expiration or termination of this Agreement shall not affect such of the provisions of this Agreement as expressly provide that they will operate after any such expiration or termination or which of necessity must continue to have effect after such expiration or termination, notwithstanding that the clauses themselves do not expressly provide for this.
17.7 | No Assignment |
Neither this Agreement nor any part, share or interest herein nor any rights or obligations hereunder may be ceded, delegated or assigned by any Party without the prior written consent of the other Parties, save as otherwise provided herein.
18 | COSTS |
Each Party will bear and pay its own legal costs and expenses of and incidental to the negotiation, drafting, preparation and implementation of this Agreement.
19 | SIGNATURE |
19.1 | This Agreement is signed by the Parties on the dates and at the places indicated below. |
19.2 | This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same Agreement as at the date of signature of the Party last in time signing one of the counterparts. |
19.3 | The persons signing this Agreement in a representative capacity warrant their authority to do so. |
19.4 | The Parties record that it is not required for this Agreement to be valid and enforceable that a Party shall initial the pages of this Agreement and/or have its signature of this Agreement verified by a witness. |
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SIGNED at Sandton on 3 September 2010
For and on behalf of |
ARMGOLD/HARMONY FREEGOLD JOINT VENTURECOMPANY (PROPRIETARY) LIMITED |
|
Signature |
A.J. Boshoff |
Name of Signatory |
Executive. |
Designation of Signatory |
SIGNED at SANDTON on 3 SEPTEMBER 2010
For and on behalf of |
WITWATERSRAND CONSOLIDATED GOLD RESOURCES LIMITED |
|
Signature |
D M URQUHART |
Name of Signatory |
CFO. |
Designation of Signatory |
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SIGNED at Sandton on 3 September 2010
For and on behalf of |
HARMONY GOLD MINING COMPANY LIMITED |
|
Signature |
A.J. Boshoff |
Name of Signatory |
Executive. |
Designation of Signatory |
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ANNEXURE 1
DIAGRAM DEPICTING THE EXPLORATION ASSETS
ANNEXURE 2
REGISTERED DESCRIPTION OF THE EXPLORATION ASSETS
Farm Name | District | Portion | Area (Ha) | Area (Ha) | Title Deed | |||||||||
as per RM | Title Deed | |||||||||||||
BLOCK A |
||||||||||||||
Hakkies 695 | Ventersburg | 9(2) | 295.5035 | 295.5035 | T2058/1968 | |||||||||
Hakkies 695 | Ventersburg | RE(2)(Kondowa) | 220.2762 | 220.2762 | T3378/2002 | |||||||||
Hakkies 742 | Ventersburg | RE(716.2973) | 554.8853 | 716.2973 | T12805/1999 | |||||||||
Hakkies 742 | Ventersburg | 1(189.9755) | 189.9755 | T27714/2002 | ||||||||||
Hakkies 695 | Ventersburg | 6(5) | 44.6110 | 44.6110 | T22212/2002 | |||||||||
Hakkies 695 | Ventersburg | 7(5) | 44.6110 | 44.6110 | T22212/2002 | |||||||||
Hakkies 695 | Ventersburg | RE3 (Engela) | 267.6662 | 267.6663 | T22212/2002 | |||||||||
Hakkies 695 | Ventersburg | RE5(3) | 133.8332 | 133.8332 | T22213/2002 | |||||||||
Hakkies 695 | Ventersburg | 8(5) | 44.6110 | 44.6110 | T22213/2002 | |||||||||
BLOCK B | ||||||||||||||
Bloemhoek 509 | Theunissen | 1(Elim) | 201.2850 | 190.5657 | T5581/1997 | |||||||||
Bloemhoek 509 | Theunissen | RE | 886.3079 | 885.2204 | T3377/2002 | |||||||||
Bloemhoek 509 | Theunissen | RE(2)(Nelspark) | 187.3068 | 187.3068 | T5581/1997 | |||||||||
Weltevreden 443 | Theunissen | RE(623.7697) | 1112.6303 | 623.7697 | T14323/1997 | |||||||||
Weltevreden 443 | Theunissen | 1(665.1082) | 665.1082 | T13510/1994 | ||||||||||
Pedamar 402 | Theunissen | Farm | 85.6532 | 85.6532 | T10501/2003 | |||||||||
Welgelegen 382 | Theunissen | RE(2)(De Rust) | 245.7008 | 245.7008 | T1072/1986 | |||||||||
Welgelegen 382 | Theunissen | 4(Bloekom) | 491.4015 | 491.4015 | T14610/1993 | |||||||||
Welgelegen 382 | Theunissen | RE(5)(Spoordraai) | 122.8390 | 122.8390 | T1017/1995 | |||||||||
Welgelegen 382 | Theunissen | RE(6)Euodia | 327.6009 | 325.6503 | T3377/2002 | |||||||||
Welgelegen 382 | Theunissen | 7(6)(Moedersgitt) [now Ptn 24] | 163.8005 | 242.3735 | T5581/1997 | |||||||||
Welgelegen 382 | Theunissen | RE10(5) | 122.8350 | 117.9878 | T27373/2002 | |||||||||
Welgelegen 382 | Theunissen | 11(5) | 122.8350 | 121.3083 | T27373/2002 | |||||||||
Welgelegen 382 | Theunissen | 12(5-Optavit) | 122.8350 | 122.8350 | T13456/1990 | |||||||||
Welgelegen 382 | Theunissen | 19(2)(now on 25) | 85.6537 | 405.7477 | T28639/1999 | |||||||||
BLOCK C | ||||||||||||||
Kriegerskraal 708 | Ventersburg | RE | 707.9175 | 707.9175 | T23906/1998 | |||||||||
Kriegerskraal 708 | Ventersburg | 1 | 707.9175 | 707.9175 | T23906/1998 | |||||||||
Palmietfontein 229 | Winburg | Farm (now RE) | 1761.4393 | 1761.4393 | T624/2002 | |||||||||
Biddulph 329 | Ventersburg | Farm | 598.7216 | 598.7216 | T624/2002 | |||||||||
De Dam 27 | Ventersburg | Farm | 185.0980 | 185.0980 | T624/2002 | |||||||||
Le Roux 717 (now 766) | Ventersburg | RE | 770.8788 | 901.4614 | T20691/2001 | |||||||||
Wintershoek Zuid 28 | Ventersburg | Farm | 1109.8913 | 1109.8913 | T3818/2002 | |||||||||
Steenbokspruit 148 | Ventersburg | Farm | 328.9083 | 328.9083 | T979/1981 | |||||||||
Total Hectares | 12055.4543 |
ANNEXURE 3
DIAGRAM DEPICTING THE MILLO AREA
ANNEXURE 4
REGISTERED DESCRIPTION OF THE MILLO AREA
Farm Name |
Portion |
Area (Ha) |
Title Deed Number |
District |
Owner |
|||||||
Millo 639 |
RE | 134.7239 | T7618/1976 | Ventersburg | Harmony Gold Mining Co | |||||||
Millo 639 |
1 | 41.7660 | T7294/1981 | Ventersburg | Harmony Gold Mining Co | |||||||
Millo 639 |
2 | 1.0606 | T584/1993 | Ventersburg | Transnet Ltd | |||||||
Total |
177.5505 |
ANNEXURE 5
DIAGRAM DEPICTING THE TWEEPAN AREA
ANNEXURE 6
REGISTERED DESCRIPTION OF THE TWEEPAN AREA
Farm Name |
Portion |
Area (Ha) |
Title Deed Number |
District |
Owner |
SG Diagram No. |
||||||||
Tweepan 678 |
RE | 42.4095 | T29981/2002 | Ventersburg | Bioteko Farmers CC | 134/1930 | ||||||||
Tweepan 678 |
1 | 134.4755 | T7618/1976 | Ventersburg | Harmony Gold Mining Co | 350/1957 | ||||||||
Tweepan 678 |
2 | 0.6655 | T1904/1993 | Ventersburg | Transnet Ltd | 93/1992 | ||||||||
Total |
177.5505 |
ANNEXURE 7
OPTION AGREEMENT
CIS/WCG/35
MEMORANDUM OF AGREEMENT- CLEAN WCG35
CIS/ABA
30/04/2004
MEMORANDUM OF AGREEMENT
between
WITWATERSRAND CONSOLIDATED GOLD
RESOURCES (PROPRIETARY) LIMITED
and
ARMGOLD/HARMONY FREEGOLD
JOINT VENTURE COMPANY (PROPRIETARY) LIMITED
TABLE OF CONTENTS
1. |
Introduction | 2 | ||||
2. |
Definitions and Interpretation | 2 | ||||
3. |
Cession | 7 | ||||
4. |
Registration of Cession | 7 | ||||
5. |
Consideration | 8 | ||||
6. |
Completion | 9 | ||||
7. |
Representations and Warranties | 9 | ||||
8. |
Exploration Programme and Feasibility Study | 12 | ||||
9. |
Option | 14 | ||||
10. |
Termination and breach | 20 | ||||
11. |
Miscellaneous | 30 |
Page 1.
1. | Introduction |
1.1 | Freegold holds the Mineral Rights and the Information. |
1.2 | Wits Gold wishes to acquire the Mineral Rights and Information in return for granting Freegold the Option. |
1.3 | Subject to the terms and conditions of this Agreement, Freegold has agreed to cede the Mineral Rights to Wits Gold, which has agreed to grant Freegold the Option on the basis set out in this Agreement. |
2. | Definitions and Interpretation |
2.1 | In this Agreement, including the Introduction, the following terms have the following meanings: |
2.1.1 | Affiliate | - | means with respect to any person, any party which controls, is controlled by or is under common control with such person, whether directly or indirectly; | |||
2.1.2 | Agreement | - | means this Agreement and any Annexes or Schedules to this Agreement; | |||
2.1.3 | Business Day | - | means any day other than a Saturday, Sunday or official public holiday in South Africa; | |||
2.1.4 | Completion | - | means completion in terms of clause 6; | |||
2.1.5 | Completion Date | - | means the first Business Day following either: |
Page 2.
2.1.5.1.1 |
the date on which the registration of cession of the Mineral Rights to Wits Gold is effected; or |
|||||
2.1.5.2 |
the date of deemed cession and delivery of the Mineral Rights in terms of clause 4.3 in which case Completion takes place on the day before the New Act comes into effect; |
|||||
whichever is applicable; | ||||||
2.1.6 | Completion Time | - | means 10h00 on the Completion Date; | |||
2.1.7 | Exploration Programme | - | the integration of a variety of geological techniques, aimed at delineating and quantifying the presence of economic mineralization prior to the undertaking of a Feasibility Study, to be undertaken by Wits Gold in terms of clause 8; | |||
2.1.8 | Feasibility Study | - | means an evaluation of the geological, mining, metallurgical, marketing and construction aspects of a mineral deposit previously defined during an Exploration Programme to be conducted by Wits Gold in terms of clause 8; |
Page 3.
2.1.9 | Freegold | - | means Armgold/Harmony Freegold Joint Venture Company (Proprietary) Limited, a limited liability company with registration No. 2001/029602/07, incorporated under the laws of the Republic of South Africa; | |||
2.1.10 | Information | - | means all data, records, geological reports, calculations, maps, interpretations and borehole core from the area of the Mineral Rights in the possession of Freegold, as at the Signature Date or acquired thereafter; | |||
2.1.11 | Group | - | means, collectively, a Party and its Affiliates; | |||
2.1.12 | Interest | - | means, without limitation, a legal, beneficial or equitable interest; | |||
2.1.13 | JSE | - | means the JSE Securities Exchange, South Africa; | |||
2.1.14 | JV | - | the joint venture referred to in clause 9.1.2; | |||
2.1.15 | JV Agreement | - | the joint venture agreement referred to in clause 9.3.2; | |||
2.1.16 | Mine or Mines | - | means the mine or mines which may be established on the Properties in accordance with this Agreement; |
Page 4.
2.1.17 | Minerals Act | - | means the Minerals Act, No 50 of 1991; | |||
2.1.18 | Mineral Rights | - | means the mineral rights in respect of the Properties, as set out in Schedule A hereto, held by Freegold and any right, consent or approval into which such rights may be converted; | |||
2.1.19 | New Act | - | means the Mineral and Petroleum Resources Development Act, No 28 of 2002; | |||
2.1.20 | Nominee | - | means any one or more Affiliate/s of Freegold nominated by Freegold to assume any of the rights of Freegold hereunder or under the JV Agreement; | |||
2.1.21 | Option | - | means the Option granted by Wits Gold to Freegold set out in clause 9; | |||
2.1.22 | Parties or Party | - | means each of Freegold, on the one hand, and Wits Gold on the other hand; | |||
2.1.23 | Properties | - | means the land to which the Mineral Rights relate; | |||
2.1.24 | Signature Date | - | means the date of last signature of this Agreement, provided both Parties sign; |
Page 5.
