Section 4 Estimation and Reporting of Ore Reserves
Criteria
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Commentary
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Mineral Resource Estimate for conversion to Ore
Reserves
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The Golpu deposit
lies in a block of deformed Upper Mesozoic to Middle Miocene
metasedimentary to sedimentary rocks cut by Miocene-Pliocene
calc-alkaline dioritic intrusives. Copper and gold mineralisation
results from a multiple intrusive porphyry system with the upper
portion overprinted by high sulphidation epithermal alteration.
Post mineral faulting has displaced and rotated the original
intrusive configuration.
The Golpu Mineral
Resource grades were estimated with Ordinary Kriging using pairwise
variograms of 10m composites for seven elements: gold, copper,
silver, molybdenum, sulphur, arsenic, and iron. The grades were
estimated into a block model with 40m x 40m x 40m parent cells with
10m x 10m x 10m resolution on domain margins. This reflects the
estimation precision available from the drillhole spacing and the
planned mining method (block caving).
The Mineral
Resource is classified based on: geological confidence as a
function of continuity and complexity of geological features; data
spacing and distribution; and estimation quality parameters
including distance to informing samples for block grade estimation.
Indicated and Inferred Mineral Resources were constrained within a
margin breakeven ‘value’ shell representing the limit
to eventual economic extraction.
The reported
Golpu Mineral Resources are inclusive of Ore Reserves.
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Site Visits
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The Competent
Person for the Ore Reserve estimate travelled to site on the
following occasions:
●
April 2015 – Site
familiarisation to confirm suitability for infrastructure and
inspect core.
●
June 2016 – Inspect
progress on geotechnical drilling programme.
●
June 2017 – Select a
site for the proposed Nambonga decline portal.
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Study Status
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A Feasibility
Study Update was completed in March 2018 for the development of an
underground mine comprising of three block caves (BC44, BC42 &
BC40). The Feasibility Study Update provides supporting basis for
this Ore Reserve estimate. BC44 and BC42 are at a Feasibility
confidence level, while BC40 is at a Pre-Feasibility confidence
level.
These studies
show that the mine plan is technically achievable and economically
viable taking into consideration all material Modifying
Factors.
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Cut-off Parameters
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The Golpu Ore Reserve employs a value based cut-off determined from
the Net Smelter Return (NSR) and site operating costs based on the
outcomes of the Feasibility Study Update. The cut-off values
applied for the estimation of Ore Reserves
are:ActivityUnitsUSD(real)Development prior to first BC44 crusher
commissioningUSD/t ore milled10BC44USD/t ore milled60BC42USD/t ore
milled40BC40USD/t ore milled19.15The NSR calculation takes into
account reserve revenue factors, metallurgical recovery
assumptions, transport costs, refining charges and royalty
charges.The site operating costs include mining cost, processing
cost, relevant site general and administration costs and relevant
sustaining capital costs.
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Mining factors or assumptions
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Estimation of the Golpu Ore Reserve involved standard steps of mine
optimisation, mine design, production scheduling and financial
modelling. Factors and assumptions have been based on numerical
modelling as well as experience and performance in similar caving
operations. The basis of the analysis is considered at Feasibility
(BC44 and BC42) and Pre-Feasibility (BC40) study levels.Preceding
Pre-Feasibility and Feasibility studies completed in 2012, 2014 and
2015 deemed block caving to be the appropriate underground mining
method to maximise the economic output of the Mineral Resource. The
Feasibility Study Update (on which this Ore Reserve statement is
based) defined a three lift block cave mine plan. Extraction levels
for the three block caves are; 4400mRL (BC44), 4200mRL (BC42), and
the 4000mRL (BC40). Geotechnical assessment during the studies has
resulted in the following key block cave mine design parameters in
the Feasibility Study Update:Mine Design ParameterValueUndercutting
StrategyAdvanced UndercutUndercut DesignW Cut with Apex
levelExtraction Level LayoutEl TenienteExtraction Spacing30m x
18mDraw Column HeightAverageBC44 320mBC42 490mBC40 590mMaximumBC44
530mBC42 805mBC40 1,120mAdditional drilling will be required to
collect further data for further geological, geotechnical and
metallurgical studies to inform final design.Grade control during
the production phase will be in the form of block cave drawpoint
sampling.The in situ grade model estimated in July 2014 was the
basis for the Ore Reserve estimate.The Feasibility Study Update
proposes the following mining approach:●Secondary/Initial
underground access via the Nambonga Decline to provide earlier and
quicker access to underground drill platforms, second means of
egress and ventilation.●Primary underground access via the
Watut Portal and the twin Watut Declines to the underground block
cave mine. The Watut Declines also form part of the primary
