HARMONY GOLD MINING CO LTD — Audit Report / Information 2007

May 18, 2007

CORRESP 1 filename1.htm corresp PAGEBREAK

HARMONY GOLD MINING COMPANY LIMITED — First Floor 4 The High Street	Suite No 1 Private Bag X1	T +27 11 684 0140
Melrose Arch Melrose North	Melrose Arch 2076	F +27 11 684 0188	NYSE and NASDAQ
2196 Johannesburg	Johannesburg South Africa	W www.harmony.co.za	trading symbol HMY
			JSE trading symbol HAR

18 May 2007

UNITED STATES SECURITIES AND EXCHANGE COMMISSION 100 F STREET, NE WASHINGTON, D.C. 2059-7410

BY EDGAR

FOR ATTENTION: H. ROGER SCHWALL, ASSISTANT DIRECTOR DIVISION OF CORPORATION FINANCE

Dear Sir,

REPLY TO REVIEW LETTER DATED 18 APRIL 2007

Reference is made to the Staff’s comment letter dated April 18, 2007 in respect of the Harmony Gold Mining Company Limited (the “Company”) Form 20-F for the year ended June 30, 2006. 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, page 19

Year-on-year reconciliation of Harmony’s ore reserves, page 38

| 1. |
| --- |
| Response: The Company acknowledges the Staff’s comment and confirms that the reserve
quantities used to measure its financial results are limited to proven and probable reserves
as defined by Industry Guide 7. |

| Directors: | P T Motsepe (Chairman), Z B Swanepoel (Chief Executive), F Abbott, J A Chissano # ,
F T De Buck, Dr D S Lushaba, C Markus, M Motloba, N V Qangule, C M L Savage * Non-Executive; # Mozambican |
| --- | --- |
| Secretary: | M P van der Walt |

Registration Number: 1950/038232/06

PAGEBREAK

Folio /Folio

2

Operating and Financial Review and Prospectus, page 133

Share –Based Compensation, page 147

| 2. |
| --- |
| Response : On July 1, 2005, the Company adopted the fair value recognition provisions of FAS
123(R) using the modified retrospective approach. Under this method, share-based payment
expense for the year ended June 30, 2006 includes: (a) compensation cost for all share-based
payments granted prior to, but not yet vested as of July 1, 2005, based on the grant-date
fair value estimated in accordance with the original provisions of FAS 123, and (b)
compensation cost for all share-based payments granted subsequent to July 1, 2005, based on
the grant-date fair value estimated in accordance with the provisions of FAS 123(R). At the
same time, the results for prior periods were adjusted based on the amounts previously
recognized under FAS 123 for purposes of pro forma disclosures. In both cases, the Company
has recognized the share-based payment expense associated with options with graded-vesting
features over the requisite service period for each separately vesting tranche of the award
as though the award were, in substance, multiple awards. |
| On a supplemental basis, the Company therefore wishes to advise the Staff that the “charge”,
or share-based payment expense, for both fiscal 2006 and 2005 represents the grant-date fair
value of the awards discussed on page F-50 of the Company’s FY 2006 20-F which are being
recognized over the employee’s requisite service period, which varies from three to five
years. The increase in the expense from fiscal 2005 to fiscal 2006 results primarily from the
share options granted on April 26, 2005, for which only two months of service were completed
in fiscal 2005, compared to a full year in fiscal 2006, and the depreciation of the Rand
against the US dollar, which increased the share-based charges in US dollar terms. The
Company will expand its Operating and Financial Review and Prospects in future filings to
clarify the nature of the charges as well as the reasons for any material movements/charges. |

2 Accounting Policies, page F-7

(t) Revenue Recognition, page F-14

| 3. |
| --- |
| Response : The Company wishes to advise the Staff on a supplemental basis that the revenues in
respect of “silver and other by-products”, which have been credited to production costs as a
by-product credit, amounted to US$1.3 million in fiscal 2006, US$4.0 million in fiscal 2005
and US$1.9 million in fiscal 2004. These sales have not historically been contemplated by the
Company’s mine plans and therefore are appropriately accounted for as by-products. This
treatment is supported by the fact that these amounts represent less than 0.3% of reported
sales in 2005 and 2004. The Company will consider the appropriateness of this policy in
future periods, based on the expected silver revenues from its Hidden Valley Project in Papua
New Guinea, which is still under development. |

