Virginia operations

The Virginia operations were among the oldest in the group however, by year end, these comprised just Unisel after the closure of Merriespruit 1. Unisel is of intermediate depth, mining ranging from 1 000 to 2 000 metres, and uses scattered mining and pillar reclamation to access the Basal, Leader and Middle Reefs. Ore is processed at Harmony 1 plant.

Safety

There was regrettably one fatality at Unisel during the period (FY10: five), with the LTIFR at 11.57 per million hours worked (FY10: 12.86).

More detailed information on safety performance and Harmony’s sustainable development concerns in South Africa can be found in the online sustainable development report.

Unisel employed 1 870 people in FY11, including 68 contractors.

Detailed information on Unisel’s resources and reserves appears in the mineral resources and mineral reserves section of the annual report.

Operations review

The FY10 review of Harmony’s asset portfolio included the economic viability of the Virginia operations, characterised by depleted orebodies, mature infrastructure and low grades. Accordingly, Brand 3, Harmony 2 and Merriespruit 3 were closed.

After careful review, the company announced in October 2010 that it would also close Merriespruit 1 shaft. Earlier in the period, a productivity-linked deal with trade unions was reached allowing Merriespruit 1 to continue operations, provided it did not make a loss (on a total cost basis, including capital expenditure) for two consecutive months and total costs remained under R250 000/kg. Despite the best endeavours of the operational team, Merriespruit 1 failed to meet these conditions and closure procedures started. After formal consultation with employees on alternatives to retrenchment, 1 200 of the 1 470 employees affected by closure were transferred to our growth operations, resulting in minimal and mainly voluntary retrenchments. The company also successfully renegotiated mortgage conditions for affected employees to preserve their homes.

As a result of restructuring the Virginia operations, production for the year was down 65% to 576 000 tonnes milled. However grade improved markedly, validating the decision to close the loss-making shafts. Gold production decreased 58% to 71 149oz.

At Unisel, both Basal and Leader Reef development produced good results after environmental constraints in the E block were removed by the completion of the cooling project. Middle reef development focused on the decline area pillars and was affected by seismicity and poor ground conditions. No development was undertaken on the A or B Reefs. Overall, the shaft produced reserves on the Basal and Leader Reefs. Future development will continue to focus more on the better-grade E block and portions of the Brand 5 shaft pillar.

Financial review

Revenue decreased 52% to R682 million. Following the closure of Merriespruit 1, cash operating costs decreased by less than 1% to R250 193/kg (US$1 114/oz). However, operating profit rose by 60% to R120 million (US$18 million) after the closure of loss-making units. Capital expenditure of R79 million (US$11 million) was spent largely on ongoing development (69%), maintenance and other shaft capital (31%).

Key statistics

Production		FY11	FY10	FY09
Volumes milled	000t (metric)	576	1 656	2 261
	000t (imperial)	636	1 826	2 493
Gold produced	kg	2 213	5 288	8 030
	oz	71 149	170 013	258 170
Average grade	g/t	3.84	3.19	3.55
	oz/t	0.112	0.093	0.104
Financial
Revenue	R million	682	1 415	2 033
	US$ million	98	187	226
Operating cost*	R/kg	250 193	252 537	184 538
	US$/oz	1 114	1 036	638
Operating profit	R million	120	75	545
	US$ million	18	10	61
Capital expenditure	R million	79	180	199
	US$ million	11	24	22
People
Number of employees
Employees		1 802	3 979
Contractors		68	57
Total		1 870	4 036
HDSAs in management	%	21	36
Women in mining	%	9	13
Expenditure on training and development	R million	14	27
Safety
fatalities		1	5
LTIFR	per million hours worked	11.57	12.86
Environment
Electricity used	000MWh	283	406
Water used for primary activities**	000m³	2 772	10 380
GHG emissions	000t CO₂e	142	491
Expenditure on local economic development	R million	5	4
Status of mining right	New-order mining right granted in December 2007

* Includes royalty payment in FY10 and FY11.

** Water decreased year on year due to the decommissioning of the Virginia operations.

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