JOHANNESBURG (miningweekly.com) – South Africa's third-largest gold producer Harmony Gold on Friday announced that it had begun to close three underperforming shafts in the Free State province, which will put the jobs of 3 700 of its employees at risk.

Harmony CEO Graham Briggs said that the company had decided to close the Harmony 2, Merriespruit 1 and Merriespruit 3 shafts in Virginia after a performance review.

"These assets have no remaining payable reserves and their closure has begun," Briggs said.

He added that "every effort" would be made to mitigate the effects of closure on the 3 700 employees affected.

Steps that would be considered would include the transfers of affected personnel to other Harmony operations, a programme to provide training in "portable" skills and the possibility of early retirement for those of the appropriate age.

Briggs has stated on several occasions that every effort will be made to re-employ as many workers as possible from Harmony's depleting operations at its new Phakisa, Doornkop, Kusasalethu (formerly Elandsrand) and Tshepong growth projects in South Africa, and at the Hidden Valley growth project in Papua New Guinea, all of which are gradually coming into production.

The latest action to close three shafts, Briggs said, was in line with the company's stated strategy of restructuring its business in a manner that enabled it to produce ounces of gold that could be mined with good margins of profit and in that way improve the company's asset mix.

Employee representatives, through their labour unions, had been informed of the closures, and that management would embark on a formal consultation process with employees.

A senior commissioner from the Commission for Conciliation, Mediation and Arbitration would facilitate alternatives to retrenchment in terms of Section 189A of the Labour Relations Act.

The shafts being closed, which have been in operation for nearly 60 years, are very much a part of Harmony's history, which is why Briggs said that the company had taken a "thorough, informed decision that they have reached the end of their lives".

"We have indicated for some time that marginal, loss-making operations would have to close for the company's greater good," Briggs added.

A process was under way recently to transfer the personnel from the depleted Brand operation to the new Phakisa operation, both in Free State province, and it was envisaged at the time that a number of jobs would be preserved in that way.

Also being envisaged recently was the transfer of some personnel from Evander to the new Doornkop operation.

Harmony is planning to produce just over 1,6-million ounces of gold in the current 2010 financial year to end June, which will represent 140 000 more ounces than the 1,46-million ounces that it produced in its 2009 financial year.

An analyst said Harmony had the fullest exposure to rand strength of South Africa's top three gold majors, which was forcing it to deal with its marginal operations with greater decisiveness at a time of rising energy costs and falling grades.

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