PAGEBREAK

Folio 3 /Folio

3 Accounting changes, page F-16

(b) Stripping costs incurred during the production phase of a mine, page F-17

| 4. |
| --- |
| Response : Prior to July 1, 2005, at the Company’s Kalgold operations, deferred stripping
costs were charged to Production costs exclusive of depreciation and amortization as gold was
produced and sold using the units of production method based on estimated recoverable
quantities of proven and probable reserves, using a stripping ratio calculated as the ratio
of total tons to be moved to total proven and probable ore reserves, which resulted in the
recognition of the costs of waste removal activities over the life of the mine as gold was
produced. The application of the deferred stripping accounting method previously applied
resulted in the recognition of an asset (deferred stripping costs). Under the Company’s
revised policy, which complies with EITF 04-6, stripping costs incurred during the production
phase of a surface mine are treated as variable production costs and considered to be a
component of mineral inventory cost subject to the provisions of ARB 43. Post production
stripping costs are therefore expensed as incurred in the consolidated statements of
operations, except to the extent that those costs are considered to be a component of mineral
inventory on hand at the balance sheet date; in which case “capitalization of the
post-production costs would be appropriate” as a component of such mineral inventory. The
Company will clarify its disclosures in future filings. |
| During the periods presented, the Company did not carry any material mineral inventories at
its Kalgold operations. All post-production stripping costs have therefore effectively been
expensed as incurred. |

15 (Loss) /Earnings Per Share, page F-34

| 5. |
| --- |
| Response : The weighted average number of ordinary shares that would have been included in the
computation of fully diluted loss per share amounted to 4,919,895 and 3,208,201 in fiscal
2006 and fiscal 2005, respectively. The Company will revise its future filings to incorporate
the disclosures required by paragraph 40(c) of FAS 128. |

26 Long term Loans, page F-41

1. We note that you issued an international unsecured fixed rate convertible bond totaling R1,700 million in May 2004 and that “bonds are convertible at the option of bondholders at any time on or after July 1, 2004 and up to and including May 15, 2009.” We further note that the “number of ordinary shares to be issued at such a conversion shall be determined by dividing the principal amount of each bond by the conversion price in effect on the relevant conversion date.” Please tell us how you considered the guidance in FAS 150, FAS 133 and EITF 00-19 with respect to your convertible bond and any associated embedded derivatives. You may wish to refer to section II.B. within the outline entitled Current Accounting and Disclosure Issues in the Division of Corporation Finance, located at http://www.sec.gov/divisions/corpfin/cfacctdisclosureissues.pdf.

PAGEBREAK

Folio 4 /Folio

| Response: The Company acknowledges the Staff’s comment and wishes to advise the Staff that
it does not consider the convertible bond to be an instrument within the scope of FAS 150. In
particular, the Company notes that the instrument would not be considered to be a
“mandatorily redeemable financial instrument”, as a result of the conversion feature embedded
within the bonds which results in the bonds being “conditionally redeemable.” The initial
conversion price of the instruments was R121 per ordinary share, subject to certain standard
anti-dilution provisions, such as a stock split, spinoff or rights offering, that are
designed to maintain the value of the conversion option. |
| --- |
| With regard to the conversion feature, the Company has analyzed whether the embedded
conversion feature meets the paragraph 11(a) scope exception of FAS 133. In analyzing whether
the conversion feature meets the paragraph 11(a) scope exception, the Company considered the
guidance in paragraphs 7-32 of EITF 00-19 to determine whether the conversion feature should
be classified as a liability or within stockholder’s equity. In particular, the Company notes
that: (i) there are no provisions in the contract that could require net-cash settlement of
the conversion feature; (ii) the shares will not be registered in the United States and that
there are no further filing or registration requirements in South Africa that would preclude
the Company from controlling the delivery of the shares; (iii) the Company has sufficient
authorized and unissued shares available to settle the contract after considering all other
commitments that may require the issuance of stock during the maximum period the derivative
contract could be outstanding; and (iv) the number of shares to be delivered is effectively
capped at the initial conversion price as defined by the terms of the bond, as all
adjustments to the conversion price are either limited to events within the Company’s control
or contain an explicit cap on the conversion price. All other criterion not specified above,
but included in EITF 00-19 paragraph 7-32 have also been met. |
| The Company has therefore determined the classification of the conversion feature to be
equity under EITF 00-19 and, since the conversion feature is indexed solely to the Company’s
own stock (as defined in EITF 01-6), the requirements in FAS 133 paragraph 11(a) have been
met. As such, the embedded conversion feature has not been bifurcated from the host contract.
Instead, the entire convertible instrument has been accounted for in accordance with APB 14. |
| The Company will revise its future filings to expand the key disclosures surrounding the
convertible bonds, including the initial conversion price, in accordance with FAS 129. |

