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HARMONY GOLD MINING COMPANY LIMITED - Kusasalethu remains closed until such time as it is viable to mine it safely and profitably again

Release Date: 07/01/2013 09:45:00      Code(s): HAR       PDF(s):  
Kusasalethu remains closed until such time as it is viable to mine it safely and profitably again

Harmony Gold Mining Company Limited
Registration number 1950/038232/06
Incorporated in the Republic of South Africa
ISIN: ZAE000015228
JSE share code: HAR
(“Harmony” or “the company”)


Kusasalethu remains closed until such time as it is viable to mine
it safely and profitably again

Harmony Gold Mining Company Limited ("Harmony" or "the Company")
advises that following the review of both the financial and
operational impact of lawlessness, violence and non-compliance to
the Mine Health and Safety Act, 29 of 1996 ("MHSA") experienced at
its Kusasalethu mine near Carletonville during the December 2012
quarter, it has decided to keep the mine closed until such time as
it is safe enough for its employees to commence mining activities.

In seeking a lasting solution that will resolve the risk to the
operation,   the Company has commenced with a process in terms of
section 189 of the Labour Relations Act, 66 of 1995 ("LRA"), which
may result in the closure of the mine and placement thereof on
care and maintenance and possible retrenchments. A process of
discussion and consultation with labour will be run parallel to
the   process   in  terms  of   section  189.  The   aim   of  the
discussion/consultation will be to seek a lasting and sustainable
solution in order to avoid the closure of the mine and the
conclusion of the section 189 process, which will imply
retrenchments.

It is management?s legal and moral obligation and duty to ensure
the security, safety and health of all employees at Kusasalethu
and to ensure that the mine's standards and procedures as well as
the provisions of the MHSA are imposed. These legal and moral
obligations have been severely undermined to the point that it has
become an impossible task given the unlawful and violent events
during the December 2012 quarter. The unlawful actions and
behaviours at Kusasalethu have led to situations that are unsafe,
and are in direct contravention of the MHSA. The consequences of
these actions and behaviours have resulted in an elevated level of
risk to all the employees of Kusasalethu. It is management's view
that it has exhausted all options in attempting to ensure
compliance with the provisions of the MHSA and in the current
environment management cannot ensure the security, safety and
health of Kusasalethu employees.

During the December 2012 quarter Kusasalethu experienced an
unprotected strike, numerous other incidents of illegal industrial
action, violence, sit-ins, vandalism of mine property and other
labour disruptions. The on-going unlawful events caused management
to give serious consideration to both the operational and
financial position   of   the   mine   and   the   future   viability   of
Kusasalethu.

Kusasalethu recorded free operating cash flow of R61 million
during the March 2011 quarter and continued to generate free
operating cash flow until the September 2012 quarter, in which it
recorded R134 million in free operating cash flow. The December
2012 quarter results for Kusasalethu indicate a cash operating
loss of R150 million* and a negative cash flow of R252 million*.
This dramatic negative turn in the December 2012 quarter is due to
the mine achieving only 22%* of its planned gold production in
terms of its business plan. This loss in production is primarily
the result of the unlawful events mentioned above. Should the
current   poor   performance continue,   then  the   situation  at
Kusasalethu is dire for the rest of the 2013 financial year and
into the future.

Management is of the view that the status quo concerning
production and labour strife will remain, as it has exhausted all
possible avenues to achieve normal production and cannot find a
solution to the current state of lawlessness prevailing. The
current situation causes considerable operating risk especially in
light of significant future financial losses and a further
deterioration of the health and safety         situation at the
operations.

The section 189 process addresses a genuine operational problem
which is preventing Kusasalethu from managing its business
effectively and is aimed at stemming further financial losses and
to a deterioration of the health and safety environment at its
operations. The reason for this process is thus ultimately to
ensure the future viability of the enterprise.

Several conditions to re-open the mine have been sent to relevant
stakeholders and all responses will be considered and reviewed
when received. The discussion/consultation with the various
stakeholders will take 60 working days from the day that the
section 189 notice has been served; Harmony will pursue
alternatives which may emanate from this process.

The aim of the discussion/consultation will be to seek a long term
solution by which normal production levels can again be achieved
and which would normalise the security, safety and health climate
at the mine. Should the aforesaid goal not be achieved by means of
a consultation and discussion process then the company will have
no alternative but to continue and conclude the section 189
process which might lead to the indefinite closure of Kusasalethu
and possible retrenchments. Stakeholders have been advised that
such possible closure of the mine could affect approximately 5200
employees.