2.1.25 | Wits Gold | - | means Witwatersrand Consolidated Gold Resources (Proprietary) Limited, a private limited liability company, registration no. 2002/031365/07 incorporated under the laws of the Republic of South Africa; |
2.2 | In this Agreement: |
2.2.1 | unless the context otherwise requires, words denoting the singular include the plural and vice versa, words denoting persons include corporations, partnerships and other legal persons and references to a person include its successors and permitted assigns; |
2.2.2 | a reference to any specified clause, Schedule or Annexure shall be construed as a reference to that specified clause, schedule or annexure of this Agreement and the Schedules and Annexures are deemed to be incorporated in this Agreement, and a reference to this Agreement includes a reference to the Schedules and Annexures; |
2.2.3 | a reference to an agreement, law, statute, decree, regulation or other legal instrument shall be construed as a reference to such agreement, law, statute, decree, regulation or other legal instrument as the same may be amended, varied, supplemented, novated, assigned or re-enacted from time to time; |
2.2.4 | the headings and the Table of Contents are inserted for convenience of reference only and shall not affect the interpretation of this Agreement; |
2.2.5 | the expression including shall be construed as meaning including without limitation, unless the context otherwise requires; and |
2.2.6 |
if any provision in the introduction or definitions of this Agreement is a substantive provision conferring rights or imposing obligations on a Party, effect shall be given to it as if it were a substantive clause in the |
Page 6.
body of this Agreement, notwithstanding that it is only contained in the introduction or definitions. |
2.3 | The rule of construction that the agreement shall be interpreted against the Party responsible for the drafting or preparation of the agreement, shall not apply. |
3. | Cession |
Freegold hereby cedes to Wits Gold, the Mineral Rights and the Information on the terms and conditions set out in this Agreement, which cession Wits Gold hereby accepts in return for the Option granted to Freegold.
4. | Registration of Cession |
4.1 | Notarial execution and registration of cession of the Mineral Rights to Wits Gold will be effected by Wits Golds Attorneys as soon as reasonably possible after the Signature Date. The Parties undertake on demand to sign all such documents and deliver all such deeds as they may respectively be called upon to sign or deliver by the said attorneys, to enable notarial execution and registration of cession of the Mineral Rights to be effected. |
4.2 | The costs of and incidental to the registration of cession of the Mineral Rights shall be borne and paid by Wits Gold. |
4.3 |
In the event that the New Act commences before the registration of cession of the Mineral Rights to Wits Gold and, as a result, registration of cession of the Mineral Rights to Wits Gold is no longer legally possible, then Freegold hereby grants its consent to Wits Gold, with effect from the day immediately preceding the commencement of the New Act, to prospect for and mine the minerals which form the subject of the Mineral Rights, for Wits Golds own benefit and account, in terms of sections 6(l)(b) and 9(1)(b) of the Minerals Act respectively. The Parties record and agree that this consent will result in Wits Gold then being the holder of an old order right (as contemplated in Schedule II of the New Act) in respect of the Mineral Rights. The granting of the said consent will, for the purposes of this Agreement, be deemed to be the cession of the Mineral Rights by |
Page 7.
Freegold to Wits Gold, and Freegold shall he deemed to have delivered the Mineral Rights on the day immediately preceding the date of commencement of the New Act. Freegold shall, to the extent reasonably possible and within its control, provide reasonable assistance and co- operation to Wits Gold, in the event that such assistance or co-operation is necessary in order for Wits Gold to obtain prospecting rights and/or mining rights pursuant to the provisions of Schedule II to the New Act, in respect of the Mineral Rights, provided that Wits Gold shall indemnify Freegold against all costs, expenses and liabilities incurred by Freegold in providing such assistance and co-operation, |
4.4 | Registration of cession of the Mineral Rights to Wits Gold will be subject to all the title conditions under which the Mineral Rights are held. |
4.5 | Risk in and benefit to the Mineral Rights shall be deemed to have passed to Wits Gold on the Completion Date. |
5. | Consideration |
5.1 | The consideration for the cession of the Mineral Rights to Wits Gold in clause 3 shall be the grant of the Option to Freegold by Wits Gold and the payment in cash by Wits Gold to Freegold of value-added tax on the value of the Option. |
5.2 | The Parties agree that the value of the Option is R1 800 000,00 (ONE MILLION EIGHT HUNDRED RAND) and that the value-added tax payable in terms of clause 5.1 will accordingly be R252 000.00 (TWO HUNDRED AND FIFTY TWO THOUSAND RAND), which amount will be paid by Wits Gold to Freegold on the first Business Day after the Signature Date. |
5.3 |
Wits Gold hereby indemnifies Freegold in relation to any capital gains tax imposed upon Freegold as a result of this sale or the granting of the Option up to a limit of R1 000 000 (ONE MILLION RAND). Wits Gold hereby undertakes to pay to Freegold an amount equal to any such capital gains tax |
Page 8.
imposed on Freegold within 3 (THREE) Business Days of a written request from Freegold in respect thereof. |
6. | Completion |
6.1 | Completion of the transactions contemplated hereby shall occur on the Completion Date at the Completion Time and if registration of cession of the Mineral Rights in terms of clause 4.1 has been effected. Completion will take place at First Floor, 4 The High Street, Melrose Arch, Melrose North at which a representative of Freegold and Wits Gold will meet, and Completion will be effected by the Wits Gold representative delivering to the Freegold representative proof of the registration of cession of the Mineral Rights to Wits Gold, unless the provisions of 4.3 are applicable, in which event Completion shall be deemed to have taken place the day before the day of commencement of the New Act. |
6.2 | Both Parties undertake to use their reasonable endeavours to ensure that Completion is effected as soon as reasonably possible. |
7. | Representations and Warranties |
7.1 | Mutual representations and warranties |
As at the Signature Date and the Completion Date, each Party represents to the other that:
7.1.1 | it is a company duly incorporated, validly subsisting and in good standing under the laws of South Africa; |
7.1.2 | it has all requisite capacity, power and authority to carry on its business and to enter into this Agreement and any agreement or instrument referred to or contemplated by this Agreement and to carry out and perform all of its obligations and duties hereunder and thereunder; and |
7.1.3 | no proceedings are pending, and it is not aware of any basis for institution of any proceedings, for its dissolution or winding-up. |
Page 9.
7.2 | Freegold representations and warranties |
7.2.1 | Freegold warrants to Wits Gold that as at the Signature Date and the day immediately prior to the Completion Date: |
7.2.1.1 | Freegold is the registered holder of the Mineral Rights, subject to any registered bonds thereover; |
7.2.1.2 | Freegold is able to cede ownership of the Mineral Rights to Wits Gold in terms of this Agreement (subject to the provisions of 4.3) and subject to the necessary consent from bondholders being obtained; |
7.2.1.3 | it has not granted to any third party any consent contemplated in section 6(l)(b) or section 9(l)(b) of the Minerals Act, or otherwise or any other right to prospect or mine, in respect of the Mineral Rights. |
7.2.2 | Save for the warranties in clause 7.2.1, Freegold gives no other warranties or undertakings and the Mineral Rights are sold voetstoots. |
7.3 | Wits Gold representations and warranties |
As at the Signature Date and the Completion Date, Wits Gold represents and warrants to Freegold.
7.3.1 |
that consistent with the objectives of the proposed Charter on broad based socio-economic empowerment contemplated in section 100 of the New Act, more than 26% (TWENTY SIX PERCENT) of the present ordinary shareholders of Wits Gold will be derived from various groupings of historically disadvantaged South Africans as defined in the said Charter. The structure as outlined in Schedule B will be formalised by means of a Shareholders Agreement that will be signed by representatives of the different groups of shareholders on or before 30 June 2004. Such shareholders agreement shall provide for a lock up of the shares in Wits Gold held by Historically Disadvantaged Persons at least until the Mineral Rights are substituted by new rights |
Page 10.
under the New Act. Failure to sign such agreement before 30 June 2004 shall result in Freegold having the option to terminate this Agreement and retake possession, control, ownership of and risk in and benefit to the Mineral Rights or any rights that Wits Gold has in relation thereto under the New Act free of consideration; |
7.3.2 | none of the execution and delivery of this Agreement, the performance by Wits Gold of its obligations hereunder, and the representations and warranties given by Wits Gold hereunder, conflict with or will conflict with, accelerate the performance required by, result in any breach or contravention of, constitute a material default under or result in the creation of any material encumbrance, lien or charge under or pursuant to the provisions of: (i) any law applicable to Wits Gold; or (ii) the memorandum and articles of association or resolutions of the directors (or any committee thereof) or shareholders of Wits Gold which are in effect at the date hereof; or (iii) any mortgage, contract, agreement, instrument, lease or other document to which Wits Gold is bound; or (iv) any judgment or order binding Wits Gold or the property or assets of Wits Gold; |
7.3.3 | except as have been obtained prior to Completion, no approval, authorisation, consent or other order of, and no filing, registration or recording with, any governmental authority is required by Wits Gold in connection with the execution and delivery or with the performance by Wits Gold of its obligations in terms of this Agreement; |
7.3.4 | Wits Gold is in compliance with all by-laws, rules and regulations and all announcements and documents filed by or on behalf of Wits Gold were true and correct in all material respects, provided full, true and plain disclosure of all material facts relevant to Wits Gold and its respective assets and undertakings to the extent required and did not contain a material misrepresentation as at the respective dates of such filings and there has been no material change to the respective assets and undertakings of Wits Gold; and |
Page 11.
7.3.5 | no representation or warranty made by it in this Agreement, or any statement, schedule, certificate or other document delivered by it pursuant to or in connection with this Agreement, or in connection with any transaction contemplated hereby, whether in the form of a physical document, letter, electronic file, email or otherwise, contains any untrue statement of a material fact or omits to state a material fact required to be stated herein or therein or necessary to make the statements contained herein or therein not misleading. |
7.4 | Survival and acknowledgement |
7.4.1 | The representations and warranties set forth in this Agreement shall survive the execution and Completion of this Agreement and continue in full force and effect until the expiry of the relevant limitation periods under applicable law. |
7.4.2 | The Parties acknowledge that the representations and warranties made are made with the intention of persuading each other to enter into this Agreement and that the Parties have entered into this Agreement on the basis of, and in full reliance on, each of such representations and warranties. |
8. | Exploration Programme and Feasibility Study |
8.1 | Wits Gold undertakes to conduct at Wits Golds sole cost, an appropriate Exploration Programme over the Properties and, if in the opinion of the Wits Gold board of directors, a Feasibility Study is justified, to conduct a Feasibility Study in a form and of such scope as would be reasonably acceptable to financiers financing the proposed establishment of a Mine or Mines on the Properties. |
8.2 |
The Parties shall forthwith after the Signature Date form an exploration committee comprising 4 (FOUR) representatives of which 2 (TWO) each shall be appointed by Freegold and Wits Gold, in order to give effect to |
Page 12.
Wits Golds undertaking in 8.1. The chairman of the said exploration committee shall be appointed by Wits Gold and he shall have a casting vote. The exploration committee, at its first meeting, shall set its own rules and procedures. |
8.3 | If the Feasibility Study indicates that it is technically and commercially viable to proceed with the establishment of the Mine or Mines, then Wits Gold shall, in accordance with its internal procedures, seek a decision from its board of directors on whether or not to proceed with the establishment of the Mine or Mines. |
8.4 | If the board of directors of Wits Gold decides in terms of clause 8.3 to proceed with the establishment of the Mine or Mines, Wits Gold shall notify Freegold of this decision in writing within 3 (THREE) Business Days after the decision has been made and shall simultaneously make available to Freegold all information and documentation which the board of directors of Wits Gold had at its disposal when it made the decision to proceed, including the costs incurred in conducting the Feasibility Study. |
8.5 | Should the board of directors of Wits Gold decide in terms of clause 8.3 not to proceed with the establishment of the Mine or Mines, but decide at any later date to do so, then Wits Gold shall notify Freegold of such decision in writing within 3 (THREE) Business Days after such decision has been made and shall simultaneously make available to Freegold all information and documentation which the board of directors of Wits Gold had at its disposal when it made the subsequent decision to proceed, including the costs incurred in conducting the Feasibility Study. |
8.6 | Neither Wits Gold nor any other member of the Wits Gold Group shall enter into or establish a joint venture or project in respect of, transfer, convey, assign or grant an option in respect of or grant a right to purchase or in any manner transfer or alienate or agree to transfer or alienate any portion of its Interest in, or rights to acquire an Interest in, the Mineral Rights to any third party, unless: |
8.6.1 | Freegold has given its prior written approval therefor, and |
Page 13.
