Doornkop mine –
one of the Harmony
operations expected
to produce more
 
Johannesburg, South Africa — MININGREVIEW.COM — 10 March 2009 – Harmony Gold Mining Company chief executive Graham Briggs says tumbling energy, raw material and equipment costs due to the credit crunch have yet to have a dramatic impact on the company’s bottom line.

Speaking at the Reuters Global Mining and Steel Summit via teleconference from Johannesburg, Briggs said costs had not been coming down as expected, and it had been quite a lot of hard work to gain much benefit.

“There has been a little bit of movement, but it really doesn’t affect the bottom line dramatically, so although steel prices and some other costs have come down, they have not come down to the extent we were hoping,” he added. “But they are not going up as they were before, which is the good news," Briggs added.

“If we are looking at the total cost line, it should be probably the same as last quarter, or probably a little lower, but it has not increased," Briggs said.

Reuters quotes analysts as saying that with gold prices nudging their all-time high and fuel, raw materials and equipment costs tumbling, mining company profit margins are expected to be widening, making gold company shares attractive.

Gold has weathered the storm unleashed by the financial crisis better than industrial metals, including copper and platinum, hit by mine closures and job culls.

Although South Africa has been spared the worst effects of the crisis, the rand currency has been hit by risk aversion and slower world economic growth, and has depreciated sharply against the dollar. This has boosted earnings for gold producers, who pay their costs in rand and receive their earnings in dollars.

“Our view is that gold is no longer acting as a commodity but as a currency, a store of wealth,” Briggs said. “My prediction is for a price of around US$900 an ounce this year.”

On production, Briggs said he expected output to rise to 1.6 million ounces this year, from 1.5 million in the previous year, and 1.7 million the year before that.

He added that output would be 2.2 million ounces in 2012, buoyed by additional production at Harmony’s Hidden Valley project in Papua New Guinea due by June this year, as well as from its Phakisa and Doornkop operations in South Africa.