[miningmx.com] – HARMONY Gold has guillotined 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.
Last week, Harmony disclosed it had halted the decline expansion of its Phakisa mine and had written down the investment for R1.31bn. This took Harmony’s full year losses to R1.27bn despite having cut into its all-in sustaining costs.
“In developing our safe and realistic operational plans for FY15, we were informed by the need to improve our margins, carefully assessing the ability of each of our assets to be profitable at current gold prices,’ said Graham Briggs, CEO of Harmony Gold.
Eugene King, an analyst for Goldman Sachs, said in a report last week that the company had not set down any restructuring plans. Other analysts estimated that up to 50% of its gold production was underwater.
“Harmony has multiple mines which are burning cash at our gold price forecasts,” said King in his report. “[There are] no plans have been laid out to restructure, divest or close any mines,’ he said.
Harmony said its production guidance for the 2015 financial year would remain unchanged at 1.2 million oz even though Target 3 was only expected to contribute a maximum 14,500 oz for the year compared to 45,429 oz previously.
Both Target 3 and Phakisa are located in South Africa’s Free State province.
Harmony Gold said in an announcement today that Target 3 had produced a cumulative loss of R280m over the last four-and-a-half years.
“Given the current gold price environment, and the significant capital investment required to sustain operations at this shaft, Target 3 is predicted to continue to make a loss in the foreseeable future,” it said.
The process of negotiations with the Department of Mineral Resources, the municipality and the Free State provincial government had begun but some 1,500 jobs were at risk. Redeployments, reskilling and voluntary separation packages would minimise job losses where possible, Harmony said.
Target 3’s South Block remained an important future source of gold, but additional development and equipping was required to access it, Harmony said.