ventilation circuit and materials handling system conveying ore to
the Watut Process Plant.●A ‘Cave Engineering
Level’ established above the Reid Fault at 4870mRL for data
gathering, further refinement of the rock mass, monitoring of the
cave and potentially dewatering.●Ore extracted via three
block caves producing at 17Mtpa (design capacity) using an inclined
conveying system to discharge on a stockpile on the surface.The
following Modifying Factors have been applied:●All
development has mining factors for dilution and recovery applied to
accurately represent the expected mined tonnes.●Decline,
access and infrastructure shapes for BC42 and BC40 outside of the
Mineral Resource have tonnes contributing but not metal; these
tonnes are allocated to unclassified material.●PCBC™
software is used for cave production scheduling and estimation of
grade for material drawn from the block caves.The total Life of
Mine dilution is approximately 17%.The geological model is
classified as Indicated and Inferred Mineral Resources. There is no
Measured Mineral Resource. Mine plans are based on the extraction
of caving blocks solely delineated on the basis of Indicated
Mineral Resources.Ore Reserves estimates and statements are
required to include estimates of dilution. The dilution included in
the total Ore Reserve (400Mt on 100% basis) is approximately 79Mt
due to the block cave mining method. The dilution included in the
Ore Reserve contains 7% of the gold metal and 5% of the copper
metal of the Ore Reserve and does not have a material impact upon
the estimate. Even without consideration of the metal contained in
the dilution incorporated in the Ore Reserve, the economic analysis
indicates an economic Probable Ore Reserve.The Wafi-Golpu Project
is a greenfield block caving project and will require the following
mining infrastructure to support the block caves:●ventilation
fans and refrigeration equipment;●dewatering
equipment;●crushing and conveying equipment;
and●underground workshop, service and personnel
facilities.
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Metallurgical factors or assumptions
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The ore will be
processed on site at the proposed treatment plant with a design
capacity of 17 Mtpa using conventional single stage SAG and ball
mill grinding, recycle crushing and flotation methods that are
incrementally sized to match the mining rate to produce a copper
and gold concentrate. The technology associated with the ore
processing is industry standard for this style of
deposit.
The key
metallurgical testwork for the Golpu deposit can be grouped into
five main programmes as follows:
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Testwork completed prior to
2011 on samples from above 5120mRL.
●
2012 PFS Variability testwork
and Metallurgical Domain Model completed on samples over the
vertical extent of the known Golpu deposit from 5120mRL to 3850mRL
across 14 exploration drill holes.
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2013/14 Variability and
flowsheet development testwork from 102 composites in the 2012 PFS
programme. Variability samples were prepared from material selected
from exploration drill holes to provide spatial and grade
variability within the respective domains. The testwork samples
were obtained from 14 exploration drill holes across seven
metallurgical domains.
●
2015 Feasibility Study
testwork programme executed testwork through the chosen process
flowsheet using bulk samples from a mine plan targeting the
development of two block caves. Based on the mine development, the
ore types identified in the early years of production included
domains 29 (Sericite metasediment), domain 30 (Sericite porphyry)
and domain 33 (Actinolite porphyry) and account for 92% of material
mined within the planned block caves.
●
2018 Feasibility Study Update
testwork programme including comminution testwork to determine
milling characteristics for ore from 4000mRL. This ore is
characterised by higher work indices than the ore higher in the
orebody, thus additional work will be executed in the near future
to confirm characteristics and if necessary alter the mill
specifications during detailed design.
A total of 13
geometallurgical domains were assigned to represent an improved
geological interpretation of the Golpu deposit and increase the
understanding of the copper and gold recoveries in the deposit.
Gold and copper recoveries are calculated for each domain. The
geometallurgical domains are based upon 103 composite samples
assembled from 17 exploration drillholes through the entire
deposit. Life of Mine metallurgical recoveries are:
●
Gold 68%
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Copper 95%
Final concentrate
derived from the testwork was utilised to conduct a product quality
assessment, which incorporated chemical analysis for major elements
and potential deleterious elements. The analysis indicated that the
levels of deleterious elements in concentrate did not exceed any of
the typical concentration restrictions for sale.
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Environmental
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Feasibility study
level analysis is in progress assessing the potential environmental
impacts of the mining and processing operations required for the
mining of the Golpu deposit and an Environmental Impact Statement
is proposed to be submitted by the WGJV to the PNG government by
the end of June 2018.
NAF (Non-Acid
Forming) waste rock would be produced from the first 300m of the
Nambonga Decline and the first 2,000m of the twin Watut Declines.
