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Harmony to boost margins in trying times

Publication: Mineweb
Journalist: Tessa Kruger

Harmony Gold tells why the company is in a position to benefit from opportunities created by the financial crises.

While numerous mining companies have announced cuts in capital expenditure and the suspension of production at operations, gold producer Harmony Gold says its capex plans remain and the company will stretch margins in these trying times.

The company said its capital expenditure plans were still intact despite the impact of the world financial crises on the mining sector. Its pipeline of projects was the future of the company and it regularly reviewed its cashflow to ensure it supported the continuation of the projects that were the low cost mines of the future.

However, the company has highlighted borrowings and debt far more than before and is even more committed to achieve a zero debt level, said spokesperson Marian van der Walt.

“The financial climate has put a lot of companies into stress and due diligences are on the increase. Harmony’s stated strategy is to have zero net debt by June 2009.

To achieve this, we not only concluded two transactions in the past 18 months, but we also managed to raise R1 billion (US$98.36 million) by issuing shares for cash in the open market,” said Van der Walt.

“Fortunately gold producers are in a fairly unique position in that the gold price is at all time highs in Rand terms, and despite the high cost pressures that gold miners faced in the past 18 months or so, Harmony has been able to improve its financial margins.”

She said Harmony weathered its own storm in 2007, tackling most of the issues other companies are now faced with and completing its restructuring process. The company would therefore not undertake any further retrenchments this year, assuming the gold price does not deteriorate.

“Due to the substantial decrease in commodity prices, we are hoping to see a decline in input costs and we are liaising with suppliers to ensure that costs are negotiated down.

“Our challenge is to get all our mines including those in build-up phase, producing at optimal rates.”

Van der Walt added the company believed it has positioned itself to benefit from the opportunities that may be created from the financial crises.

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