[miningmx.com] — HARMONY Gold Mining Company will be closing its Merriespruit 1 shaft in Virginia after the failure of a productivity-linked deal clinched with unions in May.
According to a statement released by the group on Monday, the shaft will cease operations at the end of October.
“Earlier this year a productivity-linked deal with the trade unions was reached that allowed Merriespruit 1 to continue its operations, provided it did not make a loss for two consecutive months and total costs remained under R250,000/kg,’ the statement read.
“Despite the operational team’s best endeavours, Merriespruit 1 has failed to meet these conditions and closure procedures have commenced.’
The group said about 1,470 employees are affected by the closure, of whom 1,200 would be transferred to other operations.
“The operational team and unions at Merriespruit 1 used the profitability agreement as an opportunity to extend the mine’s life,’ said Harmony CEO Graham Briggs .
“They gave it their best to meet the agreed conditions, but the orebody is mined out and with the current cost pressures in South Africa it is simply no longer viable to continue mining at this operation.’
In April, Harmony announced its intention to close three shafts at its Virginia operations: Harmony 2, Merriespruit 1 and Merriespruit 3.
It gave a lifeline to the Merriespruit 1 shaft following a “ground-breaking job preservation and profitability agreement’ with unions, provided the shaft did not make a loss – including capital expenditure – for two consecutive months.
Two weeks ago, Harmony advised its gold production for the September quarter is likely to be in the order of 3% lower than the June 2010 quarter.
Harmony will release its quarterly results on November 1.