Cash (Utilized) / Generated by Operations, page F-54

| 7. |
| --- |
| Response : The Company acknowledges the Staff’s comment and will revise its future
reconciliations of cash flows from operating activities to begin with net income/loss for all
periods presented, as contemplated by FAS 95. The Company notes that the change will not have
any impact on the cash flows from operations as previously reported. |

Geographical and Segment Information, page F-56

1. Please tell us how you have complied with the reconciliation requirement for segment revenues, reported profit or loss, assets and other significant items to the corresponding enterprise amounts in accordance with paragraph 25(c) of FAS 131.

PAGEBREAK

Folio 5 /Folio

Response : The Company acknowledges the Staff’s comment and wishes to advise the Staff that on pages F-56, F-59 and F-62 of its 2006 Annual Report on Form 20-F, it has reconciled the segment data (segment revenue, production costs, total assets and total liabilities) to its consolidated financial statements, with an aggregate reconciling adjustment. The components of the total reconciling adjustment are discussed in narrative format on pages F-63 to F-64. The Company has the information available as part of its U.S. GAAP reconciliation working papers to support the components of each reconciling adjustment and proposes to provide quantitative disclosure of the reconciling adjustments, on a disaggregated basis, in future filings with the SEC.

Exhibits 4.20 and 4.21

9.
Response: The Company acknowledges the Staff’s comment and will amend the
exhibits in its future filing.

Engineering Comments

General

1. We note that your website and some press releases refer to or use the terms “measured”, “indicated”, and “inferred”, resources. If you continue to make references on your website or press releases to reserve measures other than those recognized by the SEC, please accompany such disclosure with the following cautionary language:

Cautionary Note to US Investors – The United States Securities and Exchange Commission permits US mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We use certain terms on this website (or press release), such as “measured”, “indicated”, and “inferred” resources, which the SEC guidelines strictly prohibit US registered companies from including in their filings with the SEC. US Investors are urged to consider closely the disclosure in our Form 20-F , File No 001-31545, which may be secured from us, or from the SEC’s website at http/://www.sec.gov/edgar.shtml.

Response: The Company acknowledges the Staff’s comment and wishes to advise the Staff that the cautionary note does appear on the company’s website and has been included in its presentations. See “Disclaimer” link at the bottom of the Company’s webpage ( www.harmony.co.za ).

Paragraph 11 of the comment letter

1. Insert a small-scale map showing the location and access to each property, as required by Instruction 1(a) to Item 4.D of Form 20-F. Note that SEC’s EDGAR program now accepts Adobe PDF files and digital maps, so please include these maps in any amendments that are uploaded to EDGAR. It is relatively easy to include automatic links at the appropriate locations within the document to GIF or JPEG files, which will allow figures and diagrams to appear in the right location when the document is viewed on the Internet. For more information, please consult the EDGAR manual, and if additional assistance is required, please call Filer Support at 202-551-8900. We believe the guidance in Instruction