8.6.2 | in the event of a cession of any of the Mineral Rights to such third party, the Mineral Rights are sold for fair market value and, upon cession of the Mineral Rights to the third party. Wits Gold pays to Freegold 50% (FIFTY PERCENT) of the proceeds of such disposal of the Mineral Rights, less three times the sum of the actual costs of the Exploration Programme and the Feasibility Study (that is, the payment to Freegold = 0.5*(proceeds from sale of Mineral Rights) - 3*(actual costs of the Exploration Programme and + actual costs of the Feasibility Study)), where the payment to Freegold shall always be zero or greater than zero. |
8.7 | The restrictions in 8.6 shall not prevent Wits Gold encumbering the Mineral Rights in favour of a financial institution as security for expenditure incurred or to be incurred by Wits Gold on the Properties; provided that the relevant financers shall be bound by a right of first refusal in favour of Freegold in respect of the Mineral Rights on the terms set out, mutatis mutandis , in 9.3.2.12. |
9. | Option |
9.1 | Grant of Option |
9.1.1 | Should the board of directors of Wits Gold decide to proceed with the establishment of the Mine or Mines in terms of clause 8.4 or clause 8.5, Wits Gold hereby irrevocably grants to Freegold or its Nominee the sole and exclusive right to acquire, at its sole discretion, up to a 40% (FORTY PERCENT) beneficial Interest in the Mine or Mines, at the price determined in terms of clause 9.3.2.1, provided that at all times Freegold shall be freely entitled to cede and assign to an Affiliate their rights and obligations under this clause 9 on written notice to Wits Gold. For purposes of this clause 9 the Other Participant refers to Freegold or the Affiliate or both of them, as the case may be, from time to time. |
9.1.2 |
Upon the exercise of the Option, the Other Participant and Wits Gold will be deemed to have concluded a joint venture in accordance with |
Page 14.
the provisions of 9,3.2. The Parties shall, however, after exercise of the Option negotiate in good faith any changes to the terms set out in clause 9.3.2 with a view to maximising organisational and operational efficiencies and to incorporating tax and other related legal concerns including the implications of the New Act once effective. The Parties shall further investigate whether the JV shall be incorporated or unincorporated especially in the light of security of tenure and tax considerations. If the Parties are unable to agree on changes to the terms set out in clause 9.3.2 including the corporate structure of the JV, the provisions of clause 9.3.2 shall continue to bind the Parties. |
9.2 | Period of Option |
The Option shall be exercisable by the Other Participant within 90 (NINETY) Business Days after receipt by the Other Participant of the decisions, information and documentation referred to in either clause 8.4 or clause 8.5. The exercise of the Option will be subject to any relevant consents or permissions being required in law whether in terms of the New Act, the Competition Act 1998 or otherwise.
9.3 | Exercise of the Option |
9.3.1 | Any exercise of the Option shall be in writing and delivered to Wits Gold at the address provided for in clause 11.4. |
9.3.2 | The Parties agree that should the Other Participant exercise the Option in respect of any Mine then the Parties will be deemed to have entered into a JV Agreement in respect of such Mine in accordance with the following terms: |
9.3.2.1 |
the Other Participant will reimburse Wits Gold in cash 40% (FORTY PERCENT) of the actual costs of the Exploration Programme and the Feasibility Study plus value added tax in consideration for a 40% (FORTY PERCENT) Interest in the JV or a pro rata sum should the Other Participant elect to |
Page 15.
acquire less than 40% (FORTY PERCENT), payable within 30 (THIRTY) days after exercise of the Option; |
9.3.2.2 | all costs and profits related to the JV will be shared by the Other Participant and Wits Gold in proportion to their Interests in the JV from time to time. To the extent that one Party does not contribute its share of such costs, the other Party will be entitled to make such contribution, and there will be a proportionate dilution of the non-contributing Partys Interest in the JV. Dilution will occur in accordance with a dilution formula which will be based on the sum of all costs that are reasonably, necessarily and actually incurred in effecting completion of the Exploration Programme and the Feasibility Study, and all cash calls at that time (as defined in clause 9.3.2.8.4) by the Operator and/or the JV; |
9.3.2.3 | Wits Gold and Freegold, at the cost of the JV, will obtain all authorisations and permits necessary for the operation of the Mine or Mines, including without limitation, all necessary mining authorisations, mining rights and the approval of appropriate environmental management programs, preferably in the names of the Parties in unincorporated joint venture reflecting their respective Interests in the JV, provided that should the JV terminate or their authorisations and permits lapse, should Wits Gold either itself or through another entity to which it is affiliated in any manner whatsoever, obtain a right to prospect or mine on the Properties, then the provisions of this clause 9 shall be deemed to apply in respect of Wits Golds interest in the Properties: |
9.3.2.4 |
day-to-day JV activities will be conducted by a management committee established for this purpose ( the Management Committee ) and comprising initially of four members, each Party appointing two members thereof. The Party with the largest ownership Interest in the JV will have the right to |
Page 16.
appoint a member of the Management Committee as the Chairperson of the Management Committee. Unless specifically provided otherwise, all Management Committee decisions will be made by simple majority vote with each member having one vote and, in the event of a deadlock, the Chairperson having a casting vote. Where a Partys Interest in the JV drops to below 25% (TWENTY FIVE PERCENT) it shall only be entitled to appoint one member into the Management Committee and the Management Committee shall accordingly comprise of one less member; |
9.3.2.5 | the Party that holds a greater than 50% (FIFTY PERCENT) Interest in the JV or, if each Party holds a 50% (FIFTY PERCENT) Interest in the JV, then Wits Gold or its Nominee, shall be the first JV operator ( Operator ) and will be entitled to remain so (subject to its ability to terminate such appointment) unless its JV Interest is reduced below 50% (FIFTY PERCENT). The remuneration of the Operator will be payable quarterly to the Operator and will be equal to 2% (TWO PERCENT) of the revenues generated by the JV in each quarter, plus value added tax; |
9.3.2.6 | Wits Gold undertakes to contribute and make available to the JV |
9.3.2.6.1 | the Mineral Rights; |
9.3.2.6.2 | any prospecting permits and/or mining authorisations in relation to the Mineral Rights, which it may hold; and |
9.3.2.6.3 | any Environmental Management Programmes ( EMPs ) which it may have submitted for approval, or in respect of which it has obtained approval, |
subject to the provisions of 9.3.2.3;
Page 17.
9.3.2.7 | Wits Gold undertakes to contribute and make available to the JV all prospecting information, geological interpretations, data and information relating to the Mineral Rights, including all rights, permissions and requirements at Wits Golds disposal and reasonably required to conduct the JV operations; |
9.3.2.8 | the Operator shall: |
9.3.2.8.1 | keep all JV property in good standing and free of encumbrances, comply with laws and maintain proper books and accounts and adequate insurance; |
9.3.2.8.2 | prepare and submit monthly and quarterly reports to the Management Committee; |
9.3.2.8.3 | conduct activities according to work programmes and budgets approved by the Management Committee and otherwise in accordance with good mining practice; and |
9.3.2.8.4 | have the right to call for funds from the Parties, for example, by means of the provision of a loan to, or the purchase of a further Interest in, the JV ( cash call ) in advance on a quarterly basis to cover anticipated work programme expenditures (including a reasonable amount of working capital) which have been approved by the Management Committee. The Other Participant shall not be obliged to fund, but if it does not, the provisions of clause 9.3.2.2 shall apply; |
9.3.2.9 | all JV operations are to be conducted, all expenditures are to be incurred and all assets are to be acquired only pursuant to work programmes and budgets approved by the Management Committee; |
9.3.2.10 |
the Operator is to submit annual work programmes and budgets for Management Committee approval at least 60 days |
Page 18.
prior to the completion of previous work programmes and budgets; |
9.3.2.11 | notwithstanding any other provisions in the JV Agreement, the following matters will require the approval of the holders of at least 75% (SEVENTY FIVE PERCENT) of the Interests in the JV: |
9.3.2.11.1 | the initiation and settlement of any litigious proceedings; |
9.3.2.11.2 | the pledging or encumbering of JV assets; |
9.3.2.11.3 | the issuance or allotment of repurchase of shares, share options, warrants or debentures in any corporate vehicle established or used in connection with the JV; |
9.3.2.11.4 | non-arms length transactions between the JV and any participant therein; |
9.3.2.11.5 | the alteration of share capital of any corporate vehicle, any changes in dividend policies and amendments to any constituent documents of any corporate vehicle established or used in connection with the JV; |
9.3.2.11.6 | material deviations from any work programme and budget approved by the Management Committee; and |
9.3.2.11.7 | the initial capital expenditure budgets to construct the Mine, and the funding thereof; |
9.3.2.11.8 | approval of annual budgets and strategic and annual business plans or other similar operating plans and any modification thereof; |
9.3.2.11.9 | the issue or giving of any guarantees, suretyships, letters of comfort or other similar undertakings of any nature whatsoever; |
Page 19.
9.3.2.11.10 | the establishment or the acquisition and purchase of other businesses, either directly or indirectly by means of purchasing shares in or assets of the company to which such business may belong; |
9.3.2.11.11 | any disposal of the business or assets of the JV (other than, in the assets, in the ordinary course of business); |
9.3.2.11.12 | the appointment or dismissal of senior executives of the JV; |
9.3.2.11.13 | the incurring of any borrowings or debt not approved in the annual budget, which give rise to an aggregate liability in respect of all such matters in any financial year in excess of R500 000; |
9.3.2.11.14 | any capital expenditure or commitment not approved in the annual budget; |
9.3.2.11.15 | any change in the basis of accounting or accounting policies from those used during the immediately preceding financial year otherwise than in accordance with generally accepted accounting practice; |
9.3.2.11.16 | the purchase, sale, hiring, letting or sub-letting of any immovable property; |
9.3.2.11.17 | the appointment and removal of auditors, consultants or advisors to the JV; and |
9.3.2.11.18 | the approval of transactions and contracts outside the ordinary course of the JVs business; |
9.3.2.12 |
9.3.2.12.1 |
Except as provided in clauses 9.3.2.12.2, 9.3.2.12.3 and 9.3.2.12.4 a Party may not directly or indirectly, sell, transfer, assign or otherwise dispose of, or further grant a |
Page 20.
security interest or create a right of participation in or otherwise encumber its Interest or its rights under or in respect of this Agreement or any part thereof, and no Party shall commit to do the same unless in each case approved by the other Party in writing and any attempt to do so shall be void. |
9.3.2.12.2 | In the event of the execution of an agreement providing for the acquisition ( the Acquisition Agreement ) by any third party ( the Acquiring Third Party ) of a Partys ( the Disposing Participant ) Interest, the other Party ( the Remaining Participant ) shall have a right of first refusal to acquire same on the same terms and conditions as set out in the Acquisition Agreement, subject to the following terms: |
(a) | the Disposing Participant shall within 5 (FIVE) Business Days after the execution of the Acquisition Agreement, provide a copy of and in writing notify the Remaining Participant of the Acquisition Agreement ( the Acquisition Notice ); |
(b) | the Remaining Participant shall in writing notify its intention to exercise its right of first refusal to the Disposing Participant within 30 (THIRTY) Business Days of the Acquisition Notice; |
(c) | if the Remaining Participant is prevented from acquiring the Interest of the Disposing Participant due to antitrust or other regulatory or governmental restrictions, it may, during the period provided for in clause (b) designate (by notice given to the Disposing Participant) a third party ( the Designated Third Party ) which may exercise the Remaining Participants right of first refusal hereunder. |
Page 21.
9.3.2.12.3 | In the event of a disposal of a Participants Interest as provided for in clause 9.3.2.12.2, the Disposing Participant is obliged to procure that and the Acquisition Agreement will not be effective until the Acquiring Third Party (or Designated Third Party) has entered into an agreement with the other Participant (which agreement shall not constitute a release of the Disposing Participant from its obligations under this Agreement) whereby such Acquiring Third Party (or Designated Third Party) agrees to assume and be bound by all obligations and liabilities of the Disposing Participant and subject to all the restrictions of which the Disposing Participant in respect of the JV is subject under this Agreement. |
9.3.2.12.4 | Where a Partys Interest in the JV drops to below 10% (TEN PERCENT) the other Party shall be entitled to acquire such Interest in consideration for an amount which is equal to a corresponding percentage of the sum of all costs that are reasonably, necessarily and actually incurred in effecting completion of the Exploration Programme and the Feasibility Study, and all cash calls (as defined in clause 9.3.2.8.4) at that time by the Operator and/or the JV; |
9.3.2.13 | the Parties will not be entitled to encumber any Interest in the JV, with the exception of encumbrances agreed between the Parties in writing and for the purposes of financing the JV activities; |
9.3.2.14 | the provisions of clauses 2.2, 7, 10 and 11.2 to 11.11 inclusive shall apply, mutatis mutandis , to the JV Agreement and are hereby incorporated by reference; |
9.3.2.15 |
unless otherwise agreed between the Parties, all the rights and obligations which accrue to and are incurred by them as |
Page 22.
against third parties in pursuing the objects of the JV in accordance with the provisions of the JV Agreement, shall accrue to and be incurred by them severally in accordance with their Interests, and not jointly and severally; |
9.3.2.16 | nothing in the JV Agreement shall be construed as creating a partnership between the Parties, their intention being merely to co-operate with each other and to act together as the co-owners of the Mine/s; |
9.3.2.17 | save as may otherwise be permitted by the JV Agreement, none of the Parties shall be entitled to incur any obligations on behalf of the others or to act on behalf of the others or to act on behalf of or bind the JV or any Party; |
9.3.2.18 | the business of the JV shall be to prospect for, mine for and recover gold, silver, uranium and pyrite on and under the Mine and any other area decided upon by the Management Committee and incorporated within the ambit of this Agreement; |
9.3.2.19 | each financial year of the JV shall end on 30 June until changed by resolution of the Management Committee; |
9.3.2.20 |
the JV shall keep full, complete and accurate books of account, records and information with respect to any of the JVs affairs. Entries shall be made in such books of account and records of all such matters, transactions and things are usually written and entered in books of account and records kept by persons or entities engaged in businesses similar to the business of the JV. Each Party shall have the right, acting reasonably, to audit, examine, and make copies of or extracts from the books of account and records of the JV at all reasonable times during usual business hours. Such right may be exercised through any agent or employee of such Party designated by it, or by an independent chartered accountant designated by such Party. |
Page 23.
