Harmony Gold to shut Bambanani in Free State early as safety risks loom large

HARMONY Gold is to close its Bambanani mine in South Africa’s Free State province incurring an impairment of R144m which has been recognised in the first half of the 2022 financial year.

The mine, which will be put on care and maintenance in July roughly 18 months earlier than planned, has been shut owing to its increased sesimicity. Harmony said it was “no longer possibe to operate the mine in accordance with Harmony’s … safety protocols”.

The mine reported a 10.2% year-on-year increase in second quarter all-in sustainable cost (AISC) of R812,036/kg following a one fifth decline in gold production.

Harmony planned to shut Bambanani in 2024 along with other ageing mines Masimong (closure still set for 2023 and Kusasalethu (2024). The schedule for these other closures remained unchanged.

Harmony reported seven fatalities in the six months ended December which played a major factor in disappointing numbers. Despite a 4% increase in gold production to 778 879 ounces, AISC increased 12% to R802,260/kg. The gold price received averaged R860,795 per kilogram, 4% lower than for the corresponding period in the previous financial year.

The outcome for the interim period was a 70% decline in share earnings of 763 SA cents/share. Harmony declared an interim dividend of 40 cents/share which compares to 110 cents/share at the close of the previous interim period in 2020.

In addition to safety problems, Harmony also encountered a series of operational difficulties at its Hidden Valley mine in Papua New Guinea including slope failures in high grade mining regions and a conveyor failure which brought production to a standstill for most of the current quarter. Hidden Valley’s conveyor is due to start up on March 2.

In the wake of these difficulties, Harmony restated full year in production guidance to between 1.48 million to 1.56 million oz from a previous forecast of 1.54 million to 1.63 million oz – a 4% decline. This guidance includes the ratcheting down of production at Bambanani.

Peter Steenkamp, CEO of Harmony Gold, said it was “with a heavy heart” the company decided to shut Bambanani. Some 1,500 employees would be redeployed with no voluntary retrenchements likely. “Bambanani has some of the best crews and most experienced in Harmony. There is 17% of the pillar left but we are slowing down the mining,” he said.

The closure of these mines represents a period of transition for Harmony. In August, it laid out plans to spend R8bn in life extension projects aimed at sustaining production at around 1.4 million oz/year for seven years. Capital expenditure of R2.3bn has been earmarked for the current financial year.

A greenfields project, the Wafi-Golpu prospect which Harmony shares with Australia’s Newcrest Mining in Papua New Guinea, is forecast to start production in 2028 providing a further underpin to production.