Harmony Gold to Fix Mines, Cut Jobs After Third Quarterly Loss

Updated on

Harmony Gold Mining Co., South Africa’s third-largest producer of the precious metal, vowed to restructure mines producing almost a quarter of its bullion after making a third consecutive quarterly loss.

The company will seek higher-grade ore and reduce costs at its Masimong and Doornkop mines in South Africa and Hidden Valley in Papua New Guinea, Chief Executive Officer Graham Briggs told reporters Friday. About 400 jobs will be cut at Masimong while the company is yet to begin talks with unions at Doornkop, he said.

Harmony made a headline loss of $22 million, or 5 cents a share, in the three months to March 31, compared with $44 million, or 10 cents in the previous quarter, Randfontein-based Harmony said in a statement.

“We cannot continue operating assets that will continue to make losses for all of the forthcoming future,” Briggs said.

Like other major gold producers, the company has been cutting costs and revamping underperforming assets as it adjusts to a gold price that’s 29 percent lower than at the beginning of 2013.

The company produced 245,697 ounces of gold in the quarter, 10 percent lower than the previous three months, at an all-in sustaining cost of $1,258 an ounce. Gold was little changed at $1,185.22 an ounce at 8:47 a.m. in Johannesburg.

Gold is little changed this year, electricity prices have climbed 12 percent and wage negotiations with unions begin in June. “Inflationary costs that are fairly substantial and with a flat product price we have to continue restructuring,” Briggs said.

Last year, Harmony restructured Kusasalethu, its biggest mine, to increase the grade of ore and lower costs. It cut about 1,00 jobs, or 20 percent of the total, including transfers to other positions in the business. In 2016, the mine will produce 170,000 ounces to 180,000 ounces of gold at a cost of 400,000 rand a kilogram (2.2 pounds), or $1,050 an ounce.

Harmony declined for a third day, slipping 2.4 percent to 20 rand in Johannesburg.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE