Harmony Gold to shutter unprofitable shaft
The decision by Harmony Gold to put its loss-incurring Target 3 Shaft on hold for a while may well be bad news on the face of it – not least because of the jobs it seems likely to affect. Coming as it does so soon after last week's announcements of a R1,2-billion net loss in the June quarter (as a result of a writedown on an expansion at its Phakisa operation) and of a cutback on the investment in its Wafi-Golpu mine in Papua New Guinea, it at least shows that management continues to confront the company's demons and take the remedial action it deems to be appropriate. GK
Job cuts are a sensitive issue in South Africa, where close to a quarter of the workforce is unemployed and labour tensions are raw, especially in the mining sector which has been hit by a wave of often violent strikes the past three years.
Harmony said it would take measures to minimise and try to prevent job losses because of the placing of the operation on "care and maintenance", which means it will be closed for an indefinite period of time.
"Despite numerous initiatives by both management and organised labour to return Target 3 to profitability, this operation has continued to record cash flow losses," Harmony said in a statement.
"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," the company said.
Harmony last week said it fell to a fourth-quarter loss because of a 1.4 billion rand ($132 million) write-down on an expansion project at its Phakisa operation, which was shelved because it would have required too much capital.
The company said it expected output of about 1.2 million ounces of gold in its 2015 financial year after producing 1.17 million ounces last year.
(1 US dollar = 10.6168 South African rand)