Harmony Gold Mining Company Limited’s (Harmony) gold production for the June 2013 quarter is likely to be 10% to 12% higher than the previous quarter, driven by higher tonnages and higher grades, but its gold production for the 2013 financial year (FY) is expected to be 2% to 4% lower than the previous financial year.The company says the June 2013 Quarter results are because of a rise in gold production, cash operating costs (R/kg) were 3% to 5% lower quarter on quarter. The lower 2013 FY results expected is mainly as a result of labour disruptions at Kusasalethu during the December 2012, March 2013 and June 2013 quarters. Harmony estimates that the labour disruptions at Kusasalethu cost Harmony approximately R1.2 billion. During the June 2013 quarter, all employees at Kusasalethu returned to work safely and production build-up commenced in line with the start-up production plan. That the decrease in annual gold production was limited to this extent is a credit to Harmony’s management and employees. Pleasingly, in line with Harmony’s strategic initiative to improve the quality of ounces mined, year on year underground grade increased by 5% to 7%. On 18 June 2013 Harmony announced that it anticipated the possible write-down of the carrying value of its 50% holding in Hidden Valley to the net realisable value. The reason for the impairment is the reduction in the US dollar gold and silver prices and Hidden Valley’s poor production performance. The impairment testing process has been concluded, pending completion of the year-end audit procedures.
It is expected that an amount of between US$260m and $280m (approximately R2.6bn to R2.8bn) will be written down – the amount includes an impairment of between R50m to R80m of Harmony’s South African assets. The impairments will reduce the reported net profit, but will not have an impact on reported cash balances and free cash flow.“We continue to manage that which is in our control – production and costs. Quarter on quarter production has increased and we are making good progress with our cost cutting project, Project 400. We have reduced our capital expenditure, as well as our services, exploration, procurement and corporate costs and have approved our operational plans based on a gold price of R400 000/kg,” Graham Briggs, chief executive officer said. Harmony’s results for the quarter and year ended 30 June 2013 as well as the FY14 Business Plans will be released on Wednesday, 14 August 2013.