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Harmony Gold haunted by Kusasalethu curse

Feb 23 2015 15:32


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Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Johannesburg – Harmony Gold [JSE:HAR] must feel cursed by its Kusasalethu mine, where a fire on Sunday has delivered a fresh blow to the company's efforts to boost earnings.

In the latest setback to an operation that has been closed before because of labour violence and illegal miners, the blaze took hold deep underground during maintenance work.

All 486 miners working at the time were brought safely to the surface, but Harmony's profits will not make such a swift ascent, especially since the mine will almost certainly be closed for an indefinite period while an investigation is held.

READ: Kusasalethu gold mine closed after fire

"It’s a massive blow. More than half of their book is not making money and Kusasalethu is the main culprit," said Daniel Sacks, portfolio manager at Investec.

The deep level operation west of Johannesburg is Harmony's single largest gold producer and has been burning cash, posting a production loss of R113.5m in the December quarter.

Kusasalethu produced just shy of 25 000 ounces in the December quarter, about 10% of the company's output and well down from the almost 43 000 ounces it had churned out in the previous quarter.

Kusasalethu was shut for two weeks in the December quarter when the company flushed out illegal miners, who had been trespassing into the operation.

The asset, which has a troubled history, was also shut for several weeks at the start of 2013 in a bid to quell violent clashes rooted in a union turf war.

READ: All 486 trapped mineworkers rescued - as it happened

Chief executive Graham Briggs said last year that 18 months after it had reopened, the mine was still producing below capacity as problem after problem emerged during the protracted restart.

The company's safety record will also be back in the spotlight after Sunday's mishap. Nine workers were killed after a fire triggered by a small earthquake at Harmony’s Doornkop mine in February last year.

"We are extremely concerned about Harmony's safety record," Frans Baleni, general secretary of the National Union of Mineworkers, told Reuters.

Harmony said earlier this month it expected to return Kusasalethu to profitability by the June quarter this year, through job cuts and mining lower volumes at improved grades.

The company reported a headline loss of R496m in the three months to December 31, 2014.

johannesburg  |  earnings  |  gold  |  mining


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