Gold miner Harmony Gold has decided to restructure its Tshepong operations, in the Free State, which will be reported on separately as Tshepong North and Tshepong South in future, CEO Peter Steenkamp said in a trading statement on August 24.

“The Tshepong North sub-75 project has been suspended and the life-of-mine reduced from 19 years to seven years. This restructure will create a smaller but immediately profitable operation going forward,” he said.

The capital that was earmarked for Tshepong North will be reallocated to projects delivering higher returns, such as the Zaaiplaats project and the Kareerand tailings expansion in the Vaal river region.

“This was not an easy decision but it was necessary to ensure we continue to mine sustainably and profitably,” Steenkamp said.

This announcement came as Harmony advised shareholders that its expected basic earnings for the financial year ended June 30 would most likely be lower than that of the prior financial year.

It said one of the main reasons for this was a non-recurring gain on bargain purchase of R303-million in 2021, which was owing to the acquisition of the assets and liabilities of the Mponeng operations and its related assets.

In addition, a decreased gross profit was the result of higher production costs, as well as a higher impairment loss on property, plant and equipment and goodwill.

Following an assessment for impairment triggers, impairment tests were performed for the group's cash-generating units, revealing an impairment of R4.4-billion for property, plant and equipment and goodwill, of which R333-million was related to goodwill.

Moreover, an unfavourable rand:dollar exchange rate and a lower derivative gain recorded for the year also made a negative contribution.

Harmony expects to report a loss a share of between 160c and 189c – a decrease of more than 100% on the earnings a share of 842c reported for the 2021 financial year.

Headline earnings a share are expected to be between 461c and 549c, which represents a decrease of between 53% and 44% year-on-year.

“As we continue to grow and diversify production, capital expenditure must remain disciplined, focused and affordable. We continue to optimise our existing operations and asset mix, reallocating capital towards those projects and operations that will deliver the highest possible returns, while lowering the overall risk profile of Harmony.

“Not only will we prioritise investment in our high-grade assets, we will achieve a more balanced production split and ensure all of our mines are safe and profitable,” Steenkamp concluded.