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Harmony to close mine until it is safe

Harmony Gold has revised its production guidance for the remainder of the financial year following violent protests which led to its decision yesterday to close its Kusasalethu mine near Carletonville, west of Johannesburg, for up to six months.

Kusasalethu will stay closed indefinitely until it becomes safe and profitable to mine.

Workers wait outside the Kusasalethu mine after they were barred from entering hostels when they returned from December holidays. Harmony has told workers to stay at home until mining resumes.Photo: Motshwari Mofokeng. Credit: inlsa

As a result of the decision to idle the operation, Harmony said it had excluded the mine’s production for the balance of the financial year and it anticipated “that Harmony as a group will only produce 1.2 million ounces, rather than 1.3 million as guided before”.

The stock plummeted about 5 percent to R67.50 on the JSE as the market reacted negatively to the news, although it pared some losses to close 3.52 percent down at R68.98.

“It is uncertain now how the issue will be resolved. Until clarity for a way forward is announced, the uncertainty will continue to drag on the performance of the share price,” an analyst said.

Harmony lost an estimated R150 million in profit in the December quarter and expects to report negative cash flow of R252m as a result of the strike. The final figures are due to be reported on February 4.

During the period, only 22 percent of planned production at the mine was achieved.

An unprotected strike between October 3 and October 25 cost Harmony R200m and R125m in profit was lost.

The company had “drawn a line in the sand” and started a consultation process with unions on conditions for production to commence, which included a ban on violence, illegal sit-ins and marches.

Harmony has simultaneously started a process in terms of section 189 of the Labour Relations Act over the next 60 days.

The process may signal retrenchments that will possibly affect about 6 000 people, including 5 200 employees and 990 contract workers.

It said about 200 people would be employed for care and maintenance at the mine.

Last week the company delayed the reopening of Kusasalethu after the Christmas break because of the strikes.

Employees were told to remain at home until the mine resumed production and that they would be paid their salaries for the next six months.

Chief executive Graham Briggs said yesterday that he hoped to resume operations by July, by which time a solution would have been found to the challenges at Kusasalethu.

Harmony’s decision to temporarily close the mine underscores a breakdown of labour relations, which is compounded by rivalry between the National Union of Mineworkers (NUM) and the Association for Mineworkers and Construction Union (Amcu).

However, labour remained defiant, with Amcu national organiser Dumisani Nkalitshana warning that the union would interdict the company to resume operations and reopen hostels for employees.

Nkalitshana called for intervention from the government to stop Harmony from continuing the section 189 process.

Amcu represents 62 percent of Kusasalethu’s workers, while the NUM represents 28 percent.

The decision comes after an operational and financial review of Kusasalethu, in which the third-biggest gold producer in South Africa found that shareholders refused to pay for lawlessness and violence.

Briggs said that even though the temporary closure was a blow for the group, it was necessary to ensure the security, safety and health of employees. He added it was also important for adhering to the Mine Health and Safety Act.

“It is a big setback because Kusasalethu is a big mine… But we can’t pay for bad behaviour and people are not following the law. We cannot continue to allow people to be held hostage,” Briggs said.

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