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Harmony Gold 28% BEE, bettering charter targets

Publication: Engineering News
Journalist: Martin Creamer

JOHANNESBURG ( – South Africa’s third-biggest gold-mining company Harmony Gold sees its zealous compliance with black economic empowerment (BEE) and the Mining Charter as making the company an attractive transaction haven for companies that are battling to meet the April 30 charter deadline.

Harmony Gold executive director government relations Mashego Mashego told analysts after the company’s latest set of results that Harmony exceeds the BEE ownership requirement by 2% and is confident of fully complying with all nine pillars of the Mining Charter before year end, when the current charter expires and gives way to a new set of imperatives.

Harmony has turned the prior quarter’s loss to R31-million profit and is currently cash-flush with R2-billion in the kitty.

“At Harmony, we’re currently sitting at 28% BEE, and it’s still improving as indicated by the Phoenix transaction,” Mashego said, against the background of the charter only demanding a BEE ownership level of 26%.

Harmony Gold CEO Graham Briggs indicated that Harmony’s own internal equity targets were above those laid down in the Mining Charter, which is now under interim audit by the independent consultancy Moloto Solutions.

“We’ll continue to do deals in a BEE structure. The most recent was the deal with Phoenix and where we see opportunities we will continue to do those deals,” Briggs said in response to BNP Paribas Cadiz mining analyst Adrian Hammond.

Although the Moloto Solutions audit was not yet concluded – which was expected by the end of May when Harmony would receive a company-specific report – Mashego expressed confidence that the company would comply fully with the nine pillars of South Africa’s Mining Charter, which is aimed at uplifting historically disadvantaged South Africans (HDSAs).

“We must be representative of what is good and right to do in South Africa and what makes good business sense,” Briggs said, after the JSE-listed company reported cutting net debt by 13% to R835-million.

Harmony shares are currently outperforming the gold price by 25% and the company intends returning to being a dividend payer in the near future.

Briggs said low costs had put Harmony in pole position on the industry consolidation front, where a brief time-zone-focused Barrick-Newmont rapprochement has sparked a new global merger, unbundling and disposal mood in gold.

In response to Barclays Capital mining analyst Andrew Byrne, he added that Harmony was keeping close tabs on potential acquisition opportunities, where charter achievements, community awareness and conscientious government relations stood it in good stead on the growth front.

Harmony’s all-in sustaining costs have plummeted 18% to $1 234/oz for the nine months ended March 31.

The company was already engaged with the Department of Mineral Resources on the new targets that have been put forward for the new dispensation that would click in after the Mining Charter expires on December 31.

Through the Chamber of Mines of South Africa, Mashego said that Harmony was participating in a forum that was crystallising the new upcoming post-charter-deadline upliftment targets.

Key factors that government was seeking in the new dispensation were beneficiation – “which tends to be quite sticky” – and procurement.

“Beneficiation and procurement are the two things that are coming up,” Mashego added.

'Once empowered, always empowered' was also receiving a lot of attention in discussion of the new dispensation.

Not only had Harmony already exceeded the 26% BEE requirement by 2%, but it was also ahead of 40% of senior management being in the HDSA category.

“We’re going to be more representative of South Africa, those numbers are going to increase in Harmony as a matter of fact,” Briggs added.

Harmony has also been able to keep a lid on its wage bill, which increased by only 1% in the latest nine-month figures.

Productivity is up 8%, from 80 g a person to 86 g a person and the average age of Harmony’s mineworkers has fallen from 48 years of age to 43 years of age.

Briggs wants the Association of Mineworkers and Construction Union (AMCU) represented at the next wage negotiations in June 2015.

“AMCU are real in our lives,” Briggs said in response to JP Morgan mining analyst Allan Cooke.

He saw the setback of the 2013 wage negotiations as the absence of a productivity-improvement variation within the pay framework and was hopeful for alignment of the workforce and management with that objective in June next year.

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