Harmony Gold Mining Co. (HAR), South Africa’s third-largest producer of the metal, said it plans to idle its loss-making Target 3 operation in the country and has started talks with labor unions.
The mine, which employs about 1,500 people, has made a cumulative loss of 260 million rand ($24 million) in the past 4 1/2 years, the Randfontein, South Africa-based company said in a statement today. Target is about 160 miles southwest of Johannesburg.
“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,” Harmony said. While the South Block of the resource is valuable, it needs development.
A 22 percent drop in the bullion price since the start of 2012 has forced the world’s leading gold miners to cut costs and sell underperforming assets as they seek to maintain profitability. Barrick Gold Corp., the largest producer, sold three mines in Australia to Gold Fields Ltd. in October. AngloGold Ashanti Ltd., the third-biggest, sold a mine in Namibia to QKR Corp. this year.
Harmony has started talks with labor unions using procedures outlined in section 189 of the country’s Labour Relations Act. Discussions are steered by a facilitator appointed by the state’s Commission for Conciliation, Mediation and Arbitration. Measures to minimize job losses include offering voluntary severance packages, early retirement, and transferring employees with the relevant skills to vacancies at other operations, Harmony said.
The company forecast output of about 1.2 million ounces for the year through June 2015 at $1,150 an ounce to $1,300 an ounce. That compares with 1.17 million ounces produced in the preceding 12 months at $1,242 an ounce, it said on Aug. 14.
Gold rose 0.2 percent to $1,300.82 an ounce by 10:01 a.m. in London. Harmony climbed 0.9 percent to 32.48 rand in Johannesburg, extending gains this year to 25 percent.
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