Harmony hit by operational woes, lower output and rising costs – and safety record remains appalling
Harmony Gold posted underwhelming results for the year to the end of June, hampered by operational issues at its Hidden Valley mine in Papua New Guinea, a dip in production and rising costs. And its safety record remained appalling, with 13 of its employees killed on the job in the financial year.
The upshot was that the group’s headline earnings — which strip out one-off items such as impairments — declined by 49% to $199-million. A final dividend of 22 SA cents per share was declared, compared with 27 SA cents last year. Accounting impairments amounted to a loss of 172 SA cents per share, mostly stemming from its Tshepong operations in the Free State, which are being restructured.
The average gold price the group received increased by 5%, helped by the company’s hedging policy. But production fell by 3%, preventing the company from translating such trends into an increase in profit. Lower grades also curbed earnings while all-in sustaining costs rose by 16%.
“Average underground grade decreased by 3% to 5.37g/t from 5.51g/t due to adverse ground conditions at Moab Khotsong and the impact of seismicity at some high-grade panels at Mponeng,” Harmony said in its results statement.
Production at Hidden Valley in Papua New Guinea fell by 21% compared with the previous year because of the breakdown of a crucial conveyer belt in January, which took two months to get back up and running.
The company said it expected to mine higher grades in the near future.
“Excellent development grades have been obtained from all operations, specifically Mponeng and Moab Khotsong, which is very encouraging for future grade profiles of the South African underground operations,” Harmony said.
The company is focused on higher grades and safer mining, and it announced a few days ago a planned restructuring of its Tshepong operations to that end.
“Not only will we prioritise investment in our high-grade assets, we will achieve a more balanced production split across the three core business areas previously mentioned, and ensure all of our mines are safe and profitable,” the company said on Tuesday.
“We have therefore taken the tough decision to restructure Tshepong Operations. Going forward, Tshepong Operations will be reported on separately as Tshepong North and Tshepong South. The Tshepong North sub-75 project has been suspended and the life-of-mine reduced from 19 years to seven years. This restructuring will create a smaller but immediately profitable operation going forward. The capital which was earmarked for Tshepong North will be reallocated to projects delivering higher returns. This was not an easy decision, but it was necessary to ensure we continue to mine sustainably and profitably.”
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Harmony also decided to close its Bambanani operation before the end of the financial year because of safety concerns, with the employees redeployed to other Harmony assets.
“Safety will always take precedence over production. This was evident in our decision on the responsible closure of Bambanani at the end of this financial year. As the mine reached the end of its life, seismicity increased beyond an acceptable level,” the company said.
Harmony certainly needs to work on its safety record, which for the financial year was, frankly, appalling. Thirteen employees died on the job in the last financial year, eight at the Kusasalethu mine. And in August, the company recorded the first fall-of-ground death in the year to date at a South African gold mine. In an industry first, in the first half of the calendar year, there were no fall-of-ground deaths in the gold and platinum sectors. The second half of the year will, regrettably, not equal that milestone.
“Dedicated training for the engineering departments, alongside other safety initiatives, has been implemented to ensure we never have a repeat of the tragedy experienced this financial year,” Harmony said.
Other aspects of its safety record have been showing considerable improvement, in line with a safety drive across the industry.
The group’s lost-time injury frequency rate (LTIFR) trended “below six per one million hours worked for three consecutive quarters” — a company first.
“The LTIFR for FY22 ended at 5.90 per million hours worked compared with 6.46 per million hours worked in FY21,” Harmony said.
Still, the most measurable and important metric is human life, and the company’s record really needs to improve on that front. DM/BM