Harmony seriously at risk to a long strike

[miningmx.com] – A protracted strike on South Africa’s gold mines would do “a huge amount of damage to the industry and particularly to Harmony operations’ according to Harmony CEO Graham Briggs.

Speaking at a presentation of the group’s results for the quarter and year to end-June in Johannesburg Briggs added that “our opinion is we may well have a strike but it is unlikely to be protracted. It will probably be for a week or so.’

Unlike AngloGold Ashanti – which on Monday highlighted the diversified nature of its operations as a defence against the impact of a strike with less than 20% of earnings coming from its SA mines in the June quarter – all of Harmony’s operating mines bar one are located in the country.

Harmony’s average recovered grade of just over 5 grammes per ton (g/t) is also the lowest in the SA gold industry further reducing its ability to cope with the negative financial impact of a strike.

Briggs commented, “at 5g/t we are probably 1.5g/t to 2g/t below everyone else and that means we will be under severe pressure. We would have to cut back severely on all our expenditure. I don’t want to go into details about it but that’s what we would have to do.’

He added, ” this is not just a positional bargaining issue. It’s an affordability issue. Our ability to pay is just not there. Look at our financials and tell me how much more Harmony can pay. What do you want me to do? Do you want me to cut capital expenditure? That also means jobs lost.’

Asked about Government pressure on the industry to save jobs – as demonstrated by the actions taken recently by the Department of Mineral Resources against Glencore’s Optimum Colliery – Briggs replied, ” the Government is under pressure over jobs but the industry point of view is that a moratorium on retrenchments is not something we can do. ‘

Similar sentiments were voiced on Monday by AngloGold Ashanti CEO Srinivasan Venkatakrishnan who commented, ” companies cannot be expected to persist with unprofitable operations.’

But Briggs indicated there was scope for job-saving commitments from the mines given co-operation from the unions and a more understanding attitude from Government.

He commented, “We could put a moratorium on retrenchments if the unions were prepared to accept a condition they would only get cost of living increases. ‘

Briggs added Government needed to “recognise the sort of pressure that we as companies are under’ and requested that Government make the mining environment in South Africa ” a little more friendly and not so expensive.’

He cited “excessive and unfair’ Section 54 safety work stoppages commenting, ” we don’t object to Section 54 stoppages when they are warranted in the name of safety but where they are excessive and implemented across other operations just because the same flag happens to be flying over those operations that is completely unfair.’