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Slump in gold production leaves Harmony reporting a loss


Publication: www.busrep.co.za
Source: www.busrep.co.za
Journalist: Wiseman Khuzwayo

Harmony, South Africa's third largest gold producer, yesterday posted a loss for its third quarter to March.

The mining house's earnings a share declined from a profit of 28c to a loss of 69c a share. Similarly, headline earnings a share slipped from a profit of 49c to a loss of 32c.

"This decrease can mainly be attributed to a decrease in production," said chief executive Graham Briggs.

Harmony said revenue had fallen to R2.52 billion from R2.97bn, in a relatively stable price environment. This was caused by lower production and some inventory build-up.

Gold was trading at $913 (R6 793 at current exchange rates) an ounce a year ago, and yesterday it was bid at $1 196.50 an ounce at 5pm.

Harmony's stock, which fell 1.21 percent from Friday to close at R71.13 yesterday, has been underperforming. A year ago the share price was R86.99.

Briggs said that during the third quarter Harmony had continued restructuring to eliminate unprofitable production, the company's end game being the best asset mix, generating quality ounces.

He said that after the first round of shaft closures - three in Evander and one in Brand - in the previous quarter and early in the quarter under review, Harmony had announced the closure of another three shafts that would take effect during the fourth quarter.

"We fully anticipated the short-term effects from these actions and indeed gold production for the March quarter reduced by 10 percent in comparison to the previous quarter, of which 6 percent can be attributed to the restructuring. We experienced some technical challenges and a number of lost shifts due to stoppages imposed by the regulator for minor infringements," Briggs said.

He said Harmony was in talks with the National Union of Mineworkers to avoid retrenching 3 700 miners in the Free State. Last year 1 100 workers were retrenched in Evander.

Tshepong and Masimong mines had a slow start-up after the Christmas break; Joel had produced lower grades, mainly as a result of delays caused by the lift shaft-deepening project; and Kusasalethu, previously Elandsrand, had experienced ore-pass problems, which were being investigated, said Briggs.

He continued: "Of great concern is the number of production stoppages ordered by the new principal inspector of mines in the Free State. Thirteen shifts were lost, which translates to (about) 170kg less gold and R46 million less revenue... We are in robust consultation with the Department of Mineral Resources to address our concerns."

Leon Esterhuizen, a gold analyst at RBC Capital Markets, said Harmony was struggling but should be improving soon.

"They have a lot of projects to come on line. The old projects are costing them a lot of money and are at the end of their line. They will use old projects to fund new ones that will come at a higher grade."

Annual report

Integrated annual report 2016
Integrated annual report 2016

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Investor brief

Harmony Investor brief, Sep 2017
September 2017 -
Harmony Investor brief

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