Harmony Gold To Shut Several High-Cost Mines

High costs due to the strong rand are partly responsible for Harmony Gold’s (HMY-N, HRM-L) decision to shut down several of its mines, says the company’s chief executive, Graham Briggs, South Africa’s Business Day newspaper reported.

Mines that may be shut down are also near the end of their lives, Briggs said during the RBC capital markets Gold Conference in London last month. The mines likely to be closed down are relatively small, he explained, with about 35,000- 50,000 tonnes of ore output a month.

Harmony produced 1.46 million oz. gold in the fiscal year ended July 2009, making it one of the world’s largest gold miners.

The group’s operations are primarily in the Witwatersrand basin in South Africa, and include 10 underground operations, an open-pit mine and surface operations that encompass four provinces: Gauteng, North West Province, Mpumalanga and the Free State. Harmony also operates an open-pit mine in Papua New Guinea.

“We have said in the last three months that should the rand/kilogram gold price continue at current levels, incremental cutbacks from marginal mining operations could be expected,” Marian van der Walt, a spokesperson for Harmony wrote in response to emailed questions from The Northern Miner.

“However, the main reason for the possible shaft closures is that the orebodies have been depleted and these mines have come to the end of their lives. It is simply not profitable anymore to mine these assets, due to their mature infrastructure and low grades. Should the rand weaken, it may create an opportunity for us to reopen some of the marginal operations. The operations affected are two in Evander and one in Virginia.”

About 2,100 employees may be affected by the closures, van der Walt added.

China overtook South Africa as the world’s largest gold producer in 2007.

According to Business Day, South Africa’s gold production in volume terms fell 9.3% in the year to September.

South Africa’s Chamber of Mines says the country’s gold output was 4.8% higher in the third quarter than in the second, but down 2.9% from the third quarter of 2008.

At presstime in New York, Harmony traded at US$10.60 per share. Over the last year, the company’s shares have traded within a range of US$5.49-13.25.