Harmony Gold: Taking a Fresh Look at Safety and Production

The name Harmony Gold is renowned across the world for its mining activities. The company is listed on not only the Johannesburg Stock Exchange but also New York, Berlin and Brussels. So when Harmony officially opened the Phakisa Mine in 2008, it was an exciting opportunity to create jobs.

Harmony

Harmony was incorporated and registered as a public company in South Africa back in 1950 and later became a Randgold-managed company, exploiting the single Harmony mine lease. In 1995, Harmony was recreated as a separate entity following the winding up of Randgold.

Since that time the company has significantly increased its operations, expanding from a single, lease-bound mining operation into an independent, world-class gold producer. A series of acquisitions followed and the group received additional mining rights in the Free State, Mpumalanga, Gauteng and North West province in South Africa when it acquired Lydex in 1997, Evander in 1998, Kalgold in 1999, Randfontein in 2000, ARMgold in 2003 and Avgold in 2004.

Today Harmony has mining operations in South Africa and Papua New Guinea, including 10 underground mines, one open pit operation and several surface sources in South Africa. The company prides itself on being compliant with 2014 Mining Charter requirements and employs no fewer than 40,000 staff around the world, including 6,000 contractors.

On June 30th 2012, the company had a market capitalisation of R33 billion.

Harmony initially acquired Phakisa as part of the Freegold acquisition from AngloGold Ashanti Limited in January 2002. In September 2003, Harmony acquired these operations in their entirety.

At the end of June 2010, Phakisa reported mineral reserves of 5.159 million ounces of gold and mineral resources of 23.112 million ounces.

The success of Harmony is of course built around experience and expertise and the company’s 2012 Annual Report explained the numbers behind Phakisa Mine, located in the Free State – which is responsible for employing just shy of 4,000 staff (including contractors):

Phakisa became an operating mine on the Basal Reef in the prior year, after starting production in FY08. The mine received integrated ISO 14001, OHSAS 18000 and ISO 9000 certification during the year.

Once the expansion project is complete, this mine will operate to a depth of some 2,400 metres with monthly capacity of 72,000 tonnes. Phakisa includes the Nyala shaft, some 5 kilometres away, which is used to hoist rock and as a second escape route. Ore mined at Phakisa is processed at Harmony 1 plant, 20 kilometres away.”

The Annual Report goes on to emphasize Phakisa’s performance in one of the key operational focuses for Harmony: safety. The company website states: “Our emphasis remains on safe, profitable ounces and we are positioned to measure, measure up and deliver against our stated strategy” – and Phakisa’s results back this up:

Phakisa recorded excellent safety results for the year, with no fatalities (FY11: 5) and an LTIFR that decreased steadily to end the year at 8.87 per million hours worked (FY11: 10.27). Phakisa also recorded 1.5 million fatality-free shifts in June 2012 and 1.5 million fall-of-ground fatality-free shifts towards the end of the year, as well as 2 million tramming fatality-free shifts in FY12.

Notably, the strong improvement in safe use of rail-bound equipment reflects both internal initiatives and the mine’s success as an implementation site for the related MOSH initiative. Management is also concentrating on reducing fall-of-ground incidents by implementing best-practice standards.

Such impressive safety figures were not to the detriment of production however – and the company reported a steady increased in milled volumes during the year and saw a 7 per cent improvement in recovered grade mined. In total the mine produced 81,695 ounces which was a 44 per cent increase.

It is worth noting that these results at Phakisa were achieved despite challenges; as the company looked to build up production it encountered ventilation issues, illegal mining activities and had to commission new infrastructure. Despite these issues, Harmony reported that in March 2012 the mine set a new tonnage benchmark of 55,194 tonnes, although the Annual Report reflects caution and the need for further investment and infrastructure development:

Ventilation and cooling remain important issues for this mine to provide the working conditions that underpin its production targets. As part of this focus, new 10.5MW chillers on 55 level were installed during the year, and will be commissioned in the first quarter of FY13 after construction on the condenser pond is completed. Improved environmental conditions are expected to translate into improved production.

Capital expenditure during the year was concentrated on ventilation and cooling systems, renovations to the mine’s residences, heating, ventilation and air-conditioning (HVAC) initiatives and increased security at Nyala.

Since it is still a new mine, development at Phakisa is currently centred close to the shaft in lower-grade areas. The major drive is developing the area to the north to access higher-grade zones and move closer to the average reserve grade. Grades will improve further as development progresses towards the north and more reef is exposed in the major north-west to south-east trending Basal Reef payshoot.

It has been widely reported following comments by Harmony Gold’s CEO, Graham Briggs, that the company has in recent years had a strategy of closing lower grade and ageing mines in South Africa and developing new opportunities. Phakisa certainly falls into the latter category and represents a new generation of mine with a fresh approach to safety.