Charlotte Mathews
25 November 2008
Johannesburg — HARMONY Gold Mining's management wa s bullish about prospects for the gold mining industry, both in SA and Papua New Guinea, as the gold price had risen in almost all currencies except the dollar and yen, Harmony CEO Graham Briggs said yesterday.
He was responding to a shareholder at the group's annual general meeting, who questioned the future of gold mining since the gold price had failed to return to $1000/oz in the current financial crisis. It was trading at about $816/oz at midday yesterday.
Briggs said although gold had been trading until last week below $800/oz, in rand terms it had risen dramatically. To reap the full benefit, Harmony had to produce more gold and address issues like costs and productivity.
Harmony chairman Patrice Motsepe said although African Rainbow Minerals' (ARM's) stake in Harmony had fallen as a result of dilution, rather than selling , ARM was excited about the leadership at Harmony and the future of gold, particularly during the crisis, since gold had always been seen as a good store of value.
After the meeting Briggs said trends in commodity costs such as steel were positive for gold miners, but it would take some time for falling costs to work through the system. For some items, like steel balls, the pipeline was short and an easing of prices was starting to become evident, but falling costs usually had a delayed effect as mining companies held stocks bought at higher prices.
The rate of increase was only starting to slow, and in the current quarter the group's costs could show decreases in some items, such as transport and steel balls.
But the knock-on effects should become apparent in the first quarter of next year.
Harmony's emphasis in the next few weeks and beyond would be to ensure it benefited from reduced input costs, Briggs said, and management was examining all costs and contracts with suppliers. That did not mean it planned to eliminate contractors as it still needed to use a number of outside specialists.
He said Harmony continued to explore in Papua New Guinea and had four drill rigs working at Evander South.
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