Each Party shall bear all expenses incurred in any examination made for such Partys account; |
9.3.2.21 | the initial auditors of the JV shall be such internationally recognised firm of chartered accountants as is selected by mutual agreement between the Parties following a tender process. All audit reports and reports to management on internal controls and procedures prepared by the auditors of the JV, shall be made available to the Management Committee and each of the Parties. The audit fee to be paid to the auditors of the JV shall be fixed from time to time by the Management Committee; |
9.3.2.22 | the Management Committee shall provide each Party with audited financial statements prepared in accordance with IAS together with the report of the auditors thereon, to meet the reporting requirements of the Parties; |
9.3.2.23 | the Management Committee and each Party shall be provided with a monthly management and financial report and such other financial and operating information as may be reasonably requested from time to time by any Party or the Management Committee. The Management Committee shall ensure that the monthly management and financial reports are compiled to reflect the results of the JV in South African Rand; |
9.3.2.24 |
the JV shall from time to time open an account or accounts with such bank or banks as the Management Committee may determine, such accounts to be maintained in the name of the JV. All monies from time to time received by, or on account of, the JV shall be deposited forthwith preferably by electronic transfer in such JV accounts and all disbursements on account of the JV shall be drawn upon such JV account or accounts. Such persons as may from time to time be designated by resolution of the Management Committee, may draw cheques |
Page 24.
in the name of the JV and may sign, endorse and accept in the name of the JV, any bills, notes, cheques, drafts or other instruments for the purpose of the business of the JV, subject to such restrictions as may from time to time be prescribed by the Management Committee; |
9.3.2.25 | the JV shall prepare and deliver to either Party any information packages or other information which such Party reasonably requests in connection with any domestic or foreign tax or other governmental filing to be made by such Party or any of its Affiliates, provided that such Party reimburses the JV for the incidental out of pocket costs incurred by the JV in preparing and delivering any such information packages or information (including but not limited to reasonable costs in respect of the JVs own personnel and facilities); |
9.3.2.26 | having regard to the risks to which each of the Parties is exposed in the mining operations prudent and appropriate insurance policies shall be carried by the Parties on an ongoing basis in order to minimise risks as far as is reasonably possible and cost effectively; |
9.3.2.27 | the Operator shall on receipt of all monies paid to suppliers for production from the Mine and all monies received for the sale of by-products, deposit such monies into the bank account of the JV; |
9.3.2.28 | the Manager shall advise the Parties of funds held in the JV bank account that are surplus to the immediate requirements of the JV and the Mine; |
9.3.2.29 |
the Parties will maintain the profit distribution policy whereby, subject to the making of appropriate specific reservations, the portion of annual profit to be distributed and the portion thereof to be retained, will be commensurate with the maintaining of a sound financial position of the JV provided |
Page 25.
that the profits of the JV shall be distributed on a quarterly basis; |
9.3.2.30 | it is recorded that the Mine and the JV shall be operated for the Mine and the Parties individually and each of them shall each be liable separately to account for profit or loss from the Mine and for the payment of income tax thereon, according to their respective Interests; |
9.3.2.31 | if any Party is prevented or restricted directly or indirectly from carrying out all or any of its obligations under the JV Agreement from any cause beyond the reasonable control of that Party (including without limiting the generality of the aforegoing, war, civil commotion, riot, insurrection, strikes, lock-outs, fire, explosion, flood and acts of God, or by invasion of or sit-ins at the Mine, or where a Party is prevented from occupying or operating any part of the Mine by combination of workmen or interference by trades union), the Party so affected shall be relieved of its obligations hereunder during the period that such event and its consequences continue but only to the extent so prevented and shall not be liable for any delay or failure in the performance of any obligations hereunder of loss of damages either general, special or consequential which the other Party may suffer due to or resulting from such delay or failure, provided always that written notice shall within 48 (FORTY EIGHT) hours of the occurrence constituting Force Majeure be given of any such inability to perform by the affected Party and provided further that the obligation to give such notice shall be suspended to the extent necessitated by such Force Majeure; |
9.3.2.32 | any Party invoking Force Majeure shall use its best endeavours to terminate the circumstances giving rise to Force Majeure and upon termination of the circumstances giving rise thereto, shall forthwith give written notice thereof to the other Parties; |
Page 26.
9.3.2.33 | if the full and proper implementation of this Agreement is precluded by any of the events or a combination of the events contemplated in clause 9.3.2.31 for a period of more than 12 (TWELVE) consecutive months at any one time, then and in such event the Parties shall endeavour to conclude new arrangements equitable to both of them and should they fail to agree upon any such new arrangements within 90 (NINETY) days of either Party calling upon the other to do so, either Party shall be entitled to terminate the JV Agreement and the provisions of 9.3.2.34.1 shall apply. |
9.3.2.34 |
9.3.2.34.1 | In the event that the JV is liquidated at any time, the JV assets shall be distributed by the JV to the Parties on such liquidation, in accordance with the provisions set out in this clause. |
9.3.2.34.2 | The liquidator of the JV shall, unless otherwise agreed, be a member of the auditors of the JV at the date of liquidation or, if no such member is able or willing to act, an auditor agreed upon between the Parties, and failing such agreement, appointed by lot. |
9.3.2.34.3 | The liquidator shall: |
(i) | demand an account from each Party of the assets of the JV and the assets of the Parties contributed to the JV in its possession as well as any profits earned by the use or utilisation of those assets since the date of liquidation of the JV; |
(ii) | compile an account reflecting the assets and liabilities of the JV, including amounts owed by the JV to the Parties; |
Page 27.
(iii) | collect all debts due to the JV by persons other than the Parties; |
(iv) | realise the assets of the JV in whatever manner he deems fit, to the extent that he, in his sole discretion, deems necessary, to: |
|
pay the creditors of the JV; |
|
pay the expenses of such realisation and the liquidation; |
|
settle any claims between the Parties arising from the JV; and |
|
effect a distribution of the remaining assets or the proceeds thereof in accordance with the Parties respective Interests; |
9.3.2.34.4 | in the event of the proceeds of the realisation of the JV assets proving insufficient to meet the liabilities of the JV (other than any amounts due to the Parties), levy a contribution upon the Parties to contribute to that deficit in the proportion in which they bear the losses of the JV; |
9.3.2.34.5 | discharge all the liabilities of the JV to its creditors other than the Parties insofar as the proceeds of the realisation of the JV assets (if any), permit; and |
9.3.2.34.6 | compile and settle an account for the payment of claims owing by the JV to the Parties, the settlement of their claims against each other and the distribution of any assets remaining amongst the Parties in accordance with this 9.3.2.34 with due account being taken of amounts owing by either of the Parties to the JV. |
Page 28.
93.2.35 | it is recorded that certain of the Mineral Rights are subject to subscription rights or participation rights in favour of Southern Prospecting (Proprietary) Limited or Lydenburg Exploration Limited the details of which have been disclosed to Wits Gold, which agrees to be bound thereby. In the event of Freegold exercising the Option, the Interest of Wits Gold and Freegold in the JV shall be proportionately diluted to accommodate either or both of Southern Prospecting (Proprietary) Limited and Lydenburg Exploration Limited. |
10. | Termination and breach |
10.1 | Should either Party commit a breach of any of the material provisions of this Agreement and fail to remedy such breach within 10 (TEN) Business Days after receiving written notice from any other Party aggrieved thereby, requiring the defaulting Party to do so, then the aggrieved Party shall be entitled, without prejudice to the aggrieved Partys other rights in law, to cancel this Agreement or to claim specific performance of all the defaulting Partys obligations then due, in either event, without prejudice to the aggrieved Partys rights to claim damages. |
10.2 | Notwithstanding the aforegoing, the Parties agree that none of them shall have any claim for indirect loss and/or consequential loss or damages as a result of the breach by the other Party of the provisions of this Agreement and any execution of any judgment obtained by either Party against the other may be satisfied only against the assets and rights of the JV or the defaulting Partys Interest. |
10.3 | The Parties agree not to invoke the right to cancel this Agreement. |
Page 29.
11. | Miscellaneous |
11.1 | Effective date |
This Agreement shall become effective on the Signature Date hereof.
11.2 | Governing law |
This Agreement shall be governed by and construed in accordance with the laws of South Africa.
11.3 | Dispute Resolution |
11.3.1 | Any disputes between the Parties arising out of or in terms of or pursuant to the provisions of this Agreement will be resolved in the following manner: |
11.3.1.1 | matters which cannot be resolved at the Management Committee will be referred to the chief operating officers of the Parties respectively; |
113.1.2 | if a matter referred to the chief operating officers of the Parties respectively in terms of clause 11.3.1.1 above is not resolved between them within 14 (FOURTEEN) days after the date on which it is referred to them, the matter will be referred to the respective chairmen at that time of the Parties for resolution by them; |
11.3.1.3 | any dispute to which the provisions of this clause 11.3.1 apply which is not resolved in terms of clauses 11.3.1.1 and 11.3.1.2 will be referred to arbitration in accordance with the provisions of clauses 11.3.2 and 11.3.3 below. |
11.3.2 | Any dispute arising from or in connection with this Agreement shall be finally resolved in accordance with the Rules of the Arbitration Foundation of Southern Africa by an arbitrator or arbitrators agreed by the Parties or failing such agreement within 14 (FOURTEEN) days of the notification of the dispute appointed by the Foundation. |
Page 30.
11.3.3 | Save in the case of manifest error the decision of the arbitrator(s) shall be final and binding on the Parties, and may be made an order of any Court of competent jurisdiction. Each of the Parties hereby submits itself to the jurisdiction of the Witwatersrand Local Division of the High Court of south Africa should the other Party wish to make the arbitrators decision an order of that Court. |
11.4 | Notices |
11.4.1 | Any demand, notice or other communication to be given in connection with and as contemplated under this Agreement will be given in writing by personal delivery or by facsimile addressed to the recipient as follows: |
Wits Gold:
Physical
12 th Floor
SA Eagle House
70 Fox Street
Johannesburg
Telefax: (011) 834 1708
Contact: CEO
Freegold:
Physical
Block 27
Randfontein Office Park
Cnr Main Reef Road and Ward Avenue
Randfontein
Telefax: (011)411 2398
Contact: The Company Secretary
or to such other address in South Africa (not being a post office box or poste restante ), facsimile number or contact person as may be designated by written notice given by either Party to the other.
11.4.2 | Any demand, notice or other communication given in terms of this Agreement shall be in writing and shall |
Page 31.
11.4.2.1 | if delivered by hand be conclusively deemed to have been duly received by the addressee on the date of delivery thereof; and |
11.4.2.2 | if transmitted by facsimile be conclusively deemed to have been received by the addressee on the day of transmittal thereof if given during the normal business hours of the recipient, and on the Business Day during which such normal business hours next occur if not given during such hours on any day. |
11.4.2.3 | Notwithstanding anything to the contrary contained in this Agreement, a written notice or communication actually received by one of the Parties from the other excluding by way of electronic mail addressed to the persons described in clause 11.4.1, shall be adequate written notice or communication to such party. |
11.5 | Rights, remedies, and waivers |
The rights and remedies of either Party (the Non-Defaulting Party ) in relation to any misrepresentations or breach of warranty on the part of the other shall not be prejudiced by any investigation by or on behalf of the Non-Defaulting Party into the affairs of the other, by the execution or the performance of this Agreement or by any other act or thing which may be done by or on behalf of the Non-Defaulting Party in connection with this Agreement and which might, apart from this clause, prejudice such rights or remedies.
