Harmony Gold Mining Company has warned that job losses may be imminent as it faces challenges regarding the slumped gold price and operational concerns, including the issue of illegal mining at Kusasalethu.
CEO Graham Briggs implied that any restructuring at the troubled Kusasalethu mine was likely to include job cuts. “The plans at Kusasalethu we will be signing off in the next few weeks … We will have to go through a negotiating process with unions,” he said.
“If we look at job cuts, 50% of our costs are on labour, so any major restructuring always involves jobs and we have to look carefully at that,” he said, adding that Kusasalethu had not made a profit since 2012 and the company had been “throwing a lot of resources at it to try and improve the situation there.”
Harmony Gold’s quarterly results
Harmony’s results for the three months to end-September have revealed that its gold production increased by 6% to 9 435kg. Revenue increased by 18% to R4 431 million, as a result of a 16% increase in gold sold to 9 987kg and a 2% increase in the Rand gold price received at R443 690/kg in the September 2014 quarter.
Quarter on quarter underground grade improved by 4% – to 4.84g/t – on the back of a 5% year-on-year increase in recovered grade at the end of June 2014.
Nevertheless, although production profit increased by 8% to R913 million, a net loss was recorded due to a foreign exchange translation loss of R190 million on foreign debt, as well as an increase in depreciation of R124 million.
Quarter on quarter net debt was reduced to R771 million, however, compared to net debt in the previous quarter of R1 031 million. The net loss of R1 223 million in the June 2014 quarter reduced to R266 million in the September 2014 quarter.
Harmony Gold focuses on improving efficiencies
“Our efforts to improve efficiencies are aimed not only at mining and processing, but in every aspect of our business. We remain the most efficient South African gold miner, focused on improving our margins and funding our capital,” said Briggs.
“Harmony owns 50% of the spectacular Golpu ore body in Papua New Guinea, which has the potential to develop into a world-class copper gold mine and will allow us to sustain our business well into the future. Harmony remains undervalued and its successes are not currently factored into the share price.”
Addressing the issue of illegal mining
Harmony will be faced with the challenge of maintaining its production without the input of its key Kusasalethu mine west of Johannesburg, which has been closed for two weeks in an effort to address the illegal miners who have been starting fires in the mine.
“The decision comes after a third underground fire in October was started by illegal miners. Although no one was harmed in any of these fires, it did result in 10 production days lost in October,” Harmony said in its results statement.
Safety has been a sensitive issue for Harmony, following the death of nine employees who died in a fire in February at its Doornkop mine. Kusasalethu has also been struggling to return to full production following labour violence rooted in union rivalry at the start of 2013, which saw the mine shut for several weeks.
“Kusasalethu’s production has continued to be problematic and management is working on an alternative plan to return the mine to profitability,” the company said.