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Harmony restores that profitable feeling

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

The ramp-up of Kusasalethu, improved grades from other mines, and vigorous cost-cutting helped Harmony Gold rekindle that profitable feeling for the September quarter.

The company recorded share earnings of 5 South African cents compared to an 185 cents/share loss in the June quarter which had been characterised by mine disruptions and wage negotiations. Harmony also booked a R2.73m impairment of assets in the previous quarter following a decline in the price of gold earlier in the year.

As with the rest of the South African gold industry, there's little room for error, however. The company's all-in sustaining costs (AISC) were improved 14% to R404,694/kg (June: R471,146/kg), but the average price of gold received came in at R429,566/kg, a R233m all-in sustaining cash margin.

In an on-line presentation today, Harmony CEO Graham Briggs, demonstrated that nine of the company's 15 assets - none of which comprised the 'original' Harmony incidentally - were below the all-in sustaining cash margin.

Briggs said the company intended lowering AISC another 14% in the current quarter, especially at the Tshepong and Masimong mines, a task he said was essentially a question of "getting them back to where they should be". He raised the prospect of surgery at other marginal ounces, however.

"Where we are mining at below the cut-off, we are looking at those very critically," said Briggs. "Some areas we are scrutinising very closely; we always do that, but there's a little bit more urgency to the situation," he said.

All in all, Harmony produced 12% more gold or 9,635kg in the September quarter compared to the June quarter, at 7% lower cash costs. Its operating profit increased 55% to R1.04bn. The quarter was also capped off by an agreement to pay unions an 8% wage increase, a development Briggs said seemed to habe been forgotten. "It was the event of the quarter," he said.

The Association of Mineworkers & Construction Union (AMCU) was present at the wage talks, but did not sign the agreement raising the threat it could yet take its members on strike. The consequences of the union embarking on an illegal strike would "be dire", said Briggs, especially at Kusasalethu where miners signed individual codes of conduct which included a restriction on unprotected strikes.

"I guess they could take up a legal strike, but we have been upping our communication on the mine considerably, focusing on resolving small issues," he said. AMCU has about 13% of Harmony's 30,000 full-time workers among its ranks.

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