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Harmony posts strong Q1 numbers, costs remain a concern

Publication: Mineweb
Source: www.mineweb.com
Journalist: Geoff Candy

Groningen – Harmony Gold announced a strong start to the 2013 financial year, posting a quarterly profit of R1.4bn in the three months to end September 2012, 9% higher than the previous quarter.

During the quarter, the group said gold production rose 8% to 321 924 ounces but costs rose as well, up 6% to $1,110/ounce.

Harmony's numbers for the three months were unaffected by the labour unrest that has plagued the South African industry over the last while but, the group did say its Kusasalethu operation has been affected during the current quarter.

It said in the commentary to the results that while the majority of striking workers returned to Kusasalethu on 25 October 2012, and safety inspections, safety inductions and health checks were done during the first few days of the workers' return, production start-up has been slow.

Asked why the group seems to have been less affected than other miners, CEO, Graham Briggs, told Mineweb, that the group has really opened up all of its communication channels and its HR people &8220;have really been working with a slightly different mandate than they have before - speak to people, solve the problems, deal with the issues and let's move on, don't let things stew and boil and so on.”

“Our wage structures are different to other companies, we have a slightly lower basic but a proportion of variable pay so, if you have a good quarter, you are safe then you see a benefit,” he said.

Briggs added that the group remains committed to the country and said this latest set of results proves that the company knows how to operate in South Africa. but, he says, there is still likely to be further issues within the sector.

“I think there is probably some more issues to be resolved. What we need to do now is to start solving those issues in the boardroom as opposed to the stadium or the passage or whatever the case may be. So, we need to start tackling those on a slightly more mature basis and I think that once we get to that stage we will start to see a better situation.”

Costs

The 6% increase in operating cost experienced during the quarter, the group said, was “mainly due to two months of winter electricity tariffs and labour increases implemented on 1 July.”

Costs are likely to be further pressured in coming months as a result of the agreement signed by South Africa's Chamber of Mines which put an end to the national strikes in the gold industry but which, Harmony says, will add, roughly R10m per month onto its wage bill.

Briggs said that while productivity is a huge discussion within the company, it remains a very intensive user of labour and thus a major cost for the group will remain from salaries.

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