New Valuations

Harmony Gold Mining Company Limited (NYSE:HMY) The company is targeting production levels of 2.2 mn ounces in FY 2012 as compared to current production levels of 1.5 mn ounces produced in FY 2009, through projects such as Phakisa, Tshepong, Elandsrand New Mine, Doornkop South Reef and Hidden Valley. Over the near term the company expects production to marginally improve, based on various restructuring measures. The company expects FY 2010 production to be 1.6 mn ounces in FY 2010. We expect international Gold prices to remain higher in FY 2010 averaging at US$1,036 per Oz in FY 2010 and US$1,083 in FY 2011. However the expected appreciation of the South African rand against the US dollar is expected to more than offset the expected increase in gold prices, weighing on the company's near term topline. Cash costs are expected to rise by 19.8% y-o-y in FY 2010 based on the company's cost outlook, which will dent its operating margin over the same period. We believe, based on the robust balance sheet and expected increase in production over the longer term horizon coupled with its current price levels, the common stock is fairly valued at current levels and hence maintain our HOLD rating for the common stock.

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