Johannesburg - Graham Briggs, Harmony Gold’s chief executive, went to great lengths to repeat the company’s revised strategy in the face of a weak gold price during its annual general meeting in Johannesburg yesterday.
Speaking to shareholders during an hour-long meeting, Briggs, together with Patrice Motsepe, the non-executive chairman, quelled some reservations raised by minority shareholders, ranging from cost increases to the unstable labour environment.
“We may have to downscale our operations. If we do, it is for the good of the company. We cannot have profitable assets subsidising loss-making assets.” He said the extent of the scaling back depended largely on the gold price. “If it goes down, we will be vulnerable.”
The gold price hit a five-month low yesterday, fixing at $1 222.50 (R12 774) an ounce in the afternoon in London.
Shareholders voted almost unanimously – 99 percent – for resolutions, except for the approval of the remuneration policy, which was supported by 67 percent of shareholders.
Asked about the remuneration policy, Briggs said nothing had changed. “If you look at the total packages for the directors, there is not much of an increase,” he said after the vote.
Briggs earned a package of R11.16 million in the past year, which was 20 percent lower than the previous year. The amount from shares linked to performance declined by 71 percent year on year to R1.92m from R6.7m last year.
Harmony, which employs 36 000 workers including contractors, is offering voluntary redundancy packages in certain areas.
Briggs said a small number of employees would be affected by retrenchments, but declined to quantify the lay-offs, adding that the consultation process was looking at preserving jobs. A large number of people working at mines to be mothballed would be transferred to other operations, he said.
Kusasalethu mine, the largest producer in Harmony’s portfolio, achieved less than half of its planned gold production for the year. As a result of labour strife, Kusasalethu was shut early in January and reopened on February 14 after specific conditions for reopening were agreed on by the unions and the employees.
Furthermore, Harmony wrote down R2.7 billion at its Hidden Valley gold and silver asset in Papua New Guinea, because of the subdued precious metal prices and the project’s poor performance.
Briggs told shareholders that despite challenges at Hidden Valley, there had been an improvement in cost control.
“If there was no hope for Hidden Valley, we would have taken a difficult decision and closed it down. Looking at results in the past few months, there is optimism.”
The company plans to cut annual costs by R400m, by renegotiating supplier and contractor contracts. It has opened the opportunity for voluntary terminations.
Motsepe said: “The way shareholders vote is with their feet. People who buy gold shares know what they are getting into,” referring to the cyclical nature of the gold sector.
Harmony is South Africa’s third-largest producer and has assets in the country as well as in Papua New Guinea.
Shares fell 2.21 percent to close at R26.50 yesterday. - Business Report