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Harmony - Offer for Hill 50 Limited ("Hill 50")

Release Date: 20/12/2001 16:44:56      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
Offer for Hill 50 Limited ("Hill 50")
1. Introduction
The Board of Directors of Harmony are pleased to announce that Harmony has
made a cash offer of approximately R1,366 billion for the entire issued
capital of Hill 50, an Australian gold producer with assets in the Murchison
Belt of Western Australia, the south of Kalgoorlie and the Northern
Territory, the entire issued share capital of which is listed on the
Australian Stock Exchange.
2. Background and rationale for the offer
The offer represents an important step in the development of Harmony's
Australian gold mining business and, if successful, will enable Harmony to
further participate in the rationalisation of the highly prospective area
south of Kalgoorlie.  In addition, Hill 50's New Celebration operations are
contiguous with Harmony's new Hampton operations at Jubilee.
Combining these operations would create operational, information sharing and
exploration synergies, providing a platform to develop new opportunities and
to rationalise the combined milling capacities.
With the acquisition of Hill 50, Harmony's Australian asset base will
comprise proven, long-life, high quality cash generating mines and
prospective exploration ground in Australia's premier gold producing
Harmony's New Hampton assets currently produce approximately 220,000 ounces
per annum. Hill 50's management believes that its combined assets, currently
producing at an annualised rate of approximately 300,000 ounces per annum,
have the capacity to produce in excess of 400,000 ounces per annum. The
combined operations could produce over 600,000 ounces per annum,
representing a significant proportion of Harmony's global annual production.
As at 30 June 2001, Hill 50 had in excess of 1,9 million ounces of gold
reserves. Harmony's attributable reserve ounces resulting from the
acquisition of Hill 50 are expected to increase its reserve base to
approximately 40 million ounces.
3. Description of Hill 50's principal assets
Hill 50's principal assets consist of the mining assets and associated
infrastructure of the following operations:
- the Mt Magnet operations - situated in the Murchison Belt of Western
Australia where Hill 50 owns mining tenure in excess of 72,000 hectares,
covering the vast majority of the Mt Magnet gold field. Included in the
tenure are the Hill 50 and Star underground gold mines, which are the
historic and current major producers of the field.  The tenure covers known
and historic gold endowment of nearly 10 million ounces in a gold field that
has operated for over a century. The Hill 50 mine commenced operations in
1933 and is forecast to have a sustainable production level of in excess of
110,000 ounces per annum at grades exceeding 7 grams per tonne by 2003.  The
Star mine at Mt Magnet has reserves in excess of 660,000 ounces and
currently operates at approximately 70,000 ounces per annum at grades in
excess of 5 grams per tonne;
- New Celebration operations - situated south of Kalgoorlie, were purchased
by Hill 50 in June 2001. The operations include a 1.8 million tonnes per
annum ("Mtpa") mill, the Mt Marion underground gold mine and the extensive
land holdings that are contiguous with Harmony's holdings in the highly
prospective area south of Kalgoorlie.  The long term target of Hill 50 is
for New Celebration to produce 120,000 ounces per annum on a sustainable
- Maud Creek - situated in the Northern Territory is an advanced exploration
project that is estimated to contain a mineral resource in excess of 680,000
ounces per annum; and
- Brocks Creek - situated in the Northern territory, which Hill 50 is in the
process of acquiring, has assets which include a 1Mtpa CIP plant and
associated infrastructure.
4. Consideration payable in terms of the offer
Subject to the fulfilment of the conditions precedent referred to below,
Harmony will pay A$1.35 for each ordinary share in Hill 50 ("Hill 50
share"), A$0.65 for each listed option in Hill 50 ("Hill 50 option") and a
price equal to the difference between the cash price offered to Hill 50
shareholders and the exercise price for each Hill 50 director and employee
option ("Hill 50 incentive option").
In addition, Harmony will pay a further A$0.05 in cash for each Hill 50
share, Hill 50 option and Hill 50 incentive option in the event that its
offer is accepted by at least 90% the holders of Hill 50 shares, Hill 50
options and Hill 50 incentive options. This would translate into an
aggregate offer of A$1.40 per Hill 50 share and A$0.70 per Hill 50 option,
giving a transaction value of approximately A$237 million.
The offer represents a premium of approximately 15% at A$1.35 per Hill 50
share and a premium of approximately 19% at A$1.40 per Hill 50 share, based
on Hill 50's volume weighted average share price for the week preceding the
announcement of the offer.
5. Financial effects of the offer on Harmony
Based on the assumptions set out below, the financial effects of the offer
per Harmony share ("Harmony share") for the financial year ended 30 June
2001 would have been as follows:
                            Notes    Before    After    Inc/(De
  Earnings per Harmony      1        108.0     90.8     (16)%
  Headline Earnings per     1        253.7     235.9    (7)%
  Harmony share
  Net Asset Value per       2        3,178.0   3,178.0  0%
  Harmony share
1. Earnings per share and Headline Earnings per share are calculated using
historically published numbers for Harmony and the Hill 50 assets acquired,
as if the acquisition took place with effect from 1 July 2000, adjusted for
interest charged at 6% for the financing of the acquisition, loss of
interest received of 8% on the cash payment made and depreciation relating
to the amount paid for mining assets compared to their historical net book
value and the related tax effects.
2. Net asset value is calculated as if the Hill 50 assets were acquired 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.
6. Conditions precedent
The implementation of the offer is subject, inter alia, to the fulfilment of
the following conditions, precedent:
- the receipt of notice from the Australian Treasurer to the effect that
there is no objection to the offer under the Foreign Acquisitions and
Takeovers Act 1975 (the "FATA"), or the period provided under the FATA
lapsing without an order being made that prohibits the acquisition of Hill
50 by Harmony;
- unconditional approval of the offer by the Exchange Control Board of the
South African Reserve Bank;
- that Harmony acquires an interest of at least 50.1% in the aggregate
number of Hill 50 shares, Hill 50 options and Hill 50 incentive options in
issue at the end of the offer period;
- that between the announcement date and the end of the offer period, none
of the usual prescribed occurrences (as defined under the Australian
Corporations Act 2001 Cth, 652C(1) and (2)) occurs;
- that between the announcement date and the end of the offer period, no
event or events occur which affect the production of gold by Hill 50 or its
subsidiaries, and which alone or in aggregate have, or are likely to have,
one or more of the following effects:
(a)  a reduction in the value of the net assets of Hill 50 and its
subsidiaries of A$12 million or more; or
(b)  a reduction in the net profit before tax of Hill 50 and its
subsidiaries of A$12 million or more.
- that prior to the end of the offer period, each party to a hedge contract,
or contract of similar nature with Hill 50 or any of its subsidiaries
undertakes not to terminate, suspend or rescind any of the said contracts.
7. Further announcements
Harmony shareholders will be notified of progress in the fulfilment of the
conditions precedent, including inter alia, the rulings and approvals of the
relevant regulatory authorities.
  20 December 2001
  Sponsor to Harmony
  J.P. Morgan Equities Limited
  (Registration number 1995/011815/06)
  Legal Adviser to Harmony
  Cliff Dekker Fuller Moore Inc
  (Registration number 1998/018173/21)
  Reporting Accountants and Auditors to Harmony
  Registration number 1998/012055/21

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