Harmony keeps Kusasalethu shut, hopes to resume production by July

7th January 2013

By: Natasha Odendaal

Creamer Media Senior Deputy Editor


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JOHANNESBURG ( – South Africa’s third-largest gold producer Harmony Gold on Monday said its Kusasalethu gold mine would remain closed until it was able to operate safely and profitably.

The company last week delayed the post-festive-season reopening of the Carletonville-based mine to review its financial and operational status after a series of strikes at the operation.

Speaking at a media briefing, in Sandton, on Monday, CEO Graham Briggs said the success of the mine, which had turned profitable in March 2011, was reversed as employees embarked on a number of illegal underground sit-ins in October and December, compromising safety and halting production.

Kusasalethu, which accounted for 14% of the group’s gold production, could possibly be placed on care and maintenance or even closed permanently, if a solution to the current challenges faced by the operation were not found.

“The labour disruptions have caused a breakdown in labour relations and secure and safe production is not possible,” he said.

The operation lost 35 production days and 25 000 oz of gold during a 23-day illegal strike in October, costing the group an estimated R200-million and a loss of profit of R125-million.

During another five illegal sit-ins, staged between October 26 and December 21, violence erupted, resulting in the death of two employees and injury to another.

A mine manager was also assaulted, while management received death threats and threats of being attacked. Harmony reported that live ammunition was fired at police and mine security and mine property damaged.

Compliance with mine health and safety policies and procedures faltered on return of the striking workers, with incidents of employees refusing to adhere to normal shift schedules and other work-related instructions, the mining company stated.

During the three months to December, the mine recorded an operational loss of R150-million, with free cash flow falling into the red with a negative R252-million, from about R125-million recorded in the prior quarter. Only about 22% of planned production for the quarter was achieved.

The company aimed to release more accurate analysis of the quarter’s performance on February 4.

The mine, with a 7.1-million-ounce mineral reserve, had the potential to produce between 260 000 oz/y and 300 000 oz/y of gold for 25 years and “deserved to be mined”, said Briggs.

The sustainability of the mine was essential, as failure to resolve the challenges would result in over 6 000 people losing their jobs, including 5 193 Harmony employees and about 990 contract workers. Should the mine be placed on care and maintenance, only about 200 employees would be retained.

Closure of the mine would also have a knock-on effect on an estimated 60 000 people, including host community members, partners, customers and suppliers.

The company aimed to engage all stakeholders to develop a sustainable solution to get the mine back in the black, with sufficient assurances for a return to safe, normal operations and production.

Harmony has embarked on a process of discussion and consultation with labour, as well as a two-month facilitation process in line with Section 189 of the Labour Relations Act.

Responding to a question on whether the situation at the Kusasalethu mine had impacted or influenced the actions of workers at its other mines, Briggs said that, to date, the group’s other operations have remained stable, despite some concern earlier in the quarter that the unrest would spread.

“We are not prepared to pay for bad behaviour … This is a difficult situation and if this has any effect on other operations, then they [workers at other operations] should look to this [the actions at Kusasalethu mine] as this is the way to lose your job,” he said.

He points to the demands of the Kusasalethu mine workers as reactionary, including demands for wage payment for the period of the illegal strike, the reinstatement of suspended employees and calls for the release of a suspect following the death of two employees.

“We haven’t been dealing with long-term, sustainable demands,” Briggs commented, adding that Harmony was not prepared to renegotiate or table new employment conditions, as it already had conditions for employment in place.

These included the following of the mine’s standards and procedures by employees and strict adherence by all role-players to the provisions of the Mine Health and Safety Act. Employees and other persons on the property were prohibited from carrying firearms or other weapons, partaking in violence or intimidation, illegal sit-ins, marches or mass meetings, and vandalism or destruction of property.

The conditions also outlined that employees be committed to running the mine in a manner enabling it to reach its projected profits, which up until the September quarter was achieved by the same members of the company that were involved in the unrest, said Briggs.

Briggs, in what he admitted was an optimistic view, said he hoped the mine's challenges could be resolved and production resumed by July.

“I have given myself six months to find a solution,” he stated.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online


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