SecProbe.io

CORRESP
1
filename1.htm

corresp

    HARMONY GOLD MINING COMPANY LIMITED

    Randfontein Office Park

    Cnr Main Reef Road and
Ward Avenue,
Randfontein 1759

    PO Box 2, Randfontein, 1760

Johannesburg South Africa

    T +27 11 411 2000

F +27 11 411 2070

W www.harmony.co.za

    NYSE and NASDAQ

trading symbol HMY

    JSE trading symbol HAR

March 28, 2008

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

100 F STREET, NE

WASHINGTON, D.C.

20549

BY EDGAR

    FOR ATTENTION:

    H ROGER SCHWALL, ASSISTANT DIRECTOR

DIVISION OF CORPORATION FINANCE

    Re:

    Harmony Gold Mining Company Limited

Form 20-F for Fiscal Year Ended June 30, 2007

Filed December 7, 2007

File No. 1-31545

Dear Sir:

Reference is made to the Staff’s comment letter dated February 29, 2008 in respect of the Harmony
Gold Mining Company Limited (the “Company”) Form 20-F for the year ended June 30, 2007. Set forth
below in detail are the responses to the Staff’s comments, which have been provided in each case
following the text of the comment in the Staff letter:

Information on the Company

Disposals, page 27

    1.

    We note here and elsewhere in your document that you discuss certain transactions using
currencies other than the U.S. dollar. Please modify your document to include the U.S. dollar
equivalent amount in addition to the currency presented.

    Response: The Company acknowledges the Staff’s comment and proposes to amend the 20-F to
include the U.S. dollar equivalent amounts in addition to the foreign currency amount
throughout Item 4 and other sections of the Annual Report.

    Directors:

    PT Motsepe* (Chairman), GP Briggs (Chief Executive), F Abbott (Interim Financial
Director), JA Chissano*#, FFT De Buck*, Dr CM Diarra*##, KV Dicks*, Dr
DS Lushaba*, C Markus*, M Motloba*, CML Savage*, AJ Wilkens**Non-Executive;
#Mozambican; *##US/Mali Citizen

    Secretary:

    MP van der Walt

Registration Number: 1950/038232/06

Worldwide Operations

South African Operations

Masimong Shaft Complex, page 58

    2.

    We note your presentation by mine that includes an amount of cash profit and the amount of
Capex for each year presented. We further note that in several instances the amount of Capex
incurred for the mine per year exceeds the amount of cash profit or loss recognized in those
same years. For several of your mines, this pattern appears to exist for all years
presented. Please tell us if you have evaluated these mines for impairment and why you don’t
believe they are impaired.

    Response: FAS 144 requires an impairment test to be performed when circumstances indicate
that an asset’s carrying value may not be recoverable, typically when an impairment trigger
is identified. In addition to this GAAP requirement and as a matter of internal policy,
the Company tests each mine for impairment on an annual basis. As a part of this annual
impairment testing process, the Company evaluated the Masimong shaft complex as well the
others where the Staff has noted that the cash operating profit (or loss) was lower than
capital expenditures. These impairment evaluations indicated that the fair value of each
mine was greater than the carrying value and therefore no impairment charges were recorded.

    On a supplemental basis, the Company wishes to advise the Staff that the Company does not
believe that the circumstance of capital expenditures exceeding cash operating profit (or
loss) is necessarily an impairment trigger. At the Company’s underground operations in
particular, where the life-of-mine can extend up to 20 years, substantial capital
expenditures are often expected/planned for in early periods. Additionally, cash operating
profit may be lower than capital expenditures in periods where substantial capital projects
are underway. Using the particulars of the Masimong shaft complex as an example, the
Company notes that the life-of-mine plan extends over 14 years and includes an expectation
that capital expenditures will continue to exceed cash operating profit for the next 2
years. During the periods presented on page 58 of the Form 20-F, specific projects were
undertaken to expand the mining area and upgrade the rail bound equipment thereby
increasing the life-of-mine.

Operating and Financial Review and Prospects, page 112

General

    3.

