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Harmony Q1 production up, Sibanye deal a new way of looking at ops: Graham Briggs - CEO, Harmony Gold

Publication: The Times
Source: www.moneyweb.co.za
Journalist: Hilton Tarrant

Harmony and Sibanye are “breaking down the farm fences” – Neal Froneman

Hilton Tarrant: The country’s third-biggest gold producer, Harmony Gold Mining, brought results for the first quarter to September 30 out today. Graham Briggs, chief executive of Harmony, joins us now. Graham, production up 12%, grades up 4% in the quarter. You’ve swung back into profit, your costs are down – and we’ll get to those. But perhaps most importantly, a two-year wage agreement signed.

Graham Briggs: Ja, that was a key feature of the quarter, of course. When these things are successful, there needs to be less focus on them. But the wage agreement was really key to this quarter, and key to keeping the operations away from any labour issues and so on. So ja, good for the fold industry. A lot of collaboration between the gold miners on that one.

Hilton Tarrant: How would you describe your relationship with labour at the moment?

Graham Briggs: I think it's fairly good, Hilton. There are obviously going to be challenges. In the last while we've been focusing a lot on communication with our labour, understanding their issues and trying to resolve any problems that happen on our operations as soon as they happen. Of course we are not going to resolve all the problems in a single swift day or so, but we've been putting plans in place to solve a lot of these issues.

Hilton Tarrant: On the cost side of things, your cash cost down 7% in rands, 11% in dollars on an all-in basis as per the new World Gold Council guidance – just over R400 000/kg. I guess it helps that Kusasalethu is back to roughly normal production?

Graham Briggs: That certainly help, but it's not the only operation that helps. Obviously the other operations also help. Hidden Valley also had a good quarter, much better than it had before, so it's in line with improving to sort of break even at $1 400. There’s still work to be done on those operations with a higher-all in cost. But the improvement is I think quite impressive – a 14% improvement in all-in sustaining costs is great.

Of course, the rand was a little bit in our favour, so the dollar price there was a 19% increase in all-in costs. That would be remarkable if you are looking at sort of world gold production.

Hilton Tarrant: We spoke three months ago, and you suggested those costs were starting to become more and more difficult to make. Is there much more to come?

Graham Briggs: There is always more to come, Hilton. There are always more ways of looking at operations and looking at those parts of the operations that really one shouldn’t be focusing on or you should try and cut out, or in some way restructure. There’s always more work to be done. I don’t think in the gold mining industry we’ll ever say we've actually arrived at the final destination. We need to continually look at productivity improvements, improvements on the way we do things.

Hilton Tarrant: And one of those things where you have looked at things differently is that announcement that followed your quarterly profit announcement this morning – that you will exchange rights with Sibanye. This affects your Free State operation Joel, and Sibanye’s Beatrix operation. What is the idea with that announcement?

Graham Briggs: I think the logic about that is firstly that two companies are talking, exchanging information, and looking at ways in which we can operate better mines. And so there have been discussions there. The areas that we are swapping essentially are areas in Joel that we can’t mine, and the areas in Beatrix are areas that they can't mine. So it makes perfect sense, in other words, if there is some ore to be mined there, that we swap it and mine it that way.

And then further on the other area is really an area far down the line which gives Beatrix [indistinct]… certainly at their depths and so on. They haven't got any infrastructure close to it and therefore it makes more sense for us to mine it, and in so doing we’ll pay that 3% royalty.

Hilton Tarrant: Neal Froneman, the chief executive of Sibanye calls it “breaking down the farm fences”. Are there more fences to be broken down?

Graham Briggs: Hilton, I'm sure there are. But what exactly they are I'm not sure, and in what sort of format they will take place I don’t know. But there are synergies between operations where we continually need to make the best decision for the sake of the ore bodies and obviously our shareholders.

Hilton Tarrant: Graham, your outlook for the second quarter?

Graham Briggs: It's going to be a good quarter. The gold price we are expecting to be reasonably static, so it's relying on improved production and with that a bit more containment on costs. We’ll have to work hard on the cost side. As you said rightly, I have said before that it becomes more and more sticky. But improvement in production and that will bring down our all-in sustaining cost even further.

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