A carefully considered strategy and a staff-centric focus has ensured mining behemoth Harmony Gold’s reputation as a global leader

Harmony Gold Mining Company Limited is a world-class gold mining and exploration company, with operations and assets in SA and Papua New Guinea. The company has more than 60 years of experience in the industry and is the third-largest gold producer in SA. Its assets include nine underground mines,one open-pit operation and several surface sources in SA.

Harmony’s assets in Papua New Guinea – an open-pit mine, as well as the significant Golpu project – are held in a joint venture. The company also owns several exploration tenements in Papua New Guinea.

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At year-end (30 June 2015), the company’s attributable gold equivalent mineral resources were declared as 110.3 million ounces (63.5% in SA and 36.5% in Papua New Guinea), and its attributable gold and gold equivalent mineral reserves amounted to 42.6 million ounces of gold (51.9% in SA and 48.1% in Papua New Guinea).

The company’s primary stock exchange listing is on the JSE (ticker: HAR), with a secondary listing on the New York Stock Exchange (ticker: HMY). The bulk of Harmony’s shareholders are in SA and the US.

Harmony’s strategy
The company’s strategy is to create value for all stakeholders by increasing its margins and generating the cash necessary to develop Golpu in Papua New Guinea – ensuring positive shareholder return in the long term. The company responded to the lower gold price and higher costs during calendar year 2015 by restructuring and rationalising its asset portfolio, cutting costs, improving labour productivity, increasing the overall mining grade and focusing on mining only safe and profitable ounces.

Safety and health
At Harmony, the safety and health of its employees and contractors is not only a moral imperative but essential for creating a sustainable, responsible business. Safety is a key priority. The firm aims to eliminate and prevent all fatalities and work-related injuries and illnesses by promoting a culture that gives priority to health and safety.

In terms of the delivery of health services, Harmony has moved away from the historic mine-hospital approach that was curative in nature to one that is more proactive and focused on prevention. This approach entails providing decentralised primary healthcare-based services, called health hubs, as close as possible to where people are – that is at the operations. This health hub concept has delivered significant benefits, including decreased absenteeism, hospitalisation and medical mortality.

Harmony participates in an industry working group to address issues relating to compensation and medical care for occupational lung disease. The gold mining companies involved in the working group have engaged with all stakeholders to co-operate in the design and implementation of a comprehensive solution that is fair to past, present and future employees, and one that is also sustainable for the sector. Harmony has been working for many years to eliminate the incidenceof occupational lung disease. Various measures have been implemented to improve the management of dust underground – and these efforts continue.

Stakeholder relations
Harmony understands the impact that it has on the lives of the people it employs, the communities that surround its mines and the environment, as well as the economic contribution that it makes to the countries in which it operates. In both SA and Papua New Guinea, the firm continues to participate in stakeholder and community forums that seek to address the challenges facing the gold industry – whether with community members, land owners, its own employees or government.

SA’s gold industry
The SA gold sector – while viewed by critics as having reached a mature stage – continues to deliver a large portion of the country’s export earnings and employment opportunities. Harmony brings a number of skills to the mining of narrow, deep-level and low-grade reefs, which will serve the industry well for some decades to come. That being said, the industry’s future success and sustainability will depend on a great degree of co-operation and dedication across each mine, as well as on government creating an economic environment that is conducive to profitable mining.

Access to Power in SA
The electricity grid in SA has been under pressure since November 2014, and the national power supplier, Eskom, has announced that load shedding will continue in the medium term. As a mining company, Harmony’s primary concern is that load shedding can impact production and the safety of workers underground during a power outage. Various initiatives have been implemented to ensure that the company’s employees remain safe, that production continues and that energy is managed efficiently. These initiatives range from optimising and managing its electricity consumption, especially during peak times, the installation of modern, efficient equipment, the potential inclusion of renewable energy as a power source, and co-generation in addition to own generation.

SA’s evolving labour environment
Five values – safety, accountability, achievement, being connected and honesty – guide decisions and actions at Harmony. The company’s proactive communication campaign is focused on keeping its employees informed about the state of the mine they work at, as well as about the health of Harmony. In addition, the firm engages with all unions – whether formally recognised or not – and considerable emphasis has been given to direct engagement with employees and unions. A particular emphasis during the 2015 calendar year was on fostering an understanding of the economic circumstances of the sector as a whole and of Harmony’s mines specifically. A three-year wage agreement was reached with the National Union of Mineworkers, United Association of South Africa and Solidarity, effective from 1 July 2015. The company believes it achieved what it set out to do – reaching an agreement that ensures it remains sustainable as a company while simultaneously limiting job losses.

Caring for the environment
The protection and conservation of the environment is an integral part of Harmony’s culture and way of doing business. The firm complies in all respects with its obligations to protect and rehabilitate its footprints both during and after the end of mining. Harmony commissioned its bio-fuel energy project in 2014, which is designed to reduce its carbon footprint, rehabilitate its land and create approximately 200 jobs for women and youth from its host communities at full production. Bio-fuel energy will be produced in the form of natural gas from biomass grown on Harmony’s mine properties in the Free State. First gas from this project is scheduled to be produced in April.

Mining Charter and social responsibility
Harmony achieved each of the nine pillars of the Mining Charter and will continue its journey to bolster its future in SA by proactively participating in transforming the local mining industry. It is committed to identifying opportunities to facilitate ownership by historically disadvantaged South Africans, transforming its workforce, investing in developing South Africans and creating opportunities for small business entrepreneurs.

Golpu – a potential game changer  for Harmony
Sustaining and growing quality, profitable assets is key to Harmony’s long-term strategy. In contrast to SA where its mines are all mature operations, The firm is in the process of developing a green-fields project in Papua New Guinea (Golpu). The feasibility study on Stage 1 and the pre-feasibility study on Stage 2 were due to be completed in December 2014. This, together with the completion of a pre-development agreement with the Papua New Guinean government, will add more certainty to the development of a mine at Golpu. Results of the feasibility study will be released in the first quarter of this year.

Harmony’s exploration programme continues to enjoy considerable success in locating copper-gold mineralisation. A demonstration of this is that between the years 2005 and 2014, the Golpu resource grew ten-fold from 100 million tons to 1 billion tons. In an environment where very little is being spent on exploration and with the scarcity of new major copper and gold discoveries, the results from the Kili Teke grassroots prospect are very encouraging. As the extent of the surface copper-gold geo-chemical footprint is yet to be tested, there is potential to develop this find into a major copper-gold deposit similar to Golpu, Ok Tedi or Frieda River, which have resource cut-off grades of around 0.2% copper. New discoveries are one of the best avenues to create shareholder value.

Outlook for financial year 2016
‘Unlocking the value in each of our assets – which is crucial to our strategy – involves positioning each operation to be profitable by driving safety, production and limiting cost increases to create free cash flow,’ said Graham Briggs, Harmony’s chief executive at the company’s results presentation in November 2015. ‘We continue to improve our grade performance, our underground operations are generating free cash flow, our costs are well managed and we are on track to achieve our annual production guidance. Combined with a much higher than expected R/kg gold price, our margins are dramatically improved, enabling Harmony to repay its debt and finance the development of Golpu.’

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