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ENVIRONMENTAL PERFORMANCE

Management approach

Harmony recognises that the long-term sustainability of our business depends on the way in which we manage our assets and the impact of our business on our surrounding communities and natural environments.

Our goal in respect of environmental performance is the implementation and practice of responsible environmental management that ensures, at the very minimum, compliance with our own policies and procedures, as well as with the regulations and legislation of the countries in which we operate. In accordance with the ISO14001 standard that underpins our Environmental Management System (EMS) we will seek to incrementally improve our performance and the reporting thereof. In South Africa in particular, we are intent on identifying and implementing co-ordinated regional remediation plans that are sustainable and inclusive and that address legacy issues which have accumulated in the companies that Harmony has acquired over the years. It should be noted that the Randfontein operations are no longer operated by Harmony, and are therefore excluded from this report (although Randfontein data has been included for one month where indicated).

Harmony’s approach to environmental management is closely aligned with the ongoing risk management process. Environmental risks are identified and prioritised, and these issues are then promptly dealt with.

While oversight of environmental strategy and performance is provided by the Sustainable Development Committee of the board, responsibility for the management of operational environmental issues lies with the operational heads, who are supported by line management in the various regions. The Sustainable Development Committee is notified of any instances of ongoing non-compliance or potentially serious environmental impacts, so that they may be considered and addressed at this level. Management is tasked with adopting the best practicable environmental option in addressing these issues; that is, the option that has the most benefit or that causes the least damage to the environment, at a cost acceptable to society and affordable to the company.

A central specialised Environmental Management Function (EMF) guides environmental policy, monitors performance and assists in the implementation of best practice in South Africa. In PNG, this is managed by the MMJV.

Common to the group’s environmental vision are four key principles:

• 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.
• Continual improvement: we will evaluate and continually improve the effectiveness of our EMSs through periodic audits and management reviews, and we will review our environmental policy on an annual basis.
• 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.
• 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.

Environmental targets

To address and minimise the impact of the company’s 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, namely:

Air emissions

• To reduce electricity usage by 15% in line with the DME (now DMR) 2005 Energy Accord.
• To reduce fuel usage (diesel and petrol) by 15%.
• To reduce all dust emissions (from tailings dams) by 15%.
• To reduce methane emissions by 30%.
• To reduce domestic coal usage by 50%.

Water

• To reduce water usage by 10%.
• To reduce metals/salt discharge by 70% to surface water, and by 20% to groundwater.

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.

Land use

• A 10% reduction in the company’s land use footprint will be effected through rehabilitation.

Environmental management in South Africa

ISO14001 implementation

An ISO14001 EMS is being introduced progressively across our operations, and it is planned that the implementation programme at the longer-life operations will be completed in FY12. Formal certification will be sought progressively.

By the end of June 2009, the implementation status at the various operations (where 100% = certification) was estimated as follows:

• Doornkop – shaft - 90% and plant – started. Stage 2 certification audit scheduled for November 2009.
• Target – 12%. Certification audit planned for March 2011.
• Kusasalethu – 20%. Certification audit planned for March 2011.
• Phakisa – 20%. Certification audit planned for November 2010.
• Evander – 10%. Certification audit planned for March 2011.
• Kalgold – 12%. Certification audit planned for December 2010.

The EMS forms the basis for the implementation of the environmental policy and monitoring compliance, while the Environmental Management Plan (EMP), developed in line with legislative requirements, contains specific as well as general principles governing environmental management during the operation of the mine. The EMPs identify individual impacts, mitigation measures and rehabilitation requirements.

Generic closure objectives are set and high-level closure plans formulated within the EMP, 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 EMPs are legally binding and form part of the company’s submission for, and receipt of, mining rights conversions. Revised EMPs (aligned with new minerals legislation) were developed for Doornkop, Kalgold, Joel, St Helena, Target, Evander, the Harmony operations and Kusasalethu in FY09, and submitted to the regulatory authorities for approval. As part of this process, public participation meetings were held with interested and affected parties.

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.

