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Two mines that Harmony Gold intends to “harvest” and close within the next five years happen to be the only two in the group where the Association of Mineworkers and Construction Union (Amcu) has a strong presence.
The company this week announced an aggressive new expansion strategy that will see it buy new mines, but also accelerate the closure of existing ones by mining out only the best ore.
The Kusasalethu mine is one of Harmony’s largest and had a planned life span of another 25 years. This has now been cut to five years as the company mines out the highest-grade areas and stops capital expenditure.
In terms of employment, it is Harmony’s largest mine with almost 5 000 workers, mostly organised under Amcu.
Amcu president Joseph Mathunjwa called the move “typical capitalist brutality”.
“This is how they get rid of Amcu ... As far as I remember, it [Kusasalethu] had 24 years left. We were not informed formally, but that is how capitalists work.
“It is union-bashing at its best,” said Mathunjwa.
Harmony CEO Peter Steenkamp left the door open to re-extending Kusasalethu’s life past the five years, but for the time being, the company wants to stop wasting capital
on it.
Another mine set to close within three years is Masimong, the only other operation dominated by Amcu members, as well as Unisel, the oldest mine in the Harmony portfolio. The two mines each have about 4 500 workers, meaning planned closures at Harmony will affect more than 9 000 workers within five years.
Hidden Valley in Papua New Guinea, the company’s first operation outside South Africa, is also set to be harvested.
Marian van der Walt, Harmony’s spokesperson, said unions had been “fully aware” of the new plan. She also emphasised that closing Kusasalethu in five years was far from certain, while Unisel and Masimong were simply old and mined out.
“Harmony has a great track record of redeploying workers from shafts that close, so everyone is not getting retrenched,” she said.
“Amcu’s team at Kusasalethu definitely knew about the plan,” she added.
Harmony’s expansion ambitions will involve buying new mines to increase its gold production by 50% to 1.5 million ounces a year within three years.
That would be tantamount to buying all of AngloGold Ashanti’s local mines and would put it on an equal footing with Sibanye Gold.
Steenkamp was coy when asked where Harmony would find mines to buy, saying only that they were looking at assets in South Africa, Africa and in Papua New Guinea.
The criterion Harmony will use is that the all-in sustaining cost per ounce of gold has to be less than $950 at an exchange rate of R14 to the dollar.
That means costs of R469 144 per kilogram of gold – a threshold that would exclude half the mines Harmony operates.
The temporary collapse of the rand after the abrupt firing of finance minister Nhlanhla Nene late last year, has been a bonanza for local gold mines.
It has coincided with a rise in dollar gold prices, pushing rand gold prices up as much as 30% since last year.
Harmony this week announced headline earnings of R964 million in the year to June compared with a loss of R821 million in the preceding year. It declared its first dividend since 2012.