Graham Briggs, chief executive officer of Harmony commented: “We
wish to engage with all stakeholders in order to reach an
agreement that will bind all employees of the mine and that will
provide management with sufficient assurances that there will be a
return to normal, safe operations and production at the
Kusasalethu operations. We wish to seek a sustainable and lasting
solution that would ensure that the security, safety and health
situation at the mine is normalised and compliant with all
applicable laws and the policies and procedure of the mine.

We also wish to gain assurances from all stakeholders that the
mine will be operated in a manner which would allow it to become
viable and reach its projected profitability which would in turn
ensure the future viability of the mine. It is important for
investors to note that as a result of our decision for the time
being to keep Kusasalethu non-operational after the Christmas
break mainly for security and safety reasons; we have excluded its
production for the balance of the financial year and anticipate
that Harmony as a group will only produce 1.2 million ounces,
rather than the 1.3 million ounces guided before.”

Briggs added, "Kusasalethu has achieved substantial successes in
terms of production growth, strong cash flows and excellent safety
results, before the December 2012 quarter.    We do trust that we
will be able to rescue this mine in the next couple of months,
provided it can be run safely and return to being cash flow
positive.”

*Figures used are still a forecast. Final figures will be provided
on 4 February 2013.

The Company will have a formal presentation at the Sandton Hilton
Hotel, Ballroom 3 at 10:00 today, Monday, the 7th of January 2013,
to address any questions that investors or the media may have
regarding this press release. The event will simultaneously be
transmitted             via             webcast             (link:
http://www.corpcam.com/Harmony07012013) and via conference call. A
presentation in support of the press release and the conference
call,    have    been    posted   to    the    Company's   website
(www.harmony.co.za). An international call will be held at 15:00
today to allow our international investors an opportunity to
discuss this matter.

Conference call dial-in details for both the 10:00 SA time and
15:00 SA time calls are:

South Africa toll-free: 0 800 200 648
South Africa – Johannesburg toll: 011 535 3600 / 010 201 6616
South Africa – Cape Town toll-free: 021 819 0900
UK toll-free: 0 800 917 7042
USA toll: + 1 412 858 4600
USA toll-free: + 1 800 860 2442
Australia toll-free: 1 800 350 100
Other countries toll: +27 11 535 3600
Replay numbers:

South Africa   Toll: 011 305 2030
UK Toll-free: 0 808 234 6771
USA and Canada Toll: 1 412 317 0088
Other Countries Toll: +27 11 305 2030

Replay codes:

Conference call at 10:00(SA time): 22977#
International conference call at 15:00 (SA time): 22980#

Private Securities Litigation Reform Act Safe Harbour Statement
This release contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and 21E of the Securities Exchange Act of 1934, as amended, that
are intended to be covered by the safe harbour created by such
sections. These statements may be identified by words such as
“expects”,    “looks   forward    to”,   “anticipates”,    “intends”,
“believes”, “seeks”, “estimates”, “will”, “project” or words of
similar meaning. All statements other than those of historical
facts   included    in   this   presentation   are    forward-looking
statements, including, without limitation, (i) estimates of future
earnings, and the sensitivity of earnings to the gold and other
metals prices; (ii) estimates of future gold and other metals
production and sales, (iii) estimates of future cash costs;( iv)
estimates of future cash flows, and the sensitivity of cash flows
to the gold and other metals prices; (v) statements regarding
future   debt   repayments;   (vi)   estimates  of   future   capital
expenditures; and (vii) estimates of reserves, and statements
regarding future exploration results and the replacement of
reserves. Where the Company expresses or implies an expectation or
belief as to future events or results, such expectation or belief
is expressed in good faith and believed to have a reasonable
basis. However, forward-looking statements are subject to risks,
uncertainties and other factors, which could cause actual results
to differ materially from future results expressed, projected or
implied by such forward-looking statements. Such risks include,
but are not limited to, gold and other metals price volatility,
currency fluctuations, increased production costs and variances in
ore grade or recovery rates from those assumed in mining plans,
project cost overruns, as well as political, economic and
operational risks in the countries in which we operate and
governmental regulation and judicial outcomes. For a more detailed
discussion of such risks and other factors (such as availability
of credit or other sources of financing), see the Company's latest
Annual Report on Form 20-F for the year ended June 30, 2012 which
is on file with the Securities and Exchange Commission, as well as
the Company's other SEC filings. The Company does not undertake
any obligation to release publicly any revisions to any "forward-
looking statement" to reflect events or circumstances after the
date of this presentation, or to reflect the occurrence of
unanticipated events, except as may be required under applicable
securities laws.


For more details contact:

Marian van der Walt
Executive: Corporate and Investor Relations
+27 (0) 82 888 1242 (mobile)

Henrika Basterfield
Investor Relations Officer
+27 (0) 82 759 1775 (mobile)




7 January 2013


Sponsor:
J.P. Morgan Equities South Africa Proprietary Limited.

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