This material would be used to construct the retaining wall, base
and access road for the PAF (Potentially Acid Forming) cells. PAF
would be expected to be encountered from below these points for the
remaining scope of the mine. This material will either be stored in
cells encapsulated in impervious material or treated via the
processing plant.
Deep Sea Tailings
Placement (DSTP) has been identified in the Feasibility Study
Update as the preferred method for tailings
management.
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Infrastructure
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The Wafi-Golpu
Project is a greenfield project and currently does not have
infrastructure to support mining operations. Major Infrastructure
is required and included in the Feasibility Study Update,
including:
●
access road;
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ventilation and refrigeration
plant;
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processing plant (copper
concentrator);
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Deep Sea Tailings Placement
system including tailings pipeline from site to the discharge point
near Lae;
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concentrate export pipeline
plus associated dewatering and loading facilities at the existing
Lae Port;
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accommodation camp;
and
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on site power
station.
The land in which
the Project is located is mostly under customary land title, some
of which has been in dispute between customary land title holders
since mineral exploration began in the early 1980s. The
compensation of landholders is a requirement to the start of work
however, Section 160 of the
Mining
Act 1992
means that a dispute between customary land title
holders of this nature will not impede Project
execution.
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Costs
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Capital and
Operating costs have been determined as part of the Feasibility
Study Update.
Capital cost
estimates are based on multiple market prices across all technical
disciplines. Provision has been made for capital expenditure
requirements for new equipment, infrastructure and replacement of
infrastructure and equipment during the life of the mine.
Contingency has also been factored into the capital cost estimate
consistent with the level of accuracy of the study.
Operating cost
estimate first principles cost modelling expenses have been
quantified as far as possible and where practicable supported by
quotations.
Long term metal
prices and exchange rate assumptions adopted in the Ore Reserve
estimate are the WGJV approved long term assumptions for the
Project.
No cost impact is
expected from deleterious elements. It has therefore not been
necessary to include realisation penalties (additional costs)
relating to minor elements when preparing the Ore Reserve
estimate.
Transport and
refining charges have been based on forecast supply and demand
assumptions.
The following
allowances have been made for royalties payable in the preparation
of the Ore Reserve estimate:
●
Royalty of 2.00% of net
smelter revenue (i.e. gross revenue from all mining sales adjusted
for realisation and freight charges).
●
Mining Levy of 0.25% of gross
revenue from all mining sales.
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Revenue factors
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Long term metal
prices and exchange rate assumptions adopted in the Ore Reserve
estimate are the WGJV approved long term assumptions for the
Project and are:
●
USD1,200/oz for
gold
●
USD3.00/lb for
copper
●
USD/AUD 0.75
●
PGK/USD 3.10
The NSR
calculation takes into account reserve revenue factors,
metallurgical recovery assumptions, transport costs and refining
charges and royalty charges.
Metallurgical
test work analysis has indicated that the levels of deleterious
elements in concentrate did not exceed any of the typical
concentration restrictions for sale.
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Market assessment
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Third party
forecasts were used in the Feasibility Study Update (noting that
this information is commercial in confidence).
The Wafi-Golpu
Project’s natural market for concentrate is Asia due to the
proximity of the mine to Asian region smelters.
The Wafi-Golpu
Project is expected to achieve first ore milled approximately 4.75
years post SML grant. At such time, the Wafi-Golpu Project may face
competition from both new and established mines.
Concentrate
volume forecasts were derived from the Feasibility Study Update
production schedule.
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Economic
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The Ore Reserve
has been evaluated through a financial model. All operating and
capital costs as well as revenue factors stated in this document
were included in the financial model. A discount factor of 8.5%
real was applied. This process demonstrated the Golpu Ore Reserve
to have a positive NPV.
Sensitivities
were conducted on the key input parameters including commodity
prices, capital and operating costs, ore grade, discount rate,
exchange rate and recovery which confirmed the estimate to be
robust. The NPV range has not been provided as it is commercially
sensitive.
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Social
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To assess the
social and economic impacts of the Project upon communities, the
Feasibility Study Update included an in depth Social and Cultural
assessment, including leveraging off historical assessment work
completed. In addition an assessment of the potential economic
impacts of the Project (if developed) was undertaken by
WGJV.
The land in which
the Project is located is mostly under customary land title, some
of which has been in dispute since mineral exploration began in the
early 1980s. The compensation of landholders is a requirement to
the start of work however, Section 160 of the
Mining Act 1992
means that a dispute of
this nature will not impede Project execution.
