Illustrator Dennis Balogh

Graham Briggs

How are you positioning yourself for profitability in this economy?

Citing profits of $311 million in 2009 — compared with a $30 million loss the year before — Harmony Gold Mining Co. Ltd. (HMY) paid its first dividend in five years at the end of June 2009. “The great thing about gold,” says CEO Graham Briggs, “is that you can always find buyers. We can sell 
as much as we can produce. The only thing that changes is the price.”

But there’s the rub, he adds, because price determines profitability. By the second quarter of 2010, the price of gold had flattened from a 2009 high of $1,212 an ounce. Exacerbating that problem for South Africa-based Harmony was the widening exchange-rate gap between the strengthening rand and the faltering dollar. Briggs, 56, a geologist by training, points out that the vast majority of Harmony’s expenses are denominated in rand, and gold (like oil) is priced in U.S. dollars.

Nevertheless, Harmony created efficiencies that held production cost increases to less than 10 percent last year, Briggs says, and positioned the company for future growth. Aggressive cost management moves included the closure of seven shafts and a new labor agreement that will increase group costs by only 5 percent this year. Meanwhile, capital injections from a new joint venture partner and two capital raisings helped Harmony wipe debt from its balance sheet in 2009, says Briggs. 
“We entered the new financial year with R2 billion [US$253 million] in cash, an enviable position for any company in these troubled financial markets.”

Harmony’s expressed goal is to increase production to 2.2 million profitable ounces by 2012, from 1.5 million ounces of gold in 2009. It plans to increase profits, Briggs says, through more efficiencies in its existing mines and new exploration, particularly in Papua New Guinea. — Sharon Kahn