    Expand your discussion throughout this section to discuss fully the causes of material
changes to your financial results. We note the discussion of your results in your 2007 Annual
Report posted on your website which contains details not found in this section of the 20-F.
The purpose of this section in the 20-F is to provide management’s explanation of factors that
have affected your financial condition and results of operations and management’s assessment
of factors and trends which are anticipated to have a material effect on your financial
condition and results of operations in future periods. Refer to Item 5 of Form 20-F. As
examples only, we note the following:

    •

    Discuss and quantify the impact of the mining industry’s commitment to secure
financing to fund participation of historically disadvantaged South Africans in
mining assets will have on your operations and liquidity.

2

    •

    Discuss and quantify the impact the royalty payments to be required under the
MPRDA beginning in 2009 will have on your future operations.

    •

    We note the statement on page 6 of your Annual Report that you are likely to
produce marginally less gold in FY2008 but it should be of higher quality, which
will benefit your bottom line. Discuss the impact these known trends will have
on your operation in the Form 20-F.

    •

    We note the statement on page 11 of your Annual Report that the issue of most
concern during FY2007 was operating costs specifically in consumables and
supervisory labour. We also note that you state that implementation of the
CONOPS project has not been as successful as you had originally hoped and that
this project has high upfront costs. Given these issues, expand your discussion
in the Form 20-F to state whether these trends are expected to continue and, if
so, quantify their impact on your results.

    •

    We note the statement on page 16 of your Annual Report that challenges you
faced in FY2007 included underperformance of your recovered grade and declining
workforce productivity. Discuss the impact these known trends will have on your
operation in the Form 20-F.

    •

    We note that the unreliability of the electricity supply in South Africa has
been of a general concern to the mining industry for some time. Discuss this
trend and quantify its potential impact on your operations and operating results.

Response: The Company acknowledges the Staff’s comment and proposes to amend its 2007 20-F
to address the specific examples noted by the Staff as set out below. The Company will
endeavor to expand its discussion throughout this Item 5 more fully in future filings.

Financing to fund participation of historically disadvantaged South Africans in mining
assets

Harmony has been granted all of its mining licenses under the Minerals and Petroleum
Resources Development Act. We have therefore already incurred
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.

Royalty Bill

The Mineral and Petroleum Resource Development Act (MPRDA) also makes reference to
royalties being payable to the South African state in terms of the envisaged Mining and
Petroleum Royalty Act which has not yet been finalized. The third draft of the Mineral and
Petroleum Resources Royalty Bill was published on December 6, 2007 and provides for the
payment of a royalty according to a formula based on earnings before interest, tax and
depreciation. This rate is then applied to revenue to calculate the royalty amount due. It
is estimated that the formula could

3

translate to a royalty rate of more than 4 percent of gross sales in terms of current
pricing assumptions. The latest proposal results in a large increase from the 1.5 percent
rate proposed in the second draft in 2006. The payment of royalties is currently scheduled
to begin on May 1, 2009, if the Bill is passed by Parliament in its current form. The
Company, together with its peers, has made a presentation regarding the third draft to the
Portfolio Committee of Finance on March 19, 2008. Further discussions with National
Treasury will be held in the near future.

Quality ounces (bullets 3 and 5)

Due to the fact that the new mines are expected to start producing high volumes of ore, due
to better economics of scale, at higher grades, we expect that cash operating costs in
dollar per ounce terms will be reduced This will be dependent on the Company achieving its
operational plans. The higher grade is expected to balance the decrease in volume, ensuring
that there is consistency in the ounces produced, with an increase expected in revenue due
to the increase in the gold price, as per the Company’s long term view on the various
factors influencing the Rand gold price.

Costs and CONOPS

Costs

In order to better control our costs, we have reinstated monthly reviews to ensure that
stringent cost control measures are in place and enforced. This will assist the Company to
monitor and reduce consumable stores.

The Company reassessed its labor force and implemented several measures to reduce labor
costs. These measures included reducing our labor force by terminating the agreements of contractors and offering
voluntary severance packages to employees.

CONOPS

A task team was established to investigate the detailed working of this concept on a
shaft by-shaft basis. During the December quarter, the internal due diligences on the
effectiveness of the CONOPS method were completed at the Tshepong, Elandsrand, Masimong,
Evander 8 and Winkelhaak shafts, as well as Cooke 2 operations. These operations and Target
are the only Harmony shafts that operate on CONOPS. The review revealed that CONOPS was not
an effective mining method at Masimong and it has subsequently been terminated and the
majority of the workforce transferred to Phakisa. CONOPS will be reviewed continually and
it is our intention to phase out CONOPS at those operations that do not deliver on our
objectives. Despite our efforts to contain the costs, there may be an increase due to
factors outside of our control.