PAGEBREAK

Folio 6 /Folio

1(a) to Item 4.D of Form 20-F would generally require maps and drawings with the following features:

| • | A legend or explanation showing, by means of pattern or symbol, every pattern
or symbol used on the map or drawing. |
| --- | --- |
| • | A graphical bar scale should be included. Additional representations of scale
such as “one inch equals one mile” may be utilized provided the original scale of
the map has not been altered. |
| • | A north arrow. |
| • | An index map showing where the property is situated in relationship to the
state or province, etc., in which it was located. |
| • | A title of the map or drawing, and the date on which it was drawn. |
| • | In the event interpretive data is submitted in conjunction with any map, the
identity of the geologist or engineer that prepared such data. |

| Any drawing should be simple enough or of sufficiently large scale to clearly show all
features on the drawing. |
| --- |
| Response: The Company acknowledges the Staff’s comments. It will take the Company several
months to create the required maps. The Company will include these maps in its upcoming
20-F for the fiscal year ending June 30, 2007. |

Papua New Guinea, page 28

| 12. |
| --- |
| Response: The Company acknowledges the Staff’s comment and confirms that it will not
refer to areas that it does not control in future filings. The Company does not control
the Bulolo, Wall and Edie Creek areas. |

Wafi Golpu and Morobe, page 28

| 13. |
| --- |
| In the event a feasibility study has not completed for these product quantities, you may
classify them as mineralized material, provided the mineralization that has been
sufficiently sampled at close enough intervals to reasonably assume continuity between
samples within the area of influence of the samples. In this instance you would need to
disclose that such a deposit would not qualify as a reserve, until a comprehensive
evaluation based upon unit cost, grade, |

PAGEBREAK

Folio 7 /Folio

| recoveries, and other material factors conclude the
technical, legal and economic feasibility. |
| --- |
| Response: The Wafi Golpu gold-copper system consists of mineralized material
containing 9.3 million ounces of gold and 3.6 billion pounds of copper in the small area
around Wafi Hill. Although the area contains mineralized material it is the subject of a
pre-feasibility study in which unit costs, grade recoveries, etc. will be quantified to see
whether it is feasible and economic to exploit. |
| We will disclose that these deposits would not qualify as a reserve until an evaluation of
the relevant material factors conclude feasibility. |
| We have enclosed a CD containing the executive summary of the feasibility study. |

Moa Creek, page 28

1. You cite the best intersections for your drill results. As a general checklist, when reporting the results of sampling and chemical analyses, the following points may assist you in preparing meaningful disclosure about mineralization of existing or potential economic significance on your property:

| • | Disclose only weighed-average sample analyses associated with a measured
length or a substantial volume. |
| --- | --- |
| • | Eliminate all analyses from “grab” or “dump” samples, unless the sample is of
a substantial and disclosed weight. |
| • | Eliminate all disclosure of the highest values or grades of sample sets. |
| • | Eliminate grades disclosed as “up to” or “as high as” or “ranging from”. |
| • | Eliminate statements containing grade and/or sample-width ranges. |
| • | Aggregated sample values from related locations should be aggregated based on
a weighted average of lengths of the samples. |
| • | Generally, use tables to improve readability of sample and drilling data. |
| • | Soil samples may be disclosed as a weighted-average value over an area. |
| • | Refrain from reporting single soil sample values. |
| • | Convert all ppb quantities to ppm quantities for disclosure. |

Please revise your disclosures to comply with this guidance.
Response: The Company acknowledges the Staff’s guidance and confirms that it
will incorporate this guidance in future filings.

Evander, page 31

15.
Response: cmg/t is the width of the ore body multiplied by the metal content (g/t).
This method of stating grade is typically applied in the narrow tabular Witwatersrand

PAGEBREAK

Folio 8 /Folio

Orebodies that Harmony exploits and is used in the mine planning process of the South African gold mines.

Description of Property, page 36

| 16. |
| --- |
| Response: The Randfontein Estates Limited owns the Cooke, Doornkop and Lindum shafts.
ARMgold Limited owns the Orkney operation. This disclosure will be incorporated in future
filings. |

Ore Reserve Statement (Imperial) as at June 30, page 40

17.
Response: We have enclosed a CD containing the imperial ore reserve statement, as well as
the cut-off grades and footnotes. This disclosure will be incorporated in future filings.

18.
Response: The metallurgical recovery for the Western Area South Deep deposit is estimated
at 97.2%. This disclosure will be incorporated in future filings.

