Better days still ahead, says Briggs

[] — HARMONY Gold investors would have to be patient a little longer before the significant investment in the group’s growth assets starts to deliver output and income growth.

Posting flat production and financial figures for the quarter to end-March on Thursday, CEO Graham Briggs insisted the group’s South African asset base was geared to perform well over the long term.

Admitting that Harmony would fall well short of its production target for the full year, Briggs said the group would not chase ounces for the sake of it, and instead focus on improving the profitability of its mines.

“We’ve moved away from producing ounces for the sake of targets,’ said Briggs. “We have invested significant capital to build and commission some of the best gold mining assets (in South Africa) and the results of these efforts will be fully realised in the future.

“We’ll focus on profitability; that implies investing in new mines (and) better infrastructure.’

The group has in its financial year to date produced 976,834oz of gold – 316,909oz during the March quarter – leaving it with too much to do in its final quarter to reach its predetermined target of between 1.63 million oz (moz) and 1.65moz (Harmony’s original target was 1.7moz for the year, but revised the figure down following the closure of Merriespruit 1 shaft in October).

Some of the improvements Briggs referred to was already evident at Kusasalethu, which recovered from a shaft accident during the previous quarter. During the period under review it managed to increase output by 40% to 47,069oz, with a 7.4% improvement in yield to 4.93g/tonne and cash operating costs 28% lower at $893/oz.

Target 3 also posted a 47% increase in output to 8,038oz. Tshepong, Harmony’s biggest output contributor, posted a 3% production increase, supported by an increase in recovery grade of 7%. It is also the lowest cost producer in the company for the quarter at $760/oz.

However, Phakisa, Masimong as well as Target 1 posted production decreases for various reasons.

Another significant handicap to Harmony’s short-term output forecasts would be the breakdown of a 5km conveying circuit between the pit and plant of its Hidden Valley JV in Papua New Guinea.

Briggs said the belt would be out of order for at least the current quarter, with the group using trucks to transport ore as an interim measure – resulting in higher cash costs (11% increase during the period under review) and lower production (4% decrease).


Harmony’s net profit of R238m was boosted by a deferred tax credit of R333m. The South African Revenue Service previously disallowed Freegold’s “post 1973 gold mine’ additional capital allowance claim, and also disallowed Freegold’s application of mining ring fencing.

The issues were set down to be heard in the Income Tax Court in March, but Sars withdrew the claim on March 10, conceding that the Freegold operations were entitled to claim this capital allowance.

However, this credit was offset by a R160m impairment on the Rand Uranium assets, following the proposed sale of Rand Uranium to Gold One International.