Harmony Gold Mining Co. plans to cut costs at each of its South African mines to less than 400,000 rand ($37,000) a kilogram of bullion by increasing productivity and reducing spending on equipment and exploration.
South Africa’s third-biggest producer will reduce its costs per ounce by mining more higher-grade ore and cutting spending on future projects, Chief Executive Officer Graham Briggs said in an interview with Bloomberg TV Africa to be screened tomorrow. Harmony’s all-in sustaining costs dropped 14 percent to 404,694 rand per kilogram (2.2 pounds) in the three months ended Sept. 30.
“None of our operations including the capital will be more than 400,000 rand a kilogram,” Briggs said. “You have to increase production. You’ve got to get more gold. You’ve got to achieve your grade targets and get those grams per ton. You’ve got to get your tons so you have to get that productivity up,” he said, referring to tons of rock mined.
Harmony, which operates 10 underground mines in South Africa, is attempting to maintain profitability amid a gold price that plunged 28 percent last year, the biggest annual drop since 1981. The company, which Briggs has led since 2008, suspended its dividend after posting a loss in the three months to June. The stock has declined 63 percent since the beginning of last year.
The company plans to incentivize employees at the rockface by paying them bonuses to boost productivity, Briggs said. It will also try and negotiate better deals with equipment suppliers. Harmony may fire as many as 120 employees as it focuses on mining more profitable areas, trade union UASA said on Jan. 8.
Gold was little changed at $1,225.89 an ounce at 5:21 p.m. in Johannesburg yesterday. That equates to about 426,200 rand a kilogram.
Briggs will also target exploration costs. The company will cut spending on looking for new gold reserves to between 25 million rand and 50 million rand a quarter, from 100 million rand, he said.
“Right now shareholders don’t want to spend money on long-term potential, they’re looking at much shorter term,” he said. “You have to keep your exploration alive but you can reduce the expenditure and focus on some known areas as opposed to looking at bigger areas.”
Bank of America Merrill Lynch yesterday lowered its average gold forecast 11 percent to $1,150 an ounce, saying purchases from Indian and Chinese buyers won’t be strong enough to stop prices falling further. China probably overtook India as the world’s biggest bullion consumer last year, the World Gold Council has said.
AngloGold Ashanti Ltd. and Sibanye Gold Ltd. are South Africa’s biggest producers of the metal by output.