11.6 | Further assurances, implementation and good faith |
11.6.1 | Each Party shall, at the reasonable request of the other Party, do all such acts and things reasonably necessary or desirable to give effect to the transactions effected or to be effected pursuant to this Agreement. |
11.6.2 |
The Parties shall at all times during the continuance of this Agreement observe the principles of good faith towards one another in the |
Page 32.
performance of their obligations in terms of this Agreement. This implies, without limiting the generality of the aforegoing, that they |
11.6.2.1 | will at all times during the term of this Agreement act reasonably, honestly and in good faith; |
11.6.2.2 | will perform their obligations arising from this Agreement diligently and with reasonable care; and |
11.6.2.3 | will make full disclosure to each other of any matter that may affect the execution of this Agreement. |
11.7 | Fees |
Each of the Parties shall pay their respective legal, accounting and all other costs and expenses incurred in connection with the preparation and execution of this Agreement.
11.8 | Severance |
If at any time any non-material provision of this Agreement is or becomes invalid or illegal in any respect, such provision shall be deemed to be severed from this Agreement but the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby.
11.9 | Entire agreement / amendment and waiver |
This Agreement and the documents referred to herein constitute the entire obligation of the Parties hereto with respect to the subject matter hereof and shall supersede any prior expressions of intent or understandings with respect to the subject matter of this Agreement. Any amendment to, or waiver by either Party of any of the terms or conditions of, or consent given by either Party under, this Agreement (including, without limitation, this clause) shall be in writing, signed by the relevant Party and, in the case of an amendment, by both Parties.
11.10 | Successors and assigns and transfer of Mineral Rights |
Page 33.
11.10.1 | This Agreement shall bind and inure to the benefit of the respective successors and assigns of the Parties hereto, provided that Wits Gold may not (subject to the provisions of 8.6) assign or otherwise transfer all or any part of its rights or obligations under this Agreement without the prior written consent of Freegold, which consent shall not be unreasonably withheld. |
11.10.2 | Subject to 9.1.1, Freegold may not assign or otherwise transfer all or any part of their rights and obligations under this Agreement without the prior written consent of Wits Gold, which consent shall not be unreasonably withheld. |
11.11 | Confidentiality and public announcements |
11.11.1 | Each Party undertakes to keep the provisions of this Agreement and any confidential information obtained from the other Party (together, the Confidential Information ), confidential and not to disclose such Confidential Information to third parties, save that the Parties will be entitled to disclose the Confidential Information in terms of law or to their employees and advisors on the basis that it will only be disclosed to those parties who need to have knowledge of the Confidential Information in order for the Parties to carry out their rights and obligations in terms of this Agreement and prior to such disclosure, such employees and advisors have undertaken not to disclose the Confidential Information without the written consent of the Party that disclosed the Confidential Information. |
11.11.2 |
Neither of the Parties shall, subject to clause 11.11.3, issue any press release or any other public document or make any public statement in each case relating to, connected with or arising out of the transaction which is the subject matter of this Agreement without obtaining the prior approval of the other Party to the contents thereof and the manner of its presentation and publication, provided that such approval shall not be unreasonably withheld or delayed, provided further that after a period of 3 (THREE) Business Days has elapsed |
Page 34.
following the delivery of such a request, it shall be assumed that approval has been granted. |
11.11.3 | To the extent that a Party which is a company listed on any stock exchange is required, in order to satisfy its obligations to such stock exchange or otherwise, to give, make or publish any press release, announcement or document, such Party shall be entitled to do so provided it gives the other Party at least 3 (THREE) Business Days advance warning thereof together with drafts or a copy thereof. |
11.11.4 | The obligations in respect of confidentiality in this clause 11 shall not apply to statements required in terms of annual financial statements or announcements required by law. |
11.12 | Counterparts |
This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement. This Agreement may be executed and delivered by facsimile.
Signed at Illovo on 29th April 2004. | ||||||
Witnesses: | ||||||
1. |
|
|
||||
for
Witwatersrand Consolidated
(duly authorised hereto) |
||||||
2. |
|
Page 35.
Signed at Johannesburg on 29 th April 2004.
Witnesses: | ||||||
1. |
|
|
||||
for Armgold/Harmony Freegold Joint Venture Company Limited (duly authorised hereto) |
||||||
2. |
|
Page 36.
SCHEDULE A | ||||||||
NAME OF MINE OR PROPERTY | ||||||||
Farm |
Portion Description |
Mineral Right Owner (and % share) |
Mineral
Title or Deed Number |
Extent
(size) ha |
||||
Welgelegen 382, Theunissen | Remaining Extent of Ptn 10(Ptn of 5) | Subject to 5% subscription rights in favour of Southern Holdings | 833/2000 | 122.8350 | ||||
Bloemhoek 509, Theunissen |
Portion 1 (Elim)
Remaining extent
Remaining extent of Ptn 2(Nelspark) |
Subject to 5% subscription rights in favour of Southern Holdings |
833/2000
633/2000
833/2000 |
201.2850
886.3079
187.3068 |
||||
Biddulph 329, Ventersburg | The Farm | Subject to 5% subscription rights in favour of Lydex | 833/2000 | 598.7216 | ||||
De Dam 27, Ventersburg | The Farm | Subject to 5% subscription rights in favour of Lydex | 834/2000 | 185.0980 | ||||
Hakkies 695, Ventersburg |
Portion 6 (Ptn of Ptn 5) |
Subject to 5% subscription rights in favour of Southern Holdings |
833/2000 |
44.6110 |
||||
Portion 7 (Ptn of Ptn 5) |
833/2000 |
44.6110 |
||||||
Portion 3 (ptn of Ptn S) |
833/2000 |
44.6110 |
||||||
Portion 9 (Ptn of Ptn 2) |
833/2000 |
295.5033 |
||||||
Remaining Extent of Portion 3 (Engela) |
833/2000 |
267.6662 |
||||||
Remaining Extent of Ptn 5 (Ptn of Ptn 3) |
833/2000 |
133.8332 |
||||||
Remaining Extent of Ptn 2 (Kondowa) |
83372000 |
220.2762 |
SCHEDULE A | ||||||||
NAME OF MINE OR PROPERTY | ||||||||
Farm |
Portion Description |
Mineral Right Owner (and % share) |
Mineral
Title or Deed Number |
Extent
(size) ha |
||||
Hakkies 742, Ventersburg | Mineral Area 1 | Subject to 5% subscription rights in favour of Southern Holdings | 833/2000 | 554.8858 | ||||
Kriegerskraal 708, Ventersburg |
Portion 1 Remaining Extent |
Subject to 5% subscription rights In favour of Lydex |
834/2000
834/2000 |
707.9175
707.9175 |
||||
Le Roux 717, Ventersburg | Remaining Extent | 834/2000 | 770.8788 | |||||
Palmietfontein 229, Winburg | The Farm | Subject to 5% subscription rights in favour of Lydex | 834/2000 | 1761.4393 | ||||
Pedamar 402. Theunissen | The Farm | Subject to 5% subscription rights in favour of Southern Holdings and 5% subscription rights in Favour of Lydex | 833/2000 | 85.6532 | ||||
Steenbokspruit 148, Ventersburg | The Farm | 834/2000 | 328.9083 | |||||
Welgelagen 382, Theunissen | Portion 7 (Moedersgift)(a Ptn of Ptn 6) | Subject to 5% subscription rights in favour of Lydex | 833/2000 | 163.8005 | ||||
Mineral Area 2(a Ptn of Mineral Area 1) on Portion 19 | Subject to 5% subscription rights in favour of Lydex | 833/2000 | 65.5537 | |||||
Remaining Extent of Ptn 2(De Rust) | Subject to 5% subscription rights in favour of Lydex | 833/2000 | 245.7008 | |||||
Portion 11 (a Ptn of Ptn 5) | Subject to 5% subscription rights in favour of Southern Holdings | 833/2000 | 122.8350 | |||||
Portion 12 (Optavit)(a Ptn of Ptn 5) | Subject to 5% subscription rights in favour of Southern Holdings | 833/2000 | 122.8350 | |||||
Portion A (Bloekom) | Subject to 5% subscription rights in favour of Southern Holdings | 833/2000 | 491.4015 | |||||
Remaining Extent of Ptn 5(Spoordraal) | Subject to 5% subscription rights in favour of Southern Holdings | 833/2000 | 122.8350 |
SCHEDULE B
Witwatersrand Consolidated Gold Resources - Shareholding Structure
ANNEXURE 8
WAIVER
We, the undersigned,
[ ]
(registration number [ ])
(a limited liability public company duly incorporated in the Republic of South Africa (Company), herein represented by in his capacity as Director of the Company:
1 | waive and abandon all and any forms of economic and financial participation in the form of participation rights, subscription rights, net vendor consideration rights or royalty rights which have accrued to the Company over the area covered by the Exploration Assets, Merriespruit South Area, Millo Area and Tweepan Area (all of which are defined in 2 below); |
2 | confirm that for purposes of 1 above: |
2.1 | Exploration Assets means the prospecting right held by Witwatersrand Consolidated Gold Resources Limited in and to a certain prospecting area, details of which are attached hereto as Annexure 1; |
2.2 | the Merriespruit South Area means the area hatched in red on the diagram annexed hereto marked Annexure 2 and having the coordinates ABCDEFGHJKLM, but specifically excluding any area within 100 (one hundred) metres of any public road, railway, cemetery or residential or public area ; |
2.3 | the Millo Area means that area hatched in [ ] on the diagram annexed hereto marked Annexure 3; and |
2.4 | the Tweepan Area means that area hatched in [ ] on the diagram annexed hereto marked Annexure 4; |
3 | confirm that we shall sign whatever documentation is reasonably required of us to give effect to the waiver and abandonment referred to in 1 above; and |
4 | confirm that the waiver and abandonment referred to in 1 above shall take effect on the date of discharge in full of the consideration payable in terms of the Option Cancellation Agreement entered into amongst Armgold/Harmony Freegold Joint Venture (Proprietary) Limited, Witwatersrand Consolidated Gold Resources Limited and Harmony Gold Mining Company Limited on [ ] 2010 to which a draft of this waiver is Annexure 8. |
THUS DONE AND SIGNED AT ON THIS DAY OF 2010.
|
Director |
(who warrants his authority hereto) |
Page 4
Exhibit 12.1
CERTIFICATION
I, Graham Briggs, certify that:
1. | I have reviewed this annual report on Form 20-F of Harmony Gold Mining Company Limited; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
4. | The Companys other certifying officer(s) and I are responsible for establishing and maintaining disclosing controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and |
d. | Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonable likely to materially affect, the Companys internal control over financial reporting; and |
5. | The Companys other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
Date: October 24, 2011 | By: |
/s/ Graham Briggs |
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Graham Briggs Chief Executive Officer |
Exhibit 12.2
CERTIFICATION
I, Hannes Meyer, certify that:
1. | I have reviewed this annual report on Form 20-F of Harmony Gold Mining Company Limited; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
4. | The Companys other certifying officer(s) and I are responsible for establishing and maintaining disclosing controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and |
d. | Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonable likely to materially affect, the Companys internal control over financial reporting; and |
5. | The Companys other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
Date: October 24, 2011 | By: |
/s/ Hannes Meyer |
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Hannes Meyer |
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Chief Financial Officer |
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Financial Director |
Exhibit 13.1
CERTIFICATION
(pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Annual Report on Form 20-F for the fiscal year ended June 30, 2011 of Harmony Gold Mining Company Limited (the Company ) as filed with the U.S. Securities and Exchange Commission (the Commission ) on the date hereof (the Report ) and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Graham Briggs, Chief Executive Officer of the Company, certify, that:
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: October 24, 2011 | By: |
/s/ Graham Briggs |
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Graham Briggs Chief Executive Officer |
A signed original of this written statement required by Section 906 has been provided and will be retained by the Company and furnished to the Commission or its staff upon request.
Exhibit 13.2
CERTIFICATION
(pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Annual Report on Form 20-F for the fiscal year ended June 30, 2011 of Harmony Gold Mining Company Limited (the Company ) as filed with the U.S. Securities and Exchange Commission (the Commission ) on the date hereof (the Report ) and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Hannes Meyer, Financial Director of the Company, certify, that:
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: October 24, 2011 | By: |
/s/ Hannes Meyer |
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Hannes Meyer Chief Financial Officer Financial Director |
A signed original of this written statement required by Section 906 has been provided and will be retained by the Company and furnished to the Commission or its staff upon request.
