JOHANNESBURG (miningweekly.com) – The outlook for the rand price of gold is "relatively flat" and the prospect of rising costs continues to be "a huge issue", says Harmony Gold CEO Graham Briggs.

Briggs says that the considerable volume of gold scrap is being sold into the supply gap left by lower mine production.

He says that Harmony has closed four depleted operations in as many months and is reviewing the continued operation of other depleting assets.

If Eskom's proposed 35%-a-year electricity increase over three years goes ahead, it would more than triple Harmony's current electricity cost of R900-million a year to R3-billion a year over four years at a time of static gold price in local currency.

The company is, however, not deviating from it target of 2,2-million ounces of gold a year from 2012, when its suite of new growth projects will be in full production.

Although Harmony has experienced an 11% gold price uptick in the December quarter, the rand gold price is, the company believes, destined to remain within the R260 000/oz to R270 000/oz range for the next 12 months.

Harmony's mining inflation in rands per kilogram has ranged from 20% to 25%, brought about by higher costs and lower grades.

South African gold miners have had to give away percentages much higher than the consumer price index (CPI) in last year's electricity costs, which rose twice to total more than 30%.

"We were faced with the prospect of a 45% increase a year for three years in th epower price and we are supposed to be happy if that is reduced, but even 25% is still far higher than CPI," Briggs comments to Mining Weekly.

Wages have consistently been rising by more than a percentage point above the CPI every year for the last seven years.

"So, we're battling a little bit with costs and that's why we're obsessed with commissioning our suite of assets that have higher grade and better potential because we will see the benefit in the rand-per-kilogram costs," he says.

Harmony is thus focusing strongly on bringing its high-potential Phakisa, Doornkop and Hidden Valley into full operation.