Significant environmental incidents

Significant incidents are defined as those that have an impact outside the company’s boundaries, which may cause irreparable harm or which require significant expenditure to remedy. In FY09, four significant environmental incidents were reported. These were:

• water seepage from slimes dams (one incident);
• unexpected water discharged, particularly as a result of electricity interruptions and equipment failure (two incidents); and
• the failure of a clay-lined return water dam that resulted in the flooding of an agricultural area (one incident).

Incidents involving water are reported using a specific water-related incident reporting system, as required in terms of Regulation 704 of the National Water Act.

Environmental expenditure and 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. Expenditure on environmental matters is incorporated within the operating and capital expenditure of the operations. Each operation reviews and updates the financial provision for its expected environmental closure liability annually in consultation with an independent expert. 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 597 million at the end of June 2009 (FY08: R1 603 million), while the total rehabilitation liability was estimated at R1 918 million (FY08: R2 102 million). The assets of each mine within each fund are ring-fenced and may not be used directly to cross-subsidise one another. Contributions to the various funds will continue to be made over the operations’ life-of-mine and each fund is expected to be fully cash funded at the time of closure. Until such time as the trust funds are fully-funded, bank guarantees are issued for the shortfall.

No environmental fines were received.

Stakeholder engagement

We recognise that - if not well managed - our activities have the potential to have an impact on the natural environment and on stakeholders. In addition to being responsive to calls and queries from community members, Harmony addresses issues proactively through mine site visit programmes and representation on formal environmental bodies. Harmony is represented on several government environmental forums established by the authorities, including the Waterval Forum, the Upper Vaal River Catchment, the Sandvet Catchment Management Committee, the Wonderfonteinspruit/Loopspruit Forum, the Western Basin Technical and Monitoring Working groups, the Far Western Basin Government Task Team and the Far West Rand Dolomitic Water Association. These forums, which deal mainly with issues related to water, allow for public participation as required by the various regulators. Note that, with the sale of the Randfontein operations, Harmony is no longer a respondent in matters relating to the Wonderfonteinspruit. Nonetheless, Harmony has continued to participate in the mining interest group as well as other related forums associated with the spruit. A major milestone was reached during the year when a remediation action plan report for the Wonderfonteinspruit was released by the Department of Water Affairs and Forestry.

Discussions between Harmony and Evander through the technical working group have continued. This relates to the interaction between the Sasol Mining Block and the Evander operations (the coal orebody overlies the gold orebody). A contract has been awarded to the Institute of Groundwater Studies at the University of the Free State for a more detailed analysis of groundwater interaction. The study is expected to take a period of two years.

Energy management

Harmony’s energy consumption is primarily in the form of electricity, drawn from the national energy utility, Eskom, which in turn is largely driven by coal-fired power stations. The company is a significant user of electricity, with hoisting, cooling and ventilation systems all requiring significant amounts of electrical power.

Energy is also a significant component (11%) of the company’s operating cost base, and this has become even more significant in the past year when large electricity tariff increases have occurred.

Energy used (South Africa) Giga Joules (GJ)

	FY07	FY08	FY09
Energy from electricity purchases	1.57 x 107	1.41 x 107	1.24 x 107
Energy generated from diesel and petrol*	4.25 x 10-1	4.58 x 105	2.33 x 105
Total energy consumption	1.57 x 107	1.45 x 107	1.26 x 107

* Typographical error in FY07

Total electrical energy usage in FY09 was 3 433 978 MWh (FY08: 3 908 333 MWh) for the South African operations, down by 12% from the prior year (excludes assets disposed to Rand Uranium).

We continue to engage actively with Eskom in demand-side management (DSM) strategies to reduce the overall energy impact of our operations on the national energy grid. DSM projects aim to reduce electricity consumption during daily peak electricity periods, such as early morning and early evening.

Alternative sources of energy, including renewable sources, are not currently economically viable, although Harmony will continue to investigate them in the future as circumstances dictate.