Exhibit 15.1
BOARD OF DIRECTORS
Non-executive chairman | ||
Patrice Motsepe (49) Non-executive chairman BA (Legal), LLB Patrice was appointed director and chairman of the board in 2003. He was a partner in one of the largest law firms in South Africa, Bowman Gilfillan Inc. He was also a visiting attorney in the USA with the law firm McGuire Woods Battle and Boothe. In 1994 he founded Future Mining, which grew rapidly to become a successful contract mining company. He then formed ARMgold in 1997, which listed on the JSE in 2002. ARMgold merged with Harmony in 2003 and this ultimately led to the takeover of Anglovaal Mining (Avmin). In 2002 he was voted Business Leader of the Year by the CEOs of the top 100 companies in South Africa. In the same year, he received the Ernst & Young Best Entrepreneur of the Year award. He is a recipient of numerous business and leadership awards. He is also executive chairman of African Rainbow Minerals Limited (ARM) and deputy chairman of Sanlam. Patrice serves on the international business council of the World Economic Forum. His various business responsibilities included being president of Business Unity South Africa (BUSA), the representative voice of organised business in South Africa, from 2004 to 2008. Patrice is also president of Mamelodi Sundowns Football Club. |
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Non-executive directors |
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Frank Abbott (56) Non-executive, non-independent director BCom, CA(SA), MBL Frank joined the Harmony board as non-executive director in 1994, after which he was appointed financial director in 1997. In 2004 Frank was appointed financial director of ARM, while remaining on the Harmony board as non-executive director. In August 2007, he was seconded to Harmony as interim financial director, a position he held until handing over to Hannes Meyer in November 2009. Frank remained executive director until his retirement in July 2010. Post retirement, Frank continues to serve as non-executive director of Harmony and ARM. |
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André Wilkens (62) Non-executive, non-independent director Mine Managers Certificate of Competency, MDPA, RMIIA André joined the board in August 2007. He was appointed to the board of ARM in 2004 and to his current position as chief executive officer of ARM in 2005. Prior to that, he headed ARMgold for five years and ARM Platinum for a year before being appointed chief operating officer of Harmony after its merger with ARMgold in 2003. André has over 40 years experience in the mining industry, particularly gold and uranium. |
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Independent non-executive directors |
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Fikile De Buck (50) Lead independent non-executive director BA (Economics), FCCA (UK) Fikile joined the board in March 2006. A chartered certified accountant, she is a fellow of the Association of Chartered Certified Accountants (ACCA) (UK) and a member. From 2000 to 2008, Fikile worked in various capacities at the Council for Medical Schemes in South Africa, including as chief financial officer and chief operations officer. Prior to that she was treasurer at the Botswana Development Corporation. Fikile is a non-executive director and chairman of the audit committee of Anooraq Resources Corporation. She resigned as chairman of the audit committee of Rand Uranium (Proprietary) Limited on 17 May 2011. In August 2010, Fikile was appointed lead independent non-executive director and chairman of the nomination committee. |
BOARD OF DIRECTORS CONTINUED
Joaquim Chissano (71) Independent non-executive director PHd Joaquim was appointed to the board in April 2005. Formerly president of Mozambique (1986-2004), Joaquim also served as chairman of the African Union for 2003/2004. On leaving the presidency, he established the Joaquim Chissano Foundation for Peace Development and Culture, and has led various international peace initiatives on behalf of the United Nations, African Union and the Southern African Development Community to Guinea-Bissau, the Democratic Republic of the Congo, Uganda and Madagascar. In 2006 he was awarded the annual Chatham House Prize for significant contributions to improving international relations and received the inaugural Mo Ibrahim Prize for Achievement in African Leadership in 2007. He is a non-executive director of ARM Limited and TEAL. Joaquim was appointed to the Bill and Melinda Gates Foundation in December 2009. |
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Ken Dicks (72) Independent non-executive director Mine Managers Certificates (Metalliferous and Fiery Coal Mines), Management Development Diploma and Management Diploma Ken joined the board in February 2008. He has 40 years experience in the mining industry, mainly in the Anglo American group. He has served on the boards of mining companies such as Freegold and Western Deep Levels. He is also a non-executive director of Gold One International. |
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Dr Simo Lushaba (45) Independent non-executive director BSc (Hons), MBA and DBA Simo joined the Harmony board in October 2002. An entrepreneur and executive business coach, he previously held senior management positions at Spoornet and Lonmin plc and was chief executive of Rand Water. Simo is a member of the boards of Cashbuild Limited, Talent Africa, GVSC and the Nepad Business Foundation (SA). |
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Cathie Markus (54) Independent non-executive director BA, LLB Cathie joined the board in May 2007. She spent 16 years at Impala Platinum Holdings Limited, initially as legal advisor and, from 1998 to 2007, as executive director responsible for legal, investor and community affairs. After graduating from the University of the Witwatersrand, Cathie served articles at Bell Dewar & Hall. On qualifying as an attorney, notary and conveyancer, she joined the legal department of Dorbyl Limited. She is currently a trustee of the Impala Bafokeng Trust and chairs the St Marys School Waverley Foundation. |
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Modise Motloba (45) Independent non-executive director BSc, Diploma in Strategic Management Modise joined the board in July 2004. Currently chief executive of Quartile Capital (Proprietary) Limited, Modise is also a director of Deutsche Bank Securities SA (Proprietary) Limited, the Land Bank and the Small Enterprise Foundation. Modises 18 years experience in investment banking, treasury and fund management includes appointments at Rand Merchant Bank, African Harvest Fund Managers and Goldman Sachs. Modise is a former president of the Association of Black Securities and Investment Professionals (ABSIP) where he was instrumental in formulating and negotiating the historic financial services charter in October 2003. |
BOARD OF DIRECTORS CONTINUED
Cedric Savage (72) Independent non-executive director BSc (Eng), MBA, ISMP (Harvard) Cedric joined the board in September 2003. He started his career in the United Kingdom in 1960 as a graduate engineer with Fairey Aviation. He returned to South Africa in 1963 and worked in the oil (Mobil), textile (Felt & Textiles) and poultry (Rainbow Chickens Limited) industries. He was president of the South African Chamber of Business from 1993 to 1994. He has also served as chairman of the board of governors of the University of KwaZulu-Natals Development Foundation and as a member of council of that university. He joined the Tongaat-Hulett Group Limited in 1977 as managing director of Tongaat Foods and progressed to executive chairman of the building materials division; he became chief executive officer of the group in 1991. In May 2000, he assumed the dual roles of chief executive officer and executive chairman until his retirement in May 2009. He served on the Nedbank board from 2002 until May 2008 when he retired as non-executive director, and on the board of Datatec Limited from 2001 and Datatec International from 2004, retiring from both boards in August 2009. He served on the board of Denel (Proprietary) Limited from 2007 to August 2010. He currently serves on the General Motors South Africa Foundation and Boco Trust committees. |
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Mavuso Msimang (69) Independent non-executive director MBA (Project Management) United States International University, San Diego California, BSc, University of Zambia Mavuso has 26 years experience in management at executive level. He was involved in the successful transformation and restructuring of various state-owned entities over a period of 16 years until 2010. Mavuso is the immediate past director-general of the South African Department of Home Affairs and previously served successively as CEO of the State Information Technology Agency, South African National Parks and SA Tourism. He was country representative of international development organisations World University Service/Canada and CARE-International in Ethiopia and Kenya, respectively. He also held senior management positions with UNICEF and the World Food Programme. |
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David Noko (54) Independent non-executive director Higher National Diploma in Engineering (Mech), MBA, Postgraduate Diploma in Company Direction (Senior Executive Programme) David is currently managing director of CelaCorp (Proprietary) Limited, an executives leadership advisory consultancy. He has vast experience in executive management, serving as chief executive officer of Air Chefs and later joining De Beers where he was promoted to general manager, engineering and subsequently to general manager at Kimberley Mines. He took over as managing director of De Beers Consolidated Mines from Jonathan Oppenheimer in 2006. He was previously vice-president of the Chamber of Mines, South Africa and is a member of the Institute of Directors. |
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John Wetton (62) Independent non-executive director CA(SA), FCA (England and Wales) John was employed with Ernst & Young from 1967 to June 2010. Corporate audit was his main focus, but for the last ten years he played a business development role across Africa. John led Ernst & Youngs mining group for a number of years and continued to act as senior partner on some of the firms major mining and construction clients. John has been a member of Ernst & Youngs executive management committee and was, until retirement, a member of its Africa governance board. |
BOARD OF DIRECTORS CONTINUED
Executive directors | ||
Graham Briggs (58) Chief executive officer Bsc (Hons) (Geology) Graham was appointed chief executive officer in January 2008, after his appointment to the board in 2007. Having joined Harmony as new business manager in 1995, Grahams previous positions include that of chief executive of Harmony Australia. A geologist by training, Graham has more than 36 years experience in the field and in an operational capacity at a number of South African gold mines.
Graham serves as a director on Harmonys subsidiary companies and is a member of the board of the VM Group in the United Kingdom. He also serves as a director of Rand Uranium (Proprietary) Limited. |
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Hannes Meyer (41) Financial director BCom (Hons),CA(SA) Hannes joined Harmony in August 2009. During his 15-year career in the mining industry, he gained extensive mining and financial experience, including knowledge of mines in Africa, corporate finance and business development. Before joining Harmony, Hannes served as chief financial officer of TEAL and, from May 2008, as acting chief executive officer of TEAL. He also serves as director on various Harmony subsidiaries and the board of Rand Uranium (Proprietary) Limited. |
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Harry Ephraim Mashego Mashego (47) Executive director BA Ed, BA (Hons), GEDP, JMDP Mashego joined Harmony in July 2005 as group human resources development manager. Mashego, who has more than 20 years experience in human resources, began his career as human resources manager at Eskom. He then progressed in the field at JCI, Atlantis Diesel Engines and Foskor Limited. He was promoted to general manager at Harmonys Evander operations in November 2005 and appointed executive: human resources in August 2007. Mashego was appointed executive director: organisational development and transformation in February 2010. He accepted his new role as executive director: government relations in August 2011. |
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EXECUTIVE MANAGEMENT | ||
Bob Atkinson (59) Executive: Africa new business NHD (Metalliferous Mining) Bob joined Harmony as a section manager in 1986 and served as operations director on the executive committee between 2001 and 2003. He was appointed chief operating officer at Harmony Gold Australia and then executive: sustainable development (safety and occupational health) at Harmony in South Africa in 2004. He subsequently held the position of executive: new business and projects before assuming his current position. He has more than 40 years experience in the mining industry. |
Jaco Boshoff (42) Executive: reserves and resources; acting chief operating officer: North region BSc (Hons), MSc (Geology), MBA, PrSciNat Jaco joined Harmony in 1996. He has served as the executive: reserves and resources and competent person since 2004. In 2010, projects and new business were added to his portfolio. From 1998 to 2004 he was an ore reserve manager at various Harmony operations and before that a geologist at Harmony and at Gengold. Jaco is registered as a professional geological scientist with the South African Council for Natural Scientific Professions and has worked in the mining industry for more than 15 years. In addition to other responsibilities, he is acting as chief operating officer for Harmonys North region. |
EXECUTIVE MANAGEMENT CONTINUED
Anton Buthelezi (47) Executive: human resources National Diploma (Human Resources Management), BTech (Labour Relations Management), Advanced Diploma in Labour Law Anton rejoined Harmony in 2005 as human resources manager at Evander. He has over 22 years experience in human resources management in the mining industry. Previous positions include senior HR officer at Anglogold Ashanti, and mid and senior managerial positions in the same field at ARMgold, Samancor Chrome and Harmony. He has a proven track record in the full spectrum of HR functions as a generalist. Anton joined the executive committee in October 2011. |
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Matthews Pheello Dikane (45) Executive: legal, governance and ethics LLB, LLM (Labour Law), Postgraduate Diploma in Management Practice, Postgraduate Diploma in Corporate Law Pheello joined Harmony in 2009. He has over 20 years experience in the mining industry, working his way up from learner official to production mine overseer at AngloGold Ashanti Limited. During this time, he studied for his law degree and served articles at Perrott Van Niekerk Woodhouse Incorporated. He also completed his masters degree in labour law and postgraduate studies in management practice and corporate law. He returned to AngloGold Ashantis corporate office as a legal counsel, later joining Brink Cohen Le Roux as a senior associate where he became a director. |
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Melanie Naidoo-Vermaak (37) Executive: environment MSc Melanie joined Harmony in 2009. She is an experienced environmental specialist who has worked for both the private sector in the mining industry, and the public sector in the Departments of Water Affairs and Forestry, and Minerals and Energy. She has spent more than 12 years in this discipline and has international environmental management exposure gained in Australia, Papua New Guinea, Fiji and Africa. She has held various positions at some of the worlds leading mining companies, including BHP Billiton, Anglo American plc and De Beers Consolidated Mines Limited. |
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Alwyn Pretorius (40) Executive: safety and health BSc (Mining Engineering), BSc (Industrial Engineering) Alwyn joined Harmony on its merger with ARMgold in 2003. He began his career at Vaal Reefs as a mining graduate in training in 1993 and was appointed shift boss in 1995, gaining experience in remnant mining. Alwyn obtained his BSc in industrial engineering in 1998 and joined ARMgold in 1999 at its Orkney operations, progressing to mine manager in 2003. Alwyn was appointed executive, South African operations at Harmony in March 2007, and then as chief operating officer: North region. He was appointed executive: safety and health in August 2011. |
EXECUTIVE MANAGEMENT CONTINUED
Tom Smith (55) Chief operating officer: South region NHD (Mine Surveying and Metalliferous Mining) Tom joined Harmony in 2002. He began his career in 1975 as a sampler at Vaal Reefs mine, becoming chief surveyor in 1988. He changed his career to mining in 1991, working as a section manager on the Great Noligwa, Elandsrand and Mponeng mines. He was also involved in projects at Tau Lekoa and Moab Khotsong, acquiring experience in conventional, trackless, pillar and deep-level mining. He was promoted to production manager at AngloGolds Mponeng mine in 1998. Tom was appointed general manager of Tshepong in 2000. Following the merger with ARMgold, he was involved in restructuring of the Free State operations. He joined the executive team in September 2007 and is currently chief operating officer: South region. |
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Marian van der Walt (38) Executive: corporate and investor relations BCom (Law), LLB, Higher Diploma in Tax, Diploma in Corporate Governance, Diploma in Insolvency Law, certificates in business leadership Marian was appointed company secretary in 2003 and joined Harmonys executive committee in 2005 as executive: legal and compliance. This included taking responsibility for company secretarial, risk management, internal audit and Sarbanes-Oxley compliance. In 2008, she resigned as company secretary, enabling her to accept her current position as executive: corporate and investor relations. Marian began her career as attorney and conveyancer in 1998 and held positions at Routledge Modise Attorneys, Deloitte and Touche and the Standard Bank of South Africa Limited prior to joining Harmony. |
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Johannes van Heerden (39) Chief executive officer: South-east Asia BCompt (Hons), CA(SA) Johannes was appointed as chief executive officer of Harmonys south-east Asia operations in January 2008. He is responsible for Harmonys Papua New Guinean assets. In this role he also serves on the Morobe Mining Joint Ventures (MMJV) committee which is responsible for providing oversight and direction to the MMJV assets consisting of the Hidden Valley mine, Wafi-Golpu project and Morobe exploration, held in 50/50 partnership with Newcrest Mining Limited. He joined Harmony in July 1998 as financial manager of the Free State operations with operational and group reporting responsibility for the region. He was appointed group financial manager in 2001, before being relocated to Harmony South-east Asia as chief financial officer in 2003, responsible for Harmonys Australian and Papua New Guinean portfolio. In this capacity, he served as non-executive director of Abelle Limited, the ASX-listed Australian company that held the PNG assets before Harmonys subsequent takeover. He was appointed to the Harmony executive committee in 2005. |
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Abre van Vuuren (51) Executive: risk management and health services BCom, MDP, DPLR Abre was appointed human resources manager at Grootvlei Gold Mining Company, when Harmony acquired the operation in 1997. He joined Harmonys executive committee in 2000, responsible for industrial relations. Since then he has held various positions in services and human resources until accepting his current position as executive: risk management and service improvement. Abre started his career in the mining industry in 1982, holding positions in finance and mainly human resources, on various gold mines and collieries in the Rand Mines. |
Exhibit 15.2
CORPORATE GOVERNANCE |
The board of directors takes ultimate responsibility for Harmonys adherence to sound corporate governance standards and ensures that all business judgements are made with reasonable care, skill and diligence. Sound corporate governance structures and processes are applied at Harmony and considered by the board to be pivotal in delivering sustainable growth in the interests of all stakeholders.
