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Harmony - Results of the early settlement offer

Release Date: 29/11/2004 14:30:05      Code(s): HAR
Harmony - Results of the early settlement offer                                 
          Harmony to commence the subsequent offer with 10.8% of Gold Fields    
Harmony Gold Mining Company Limited                                             
(Incorporated in the Republic of South Africa)                                  
(Registration number 1950/038232/06)                                            
Share code: HAR     ISIN: ZAE000015228                                          
29 November 2004                                                                
                      Results of the early settlement offer                     
       Harmony to commence the subsequent offer with 30,9% of Gold Fields       
On  18  October  2004, Harmony announced the terms of a proposed merger  between
Harmony  and Gold Fields offering 1.275 new Harmony shares for each Gold  Fields
share, representing a premium of approximately 29%* and an implied price to  net
present  value multiple for Gold Fields of 2.4x, a substantial premium  to  Gold
Fields" peer group. The proposed merger was structured on the basis of an  early
settlement offer for up to 34.9% of Gold Fields with a subsequent offer for  the
balance of Gold Fields" entire issued share capital.                            
Harmony is pleased to announce that as at 12.00 p.m. (South African time) on  26
November 2004, the closing date of the early settlement offer, valid acceptances
of  the early settlement offer had been received in respect of a total of 53 392
108  Gold  Fields shares representing approximately 10.8% of the  entire  issued
share  capital  of Gold Fields.  Settlement of the consideration due  under  the
early settlement offer in respect of valid acceptances received on or before the
closing  date  will be despatched as soon as possible and, in any event,  by  no
later than Friday, 3 December 2004.                                             
In  addition,  as  previously  announced, Harmony has  received  an  irrevocable
undertaking from Norilsk to accept the subsequent offer in respect of 98 467 758
Gold Fields shares, representing approximately 20.03% of the entire issued share
capital of Gold Fields.                                                         
Accordingly,  Harmony  now either owns, has received valid  acceptances  of  the
early  settlement  offer  or  has  an  irrevocable  undertaking  to  accept  the
subsequent  offer  in  respect of a total of 151  859  866  Gold  Fields  shares
representing  approximately 30.9% of the entire issued  share  capital  of  Gold
Harmony  is  pleased  with the support of its proposed  merger  by  Gold  Fields
shareholders.  Harmony believes that a starting position of 30.9%  represents  a
strong platform for the subsequent offer.  In addition, a significant number  of
Gold Fields" shareholders who did not tender or only partially tendered into the
early  settlement  offer have indicated their support for the  proposed  merger,
stating their preference to accept the subsequent offer.                        
Reasons fed back by a number of Gold Fields" shareholders to Harmony for waiting
to accept the subsequent offer, aside from it being common practice, include the
fact that Gold Fields" management has been offering Gold Fields" shareholders  a
number  of  potential inducements to refrain from tendering  their  shares.   To
Harmony"s knowledge, these have included, inter alia:                           
-     a specific buy-back by Gold Fields of Norilsk"s 20% holding in Gold Fields
  at a 15% premium to Harmony"s offers, which would require the approval by way 
a special resolution of Gold Fields" shareholders in general meeting, at which
  Norilsk will be precluded from voting on the matter;                          
-    a potential white knight making an offer for the whole of Gold Fields;     
-    the potential sale of all or certain of Gold Fields" international assets; 
-     the  potential unbundling of certain of Gold Fields" South African assets;
-     the  revision of the terms of the proposed transaction between Gold Fields
  and IAMGold to attempt to address the inequality of the previous agreement  by
Gold Fields" management.                                                      
Harmony  believes  that  some  of these are not capable  of  being  implemented,
especially  in  a  manner that would be considered attractive  to  Gold  Fields"
shareholders  and clearly a number of these proposed options are  also  mutually
exclusive and contradictory.  To take one example, the sale of production ounces
for  cash,  especially in a firesale environment, to raise cash  to  buy  out  a
single  shareholder  at a substantial premium is unlikely  to  be  in  the  best
interests  of all of Gold Fields" shareholders or to meet with the  approval  of
those shareholders.                                                             
Harmony  awaits evidence that the Gold Fields" board has a coherent strategy  in
place  to  deliver  on any of these promises in a manner that  is  in  the  best
interests of all of its shareholders, now including Harmony. Harmony will  watch
the outcome with interest.                                                      
The first test of Gold Fields" shareholders belief in the Gold Fields" board and
management  and their strategy will come on 7 December 2004, when  Gold  Fields"
shareholders vote on the proposed IAMGold transaction.  Harmony is of the strong
view  that  a  board  that  has  a major strategic  move  rejected  by  its  own
shareholders  should  consider whether it continues  to  have  the  support  and
confidence  of  its  shareholders.  Harmony is  encouraged  by  the  substantial
opposition  to the proposed IAMGold transaction which had been expressed  during
meetings  that  Harmony  has  held  with  Gold  Fields"  shareholders.   Harmony
considers that Gold Fields" management has already positioned itself for a  vote
of no confidence in this major element of its strategy.                         
At the heart of Harmony"s proposal is what it believes will be the creation of a
highly profitable South African champion that is able to compete internationally
and  is  positioned  to  become  the leading global  gold  miner.    Harmony  is
convinced  that, by applying Harmony"s superior and proven operational expertise
and  efficiency to Gold Fields" assets, Harmony will build an exciting  platform
which  would  create value for all shareholders.  From the outset  the  enlarged
group  would be the largest gold mining company in terms of production, reserves
and  resources.  Building on this Harmony is committed to also becoming the most
efficient and valuable gold miner worldwide.                                    
