Harmony CEO Graham Briggs speaks to international investors and the media about the Kusasalethu mine. The ‘status  quo’ of labour strife was set to remain, he said in Sandton on Monday. Picture: MARTIN RHODES
Harmony CEO Graham Briggs speaks to international investors and the media about the Kusasalethu mine. The ‘status quo’ of labour strife was set to remain, he said in Sandton on Monday. Picture: MARTIN RHODES

HARMONY Gold has suspended production at Kusasalethu mine, warning it will close it if a solution to the "lawlessness, violence and intimidation" is not found.

If the mine is placed under care and maintenance indefinitely, close to 6,200 permanent and contract jobs could be lost.

"We are drawing a line in the sand and saying that things cannot continue as they are," Graham Briggs, CEO of South Africa’s third-largest gold producer, said on Monday.

The company had embarked on a consultative process with trade unions, he said, as part of efforts to bring an end to the labour strife at Kusasalethu in Carletonville, Gauteng.

"We wish to seek a sustainable and lasting solution that will ensure that the security, safety and health situation at the mine is normalised," Mr Briggs said.

Rivalry between the National Union of Mineworkers and the Association of Mineworkers and Construction Union at Kusasalethu escalated after last year’s wildcat strikes in the gold, platinum and coal sectors.

In the three months ending December, the second quarter of Harmony’s 2013 financial year, disgruntled employees disrupted operations by staging a series of illegal sit-ins at Kusasalethu.

The mine is expected to report a cash operating loss of R150m for the December quarter, and a negative cash flow of R252m.

Planned production prior to the festive break fell to 22% of capacity due to the disruptions.

Five sit-ins were staged over the past quarter. The last on December 20 saw 1,700 workers in an illegal sit-in, demanding the reinstatement of 578 colleagues suspended for taking part in a 35-day unprotected strike.

Mr Briggs said Harmony’s employees were required to adhere to provisions of the Mine Health and Safety Act, and work in line with the company’s code of conduct. He said Harmony had started a consultation process in terms of section 189 of the Labour Relations Act, which may result in closing the Kusasalethu mine and possible retrenchments.

"Management is of the view that the status quo concerning production and labour strife will remain, as it has exhausted all possible avenues to achieve normal production and cannot find a solution to the current state of lawlessness prevailing," Harmony said on Monday.

Mr Briggs added that this might lead to the indefinite closure of the mine, until such time that it was deemed viable to mine at a profit again.

Since Harmony acquired its Carletonville properties in 2001, the Kusasalethu mine has grown to contribute an estimated 14% towards the company’s annual output of 1.27-million ounces for the year to July 2012.

Harmony’s share price on Monday dropped 3.52% or R2.52 to close at R68.98 on the JSE.

Wayne McCurrie, senior portfolio manager at Momentum Asset Management, said although the share had taken a knock, the miner had sent a positive message that it was taking steps to mitigate the effect of the labour unrest.

"Harmony is … warning unions about the consequences of their actions and they are sending a message to their investors that they are doing something to project their investments," Mr McCurrie said.

Elize Strydom, Chamber of Mines senior executive for employment relations, welcomed Harmony’s announcement.

"We are aware of Harmony’s position and its invitation to the unions, and we understand its view that operations can only resume under a safe environment," she said.

Gold sector members of the chamber are scheduled to meet on Thursday to share information and decide on a way forward to deal with labour unrest.