In 2014 in South Africa, Harmony Gold plans to lessen its service and corporate expenses by R400-million and its complete capital expenditure also in South Africa and Papua New Guinea by R1.4-billion. Future predictions concerning prices of gold are uncertain and no one can really guarantee otherwise. Over the last year, we have been able to create strong margins with gold; however with gold price fluctuations and decreased levels just under $1 400/oz, instantaneous actions are required in order to reduce costs and these actions were implemented during April. Greater and more effective cost-cutting methods are not finalised and more planning is needed.
The cost drops are intended at keeping Harmony Gold profitable if the worst case scenario unfolds which would be that the gold price remains at levels of around $1 400/oz. Should the price fall to levels of around $1 200/oz, Harmony Gold would have to go ahead with way more surprising costs being cut compared to what we have seen thus far. It was expected that there would be so many job losses due to these cut offs, as no shafts were shut down. Some of the actions that will be a reality soon include reducing service and corporate costs and also renewing or renegotiating all external consultant and supply contracts, will lead to jobs being lost.
So, how will employees be fired? Employee numbers will be reduced through a voluntary process bearing in mind that the number of jobs decrease should not surpass 500. The closure of the Kusasalethu mine led to production decreases due to reasons of safety and security. A media release stated that the damage to the ventilation shaft at the Phakisa gold project, in the Free State; and an unhurried start-up at the other operations post the festive season were the safety and security threats involved. Even though it was unexpected, the gold production in the quarter that just passed was relatively poor for Harmony Gld.
Harmony Gold is now fully focused on getting assets such as Kusasalethu and Phakisa into complete production. The damage to the ventilation shaft at Phakisa was a very low moment which affected the company in that we have not been able to fight.