Harmony  has been able to build a substantial, sustainable gold mining  business
out  of  mines that were discarded as unprofitable by its competitors, including
Gold  Fields.   Harmony  attributes  its"  success  to  concentrating  on  basic
management  principles known as the "Harmony Way", which include a strong  focus
on cost control and a flat, decentralised management structure that empowers the
people  on  the ground.  Given Harmony"s proven track record in delivering  cost
savings, Harmony is confident that, following completion of the proposed merger,
Harmony  can achieve sustainable annual cost savings of at least R1 billion,  or
15% of Gold Fields" South African cost base.                                    
After  initially  attacking  Harmony"s analysis  as  unrealistic,  Gold  Fields"
estimates of potential cost savings are creeping up towards the low end of  what
Harmony  believes  is  achievable by applying the  "Harmony  Way",  an  implicit
acceptance  of  the  cost  savings  opportunities  achievable  under   Harmony"s
management.   Furthermore, Harmony questions whether Gold Fields" management  is
able  to  deliver  even this lower amount, given its poor  performance  on  cost
management to date.  On 28 October 2004, Ian Cockerill confirmed: "A  desire  to
cut costs has always been a part of the Gold Fields strategy, but the desire  to
do  something  and  the ability to deliver can often be two  entirely  different
In  its  analysis of potential cost savings, Harmony is fortunate to be able  to
make  direct  comparisons in respect of the cost levels of assets acquired  from
Gold  Fields.  For instance, in relation to Evander, Harmony has achieved  total
cost  savings  of some 33%.  In fact, if Gold Fields still owned Evander  today,
with  Harmony"s  cost structure, Harmony estimates that Evander  would  be  Gold
Fields" most profitable underground operation by operating margin.              
Harmony  believes that savings of this magnitude would unlock a market value  of
at  least  R17  billion.   In addition, due to the current  uncertainty  in  the
market,  Harmony is trading at a substantial discount to its fundamental  value,
with  a price to net present value multiple of only 1.3x.  As certainty returns,
Harmony  expects this discount to correct itself, further increasing  the  value
inherent  in the proposed merger.  Following completion of the proposed  merger,
the enlarged group would be the world"s largest gold mining company in terms  of
production,  reserves and resources, in Harmony"s view a "must have"  investment
with substantial index weightings.                                              
Harmony initiated a strong Rand restructuring process some six months ago, which
involved  closing down unprofitable operations and streamlining the work  force.
This  restructuring  process has now been completed  and  some  83%  of  Harmony
operations  are  profitable  with  only  a  marginal  reduction  in  production.
Harmony"s ore reserves are strong and demonstrate little sensitivity to a  lower
gold  price.   Harmony believes that it is now optimally positioned  to  face  a
sustained strong Rand/Dollar exchange rate.                                     
"We  are  delighted that we will be starting the subsequent offer with 30.9%  of
Gold Fields" shares behind us and consider that this provides strong impetus for
the  ultimate success of the proposed merger.  We are further encouraged by  the
feedback that we have received from Gold Fields" shareholders who have indicated
their  ultimate  belief in the value proposition that Harmony  is  offering  and
their  support  for the proposed merger.  In addition, a significant  number  of
Gold  Fields" shareholders have expressed to Harmony their recognition that  the
proposed IAMGold transaction, which represents the major pillar of Gold  Fields"
management"s strategy is value destructive and not in the best interest of  Gold
Fields  and its shareholders.  Now that Gold Fields" management is reaching  the
end  of  its  largely  unsuccessful attempts to frustrate  the  proposed  merger
through  a serious of expensive and technical legal challenges, we look  forward
to arguing Harmony"s compelling value proposition based on fundamentals with the
confidence  that  the  various  contradictory  promises  made  by  Gold  Fields"
management  will be revealed as both value destructive and ultimately  incapable
of implementation in a manner that is either to the benefit of or likely to meet
with  the  approval  of  Gold Fields" shareholders."  said  Harmony  CE  Bernard
THE SUBSEQUENT OFFER                                                            
As  set out in the circular to Gold Fields" shareholders dated 20 October  2004,
Harmony irrevocably undertook to make an the subsequent offer on the same  terms
as  the  early settlement offer for the balance of the issued share  capital  of
Gold  Fields  not already acquired by Harmony under the early settlement  offer.
Accordingly, Harmony will commence the subsequent offer and will shortly post to
Gold  Fields"  shareholders a supplementary document containing  the  terms  and
conditions of the subsequent offer.                                             
*  the 29% premium is calculated by comparing the closing Harmony share price on
14  October  2004  to the average daily volume weighted average  price  of  Gold
Fields shares on the JSE for the 30 business days ending on 14 October 2004, the
last practicable date in accordance with the JSE Listings Requirements prior  to
the announcement of the proposed merger.                                        
Ferdi Dippenaar       +27 11 684 0140   Corne Bobbert       +27 11 684 0146     
Marketing Director    +27 82 807 3684   Investor Relations  +27 83 380 6614     
HSBC                                    INVESTEC                                
Adrian Coates         +44 20 7991 8888  Dennis Tucker       +27 11 286 8725     
Andrew Bell                             George Nakos                            
Jan Sanders                             Andrew Brady                            
Tim Morgan-Wynne                        Kevin Kerr                              
Graham Shuttleworth                                                             
Date: 29/11/2004 02:30:12 PM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             

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