Greenhouse gas emissions

Harmony’s GHG emissions are predominantly indirect, and as a consequence of electricity used and purchased from the national power utility, Eskom. Total scope 1 and 2 emissions in South Africa in FY09 were 4 183 373 tonnes CO₂e, down from the total emissions in FY08 of 4 582 000 tonnes CO₂e, a decrease of 9%.

Greenhouse gas emissions - South Africa

Water management

Water is a scarce resource in South Africa and this scarcity is likely to increase in years to come, as will the cost of the water purchased from external suppliers.

The South African operations source their water from:

• bulk water service providers and municipalities;
• surface water run-off;
• water that ingresses into deep-level mining operations that is then pumped to surface; and
• recycled water.

These operations do not draw water from water courses, or boreholes.

Harmony’s operations make extensive use of water. We have a group-wide initiative in place to re-use process water and optimise water retreatment. Approximately 32% of the total volume of water used during the year was recycled. Water management plans have been developed for all South African operations and water use applications have been submitted to the Department of Water Affairs and Forestry, although none of these have yet been approved.

The significant decrease in water used for primary activities in FY09 is due in part to the exclusion of Rand Uranium. In addition, a number of reporting inaccuracies at a group level have contributed to the reduced usage amounts for the current year. The significant decrease in surface water used between FY08 and FY09 is due to the fact that certain sources were double accounted for prior to FY09. The current FY09 figure is more reflective of actual usage.

Water used in primary activities (000m³)

	FY07	FY08	FY09*
Water used for primary activities	101 024	104 763	32 971
Potable water from external sources	22 972	21 323	16 721
Non-potable water from external sources	78 052	83 429	16 249
Surface water used	53 795	55 088	111
Groundwater used	24 545	28 352	15 742
Water recycled in processes	29 295	34 521	10 491

* Excludes Rand Uranium

Emissions

Dust released from Harmony’s surface operations can have a negative effect on the quality of the ambient air and measures are in place to minimise this impact. Dust-related complaints from community members have continued to decline during the year after intensive efforts by the company to reduce pollution from this source and to engage regularly with stakeholders.

Efforts continued during the year to rehabilitate tailings dams, particularly at:

• Evander’s Kinross and Winkelhaak mines, where the establishment of a 2 hectares per annum side-slope vegetation programme and a 40 hectare dry-land vegetation programme are under way. The total cost for side-slope vegetation establishment and maintenance, as well as the establishment of 40 hectares of dry-land vegetation on top of Winkelhaak slimes dam, amounted to R1.128 million for the year.
• Approximately 32 000 metres of contour walls were constructed at the Bracken/Leslie Tailings dams. Vegetation of the tailings dams began in September 2009.

Land management, biodiversity and closure

Harmony has some 49 844 hectares of land under management within mining rights (including 13 678 hectares of land pending transfer to Rand Uranium). This includes the disturbed areas under rehabilitation. None of Harmony's producing operations are located in areas of high biodiversity value, either inside of or outside of protected areas. None of Harmony's operations affect IUCN Red List species.

Rehabilitation is conducted in line with regulatory requirements and in compliance with the company’s EMPs, with progressive rehabilitation and closure planning taking place in anticipation of final mine closure. Rehabilitation is aimed at making the areas suitable for future land development, with a goal of achieving positive socio-economic benefits. Land use objectives are established in consultation with relevant government departments, local authorities, landowners and all relevant interested and affected parties. Consultation forms part of the planning and development process as it is a prerequisite for closure approval.

Demolition of the unused Free State 2 plant was completed during the year, and rehabilitation of the area has begun. Clearance was obtained from the National Nuclear Regulator (NNR) in respect of this site – the future land use is limited to industrial and recreational activities.

While most of Harmony’s current mining operations in South Africa are underground (and therefore cause less surface disturbance than open-pit mining) or in areas that have historically been affected by mining, the effects are monitored and mitigated where possible.

Harmony will be compiling a Biodiversity Action Plan in FY10.

