Bullion producer Harmony Gold is temporarily closing its Target 3 mine in a move that could affect up to 1500 jobs.

In South Africa, job cuts are a sensitive issue since a quarter of the country’s workforce is unemployed. Furthermore, labour tensions have increased in the mining sector, resulting in numerous strikes over the past three years.

Target 3 to be placed on care and maintenance

Target 3 will be placed under care and maintenance because it made a cumulative loss of approximately R260 million over the last four and a half years.

“Despite numerous initiatives by both management and organised labour to return Target 3 to profitability, this operation has continued to record cash flow losses. Given the current gold price environment, and the significant capital investment required to sustain operations at this shaft, Target 3 is predicted to continue to make a loss in the foreseeable future,” Harmony Gold said in a statement.

The company added that additional development and equipping is required to access the targeted South Block to sustain operations at Target 3 and, in particular the build-up in Basal reef stoping. While the targeted South Block remains a valuable resource, the shaft will be placed on care and maintenance once the requirements of a section 189 process have been fulfilled.

Consultation and engagement

The cessation of operations at Target 3 will have an impact on employees and contractors, but Harmony Gold said it would take measures to minimise and try to prevent job losses.

“Such measures include offering voluntary separation packages to eligible employees, early retirements, transferring employees where skills match current vacancies at other Harmony operations and re-skilling employees for redeployment into alternative jobs where possible within the company,” the company said.

Engagement with the Department of Mineral Resources, the Matjhabeng Local Municipality and the Free State Provincial government has begun.

Harmony Gold CEO Graham Briggs, said: “In developing our safe and realistic operational plans for FY15, we were informed by the need to improve our margins, carefully assessing the ability of each of our assets to be profitable at current gold prices.”

Production guidance

Harmony’s guidance of approximately 1.2 million ounces at an all-in sustaining cost of R410 000- R430 000/kg (~US$1 150 – 1 300oz¹) for FY15 supports the company’s medium and long-term objective of positioning it as a competitive, value-focused gold mining company.

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