Eskom

On January 24, 2008, ESKOM advised Harmony that it would be interrupting the power supply
to the Company’s South African operations. As the safety of the miners could not be
guaranteed, mining was halted for four days, after which shafts operated at between 60% -
80% of capacity. A meeting between ESKOM and its industrial consumers was held on January
29, 2008, whereby ESKOM committed to supplying 90% of the Company’s electricity usage. This came into effect on February 1, 2008. Management is
restructuring operating processes in order to gain the most effective and efficient use of
the electricity allotted. In the light of Eskom’s electricity supply disruptions and with
mines operating only at 90% of Harmony’s previous power supply, the Company’s production
for the March 2008 quarter will decrease. However, Harmony’s Management continues to have
discussions with Eskom and are dealing with the power allocated to our shafts

4

responsibly. We are devising new strategies on optimizing operations to produce 90% of
previous electricity usage to ensure that we deliver in line with our strategic plans.

Liquidity and Capital Resources, page 177

    4.

    Expand your discussion in this section to specifically discuss the impacts that known trends
will have on your future liquidity. As an example only, we note your discussion in page 12 of
the Annual Report of the planned capital expenditures for your Growth projects, most notably
the Hidden Valley project. We note your statement that these projects will require a great
deal of capital over the next 2-3 years and “given the current cash position of the company we
are reevaluating the planned capital expenditure”. We also note the discussion on page 141
regarding your anticipated financing needs that does not discuss this concern. Expand your
discussion in the 20-F to address this concern and its impact on future results if you must
scale back planned expenditures.

    Response: The Company acknowledges the Staff’s comment and proposes that the discussion be
expanded in our amended Form 20-Fas follows, with the additions italicized:

               Working Capital and Anticipated Financing Needs

     The Board believes that Harmony’s working capital resources, by way of cash
generated from operations and existing cash on hand, are sufficient to meet
Harmony’s present working capital needs. Several of the Growth projects will
require a great deal of capital expenditure over the next two to three years, and
given the current cash position, the Company is re-evaluating the planned capital
expenditure, together with project timelines. Additional funding options are being
investigated, including debt raising and the disposal of certain assets, such as
the Cooke uranium dump. Establishing a joint venture partnership for the Hidden
Valley project is also a consideration that is being investigated. Should a
decision be taken to reduce or cease capital expenditure on one or more of the
projects, the effect would be to delay the start of production, and therefore the
associated revenue stream.
For more information on Harmony’s planned capital expenditures, see “ — Capital
Expenditures” above and Item 4. “Information on the Company — Business —
Harmony’s Mining Operations.” Harmony may, in the future, explore debt and/or
equity financing in connection with its acquisition strategy and/or major capital
projects. See Item 3. “Key Information — Risk Factors — Harmony’s strategy
depends on its ability to make additional acquisitions.”

Report of Independent Registered Public Accounting Firm, page F-2

    5.

    Please provide an audit opinion that identifies the office location of the firm.

    Response: The Company acknowledges the Staff’s comment and will include “Johannesburg,
Republic of South Africa” before the audit opinion date in its amended Form 20-F.

Note 2 — Accounting Policies

Note (n) — Property, Plant and Equipment, page F-14

    6.

    We note your policy is to capitalize costs incurred to further delineate an ore body. We
note in your policy regarding exploration costs that such costs are expensed as incurred.
Please explain these two policy disclosures for us, including how costs incurred to further
delineate an ore body are different from exploration costs.

5

    Response: The Company wishes to advise the Staff that costs incurred for the purpose of
upgrading indicated and inferred resources, or converting measured and indicated resources
to proven and probable reserves, including drilling and analysis costs at locations that
are either in the production or development stage, represent exploration costs and are
expensed as incurred.

    When it has been determined that a property can be economically developed as a result of
establishing proven and probable reserves, costs incurred prospectively to develop the
property are capitalized as mine development costs. These costs include the costs of
precision drilling to further delineate an ore body in locations where proven and probable
reserves have been established (such as those incurred to establish the exact position and
displacement of known geological structures as well as the position of known
sedimentological features). Therefore, unlike exploration costs, whic