Harmony Gold is not overly concerned about the department of labour’s new policy of introducing quotas for the number of documented foreign nationals with work visas who can be employed in a major economic sector, CEO Peter Steenkamp says.
The company has not been recruiting foreign workers recently, he says. Harmony’s SA operations employ about 40,000 workers. Of these, 5,000 are foreign nationals, mainly from Lesotho, Mozambique and Zimbabwe.
According to Steenkamp, the number of foreign workers used to be much higher but has been declining. Many are “legacy people who have been here for many years. But as these workers finish employment with us and retire, we don’t replace them with foreigners, we replace them with South Africans,” he said.
Employment and labour minister Thulas Nxesi released the national labour migration policy for public comment on Monday. The government wants to introduce quotas on the total number of documented foreign nationals with work visas who can be employed in major economic sectors.
“We have researched extensively and benchmarked internationally in search of policy based on best practice,” said Nxesi. “It has become increasingly apparent, with the rapid expansion of international migration flows, that SA needs to develop appropriate policy effectively to manage this.
“SA is not immune to international migration trends as well as attempts to exploit this for political gain.”
In results released earlier, SA’s largest gold producer said higher costs and production issues contributed to cutting its profit by more than two-thirds in its half-year to end-December, including seismic issues that have brought forward the closure of its Bambanani mine by two years.
Harmony said it will now close Bambanani in June after concluding that it is no longer safe to mine, resulting in a R144m write-down, with the group also cutting its SA guidance.
Production rose 4% to 24,226kg to end-December but net profit fell 69% to R1.4bn, with the group also hit by a lower gold price and higher costs, as well as safety-related and unplanned labour stoppages.
The closure of Bambanani, which accounts for about 5% of underground production, is another blow for the group that is also facing difficulties at its Hidden Valley operation in Papua New Guinea, where a conveyor belt failure hit production in the first quarter of 2022.
Steenkamp said unless the workers at Bambanani opted for voluntary separation, all of its 1,500 employees would be retained in new positions within the company.
The planned closure of two other ageing mines — Masimong, which employs about 2,000 people, and Kusasalethu, with about 3,700 employees — was still set to take place in 2023 and 2024, respectively.
Before Russia’s invasion of Ukraine last week there was already good support globally for gold. Prices rose to about R900,000/kg, with an outlook to remain high for the next six months, possibly rising 10% or more to more than R1m/kg, Steenkamp said.
“Should the Russia-Ukraine conflict be resolved speedily, there is still good underlying support for the gold price,” he said.
The company indicated that plans are under way to allocate capital to its decarbonisation strategy. This includes several renewable energy projects that aim to provide 20%-25% of Harmony’s current energy needs.
The first phase of its renewable energy plan consists of a 30MW solar energy plant in the Free State. “Commercial close for the power purchase agreement is imminent,” the company said.
In phase 2, it plans to build an additional 137MW of renewable energy at various longer-life mines. This part of the programme is expected to reach full production by 2025 and to deliver more than R500m per annum in electricity cost savings.
“We have realised R1bn in savings since 2016 due to more efficient energy usage and plan to save even more by further improving efficiencies,” Steenkamp said.
Harmony hopes to achieve net-zero emissions by 2045, for which it has set three interim carbon reduction targets of 20% by 2026, 40% by 2031, and 60% by 2036.
Harmony became SA’s largest gold miner in 2020 when it acquired the last remaining assets of AngloGold Ashanti in SA. Itoperates nine underground mines and one open-pit operation in SA, as well as several surface treatment operations.
The group also owns Hidden Valley in Papua New Guinea, an open-pit gold and silver mine, and a significant gold-copper portfolio that includes a 50% stake in the Wafi-Golpu project, also in that country.
Harmony on Monday cut its interim dividend 63.6% to 40c, a R246.6m payout for a group valued at R41bn on the JSE.
Gold production for the second half of the financial year from SA operations is expected to improve relative to first-half production, the group said.
Harmony revised its full-year production guidance for these operations to between 1.366-million ounces and 1.439-million ounces, a near to 2% decline.
Harmony’s share price leapt the most since April 2020 on Monday, 14.62% to R67.19.
Update: February 28 2022
This story has been updated with additional information.
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