Materials usage

Minimising the use of raw materials is both an environmental and operational objective. The most significant resource used is the rock mined and reef processed. In South Africa, Harmony reprocessed (recycled) significant amounts of waste rock and slimes to obtain gold remaining in this material – 64% of all material processed was recycled material.

In FY09 there was less waste available for recycling

A table detailing the primary resources used appears below. The most significant risk in respect of resource usages that associated with cyanide.

Cyanide

In June 2007, Harmony was accepted as a signatory to the International Cyanide Management Code for the Manufacture, Transport and Use of Cyanide in the Production of Gold (the Cyanide Code). The Cyanide Code is a voluntary industry programme developed by the United Nations’ Environment Programme (UNEP) and the International Council on Mining and Metals (ICMM) for companies involved in the production of gold using cyanide. The aim of the Cyanide Code is to promote responsible management of cyanide so as to enhance the protection of human health and to minimise environmental impacts. The certification process involves four stages of audits to achieve compliance: initial gap analysis, pre-certification, certification and a maintenance programme.

Harmony has undertaken to comply with the Code at all its major gold plants (excluding Kalgold) and has a plan in place to achieve compliance by the end of the 2010 financial year (that is, June 2010). To date, the Kusasalethu Plant (formerly Elandsrand) near Carletonville, the Harmony 1, Target, Central and Virginia plants in the Free State, and the Kalgold Plant near Mafikeng have all undergone an external, independent compliance audit. Kusasalethu has been certified as substantially compliant and is expected to be fully certified by January 2011.

The Doornkop plant has been certified with substantial compliance and corrective action on minor findings has been submitted. The Saaiplaas certification audit was conducted in March with a number of minor non-compliance issues identified which were attended to within a month of the audit, and two substantial issues are to be re-evaluated in November 2010. The Joel plant was initially scheduled for decommission but is now fully operational. As a result, the Cyanide Code implementation started after the other plants. A follow-up audit and a gap analysis will be conducted in FY11 with re-certification planned every three years. The Evander operation was certified as being substantially compliant. The Harmony 1 plant certification audit was conducted in January 2010 with the substantial compliance result being for outstanding training on all the new cyanide procedures. This training has since been completed.

Materials used by operations (by weight or volume) South Africa

	units		FY07	FY08	FY09
Rock mined (ore and waste)	(000t)		23 685	13 389	11 291
Ore mined	(000t)		14 029	10 315	6 137
Waste rock recycled	(000t)		1 375	2 739	5 855
Slimes recycled	(000t)		1 763	7 533	13 868
LPG	(000t)		0.32	0	0.22
Grease	(000t)		0.37	0.41	0.41
Cyanide	(000t)		9.65	8.98	6.82
Fuels	(000l)		11 875	12 833	6 554
Lubricating and hydraulic oil	(000l)		2 166	2 188	3 357

* Excludes Rand Uranium

Waste management South Africa

	units	FY07	FY08	FY09
Accumulated tailings in tailings dams (active and dormant)	(000t)	1 759 972	1 793 562	1 806 254
Accumulated in waste rock dumps	(000t)	126 087	124 816	124 115
Non-mineral waste
Hazardous to landfill	(000t)	Nil	Nil	Nil
Hazardous to incineration	(000t)	Nil	Nil	Nil
Low-level radioactive waste generated

* Excludes Rand Uranium

Environmental management in PNG

An EMP has been drawn up for the Hidden Valley operations, and approved by the PNG authorities. It was developed to ensure compliance with the Hidden Valley environmental permits, to assist in planning for the development and implementation of robust monitoring programmes and for the implementation of action plans to minimise environmental risks.

The primary environmental considerations for the MMJV are acid rock drainage (ARD) management, erosion and sediment control, land management and rehabilitation.

An important feature of the MMJV’s environmental planning and management is the development and maintenance of a close relationship with the community. A safety and health, environment, and community affairs aspects and impacts register has been developed for all exploration activities. This is a critical part of the management system and will help develop appropriate objectives and targets and prioritise actions moving forward.

