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Harmony lands solid profit despite R325m strike hit

Publication: Miningmz
Source: www.miningmx.com
Journalist: David McKay

Harmony Gold Mining Company (Harmony) kicked off its new financial year in style, posting a R1.4bn September quarter operating profit, a 9% increase quarter-on-quarter, but said that strike action as its Kusasalethu mine near Carletonville would trim 25,000 ounces off its full-year production target of 1.3 million oz.

The strike, which was resolved after unions accepted a Chamber of Mines proposal to improve the wages of entry-level workers, would result in Harmony’s labour costs rising by R10m per month.

The strike, which involved 5,400 employees over 23 days (excluding an estimated 10 day start-up period), carried a cost of R200m. The impact on profit was R125m with a total opportunity cost of R325m. Start-up at Kusasalethu had been slow.

CEO Graham Briggs said that union representation at the mine was being confirmed but added that there was a strong Amcu (Associated Mineworkers & Construction Union) presence.

Commenting on labour relations, Briggs said: “We have taken the blinkers off and we’re talking to all parties.”

Gold production in the quarter totalled 321,924 oz, an 8% improvement over the June quarter, a performance that was aided by an improvement in the gold price received, which, at $1,663/oz, was a 5% increase quarter-on-quarter.

The financial outcome for Harmony shareholders was headline earnings of R529m compared to a R27m loss in the June quarter. Harmony’s figures included contributions from now-discontinued assets, including R89m from Evander Mines, which Harmony is in the process of selling to Pan African Resources.

Harmony’s net cash position stands at R120m. Cash after capital expenditure totalled R2.26bn minus debt of R2.14bn.

Cash on hand would be increased in January when Pan African Resources paid a first tranche R1bn (minus a non-refundable R50m deposit it had made to Harmony). A further R500m would be paid once the mining right had been transferred.

Frank Abbott, CFO of Harmony, said that the cash would be used to pay down debt with the balance kept in abeyance for capital expenditure purposes.

Interestingly, Harmony wrote down a total of R192m over the last two quarters representing the decline in value of its shares in Witwatersrand Consolidated Gold Resources (Wits Gold).

Shares in Harmony Gold were just over a percent lower in early trade on the Johannesburg Stock Exchange.

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