Other key
agreements that will be required for project development include:
the Memorandum of Agreement (a Development Forum process) in
relation to benefits that might be accrued to effective landholders
and a Mining Development Contract with the Independent State of
PNG.
The respect for
all landowners, and regular engagement with them, will be vital to
the maintenance of a social licence to operate.
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Other
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A Level 2B
Environment Permit (EP) has been granted for exploration
activities.
Applications for
a Special Mining Lease (SML) and related ancillary tenements have
been submitted by WGJV to the Mineral Resources
Authority.
Approval of the
Project by the PNG Government will be founded on the assessment of
the Environmental Impact Statement (EIS) due to be submitted by the
WGJV to the PNG government by the end of June 2018. This EIS will
inform government’s decision to grant an SML, related
ancillary tenements and a Level 3 EP. The grant of these key
instruments is a prerequisite for execution of the
Project.
The Golpu deposit
is located in a seismically active area in a region close to a
source of earthquakes that can produce seismic accelerations at the
site. This risk has been taken into account in infrastructure and
mine design.
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Classification
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The Ore Reserve
classification is based on Indicated Mineral Resources only. No
Measured Mineral Resources are stated for this deposit. This
classification is based on geological confidence as a function of
continuity and complexity of geological features; data spacing and
distribution and estimation quality parameters including distance
to informing samples for block grade estimation.
Diluting material
has been included within the Probable Ore Reserve as mined dilution
due to the non-selective nature of block cave mining. This
represents 7% of the gold metal and 5% of the copper metal in the
Ore Reserve. Even without consideration of the metal contained in
the dilution incorporated in the Ore Reserve, the economic analysis
indicates an economic Probable Ore Reserve.
It is the
Competent Person’s view that the classifications used for the
Ore Reserves are appropriate.
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Audits or reviews
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SRK Consulting
(Australasia) Pty Ltd (SRK) was commissioned to conduct an
independent review of the mining section of the Feasibility Study
Update, which included the Ore Reserve estimation processes and
results.
SRK concluded
that the Ore Reserve estimates had been prepared using normal
industry practice and has been appropriately classified as Probable
Ore Reserve. SRK did not identify any material issues with the
estimate.
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Discussion of relative accuracy/ confidence
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The accuracy of
the estimates within this Ore Reserve is mostly determined by the
order of accuracy associated with the Mineral Resource
model.
BC44 and BC42 are
at a Feasibility confidence level (+/-15% accuracy), while BC40 is
at a Pre-Feasibility confidence level (+/- 25%
accuracy).
The Competent
Person views the Golpu Ore Reserve a reasonable assessment of the
global estimate.
The remaining
areas of uncertainty at the current study stage are with the
geotechnical parameters for the mining area below 4200mRL (i.e.
BC40) that has been investigated to a Pre-Feasibility Study (PFS)
level of confidence and is constrained by an incomplete set of
orebody data with rock strength only being confirmed in the north
east quadrant of the planned BC40 footprint. An analysis has
indicated that based on the known rock strength being extrapolated
across the remaining areas of lower orebody knowledge, mining is
feasible. The Modifying Factors (key inputs) applied within
PCBC™ cave scheduling software relies upon geology and
geotechnical data such as structural geology and rock mass
strength.
Further orebody
data is required to confirm the geological and geotechnical
information and is planned as part of the Forward Works
Programme.
Golpu is a
greenfields site and there is no previous production from the Golpu
deposit to compare relative accuracy and confidence.
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About the Wafi-Golpu Project
Harmony and
Newcrest each currently own 50% of Wafi-Golpu through the
WGJV.
The State of PNG
retains the right to purchase, at a pro rata share of accumulated
exploration expenditure, up to 30% equity interest in any mineral
discovery at Wafi-Golpu, at any time before the commencement of
mining. If the State of PNG chooses to take-up its full 30%
interest, the interest of each of Newcrest and Harmony will become
35%.
The Golpu deposit
is located approximately 65km south-west of Lae in the Morobe
Province of PNG which is the second largest city in PNG and will
host the Wafi-Golpu export facilities. The proposed mine site sits
at an elevation of approximately 200 metres above sea level in
moderately hilly terrain and is located near the Watut River
approximately 30km upstream from the confluence of the Watut and
Markham rivers.