Water management

In FY09, water consumption at Hidden Valley was less than the annual allowable extractable volume of 1 312 406m³. This water came from tributaries of the Upper Watut River, namely the Pihema, Puruang and Keru creeks. None of these sources have been significantly affected by the water withdrawal. The water extraction rate does not reduce the volume of the surface water below the "base flow" for these creeks due to an environmental permit condition.

Both ore and waste at Hidden Valley have been found to be susceptible to acid-generation and this has been taken into account in the ongoing design of the Hidden Valley mine.

The construction of the Hidden Valley mine has contributed to a build up of sedimentation in the Watut River system, which is causing significant concern among downstream communities who live on the river banks.

In response, a series of studies were commissioned by Hidden Valley Services Limited to assess current and future impacts on the Watut River system. These recently completed sediment, biology and ARD characterisation studies confirm the environmental impact on the Watut River, in part, from Hidden Valley pre-strip and construction activities as well as from other sources along the river.

To effectively manage this situation, the MMJVis implementing a management strategy with the following objectives:

• To provide direction for any further technical studies related to impacts on the Watut River.
• To identify and implement immediate measures to reduce impacts from the mine on the Watut River.
• To inform stakeholders of the development and ongoing implementation of this strategy via an appropriate stakeholder consultation and engagement mechanism.
• To minimise and control ongoing mine-derived sediment loading into the Watut River.
• To minimise environmental and social effects related to mine-induced impacts on the Watut River including water quality, aquatic biology, fluvial geomorphology, economic and aesthetic aspects.

A team of experienced personnel supported by Independent Peer Review and Advisory Consultants has been established to lead and manage this strategy.

Energy management

A power supply agreement was signed in April 2007 with PNG power in order to supply the Hidden Valley project with hydro-generated power by July 2010. This involves the construction of a new hydro-generator at the existing Yonki Dam power site, as well as a new transmission line from Nadzab (Lae Airport) to Hidden Valley which is in progress. In FY09, most of the electricity used at the MMJV was produced by diesel generators on site.

Greenhouse gas emissions

A greenhouse gas (GHG), Carbon Management Standard, GHG Reporting Protocol and data collection templates for all sites have been developed. This will make it much easier in the future to collect relevant data and calculate GHG emissions for various operations. Future work includes setting up systems within an integrated business information system to capture data automatically (such as flight information) which will simplify and speed up the reporting timeframe.

GHG emissions in PNG are direct only. Total (scope 1 and 2) emissions in PNG in FY09 were comparable to those in FY08: 43 714 tonnes CO₂e, while Hidden Valley was under construction.

Rehabilitation and land management

There are strategies planned to manage impacts on biodiversity. These include the development and implementation of an EMS that is consistent with ISO14001 as well as ongoing rehabilitation activities which will restore the habitat for native species. The MMJV is not located in a biodiversity – protected area and does not affect IUCN Red List species.

Good progress was made with rehabilitation performance during the year (see table below).

Site	Total disturbed area (Ha)¹	Total area available for rehabilitation (Ha)²	Rehabilitation completed FY09 (Ha)³	Total cumulative rehabilitation completed (Ha)	FY09 rehabilitation target (Ha)³
Hidden Valley4	397	254	122	122	178
Mount Magnet	2315	1890	27	1008	13

Notes:

1. Includes all areas of disturbance (such as open pits, all landforms, infrastructure areas etc).
2. Excludes areas which cannot be rehabilitated such as active pits and 'permanent' infrastructure areas (such as offices, workshops, core shed etc).
3. Land for which all rehabilitation activities apart from monitoring & maintenance have been completed (shaping, topsoiling, ripping, seeding etc).
4. Includes statistics for Mining lease ML151 and mining easement ME82.

A site closure plan has been prepared by an external consultant which complies with PNG policy and internal requirements.

Implementation of the Cyanide Code

The Hidden Valley processing plant has been designed and constructed to comply with the Cyanide Code and work has commenced on developing and implementing supporting systems (procedures, training etc) to ensure compliance with the code. A gap analysis against the code requirements is planned for FY10.