SA rand   US dollar
20092010Figures in million20102009


Cost of sales

7 6578 358 Production costs (a)1 103850
1 1761 326 Amortisation and depreciation of mining properties, mine development costs and mine plant facilities175130
7749 Amortisation and depreciation of assets other than mining and mining related assets (b)69
529 Rehabilitation expenditure (c)41
4457 Care and maintenance cost of restructured shafts85
39205 Employment termination and restructuring costs (d)274
113148 Share-based payments (e)2013
546331 Impairment of assets (f)4371
2(19) Provision for post retirement benefits (g)(3)
9 65910 484 Total cost of sales1 3831 083
   (a)Production costs include mine production, transport and refinery costs, applicable general and administrative costs, movement in inventories and ore stockpiles and ongoing environmental rehabilitation costs as well as transfers to and from deferred stripping.
Ongoing employee termination costs are included, however employee termination costs associated with major restructuring and shaft closures are excluded. Production costs, analysed by nature, consist of the following:
4 8575 776  Labour costs, including contractors762540
1 9372 284  Stores and materials302215
8401 212  Water and electricity16093
222178  Insurance2425
136140  Transportation1915
(14)(20)  Changes in inventory(3)(2)
(953)(1 187)  Capitalisation of mine development costs(157)(106)
6  Deferred mining1
(25)(35)  By-products sales(5)(3)
33  Royalty expense4
657(29)  Other(4)73
7 6578 358  Total production cost1 103850
   (b)Amortisation and depreciation of assets other than mining and mining related assets  
816  Other non-mining assets21
2430  Intangible assets43
453  Amortisation of issue costs5
7749  Total amortisation and depreciation69
   (c)For the assumptions used to calculate the rehabilitation costs, refer to note 3.4.  
    This expense includes the change in estimate for the rehabilitation provision as well as ongoing rehabilitation cost.  
   (d)Employment termination and restructuring costs consist of the following:  
    Harmony Gold Mining Company Limited  
1072  (Harmony)91
94  Randfontein Estates Limited (Randfontein)11
8116  Evander Gold Mines Limited (Evander)151
    ARMGold/Harmony Freegold Joint Venture  
1212  Company (Proprietary) Limited (Freegold)21
1  Avgold Limited (Avgold)
39205  Total employment termination and restructuring cost274
    During the 2010 financial year, certain shafts in Harmony and Evander were closed and placed on care and maintenance. These closures were due to mining no longer being economically viable as a result of the current economic situation. The group also engaged in a voluntary retrenchment process during the year, resulting in retrenchment costs for various operations.     
   (e) Refer to note 34 for details on the share-based payment schemes operated by the group.  
   (f)Impairment consists of the following:  
52249  Virginia(1)337
23611  Target(1)131
25870  Evander(1)933
1  Australia
546331  Total impairment of assets4371
     (1) During the 2010 financial year impairments to the value of R300 million (US$40 million) were recognised mainly as a result of the shaft closures discussed under note 5(d) above. The remaining balance in 2010 and the impairment in 2009 resulted from revised business (life-of-mine) plans, which are completed in June of each year, and included increases in electricity and labour costs. Included in 2009 for Evander and Target was additional capital expenditure that was needed to access reserve ounces in areas where geological anomolies have been discovered.   
    These adjustments impacted negatively on the recoverable amount of property, plant and equipment and contributed to the recognition of the impairments at the shafts. Impairment tests were performed as required by IAS 36, Impairment of Assets, and as a result these impairments were recorded. For assumptions used to calculate the recoverable amount, refer to note 3.1.  
   (g)The net credit of R19 million (US$2.5 million) is a result of curtailments in 124 members’ post employment subsidies due to renegotiation of employment contracts. These members were transferred from Freegold employment conditions to Harmony employment conditions.