Elandskraal Operations, page 42

| 19. |
| --- |
| Response : The Company acknowledges the Staff’s comment and confirms that it will define
these terms in the text or glossary in future fillings. |
| The staffing levels to which these statistics apply, are the “at work” staff
strength. In simpler terms this means that only the persons who are physically
present at work are counted for purposes of this statistic. |
| With the “lost time frequency”, and the “fatality frequency rates”, the rates are
calculated and expressed as rates in “injuries per million man hours worked”. |
| The formula to calculate the injury per million man hours worked, is calculated
as follows: |

Total LTI for the month, quarter or year, multiplied by 1 000 000
Total shifts worked for the period in question x 9 hours
The formula to calculate the fatalities per million man hours worked, is calculated as
follows:

PAGEBREAK

Folio 9 /Folio

Total Fatalities for the month, quarter or year, multiplied by 1 000 000
Total shifts worked for the period in question x 9 hours
The variances and reasons will be incorporated in future filings.

Plants, page 44

| 20. |
| --- |
| Response: The 95.6% recovery is calculated from the Plant head less residue divided by the
Plant head. There were sampling and evaluation problems during the period which resulted in
the variance. A comprehensive investigation led to the replacement of on-line samplers on the
feed system. The other plants Central, Saaiplaas, Freestate 1 and Target are between 96% and
97%. The only larger variance was at Freestate 1 plant due to gold inventory changes. |
| The variances and reasons will be incorporated in future filings. |

Tshepong, page 59

| 21. |
| --- |
| Response: Tshepong shaft complex forms part of the Freegold operations; Masimong forms part
of the Freestate operations; and the ARMgold operations consist of the Orkney shafts. Refer
to the ore reserve statement on page 40. We have also included a breakdown of these 3
operations to provide additional clarity. |

Freegold operations	ARMgold operations	Free State operations
Tshepong	Orkney 2	Masimong
Phakisa	Surface operations	Welkom 1
Harmony 2	Other	Merriespruit 1
Bambanani		Unisel
Joel		Brand 3
Eland		Brand 5
Kudu/Sable		Surface Operations
West Shaft		Other
Nyala
St Helena
Surface operations
Other

Hidden Valley project, page 118

| 22. |
| --- |
| Response: We have enclosed a CD containing the
executive summary of the feasibility
study. |

PAGEBREAK

Folio 10 /Folio

Hidden Valley project, page 119

23.
Response: We apologise for the typing error. The amount in respect of the ore
treated should read 47.4 million tons.

Item 24

1. Proven and probable reserves are disclosed for your Free Gold properties. Forward to our engineer as supplemental information and not as part of the registration statement, information that establishes the legal, technical and economic feasibility of the materials designated as reserves, as required by Section C of SEC’s Industry Guide 7. This request is directed primarily for summary reports which include the following:

•	Property and/or geologic maps
•	Description of your sampling and assaying procedures
•	Drill-hole maps showing drill intercepts
•	Representative geologic cross-sections and drill logs
•	Description and examples of your cut-off calculation procedures
•	Cut-offs used for each category of reserve and resource
•	Justifications for the drill hole spacing used at various classification
levels
•	A detailed description of your procedures for estimating “reserves”
•	Copies of pertinent engineering and geological reports, and feasibility
studies or mine plans (including cash flow analyses)
•	A detailed permitting and government approval schedule for the project,
particularly identifying the primary environmental or construction approval(s)
and your current location on that schedule.
•	Copies of recent geological and/or ore reserve audits.

| To minimize the transfer of paper, please provide the requested information on a CD,
formatted as Adobe PDF files and provide the name and phone number for a technical
person our engineer may call, if he has technical questions about your reserves. |
| --- |
| We remind you of the requirements of Rule 12b-4 under the Exchange Act if you wish
this information returned. In such case, you may wish to provide a pre-paid,
pre-addressed shipping label to facilitate the return of the supplemental information. |
| Response: We have enclosed a CD containing the executive summary of the
feasibility study. |

PAGEBREAK

Folio 11 /Folio

The Company acknowledges that it is responsible for the adequacy and accuracy of the disclosure in the filings it makes with the Commission. It understands that staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing and that the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Yours faithfully

N.V. Qangule Chief Financial Officer

cc: Jennifer Goecken, Division of Corporation Finance Jill Davis, Branch Chief

Folio /Folio