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Harmony Gold output may rise 7% on Hidden Valley mine


Publication: Bloomberg.com
Journalist: Carli Lourens

Harmony Gold Mining Ltd., Africa’s third-biggest producer of the metal, said production may expand by about 7 percent this quarter as the company’s Hidden Valley mine in Papua New Guinea ramps up output.

Production may rise to about 400,000 ounces in the fiscal second quarter ending December, from 373,431 ounces in the previous three months, Chief Executive Officer Graham Briggs said in an interview in Johannesburg today.

Briggs is boosting output to mitigate the effect of rising wages and electricity costs in South Africa. Harmony, which has all but one of its mines in the country, is also buying assets to reach its goal of producing an annual 2.2 million ounces by fiscal 2012, from a forecast 1.6 million ounces in fiscal 2010.

Hidden Valley will miss an output target of about 120,000 ounces this fiscal year as equipment breakdowns and rain delayed commercial production, Briggs told investors on a conference call today. The mine may produce about 100,000 ounces, he said. Harmony increased its overall production 5.6 percent in the fiscal first quarter, beating guidance of 4 percent growth.

The company posted a first-quarter net loss of 29 million rand ($3.8 million), compared with net income of 238 million rand the previous quarter. While the dollar gold price rose to a record in the period, the rand surged, pushing down the value of the metal in terms of the South African currency.

‘Virtually Depleted’

Harmony will consider shutting ageing, high-cost operations in coming months as costs climb, Briggs told investors. Gold in the Brand and Harmony Two shafts is “virtually depleted,” he said, adding the company aims to reorganize two Evander shafts.

Costs may rise about 15 percent a year on higher wages and a proposed increase in power tariffs by supplier Eskom Holdings Ltd. of 45 percent a year for the next three years, Briggs said.

The company’s goal of buying more mines will become more difficult over the next year or so as gold rises to an average $1,100 an ounce, from $1,045 today, he said. Briggs expects to complete the purchase of Pamodzi Gold Ltd.’s President Steyn mine next month.

Harmony fell 2.30 rand, or 2.9 percent, to 78.50 rand, extending the year’s drop to 20 percent. The FTSE/JSE Africa Gold Mining index is up 5.7 percent this year.

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