Company announcements

Harmony reports solid operational performance underlined by 6% growth in EPS

January 27, 2003

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Harmony Gold Mining Company Limited (NYSE: HMY: JSE: HAR) today reported a 6% increase in earnings per share, up from 247 cents to 262 cents quarter on quarter, despite receiving 6% or R6 292/kg less in gold price. The Harmony Board has approved an interim dividend of 125 cents up 67% on last year’s interim dividend of 75 cents. Earnings per share for the first six months of the 2003 financial year totals 509 cents, an increase of 89% over the 270 cents reported for the corresponding period in the previous financial year.

In terms of growth in production and earnings per share the company is well on track to improve on the previous year’s performance and is confident that planned year on year production growth of 16%, which will see the company produce in excess of 3,1 million ounces per annum, is achievable.

Cash operating profits quarter on quarter decreased by 20% from R950 million to R763 million with the stronger Rand alone contributing R150 million to the R187 million decrease. The company however still achieved a US$102/oz or 31% cash operating profit margin at cash costs of US$222/oz.

In cost terms, the operations performed well, despite South African inflation reaching a recent high of 12%. Cash operating costs decreased by 2% or R38 million to R1 649 million. Rand/tonne costs decreased by 4%. Despite the 3% decrease in overall production of 24 078 kg, R/kg costs remained flat at R68 500.The effects of the appreciation of the South African Rand is clear with Dollar cash costs increasing from US$204/oz using a R10,39 exchange rate to US$222/oz at R9,61 to the Dollar.

On 19 September 2002, Harmony, the National Union of Mineworkers (NUM) and the United Association of South Africa (UASA) entered into a historical agreement whereby the stakeholders will develop and maintain programmes to reverse the impact of HIV/AIDS.

The company views the current rising Dollar gold price trend as great news as it reflects interest from investors and speculators in gold as an alternative investment, hedging themselves against the current uncertainty in world markets.

“It is pleasing to see gold trading above US$350/oz as this shows there is solid support for gold at these levels and in the continued absence of significant hedging activities. Concerns that a gold price of above US$350/oz would see producers returning to their bad habits of hedging has been shown to be unfounded. The low interest rate environment resulted in a low gold contango and not even the most prolific hedgers are prepared to continue to ignore the clearly expressed wishes of investors when the potential benefits of hedging is negligible. Exotic financial instruments are out of favour with investors and simple (“vanilla”) hedging is not worth the risk of further alienating investors who want exposure to a rising gold price. The record long positions held by speculators show that they expect the two year rising trend to continue,” commented Bernard Swanepoel, chief executive.

With the 23 acquisitions Harmony has completed to date came a portfolio of probably the most prospective shallow to medium depth mining project areas remaining in South Africa, at no cost. The returns from these acquisitions have been spectacular. The rising gold price may mean that now is not the smartest time to be buying growth opportunities. At these prices excellent returns are available from internal or organic growth projects which Harmony today owns. The Doornkop South Reef Project which was launched on 22 January 2003 is an excellent example. The Project, with an NPV of R876 million and IRR of 48%, will add an additional 330 000 ounces to the company’s production profile. In addition, 2 798 employment opportunities will be created. More projects are being evaluated and further announcements are expected in the next quarter.

The company recently announced its acquisition of stakes in companies who have operations and prospective exploration areas in Russia, and other mining regions in the world. Harmony’s stake in Highland Gold which was acquired at a total cost of US$26,4 million is currently valued at US$134 million.

On 21 November 2002 Harmony acquired a 21% stake in High River Gold at a cost of US$14,5 million. The stake in this Toronto based company with gold interests in Russia, Canada and West Africa has subsequently increased to US$24 million.

“In line with our growth strategy it has in the past, and definitely will in the future, become necessary for the company to make strategic investments in corporate entities. To date these activities have seen Harmony establish a sizeable international production base,” concluded Bernard.

For more details contact:

Bernard Swanepoel
+27 83 303 9922

Ferdi Dippenaar
Marketing Director
+27(0)82 807 3684

Corné Bobbert
Investor Relations Officer
Tel: +27 11 684 0146
Office: +27 11 684 0188
Mobile: +27(0)83 380 6614
cbobbert@harmony.co.za