Governance structures and processes are reviewed regularly and adapted to accommodate internal developments and reflect national and international best practice to the extent considered in the best interests of the company. The board believes that, for the period under review, the company has applied the recommendations of the code of governance principles contained in the King Report on Governance for South Africa, 2009 (King III), the provisions of the Companies Act of 1973, the Corporate Laws Amendment Act (No 24 of 2006) and the new Companies Act (No 71 of 2008) which came into effect on 1 May 2011. Deviations from the King III governance principles are explained throughout the report.
The board considers corporate governance a priority that requires more attention than merely establishing the steps to be taken to demonstrate compliance with codes, legal, regulatory or listings requirements. The board has therefore carefully considered the extent to which the implementation of new corporate governance concepts will be in the best interests of the company. The audit committee and the board continue to review and benchmark the companys governance structures and processes to ensure the directors and the board exercise effective leadership, based on an ethical foundation and the principles of responsible corporate citizenship and sustainability. Harmony is committed to achieving high standards of business integrity and ethics across all its activities. Issues of governance will continue to receive the consideration and attention of the board and its committees in the year ahead.
Board of directors
Harmony is governed by a unitary board which, at 30 June 2011, comprised 15 members, nine of whom were independent non-executive directors (determined on the basis of both King III and the Sarbanes-Oxley Act in the United States) and three of whom were executive directors.
Given that Harmony is a South African company, we understand the need for transformation at the highest levels. Two non-executive directors are women, and eight directors are drawn from groups considered to be historically disadvantaged South Africans (HDSAs).
At 30 June 2011, the members of Harmonys board of directors were:
Non-independent non-executive chairman
Patrice Motsepe (reappointed on 12 August 2011 in terms of King III)
Lead independent non-executive director
Fikile De Buck (reappointed on 12 August 2011 in terms of King III)
Executive directors
Graham Briggs (chief executive officer)
Hannes Meyer (financial director)
Harry Ephraim Mashego Mashego (executive director)
CORPORATE GOVERNANCE CONTINUED
Independent non-executive directors
Joaquim Chissano
Ken Dicks
Cathie Markus
Mavuso Msimang
Modise Motloba
David Noko
Simo Lushaba
Cedric Savage
Dr Cheick Diarra resigned as independent non-executive director on 31 May 2011 and John Wetton was appointed as independent non-executive director post year end on 1 July 2011.
Non-independent non-executive directors
Frank Abbott
André Wilkens
Board purpose and function
The board is guided in its actions by the board charter (www.harmony.co.za) which is reviewed annually. The charters of the board and its committees have been revised to align these with the wording and concepts of King III. The charters are reviewed annually.
The board charter requires that directors exercise leadership, enterprise, integrity and good judgement, accountability, responsibility, due care and transparency. The charter serves as a guide to members on the boards:
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Purpose and role |
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Responsibilities and authority |
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Composition |
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Meetings |
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Self-assessment. |
The board provides strategic direction to the company at quarterly board meetings and by delegating authority to board committees. It reviews and directs the companys strategic objectives, annual budget and plans. The board also guides and reviews Harmonys non-financial performance.
A number of duties, responsibilities and personal liabilities are imposed on Harmonys directors under both common and statutory law, not only in South Africa, but also in the United States, Australia, PNG and the United Kingdom.
Board appointments and resignations
In considering new appointments to the board, Harmony considers skills, experience, gender and racial composition and believes it has achieved an acceptable balance of members. The company is satisfied that non-executive and independent directors are of sufficient calibre, experience and number for their views to carry significant weight in the boards decisions. While the nomination committee makes recommendations on appointments to the board, consideration of such appointments is undertaken by the board as a whole in accordance with its charter.
David Noko and Mavuso Msimang were appointed to the board on 26 March 2011 and John Wetton was appointed on 1 July 2011. Dr Cheick Diarra resigned as a director on 31 May 2011.
Board meetings
Five board meetings were held during the period under review and a strategy session was held on 26 March 2011. The board charter requires that at least one board meeting be held every quarter. Attendance at these meetings is reflected below. Resolutions requiring urgent decisions were passed by means of round-robin resolutions and confirmed at the next board meeting.
PT Motsepe |
5 | |||
GP Briggs |
5 | |||
HO Meyer |
5 | |||
F Abbott |
5 | |||
HE Mashego |
5 | |||
JA Chissano |
5 | |||
FFT De Buck |
5 | |||
CM Diarra 1 |
0 | |||
KV Dicks |
5 | |||
DS Lushaba |
5 | |||
CE Markus |
5 | |||
MJ Motloba |
4 | |||
CML Savage |
5 | |||
AJ Wilkens |
5 | |||
M Msimang 2 |
1 | |||
DC Noko 2 |
1 |
1 |
Resigned on 31 May 2011. |
2 |
Appointed as members on 26 March 2011. |
CORPORATE GOVERNANCE CONTINUED
Chairman and lead independent director
Following the boards annual self-assessment, Patrice Motsepe was re-elected chairman of the board in August 2011 for a 12-month period as recommended by King III. The roles of chairman and chief executive officer are separate and distinct as required by King III. The chairman is not considered independent. The board is, however, of the view that the value added by Patrice Motsepe as chairman is significant, and that the board as a whole is predominantly independent in nature.
Fikile De Buck was reappointed lead independent non-executive director in August 2011, given the fact that the chairman is not independent. This appointment is in line with the requirements of King III to assist the board in managing any actual or perceived conflicts of interest.
Board induction and training
On appointment and as part of the companys board induction programme, new directors are briefed by the company secretary and given comprehensive company information packs including committee charters, articles of association, code of ethics, delegation of authority and a copy of the JSE listings requirements and Companies Act, 2008.
New directors are invited to meet with management at head office for a tour of the business and informal introductory meetings with various management teams.
Articles of interest and updates on corporate governance are frequently sent to the board to keep directors informed. Specific training sessions are arranged when requested by directors. The board has initiated a programme of identifying specific training needs of directors to actively address these. Board members are also invited to attend underground visits at the mines.
Access to management and operations, and independent advice
Each director has unrestricted access to the advice and services of senior management. All non-executive directors are able to visit Harmonys operations at any time and attend management meetings at their discretion. Board members
have unrestricted access to company and subsidiary information, records, documents and property. If required by a board member, independent professional advice may be obtained at the companys expense.
Delegation of authority
The board delegates authority for certain matters to specified board committees, as well as the executive directors. These matters are monitored and evaluated by the board at each meeting.
Board self-assessment
In terms of its charter, the board is required to conduct an annual self-assessment of the performance of the board as a whole, board committees, individual directors and the chairman.
These assessments are based on several factors, including expertise, enquiring attitude, objectivity and independence, judgement, understanding of Harmonys business, understanding and commitment to the boards duties and responsibilities, willingness to devote the time needed to prepare for and participate in committee deliberations, timely responses and attendance at meetings.
Harmony supports the principles and practices of sound governance. As part of this philosophy, KPMG was again appointed to assist with the annual board self-assessment. The 2011 self-assessment questions and statements considered the recommendations of King III, as well as feedback received from the board during the previous years assessment process. Final questionnaires were approved by the chairman before distribution to board members. The questionnaires were completed by each board member. A full report based on the findings of this evaluation was circulated to the board and improvements will be made where necessary.
Executive directors
Executive directors have standard employment contracts which include a notice period of at least three months. The executive directors have waived their rights to directors fees.
CORPORATE GOVERNANCE CONTINUED
Executive directors participate in Harmonys share schemes and also benefit from pension contributions (or provident fund), life insurance and medical aid. Their employment contracts do not make provision for predetermined compensation on termination. The number of share options held by executive directors during the financial year is detailed in the Remuneration report on pages 200 to 201.
Non-executive directors
No non-executive director has a service contract with Harmony. Non-executive directors are entitled to fees as approved at Harmonys annual general meeting (AGM) and to reimbursement for out-of-pocket expenses incurred on the companys behalf. Details of directors fees paid in the period under review appear in the Remuneration report on page 199.
Annual general meeting
The notice of the AGM has been distributed to shareholders either electronically or via registered post with a summary of the financial statements to be presented at the meeting.
Directors are encouraged to attend the AGM, particularly the chairmen of the various board committees. Shareholders should ideally also use this opportunity to engage with the board and members of the executive management team.
Rotation of directors
The rotation of directors is accepted as standard practice as it ensures the board remains dynamic. At the same time, this rotation is managed to ensure the boards skill and diversity is not compromised. In terms of the companys articles of association, one-third of the longest-standing directors on the board must retire from office at the next AGM. Provision is also made for the exemption from retirement of executive directors in terms of their employment contracts although, currently, both non-executive and executive directors make themselves available for retirement by rotation. In addition, directors appointed after the previous AGM are also expected to stand down for re-election by shareholders.
Accordingly, the following directors will retire, and have made themselves available for re-election, at the forthcoming AGM:
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Graham Briggs |
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Frank Abbott |
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Ken Dicks |
In addition, David Noko, Mavuso Msimang and John Wetton, the new independent non-executive directors, will make themselves available for election at the AGM. Cedric Savage, being due for retirement by rotation, has indicated he will not be available for re-election at the AGM.
A short curriculum vitae of all directors appears on pages 26 to 29 of this report.
