Harmony Gold on Wednesday announced the suspension of a life-of-mine extending project at its flagship Tshepong mining operations and warned that cost increases and impairment losses would cut its full-year profit by half.
In a trading update, Harmony said the decision to suspend the Tshepong North sub-75 project following a reserve downgrade would reduce the life of the mine from 19 years to seven.
The project was one of several initiatives Harmony was pursuing to maintain annual production above 1.4 million ounces.
Harmony chief executive officer Peter Steenkamp said the Tshepong operations, which contributed 16% of Harmony’s 2021 production of 1.54 million ounces, would be split into two separate units – Tshepong North and Tshepong South.
“This restructure will create a smaller but immediately profitable operation going forward. The capital which was earmarked for Tshepong North will be reallocated to projects delivering higher returns,” Steenkamp said in a statement.
He said the “tough decision” was taken to ensure Harmony continued to mine in a sustainable and profitable manner.
Harmony forecast its headline earnings per share – the main profit measure in South Africa – at between R4.61 and R5.49 in the year ended June 30, down from R9.87 last year.
It said an impairment of R4.433 billion was recorded during the year, while increases in the cost of labour, electricity and consumables hurt the bottom line.
The impairment was largely due to the reserve downgrade at the Tshepong operations, which significantly affected their valuation, Harmony said.
Harmony, one of the top 10 gold producing companies in the world by output, is due to release its annual results on August 30.