Illegal mining forces Harmony to halt mine

[miningmx.com] – HARMONY Gold is to shut its Kusasalethu mine on the west Rand for two weeks and send employees on leave in a bid to combat the threat to safety posed by illegal mining on its premises.

The action, aimed primarily at protecting employees at the mine which has suffered three underground fires this month, also has the affect of denting Harmony’s chances of clawing itself back to profitability.

Harmony said on October 14 that gold production in the first quarter of its 2015 financial year would be about 6% higher. It booked a full-year R1.27bn net loss (2013: – R2.35bn) in August amid falling gold recovery grades.

An underground fire broke out at Kusasalethu on October 30, and although all employees were evacuated safely, Harmony CEO, Graham Briggs, said the risk of another fire harming employees was too great a risk to bear.

“The risk of yet another underground fire is a risk that we are not prepared to take and therefore we are reverting to this temporary mine closure’, said Briggs. During the closure of the mine, Harmony would attempt to remove the illegal miners.

“Mr Briggs notes that Kusasalethu’s production has not reached planned levels and these ongoing incidents of sabotage further undermine the mine’s sustainability,” Harmony said in a statement late Friday afternoon.

Briggs’ Harmony has had a year to forget. In February, the company lost nine miners following an underground fire at its Doornkop facility. This was followed in July and August by restructuring following the climb-down in the gold price, the rand weakness against the dollar notwithstanding.

It first halted the decline expansion of its Phakisa mine and had written down the investment for R1.31bn. It then shut another loss-making asset saying it would put Target 3 – which contributed 4% of the firm’s 1.13 million ounces in output – on care and maintenance, risking 1,500 jobs.

In addition to the risk of more underground fires posed by illegal mining at Kusasalethu, Harmony added that employees had been threatened by illegal miners whilst other employees were assisting them with access and sustenance.

“During October 2014, 105 illegal miners have been arrested and about 25 employees are subject to disciplinary action,” Harmony said, adding that illegal mining – not just of closed mines – was “rife” in the industry.

“Harmony is adopting an uncompromising stance towards these activities and is working with organised labour and the regulatory authorities to do so,” it said in a statement.

This would include increased security and improved clocking-in systems to tighten control on access to the mine. “The company also regularly inspects closed-up sections to ensure that they remain sealed off and cannot be accessed illegally,” it said.

Kusasalethu produced 96,650 ounces in Harmony’s 2013 financial year – equal to 8.5% of total gold production – and down from 198,000 oz in the 2012 financial year.