Board committees
To enable the board to properly discharge its duties, certain responsibilities have been delegated to board committees. At 30 June 2011, these board committees comprised:
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Audit committee |
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Empowerment committee |
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Investment committee |
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Nomination committee |
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Remuneration committee |
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Sustainable development committee |
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Technical committee |
At a meeting in August 2011, the board resolved that the sustainable development committee be replaced by a social and ethics committee to comply with the provisions of the new Companies Act, 2008. The social and ethics committees responsibilities will incorporate those of its predecessor which already included many of the statutory responsibilities of a social and ethics committee. As far as any other committee oversees some of the statutory responsibilities of the social and ethics committee, this committee will deliver a report to the social and ethics committee annually. The chairman of the social and ethics committee will be present at the AGM to report on matters within its mandate.
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Each board committee discharges its responsibilities in accordance with its charter which can be accessed from the companys website (www.harmony.co.za). Each committee has also adopted a work plan that is approved by the board annually, and against which the committee reports to the board.
During the period under review the majority of members of all the board committees were independent non-executive directors. All board committees were chaired by an independent non-executive director, except for the technical committee. André Wilkens (a non-independent, non-executive director) is chairman of the technical committee. Appointing non-independent, non-executive directors as chairmen of board committees is not in line with the recommendations of King III. Adopting the apply or explain principle set out in King III, Andrés appointment was based on his extensive knowledge on the specific areas and responsibilities of the technical committee, the best interests of the company and the majority of other members of that committee being independent.
The creation of the committees does not reduce the boards overall responsibility and the chairmen of all committees report and make recommendations to the board through designated reporting opportunities at each board meeting. Minutes of all committee meetings are included in information packs provided to each board member prior to meetings.
Audit committee
The role of the audit committee is to:
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Attend to its statutory duties as set out in the Companies Act, 2008 |
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Assist the board in discharging its duties relating to safeguarding assets |
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Monitor the operation of an adequate system of internal controls and control processes |
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Ensure the preparation of accurate financial reporting and statements in compliance with all applicable legal requirements, corporate governance and accounting standards. |
The committee also supports the board on the risk profile and risk management of the company and its subsidiaries. The
committee ensures there is an internal audit function in place and that the roles of the internal and external audit functions are properly coordinated.
The audit committee recommends the appointment of external auditors to the board and shareholders, and also approves non-audit services provided by the external auditors. The committee has reviewed the independence of the external auditors and is satisfied that they are independent from the company and its subsidiaries.
The audit committee reports and makes recommendations to the board as appropriate. The board retains responsibility for the implementation of such recommendations.
At 30 June 2011, the members of this committee were:
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Cedric Savage (chairman) Member since 26 January 2004 and appointed chairman on 5 August 2005 |
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Fikile De Buck Member since 30 March 2006 |
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Simo Lushaba Member since 24 January 2003 |
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Modise Motloba Member since 30 July 2004 |
John Wetton has been appointed a member of the audit committee from 1 July 2011 and will replace Cedric Savage as chairman of the committee from the date of the AGM.
The internal auditors, external auditors, chief executive officer, financial director and executive managers are invited to committee meetings.
Harmony does not have an individual financial expert as defined by the rules of the Securities and Exchange Commission (SEC) serving on its audit committee. The company believes that audit committee members, through their collective experience, meet the majority of the definitions of the SEC for an audit committee financial expert in both the public and private sectors. The members have served as directors and officers of numerous public companies and have over the years developed a good knowledge and understanding of IFRS, overseeing the preparation, audit and evaluation of financial statements. Harmony believes that the combined knowledge, skills and experience of the audit committee members, and their authority to engage
CORPORATE GOVERNANCE CONTINUED
outside experts for advice on matters relating to their responsibilities as deemed appropriate, enables them as a group to act effectively in fulfilling tasks and responsibilities required under the Sarbanes-Oxley Act.
The committee is responsible for ensuring that the combined assurance model introduced by King III is applied to provide a coordinated approach to all assurance activities.
In particular, the committee:
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Ensures the combined assurance received is appropriate to address all significant risks facing the company |
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Monitors the relationship between external service providers and the company. |
The audit committee oversees and monitors the governance of information technology on behalf of the board in accordance with King III. A chief information officer has been appointed to attend to information technology in the company and reports to the committee each quarter.
The committee considered the appropriateness of the expertise and experience of the financial director, as required by the JSE listings requirements, and concluded that the financial director has the necessary expertise and experience to fulfil his role. The committee has also satisfied itself that the expertise, resources and experience of the finance function are adequate, as recommended by King III.
In terms of its charter, the audit committee is required to meet at least four times a year, or more frequently as circumstances dictate. During the period under review, the committee met on five occasions.
Cedric Savage |
5 | |||
Fikile De Buck |
4 | |||
Simo Lushaba |
5 | |||
Modise Motloba |
3 |
Empowerment committee
The empowerment committee ensures that the company meets regulations stipulated in the Employment Equity Act, Labour Relations Act and Mineral and Petroleum Resources Development Acts (MPRDA) Mining Charter scorecard. It also ensures Harmony fulfils its own empowerment imperatives.
The responsibilities of the committee include ensuring that a sustainable organisational culture, structures and processes are in place to support the development of empowerment in the company; monitoring the development and progress of empowerment in the company; addressing inequalities that may exist in staff profiles and organisational practices; and reviewing and monitoring whether appropriate support is given to historically disadvantaged employees to equip them for successful careers in the company.
At 30 June 2011, the members of this committee were:
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Joaquim Chissano (chairman) Member and chairman since 3 May 2006 |
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Cathie Markus Member since 29 October 2007 |
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Modise Motloba Member since 3 May 2006 |
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Mavuso Msimang Member since 3 May 2011 |
During the period under review the chief executive officer and executive managers were invited to attend meetings.
The empowerment committee met on four occasions during the period under review.
Joaquim Chissano |
4 | |||
Cathie Markus |
4 | |||
Modise Motloba |
4 | |||
Mavuso Msimang |
0 | * |
* | Appointed as member after the last committee meeting in the financial year. |
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Investment committee
The primary purpose of the investment committee is to consider projects, acquisitions and disposal of assets in line with the companys overall strategy. This includes performing other investment-related functions that may be designated by the board from time to time, considering the viability of capital projects or disposals and the effect these may have on the companys cash flow, as well as whether these fit into the companys overall strategy. This committees responsibilities include ensuring that due diligence procedures are followed when acquiring or disposing of assets.
At 30 June 2011, the members of the committee were:
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Simo Lushaba (chairman) Member since 26 January 2004 and appointed chairman on 5 August 2005 |
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Ken Dicks Member since 13 February 2008 |
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Cathie Markus Member since 29 October 2007 |
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Cedric Savage Member since 26 January 2004 |
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André Wilkens Member since 7 August 2007 |
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Frank Abbott Member since 29 October 2010 |
During the period under review the chief executive officer, financial director and executive managers were invited to attend investment committee meetings.
The committee should meet at least four times a year but may, at its discretion, meet more often, depending on the circumstances. The committee met on six occasions during the period under review.
Simo Lushaba |
5 | |||
Ken Dicks |
6 | |||
Cathie Markus |
6 | |||
Cedric Savage |
6 | |||
André Wilkens |
3 | |||
Frank Abbott |
5 |
Nomination committee
The primary purpose of the nomination committee is to ensure that procedures governing appointments to the board are formal and transparent, by making recommendations to the board on all new board appointments and reviewing succession planning for directors. The duties and responsibilities of this committee are set out in its charter.
During the period under review the lead independent director chaired the committee. In line with King III, the chairman of the board was also a member of the committee.
At 30 June 2011, the members of this committee were:
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Fikile De Buck (chairman) Member and chairman since 13 August 2010 |
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Patrice Motsepe Member since 24 October 2003 |
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Frank Abbott Member since 5 August 2005 |
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Joaquim Chissano Member since 3 May 2006 |
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Modise Motloba Member since 29 October 2010 |
Members of this committee are required to meet annually or more often at the committees discretion, depending on prevailing circumstances. The committee met six times during the year.
Fikile De Buck |
4 | |||
Patrice Motsepe |
5 | |||
Frank Abbott |
5 | |||
Joaquim Chissano |
3 | |||
Modise Motloba |
2 |
The chief executive officer was invited to attend all meetings of the committee.
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Remuneration committee
The primary purpose of the remuneration committee is to ensure that the companys directors and executive managers are fairly rewarded for their individual contributions to Harmonys performance. The remuneration of executive managers is set by a committee of board members with no personal interest in the outcome of these decisions, and who will give due regard to the interests of shareholders and to the financial and commercial health of the company.
The committees primary aims are to monitor and strengthen the objectivity and credibility of the remuneration system of Harmonys directors and executive managers and to make recommendations to the board on remuneration packages and policies applicable to directors. A formal remuneration and incentive awards policy has been reviewed by the committee and adopted by the board, with a summary on pages 193 to 198 and presented to shareholders for a non-binding advisory vote in the notice of AGM.
At 30 June 2011, the members of this committee were:
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Cedric Savage (chairman) Member since 24 January 2004 and chairman from 3 May 2006 |
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Simo Lushaba Member since 5 August 2005 |
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André Wilkens Member since 7 August 2007 |
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Fikile De Buck Member since 29 October 2010 |
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Frank Abbott Member since 3 May 2011 |
The board elected Frank Abbott (a non-independent, non-executive director) to replace Cedric Savage who retires as chairman of the committee from the date of the AGM. Although King III recommends all chairmen be independent non-executive directors, the board considered the appointment of Frank Abbott as chairman to be in the best interests of the company given his vast knowledge of the companys remuneration policies and procedures. The lead independent director is a member of the committee and will ensure that decisions are fair and unbiased.
The chief executive officer, financial director and executive director: organisational development and transformation were invited to attend all meetings.
The remuneration committee is expected to meet at least quarterly or to pass resolutions by round robin if a formal meeting cannot be held. During the period under review, the committee met six times.
Cedric Savage |
6 | |||
Simo Lushaba |
6 | |||
André Wilkens |
6 | |||
Fikile De Buck |
2 | |||
Frank Abbott |
0 | * |
* | Appointed as member after the last committee meeting in the financial year. |
Social and ethics committee previously known as the sustainable development committee
During the period under review, the role of the sustainable development committee was to supplement, support, advise and provide guidance on the effectiveness of managements efforts in sustainable development. The committee considered the following issues: occupational health, HIV/Aids, social investment and environmental management.
At 30 June 2011, the members of this committee were:
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Modise Motloba (chairman) Member and chairman since 5 August 2005 |
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Joaquim Chissano Member since 3 May 2006 |
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Fikile De Buck Member since 3 May 2006 |
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Cathie Markus Member since 29 October 2010 |
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David Noko Member since 3 May 2011 |
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Mavuso Msimang Member since 3 May 2011 |
The committee comprised six non-executive directors, five of whom were independent.
The chief executive officer and executive managers were invited to attend all meetings.
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Five meetings were held during the period under review.
Modise Motloba |
5 | |||
Joaquim Chissano |
4 | |||
Fikile De Buck |
4 | |||
Cathie Markus |
2 | |||
David Noko |
0 | * | ||
Mavuso Msimang |
0 | * |
* | Appointed as members after the last meeting of the committee in the financial year. |
Technical committee
The technical committee was formed in January 2008 to provide a platform for the chief executive officer to discuss the companys strategy, performance against targets, operational results and projects. During the period under review, the board agreed that the committee should also attend to safety matters. The technical committee further informs the board of key developments, progress against objectives and challenges facing operations. The companys strategic plans are considered by the committee and recommended for approval to the board. The committee also provides guidance and support to management to ensure the company remains sustainable and successful.
At 30 June 2011, the members of this committee were:
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André Wilkens (chairman) Member and chairman since 22 January 2008 |
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Ken Dicks Member since 13 February 2008 |
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Cedric Savage Member since 22 January 2008 |
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David Noko Member since 3 May 2011 |
The chief executive officer was invited to attend technical committee meetings, as were other members of executive management.
The committee met on five occasions during the period under review.
André Wilkens |
5 | |||
Ken Dicks |
5 | |||
Cedric Savage |
4 | |||
David Noko |
2 |
Company secretary
Harmonys company secretary plays an active role in achieving good corporate governance, supporting the chairman and the board in:
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Ensuring the effective functioning of the board |
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Providing guidance to the chairman, board and directors of Harmonys subsidiaries on their responsibilities and duties in the prevailing regulatory and statutory environment |
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Providing the board with guidance on how to discharge these responsibilities and duties in the best interests of Harmony |
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Raising matters that may warrant the attention of the board. |
The company secretary assists in ensuring that the boards decisions and instructions are clearly communicated to the relevant stakeholders, and is available as a central source of guidance and advice in Harmony on matters of ethics and good governance. In FY11, iThemba Governance and Statutory Solutions (Proprietary) Limited was appointed on 22 March 2011 following the resignation of Harmonys internal company secretary.