[miningmx.com] – RESTRUCTURING in the South African gold industry was nudged up a notch today after Harmony Gold served notice it would cut volumes at its under-performing Kusasalethu operation, west of Johannesburg.
It joins AngloGold Ashanti, which is considering reducing jobs at its South African mines, and Sibanye Gold which is hoping to restructure its Cooke 4 operations, pending an objection from the Competition Commission.
Graham Briggs, CEO of Harmony Gold, said the new plan for Kusasalethu was to mine lower volumes at higher grades. The mine, which has absorbed R3.9bn in capital spend since 2011, and posted negative cash flow of R504m over the last 16 months, employs about 6,300 people including contractors.
Without restructuring the mine would “not survive”, said Briggs. Kusasalethu produced 86,500 ounces of gold over the last two quarters, equal to about 15% of Harmony’s total gold output over that period.
“The current situation is clearly unsustainable. Harmony’s intention is to restore the mine to profitability in the fourth quarter of the current financial year and – in so doing – preserve as many jobs as possible,” said Briggs in a company statement.
Shares in Harmony Gold recovered somewhat today after taking a pounding on December 1 in a sell-off that affected almost every resource company on the Johannesburg Stock Exchange.
Harmony said on November 5 it was considering its options at Kusasalethu which has struggled to contribute to the group since 2012 following a series of strikes and other interruptions, the most recently being a two-week shut-down so as to tackle the spate of illegal underground mining near its operating levels.
“I did say some time ago that we would be addressing the non-perfomers that we could not afford,’ said Briggs in November. “Kusasalethu is the next one we need to deal with,’ he said.
In August, Briggs closed Target 3 which contributed 4% of the firm’s 1.13 million ounces in gold production only weeks after saying its Phakisa mine expansion had been discontinued and written down for R1.27bn.
“There are quite a few things that need to change including the attitude of the people,” said Briggs previously of Kusasalethu’s problems.
“Absenteeism needs to be worked on, and we need to get back to a status of ‘we are winners’ rather than ‘we are losers’,” he said.
As a result, Kusasalethu has commenced a Section 189 consultation process which allows for a 60-day consultation period between management and unions. Measures such as voluntary separation and, early retirement packages, as well as transfers in Harmony would be considered to retain as many employees, the company said.
“Kusasalethu has not returned to profitability after various setbacks. We need to be both decisive and mindful in our actions so that we preserve the viability of this mine for several decades to come,” said Briggs.
“Without these actions, this mine will not survive and that would indeed be a tragedy for our company, our employees, our communities and our country,’ he said.