For further information please contact
Lauren Fourie
+27 (0)71 607 1498
lauren.fourie@harmony.co.za
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Marian van der Walt
+27 (0)82 888 1242 Marian@harmony.co.za
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This information is available on our website at
www.harmony.co.za
Competent Person’s Statement
The information
in this report that relates to Golpu Mineral Resources is based on
information compiled by the Competent Person, Mr David Finn, who is
a member of The Australasian Institute of Mining and Metallurgy. Mr
David Finn, is a full-time employee of Newcrest Mining Limited or
its relevant subsidiaries. Mr David Finn has sufficient experience
which is relevant to the styles of mineralisation and type of
deposit under consideration and to the activity which he is
undertaking to qualify as a Competent Person as defined in the JORC
Code 2012 and SAMREC 2016 (materially the same as the JORC code)..
Mr David Finn consents to the inclusion of material of the matters
based on his information in the form and context in which it
appears.
The information
in this report that relates to Golpu Ore Reserves is based on
information compiled by the Competent Person, Mr Pasqualino Manca,
who is a member of The Australasian Institute of Mining and
Metallurgy. Mr Pasqualino Manca, is a full-time employee of
Newcrest Mining Limited or its relevant subsidiaries, Mr Pasqualino
Manca has sufficient experience which is relevant to the styles of
mineralisation and type of deposit under consideration and to the
activity which he is undertaking to qualify as a Competent Person
as defined in the JORC Code 2012 and SAMREC 2016 (materially the
same as the JORC code). Mr Pasqualino Manca consents to the
inclusion of material of the matters based on his information in
the form and context in which it appears.
Mr Gregory Job,
BSc, MSc, who has 29 years’ relevant experience and a member
of the Australian Institute of Mining and Metallurgy (AusIMM), is
Harmony’s competent person for Papua New Guinea.
Mr Jaco Boshoff,
BSc (Hons), MSc, MBA, Pr. Sci. Nat, MSAIMM, MGSSA is
Harmony’s lead competent person. Mr Boshoff who has 22
years’ relevant experience, is registered with the South
African Council for Natural Scientific Professions (SACNASP) and is
a member of the South African Institute of Mining and Metallurgy
(SAIMM) and
a member of the
Geological Society of South Africa (GSSA).
Forward Looking Statements
This report contains forward-looking statements within the meaning
of the safe harbor provided by Section 21E of the Securities
Exchange Act of 1934, as amended, and Section 27A of the Securities
Act of 1933, as amended, 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”, “should”, “could”,
“estimates”, “forecast”,
“predict”, “continue” or similar
expressions or the negative thereof.
These forward-looking statements, including, among others, those
relating to our future business prospects, revenues and income,
wherever they may occur in this report and the exhibits to this
report, are essentially 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 presentation. Important factors that could cause actual
results to differ materially from estimates or projections
contained in the forward-looking statements include, without
limitation: overall economic and business conditions in South
Africa, Papua New Guinea, Australia and elsewhere, estimates of
future earnings, and the sensitivity of earnings to the gold and
other metals prices, estimates of future gold and other metals
production and sales, estimates of future cash costs, estimates of
future cash flows, and the sensitivity of cash flows to the gold
and other metals prices, statements regarding future debt
repayments, estimates of future capital expenditures, the success
of our business strategy, development activities and other
initiatives, estimates of reserves statements regarding future
exploration results and the replacement of reserves, the ability to
achieve anticipated efficiencies and other cost savings in
connection with past and future acquisitions, fluctuations in the
market price of gold, the occurrence of hazards associated with
underground and surface gold mining, the occurrence of labor
disruptions, power cost increases as well as power stoppages,
fluctuations and usage constraints, supply chain shortages and
increases in the prices of production imports, availability, terms
and deployment of capital, changes in government regulation,
particularly mining rights and environmental regulation,
fluctuations in exchange rates, the adequacy of the Group’s
insurance coverage and socio-economic or political instability in
South Africa and Papua New Guinea and other countries in which we
operate.
For a more detailed discussion of such risks and other factors
(such as availability of credit or other sources of financing), see
the Company’s latest Integrated Annual Report and Form 20-F
which is on file with the Securities and Exchange Commission, as
well as the Company’s other Securities and Exchange
Commission filings. The Company undertakes no obligation to update
publicly or release any revisions to these forward-looking
statements to reflect events or circumstances after the date of
this presentation or to reflect the occurrence of unanticipated
events, except as required by law.
Ends.
12 April
2018
Corporate
office:
Randfontein
Office Park
P O Box
2
Randfontein
South Africa
1760
T +27 (11) 411
2000
Listing
codes:
ISIN no:
ZAE000015228
Registration no:
1950/038232/06
JSE Sponsor: J.P.
Morgan Equities South Africa Propriety Limited
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused
this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
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Harmony Gold Mining Company
Limited
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Date:
April 12,
2018
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By:
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/s/
Frank Abbott
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Name
Frank
Abbott
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Title
Financial
Director
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