JOHANNESBURG (miningweekly.com) – The new South African technology that AngloGold Ashanti is putting through its paces has the potential to extend the life of the entire South African gold mining sector, Harmony Gold CEO Graham Briggs said on Wednesday.

Speaking to the media after the presentation of its strike-hit results for the year to June 30, Briggs told Mining Weekly Online in a video interview (see attached) that the “game-changing” technology could conceivably double the life-of-mine of Harmony Gold’s Kusasalethu operation near Carletonville, where the volume of orebody locked up in pillars is actually equal to the volume of orebody that will be mined there in the next two decades-plus.

The pillars, which are gold bearing, play a critical structural support role during mining and are left in position after mining.

The new technology allows those pillars to be mined and then backfilled, so that they can continue to play their supporting role.

“There are going to be benefits, there’s not doubt about that,” the head of South Africa’s third-largest gold-mining company told Mining Weekly Online, adding that Harmony Gold was already using backfilling techniques at it Bambanani gold mine in the Free State.

AngloGold Ashanti, South Africa’s largest gold-mining company, has decided not to patent the technology so that it can be implemented across the gold- and platinum-mining sectors.

“This could double the kilograms of gold from Kusasalethu,” Briggs said, adding that the technology would also be able to play a significant role at virtually all of its other operations and also at ultra-depth as it leapfrogs over mechanisation into automation.

“In fact, at ultra depth, the technology may be the only solution,” he said, adding that extending the life of the South African gold mining industry was critically important given gold’s contribution to the economy as the country’s largest single export, and its knock-on employment effect, which touched the lives of more than 1.5-million local people.

Also, it was important to note that no other labour-intensive South African industry paid its workers more than the gold mining industry, with entry-level labourers receiving R9 000 a month.

“The gold mining industry is still critically important to South Africa, and continues to have the potential to be a very good business,” he reiterated.

AngloGold Ashanti, which has spent $30-million to $40-million on the new nonblast technology, believes it has the potential to double its 30-million-ounce reserve.

After being successfully piloted at AngloGold Ashanti’s Tau Tona gold mine, the technology is being migrated to the Kopanang mine.

The non-patented new technology, which removes only gold ore and then backfills the bored-out area, dispenses with drilling-and-blasting and thus the impact of seismicity, which makes mines safer.

In bringing out “all of the gold, only the gold, all the time” it improves gold grading significantly and allows mining to take place 24 hours a day, 365 days a year.

In the 12 months to June 30, Harmony cut R450-million in corporate and services costs and will lower capital expenditure (capex) by R650-million in the new financial year to position itself for the future.

The 37 000-employee JSE-listed company produced 2% less gold – 35 374 kg or 1.14-million ounces  – than the 1.27-million ounces last year, owing mainly to strikes at Kusasalethu, but also as a result of less gold from Tsepong and Phakisa, in the Free State, Hidden Valley, in Papua New Guinea, and the company’s dump retreatment operations.

Harmony will not declare a final dividend as it has failed to record a profit for the last six months. An interim dividend of 50c a share was paid last year

Strike-hit Kusasalethu produced 51% less gold, which cost the company R1.2-billion and contributed to Harmony’s total basic loss a share for the year of 548c, compared with earnings of 614c a share last year.

Total headline earnings a share plummeted from 565c ($0.074) a share to 47c ($0.05) a share.

However, Briggs said safety initiatives, improved productivity, correct capex, improved grade and cut costs were securing a sustainable business for Harmony.

He described the weaker rand as a huge advantage for a predominately South African producer that had been receiving far higher rand prices than the R400 000/kg that was sufficient to keep the company going.

Harmony received R470 030/kg in the March quarter and R427 534/kg in the June quarter, which Briggs calculated was considerably more than the R400 000/kg needed to sustain the company.

The rand gold price received for every kilogram produced in the year was up 8%. 

The June quarter showed improvement, with cash operating costs falling 3% to R351 109/kg ($1 156/oz) and an operating profit of R639-million ($68 million) being recorded.

Capex for the 2014 financial year had been cut to a guided R2.1-billion – a R650-million saving that impacts mainly Papua New Guinea, where the Golpu project is being de-risked through a modular, expandable development approach that departs from the 2012 prefeasibility study.

Moreover, the net loss of R3 499-million spilled over into the June quarter, on top of the R124-million in the March quarter, caused mainly by problems at Hidden Valley, which had seen a R2 675-million asset impairment and a derecognition of R547-million worth of deferred tax.

The deaths of Phakisa scraper winch operator Potso Peter Kotjomela and Kusasalethu development team leader Michael Chake in the June quarter have marred the company’s best-ever annual injury safety record.

While labour unrest more than halved Kusasalethu gold output in the year to June 30, several Free State mines, and also the Doornkop mine, in Gauteng, lifted their games significantly

The Free State’s Bambanani produced 54% more gold to 556 kg on the back of a 49% grade improvement to 9.79 g/t; and Free State’s Joel mine came in with much higher production at 565 kg, also by lifting the grade to 5.28 g/t and milling 10% more tons.

Doornkop produced 18% more gold to 556 kg, from 9% better recovery to 3.60 g/t, and 9% more tons milled.

With Kusasalethu coming back in June, quarterly gold production rose 12% to 8 588 kg (276 109 oz), only to be snagged by a 9%-lower gold price and an 8% rise in cash operating costs.

The carrying value of Harmony’s 50% holding in Hidden Valley, where production performance has been disappointing, is being written down to its net recoverable value and Harmony's South African assets have also been hit by a R58-million impairment.

Harmony's contribution to Golpu drilling and project expenditure for the next two financial years will be funded from cash flow.

The labour relations climate remained volatile, with National Union of Mineworkers at Doornkop and Tshepong forcing two work stoppages on issues now resolved or in the process of being addressed through the existing mine-based structures.

At Masimong, a recognition agreement with the Association of Mineworkers and Construction Union (AMCU) has been signed, with AMCU now representing a third of Masimong's total workforce.

At Kusasalethu, AMCU is representing 74% of the employees in the gold sector wage negotiations now under way at the Chamber of Mines.

In the wake of labour disruptions at Kusasalethu costing Harmony R1.2-billion, the company has joined the industry in attempting to contain labour unrest through the signing of codes of conduct with unions, the holding of mass meetings by general managers, communication campaigns and reintroducing productivity bonuses.

Harmony is selling 30% of the Phoenix tailings business in the Free State to broad-based black economic-empowerment shareholders, which include Sikhuliso Resources, Kopano Resources, Masincazelane Investments, the Malibongwe Women Development Trust and a community trust the company has created. 

New employee share ownership plan (Esop) awards were made last year and all employees other than management are awarded shares in terms of the Esop rules.