Harmony Gold's Q2 production falls 10 percent

The bullion producer reported a headline loss of R496 million in the three months to 31 December, 2014.

Harmony Gold's Kusasalethu mine. Picture: Harmony Gold.

JOHANNESBURG - South Africa's Harmony Gold said on Monday gold production dropped 10 percent in its second fiscal quarter due to maintenance and repair breaks at two operations.

The bullion producer reported a headline loss of R496 million in the three months to 31 December, 2014, due to the lower output and restructuring.

"Lower gold production quarter on quarter and a lower gold price resulted in a decrease in production profit to R618 million in the December 2014 quarter, compared to R913 million in the previous quarter," the company said in a statement.

Harmony expects its biggest operation, Kusasalethu, to return to profitability in the last quarter of the company's financial year, which runs to the end of June, through job cuts and other cost cutting.

"In essence, we need to make money, we cannot continue making losses like we have in the last two years," Harmony's chief executive Graham Briggs said. Details of the job cuts will be announced at the end of February, he said.

Rolling power cuts that started last year when the state power utility Eskom cut supply to meet its consumption needs contributed to a 50 kilogram loss in gold output for Harmony, Briggs said.

"Of course, the quarter which we end looks even worse on Eskom," Briggs said. "I don't know what the effects will be on our production."

Eskom, which supplies about 95 percent of electricity to Africa's most advanced economy, is battling to meet its daily demand of about 30,000 megawatts, relying heavily on diesel-powered turbines to keep the lights on in South Africa.

The utility's generating capacity has been curtailed due to technical faults at its aging power plants, as well as by a shortfall in its installed power generation capacity, leading to regular power cuts since March 2014.