[miningmx.com] – HARMONY Gold CEO, Graham Briggs, talked down the possibility of consolidation in the South African gold sector saying that transactions had to have mutual benefit and not be an expression of executive ego.
“In the past, there were some under the radar co-operation projects with Sibanye Gold where we’d say: “Your operation is adjacent to mine and if we bulk the two together we’ll get better costs,’’ said Briggs in an interview with Miningmx
Harmony Gold has a deal with Sibanye Gold where it’s allowed to mine a certain portion of the orebody from the Joel mine at the south-western edge of the Witwatersrand basin.
“Sibanye Gold, in turn, can mine other portions of Joel from their Beatrix mine, and we’ve done a small deal there,’ Briggs said.
“But big acquisitions such as where Sibanye buys Harmony … for that we’ll have to go the shareholders. It has to be to their benefit and not simply to stroke the ego of a CEO or the new business manager,’ he said.
Briggs’ comments come at a time when Harmony is working through a number of operational challenges including fixing up problems at its Kusasalethu mine in South Africa and Hidden Valley in Papua New Guinea.
Harmony reported a headline loss of R496m in the December quarter, compared to a R266m loss in the previous quarter.
As a result, the company’s cash balance fell from the previous quarter’s R2.2bn to R1.3bn, while net debt currently stands at R1.7bn – significantly more than the previous quarter’s R771m. Harmony’s market capitalisation is currently R14.3bn.
Briggs was nevertheless upbeat about the company’s long-term prospects owing to restructuring as well as its Wafi-Golpu project in Papua New Guinea.
“Shareholder value is created through investing in Golpu, securing a sustainable, profitable future for Harmony,’ said Briggs. “Golpu is a resource that we’re sure will develop into a world-class copper gold mine, and will allow us to sustain our business well into the future,’ he said.
Briggs assured shareholders that Harmony is firmly focused on cost control and cash generation at some of its existing assets.
Unprofitable operations have been scrapped to the value of R214m at its Kusasalethu in West Rand and R216m at Masimong. Retrenchment costs of R182m have been recorded for the quarter.
In December last year, Harmony announced that a new plan would be implemented to return Kusasalethu to profitability. The new plan will entail mining lower volumes at higher grades at a reduced cost. Kusasalethu has suffered several setbacks and had four fires associated with illegal mining operations in the past quarter.
The company hopes to have restored Kusasalethu to profitability by the end of the fourth quarter of the 2015 current financial year after commencing with a Section 189 process in terms of the Labour Relations Act to restructure the mine.
The Hidden Valley mine in Papua New Guinea also contributed to the quarter’s lower production, due to a fatality and a belt tear which resulted in stoppages.
Briggs believes gold production during the March 2015 quarter is expected to be higher once Kusasalethu’s restructuring is finalised and Hidden Valley returns to full production.
Asked about any major acquisitions in the near future, Briggs said for the moment Harmony was focusing on getting its own operations in order. “And there are few opportunities in South Africa right now,’ he said.
