Graham Briggs, CEO, Harmony Gold
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Financials mask operational woes at Harmony
Allan Seccombe
Posted: Thu, 08 May 2008

[miningmx.com] -- HARMONY Gold’s financial performance in the March quarter flattered to deceive. The high gold price and weak rand offset sharply lower production in the three months and rising costs.

Harmony posted a net profit of R164m in the three months to end-March against a R195m loss in the previous quarter. Cash operating profit came in at R828m from R450m in the December quarter.

On the production side, the picture was less rosy.
restructuring phase has had a negative impact
“Harmony’s operational performance from its continuing operations for the quarter under review was disappointing,” said CEO Graham Briggs.

"It was an interesting quarter, tough, but we've met our objectives from a restructuring point of view. We are in a position now to forge ahead. We've got a new foundation to look for an improvement in morale and production and the like," Briggs said.

Harmony's shares were up two percent by midday South African time at R90.80, but off the morning session high of R91.97.

Tonnages were 7.2% lower, pulling gold output down by 16.6% to 10,347 kg. Grades in the group fell 10% and cash operating costs leapt 9.2% to R145,514/kg.

Harmony lost 800kg of gold because of the South African power crisis.

The extent of the electricity shortage was made starkly evident at the end of January when power utility Eskom declared force majeure and effectively shut the country’s mines for a week, and subsequent build up to supply 90% of normal power consumption.

During the quarter, Harmony also terminated the controversial continuous operations (conops) scheme at Elandsrand and Tshepong.

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Conops was designed to build in more working days at its mines and was introduced by former CEO Bernard Swanepoel, triggering a great deal of scepticism about its efficacy from a large number of analysts.

Briggs said the termination of conops at these two mines as well as Bambanani during the December quarter had caused a drop off in tonnages and grade as the size of the labour force was reduced.

Harmony has cut nearly 6,000 jobs at its mines in the past six months.

“Noticeably, the company’s restructuring phase has had a negative impact and consequences on productivity,” Briggs said.