Significant surge in Harmony gold output
30 percent improvement spurred by acquisition of Moab Khotsong and better performance at Hidden Valley
HARMONY Gold’s output improved by 30 percent in the September quarter, following the acquisition of Moab Khotsong and a better performance at Hidden Valley, but higher costs weighed on its local mines.
Harmony’s chief executive Peter Steenkamp, said yesterday: “Operating costs during the September 2018 quarter increased due to the seasonal higher winter electricity tariffs in July and August and higher labour costs, including once-off leave liability adjustments following the settlement of the wage agreement reached on October 3 .”
Last month Harmony signed a three-year wage deal with organised labour in which it agreed to pay miners, artisans and officials a 6.3 percent increase for this year, and 6.3 percent or consumer price index whichever was the greater, for the following two years.
The company yesterday recorded a 30 percent higher group production in September compared with the same period last year, but was 2 percent lower when compared with the June 2018 quarter.
“Hidden Valley and Moab Khotsong have boosted the group’s production and free cash flow generation compared with the September 2017 quarter.
“We are confident that we will achieve our annual production and cost guidance as we continue to focus on safety, production and cost management,” said Steenkamp.
Harmony bought Moab Khotsong, a deep level mine in Orkney in the North West, from AngloGold Ashanti for R3.5 billion, and as part of the deal it also acquired Great Noligwa.
The acquisition was expected to help the company meet its target of becoming a 1.5-million ounce producer by next year.
The South African operations recorded a 19 percent increase in gold production to 10 388kg (333 981oz) in the September 2018 quarter compared with the September 2017 quarter, mainly due to the addition of gold produced by Moab Khotsong.
Quarter-on-quarter, production decreased by 2 percent.
Steenkamp said the group expected that underground recovered grade at Moab Khotsong would improve in the 2019 financial year as mining in the middle mine section progresses.
Harmony also reported that all-in sustaining unit costs for the group had increased quarter-on-quarter by 8 percent to R526 747 a kg ($1 166 an ounce) in the September 2018 quarter.
Hidden Valley, an open pit mine in Papua New Guinea, generated free cash flow in the first quarter since achieving commercial levels of production in June, compared with a net cash outflow in the previous quarter.
The operation recorded an all-in sustaining unit cost of R506 911 a kg ($1 119 an oz).
In September last year comparative quarter, Hidden Valley recorded lower gold production due to the planned three-and a half-month plant stoppage and infrastructure upgrade between August and November.
“Recovered grade and gold production is expected to improve during the remainder of the 2019 financial year as mining into the deeper and higher grade areas of the ore-body progresses,” Steenkamp said.
Harmony shares fell 3.14 percent on the JSE yesterday to close at R25.31.