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Harmony Gold considers SA job cuts as gold price slumps

Chief Executive Graham Briggs implied that any restructuring at the mine was likely to include job cuts.

Unveiling its results for the 3 months to end-September, Harmony Gold said losses narrowed by 78 percent to R226 million. Picture: Harmony Gold.

JOHANNESBURG - Harmony Gold reported a further quarterly loss on Wednesday and suggested it might have to cut jobs as it contends with a depressed gold price and operational problems which include an escalating battle with illegal miners.

Unveiling its results for the three months to end-September, the company said losses narrowed by 78 percent to R226 million as production rose by 6 percent to just over 303,000 ounces.

The company also benefited from an increase in the rand gold price because of weakness in the domestic currency. The average gold price in the quarter eased 0.5 percent to $1,282 an ounce but the rand/gold price rose 2 percent.

But the current quarter will be a tough one as the company last week said it was closing its key Kusasalethu mine west of Johannesburg for two weeks to try to remove illegal miners who are believed to be starting fires in the mine.

"The decision comes after a third underground fire in October was started by illegal miners. Although no one was harmed in any of these fires, it did result in 10 production days lost in October," Harmony said in its results statement.

The company is especially sensitive about safety after nine employees died in a fire in February at its Doornkop mine.

Harmony has also struggled to get Kusasalethu back to full production after shutting the mine for several weeks at the start of 2013 because of labour violence rooted in union rivalry.

"Kusasalethu's production has continued to be problematic and management is working on an alternative plan to return the mine to profitability," the company said.

Chief Executive Graham Briggs implied that any restructuring at the mine was likely to include job cuts.

"The plans at Kusasalethu we will be signing off in the next few weeks ... We will have to go through a negotiating process with unions," he said on a conference call.

Under South African labour law companies have to hold talks with unions if they plan lay-offs.

"If we look at job cuts, 50 percent of our costs are on labour, so any major restructuring always involves jobs and we have to look carefully at that," Briggs said.

He said Kusasalethu had not made a profit since 2012 and the company had been "throwing a lot of resources at it to try and improve the situation there."

PRICE SLIDE

Gold producers in general are caught in a bind as prices tumble and costs climb.

The spot price fell to fresh four-year lows on Wednesday at below $1,200 an ounce, a critical level that many analysts see as a "tipping point" that will cause shaft closures.

Any move to cut jobs at Kusasalethu could meet with stiff labour resistance given the heavy presence at the mine of the hardline Association of Mineworkers and Construction Union (AMCU), whose members have downed tools in the past at Anglo American Platinum in protest at planned lay-offs.

WAFI-GOLPU

Meanwhile Briggs said the market would get an update in Decmber on the pre-feasibility study at Harmony's flagship Wafi-Golpu project in Papua New Guinea, with new estimates on capital expenditure.

Harmony has already said it expects "significantly lower" investment than previous estimates which called for spending of almost $6 billion to develop the mine. Costs will be shared with joint-venture partner Newcrest Mining.

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