HomeNewsHarmony cuts 2012 mining output target

Harmony cuts 2012 mining output target

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Harmony Gold, South Africa’s third-largest bullion miner, cut its full-year production target by 13% yesterday, as safety stoppages threatened to crimp a surge in profit from record gold prices.

Harmony — which more than doubled its second quarter earnings compared with the first quarter as it reaped the benefits of a weak rand and a sky-high gold price — said shutdowns because of fatalities could take some lustre off its future output.

South Africa’s government has been clamping down on miners to cut their accident rates, leading to lower output. Mines are usually shut down for several days at a time following a fatality.

Shares of Harmony surged more than 4% as investors focused on its better-than-expected results.

After seven fatalities at its operations during the October-December quarter, Harmony has cut its production target to 1,35 million ounces, from the previous target of 1,55 million ounces.

“It is concern in the general mining operations in South Africa. I don’t think we have a good track record,” said Abri du Plessis, chief investment officer at Gryphon Asset Management, about industry safety.

“But one must also remember, we’re working a bit deeper than average.”

South Africa has some of the world’s deepest gold mines, increasing both the risk for mineworkers and the cost to extract bullion.

Safety stoppages have also hurt the platinum sector, which accounts for about 80% of the global supply of the precious metal.

Lonmin — the world’s third-largest platinum producer — lost 177 000 tonnes of production to safety stoppages in its first quarter.

Aquarius Platinum, the world’s fourth-largest, last week joined the industry in warning the government’s drive to slash fatality rates was leading to lengthier and more costly halts to production.

Harmony posted headline earnings per share of 242 cents in the October-December quarter, up from 95 cents in the preceding quarter.

This far outstripped the average estimate of 159 cents in a Reuters poll of five analysts.

Headline earnings per share, the main measure of profit in South Africa, excludes certain one-time items.

The average gold price during the quarter in rand terms scaled 12% to a record, helped by a weaker local currency.

Harmony said it expected even higher gold prices in the coming year.

Harmony declared a dividend of 40 cents.

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