Harmony Gold Mining Co., Africa’s third-largest producer, said profit rose 28 percent as costs dropped and prices received for the metal climbed even as its biggest operation was shut due to strikes. The stock rallied.
Earnings excluding one-time items advanced to 680 million rand ($77 million), or 1.58 rand a share, in the quarter through December from 529 million rand, or 1.23 rand a share, in the prior three months, the Johannesburg-based company said in a statement today. The average estimate of five analysts surveyed by Bloomberg was for earnings of 1.05 rand a share.
Gold output dropped 9 percent in the December quarter from the previous three months because of work stoppages and violence at Harmony’s Kusasalethu mine, its largest. The operation, which is in Carletonville, South Africa, has been shut since then for safety, and Harmony has until March 7 to complete a review with unions that may lead to the mine’s closure.
“It’s very difficult not to agree to law and order and safety no matter what side of the fence you are on,” Chief Executive Officer Graham Briggs said on a call today. The agreement Harmony and labor unions are working on should allow for “lasting and sustainable engagement,” he said.
Harmony rallied 7.7 percent, the most in almost 18 months, to 61.80 rand by the close in Johannesburg.
About 6,000 workers including contractors at the mine could lose their jobs, the company said in a Jan. 7 statement. About 200 employees will perform maintenance on the mine during a 60-day review process that may lead to the closure of Kusasalethu.
Briggs said the pact it’s negotiating with workers will allow for greater union involvement. “If a particular union wants to engage with us, then we have a mechanism which is going to be sustainable and avoid crisis we’ve had in labor,” he said.
Illegal meetings and marches by the Association of Mineworkers and Construction Union, or AMCU, whose representatives have been reluctant to negotiate with the company, contributed to unrest that kept Kusasalethu closed, Briggs said last month.
The AMCU now represents 62 percent of employees at the operation, while the National Union of Mineworkers represents 28 percent, Briggs said last month, citing figures that are in the process of being verified.
John Paulson, a billionaire whose hedge fund is the largest shareholder of AngloGold Ashanti, on Feb. 1 said Africa’s largest producer of the metal might increase in value if it were to split its South African operations from international assets.
Gold Fields Ltd., the world’s fourth-biggest producer of the metal, last year announced a spin off most of its South African mines, to be listed as a separate company, Sibanye Gold.
“We can operate in this environment,” Briggs said, referring to South Africa. “If AngloGold would split into two that might create some good opportunities for us. When you look at strategy you have to look at all the options.”
Operating costs dropped 127 million rand, mainly because of lower summer electricity tariffs, the company said.