JOHANNESBURG (miningweekly.com) – Gold mining company Harmony Gold on Tuesday reported its best-ever safety record in the six months to the end of December, when its earnings rocketed and its revenue rise outperformed the same period last year.

The JSE-listed company, headed by CEO Peter Steenkamp, reported a 6 325% increase in earnings a share to 249c and a 6 325% increase in headline earnings a share to 249c.

Revenue rose 12% to R15 477-million and there was a 46% improvement in safety.

“We remain committed to our safety and health journey we embarked upon in calendar year 2016, with our focus on leadership, risk management and people.

“Key related elements of this journey are our four-layered risk management approach and attaining a proactive safety culture," Steenkamp stated in a release to Mining Weekly.

The stronger gold price boosted financial performance, after gold production fell 8%, mainly owing to a 32% decrease at Kusasalethu.

The stronger gold price boosted financial performance, after gold production fell 8%, mainly owing to a 32% decrease at Kusasalethu, where some of the mine's high-grade panels ran into an unexpected geological down-throw fault. As a consequence, the panels had to be repositioned.

“We’ve done the replanning and Kusasalethu, by the end of this financial year, will be back on to the production level normally expected from Kusasalethu. We believe that we’ll be able to recover,” Steenkamp said in response to Mining Weekly during an early morning conference call.

“The other areas where we had lower gold performance, like at Hidden Valley, we really expected and going lower grade was part of the plan and communicated to the market. We are fully on line to recover,” he said.

Guidance has been reduced 4% from 1.46-million ounces to 1.40-million ounces because first-half losses at Kusasalethu cannot be recouped.

The gold price was 19% up in the first six months to R683 158/kg and with the current spot price of gold up, good margins are expected in the next six months.

The decision not to declare dividends follows the company mainly debt-funding its latest growth phase.

“Our first objective is to reduce our debt, so that’s why we haven’t paid a dividend. We're also still at the half-year,” said outgoing FD Frank Abbott.

Speculation is that the company may be keeping its powder dry to acquire Mponeng, the world’s deepest mine, from AngloGold Ashanti. Mponeng produced 265 000 oz of gold in 2018, while output from the surface operations, which extract the precious metal from ore dumps, totalled 171 000 oz.

The company, which is hedged, has been able to lock in the current high prices for the long term.

“It’s actually better to hedge at high prices than at low prices. We’ve been hedging to lock-in margin and profit. We’ve done very well over the last four years and we’ll continue to hedge. It’s only 20% of our production, so it’s not like we’re capping the upside. But we really what to lock in these high prices into the future,” Abbott added.

Total costs rose at the inflationary cost of 6% in the six months following sustained effort to hold down costs, but production units fell by 8%, which lifted unit costs.

Steenkamp said he was very encouraged by the announcement that mines can self-generate electricity.

Harmony had, he said, a long-standing plan with the National Electricity Regulator of South Africa (Nersa) to generate 30 MW of solar power in the Free State and is in discussion with Nersa to obtain the go-ahead to proceed.

It was far down the line in identifying the company that would build the solar power project.

“We can potentially do another 40 MW, which is already designed. If we get the go-ahead very soon, by the end of the financial year we should be in a position to start building and six months later we’ll have the 30 MW plant up and running, provided all the regulatory obstacles are out of the way,” Steenkamp added.

Production was hit by mineworkers having to be kept on surface for two day shifts and two night shifts during load-shedding of electricity by State power utility Eskom.

“It was just before Christmas and all the momentum we had was broken. The continuous stage-two load-shedding is also impacting us. In the past we normally could make up stage two over the weekend by hoisting extra tonnage, but that has been taken off the table at this point in time so we’re discussing with Eskom a way that avoids us having to cut back on production so that we can continue with what we have.

“Electricity is a big cost for us at the moment. It represents 16% of our total cost and it’s something that we need to manage very well,” he said.

Harmony has expertise at deep-level mining and any acquisition must have a million ounces of reserve, at least ten years of life and an all-in sustaining cost of about $950/oz to $1 000/oz.

All its operations in South Africa, except for Kalgold and surface dump retreatment operations, are underground mines.

“We do have the ability and the expertise to run underground mines so we would not necessarily shy away from an underground mine,” he added.