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Proposed acquisition by Harmony and ARM of certain Free State Assets

Release Date: 21/11/2001 12:59:28      Code(s): HAR
Harmony Gold Mining Company Limited
  (Incorporated in the Republic of South Africa)
  (Registration number 1950/038232/06)
  Share code: HAR ISIN: ZAE000015228
  ("Harmony")
African Rainbow Minerals (Proprietary) Limited
  (Incorporated in the Republic of South Africa)
  (Registration number 1997/020158/07)
  ("ARM")
Proposed acquisition by Harmony and ARM of certain Free State Assets from
AngloGold Limited ("AngloGold") and establishment of a co-operation
agreement between Harmony and ARM regarding future mining opportunities
1. Introduction
   Further to Harmony's cautionary announcement dated 10 October 2001,
JPMorgan and BoE Merchant Bank are authorised to announce that Harmony and
ARM have reached an in-principle agreement with AngloGold in terms of which
they will, subject to the fulfilment of the conditions precedent reflected
in paragraph 7 below, acquire from AngloGold its assets and businesses in
the Free State goldfields (the "acquisition assets") as going concerns, with
effect from 1 January 2002 (the "effective date") (the "acquisition").
2. Background and rationale for the acquisition
   Harmony's original operating assets are situated in the Free State and it
has consistently viewed its assets in this region as a key component of its
production base. This production base has been supplemented by the
acquisition of Unisel in 1996, the Saaiplaas 2 and 3 shafts in 1997, the
Brand shafts in 1998 and Masimong in 1998.
Similarly ARM derives a significant proportion of its gold production from
the Free State goldfields.  Consequently both Harmony and ARM consider the
acquisition assets as a natural extension to their existing businesses.
   Harmony and ARM have similar proven management methodologies that could
successfully be applied to the acquisition assets.  The directors of Harmony
and ARM are of the opinion that significant operational synergies could be
possible following the application of these methodologies to the acquisition
assets which, together with Harmony and ARM's existing operations, will
provide an extensive, contiguous operational area both underground and on
surface.
   Harmony's attributable annualised production is expected to increase by
approximately 500 000 ounces to a total of 3.0 million ounces, firmly
entrenching the company as the 5th largest gold producer in the world.
ARM's annualised production is expected to increase to 1 000 000 ounces per
annum.  In addition Harmony's attributable reserve ounces in the acquisition
assets is expected to increase its reserve base to 38 million ounces.
   Both Harmony and ARM consider that the acquisition is necessary to
consolidate their presence in the Free State with a view to creating a
seamless, viable, safe and sustainable gold mining industry in the region,
the achievement of which will contribute to the well-being of the region's
economic and social fabric.
3. Description of the acquisition assets
   The acquisition assets consist of the mining assets and associated
infrastructure of the following operations:
* Joel - situated about 20km south-east of Welkom, this operation produced
862 000 tonnes for the nine month period ended September 2001, yielding 98
000 ounces at a cash cost of US$366 per ounce.  Joel currently mines the
Beatrix and VS 5 reef horizons, with published reserves of 3.11 million
ounces as at 31 December 2000.
* Tshepong - situated about 10km north of Welkom, this operation produced 1
071 000 tonnes for the nine month period ended September 2001, yielding 285
000 ounces at a cash cost of US$186 per ounce.
Tshepong currently mines the Basal and B reef horizons, with published
reserves of 5.71 million ounces as at 31 December 2000.
* Matjhabeng - situated in Welkom, this operation produced 610 000 tonnes
for the nine month period ended September 2001, yielding 144 000 ounces at a
cash cost of US$256 per ounce.  Matjhabeng currently mines the Basal reef
horizon, with published reserves of 0.34 million ounces as at 31 December
2000.
* Bambanani - situated just south of Welkom, this operation produced 1 242
000 tonnes for the nine month period ended September 2001, yielding 311 000
ounces at a cash cost of US$238 per ounce.  Bambanani currently mines the
Basal reef horizon, with published reserves of 3.06 million ounces as at 31
December 2000.
* Certain surface treatment operations situated on the Tshepong, Matjhabeng
and Bambanani sites, which treated 2 758 000 tons for the nine month period
ended September 2001, yielding 70 000 ounces at a cash cost of US$168 per
ton.  Surface reserves as at 31 December 2000 amounted to 0.21 million
ounces.
