Harmony Gold Reports Loss and Cuts Spending to Scale Back Costs
Harmony Gold Mining Co. (HAR), Africa’s third-largest producer of the metal, reported a loss after temporarily shutting its largest mine because of labor unrest and plans to cut costs to return to profit.
The loss excluding one-time items was 47 South African cents (5 cents) a share in the third quarter through March compared with a profit of 1.85 a share in the previous three months, the Johannesburg-based company said today in a statement. The median estimate of analysts by Bloomberg was for profit of 53 cents a share. Output fell 15 percent to 247,529 ounces.
The company plans to cut corporate costs in South Africa by 400 million rand and reduce capital spending by 1.4 billion rand in fiscal 2014, it said. This will cut spending to 3.6 billion rand, Chief Executive Officer Graham Briggs said on a conference call today. Harmony on Feb. 15 began a phased reopening of Kusasalethu, its biggest mine, after an agreement with unions. Ninety percent of workers have returned, Briggs said. It closed the operation Dec. 20 after weeks of strikes and violence, and began talks amid a threat to as many as 6,000 jobs at the operation.
“The sudden drop in the gold price requires us to look more carefully at our costs,” Briggs said.
Gold miners are studying operations and asset sales after average gold prices slid 5 percent from the prior quarter. The National Union of Mineworkers in April said it will seek higher pay in negotiation with the Chamber of Mines this month, after Lonmin Plc (LMI) last year agreed to 11 percent to 22 percent raises.
Harmony restarted operations yesterday at its Phakisa and Tshepong mines, which last year together contributed 18 percent of the company’s output, after suspending activity because of a fire on April 23 that left one employee dead.
The company is doing an optimization study of its Wafi Golpu project in Papua New Guinea and plans to remove 20 percent of costs at the Hidden Valley mine to return it to profitability.
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