4. Structure of the transaction
   The acquisition assets are currently operating divisions within
Anglogold.  It is proposed to transfer the acquisition assets into a newly
formed company (or any other company which is a wholly owned subsidiary of
Anglogold and approved by Harmony and ARM) (the "Company").  Each of Harmony
and ARM will thereafter acquire 50% of the share capital of and claims on
loan account against the Company.
5. Consideration payable in terms of the acquisition
   Subject to the fulfilment of the conditions precedent referred to below,
as consideration for the acquisition assets, Harmony and ARM will pay to
AngloGold an aggregate amount of R2.2 billion, of which an amount R1.8
billion will be payable, in cash, on the date which is 10 business days
following the date upon which the conditions precedent referred to in
paragraph 7 are fulfilled (the "implementation date") and the balance of
R400m will be payable on 1 January 2005.
   In terms of the memorandum of understanding signed between Harmony, ARM
and AngloGold, each of Harmony and ARM will pay R900m of the purchase
consideration on the implementation date and R200m of the purchase
consideration on 1 January 2005.
6. Financial effects of the acquisition to Harmony
Based on the assumptions set out below, the financial effects of the
acquisition per Harmony share ("Harmony share") for the financial year ended
30 June 2001 would have been as follows:
                                    Notes   Before    After    Inc/(Decr)
Earnings per Harmony share            1     108.04    107.27   (0.7%)
Headline Earnings per Harmony share   1     245.70    244.90   (0.3%)
Net Asset Value per Harmony share     2     4 320     4 320       0%
Notes:
1. Earnings per share and Headline Earnings per share are calculated using
historically published numbers for Harmony and the acquisition assets, as if
the transaction took place with effect from 1 July 2000, adjusted for
interest charged at 10% for the financing of the acquisition and
depreciation relating to the amount paid for mining assets compared to their
historical net book value and the related tax effects. 50% of the
acquisition assets have been consolidated in the calculation of these
figures.
2. Net asset value is calculated as if the acquisition occurred on 30 June
2001. There is no pro-forma effect of the acquisition on Harmony's net asset
value at 30 June 2001 as the entire purchase price is assumed to be funded
through a combination of cash and debt.
7. Conditions precedent
   The acquisition is subject to the conclusion of a formal sale and
purchase agreement (the "formal agreement") between Harmony, ARM and
Anglogold by not later than 31 December 2001.  The formal agreement will be
subject, inter alia, to the fulfilment of the following conditions
precedent, namely:
- the conclusion of a high-level due diligence investigation to the
satisfaction of Harmony and ARM;
- the approval of the cession of the mining leases in respect of the
acquisition assets to the Company by the Minister of  Minerals and Energy;
- the granting of the necessary mining authorisations to the Company;
- the prerequisite rulings and approvals of the relevant regulatory
authorities, including the Competition Authorities;
- the approval of Harmony shareholders, insofar as may be necessary; and
- the conclusion of a formal joint venture and shareholders' agreement
between Harmony and ARM.
8. Formation of co-operation agreement
   In parallel with the conclusion of the joint venture and shareholders'
agreement between Harmony and ARM for the purpose of acquiring the
acquisition assets, Harmony and ARM have concluded a co-operation agreement
(the "Agreement"), to run for a period of 12 months, to jointly exploit
opportunities for the acquisition and establishment of gold mining and
related businesses or the acquisition or exploitation of mineral rights
within the Republic of South Africa.  The Agreement excludes the
exploitation or expansion of Harmony and ARM's existing gold mining and
related assets.
   The Agreement underlies Harmony and ARM's commitment to realise value for
its shareholders and black empowerment and represents a significant step in
this regard.  This agreement follows the creation of a participation in the
Elandskraal assets by Khumo Bhatong and the equity participation in Harmony
by Simane Security Investment (Pty) Limited.
9. Further announcements
   Harmony shareholders will be notified of progress in the fulfilment of
the conditions precedent, including inter alia, the signature of the formal
agreement.
   Virginia                             Sandton
   21 November 2001                     21 November 2001
Advisers to Harmony
  JPMorgan Chase Bank
  (Registration number 2001/016069/10)
Advisers to ARM
  BOE Merchant Bank
  (Registration number 1951/000847/06)
Sponsoring Broker to Harmony
  J.P. Morgan Equities
  (Registration number 1995/011815/06)
Legal Advisor to ARM
  Bowman Gilfillan Inc.
  (Registration number 1998/021409/21)
Legal Adviser to Harmony
  Cliff Dekker Fuller Moore Inc
  (Registration number 1998/018173/21)
Reporting Accountants and Auditors to Harmony
  PricewaterhouseCoopers
  Registration number 1998/012055/21



                                        
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