* Harmony Q2 headline EPS 242 cents vs 95 cents in Q1
* Earnings beat consensus estimate of 159 cents
* Interim dividend of 0.4 rand
By Sherilee Lakmidas and Ed Stoddard
JOHANNESBURG/CAPE TOWN, Feb 6 Harmony Gold
, South Africa's third-largest bullion miner, cut its
full-year production target by 13 percent on Monday, as safety
stoppages threatened to crimp a surge in profit from record gold
Harmony's chief executive warned the frequency of
government-mandated safety stoppages was creating tension
between South Africa's mining industry and government.
Pretoria has been clamping down on miners to cut their
accident rates, leading to lower output. Mines are usually shut
down for several days at a time for an investigation after a
While Harmony more than doubled its second-quarter profits
on Monday as it reaped the benefit of a weak rand and a sky-high
gold price, CEO Graham Briggs voiced concern over the
government's rules on stoppages.
"It's a difficult issue because obviously there are
justifications, but the way they are using them is punitive. The
stoppages are not always related to fatalities," he told Reuters
in an interview on the sidelines of an industry conference.
"It's a big problem because it's becoming a situation where
we don't trust each other. It becomes a potential area of
conflict instead of working together to solve problems. It
becomes a very difficult and suspicious arrangement," Briggs
After seven fatalities at its operations during the
October-December quarter, Harmony has cut its production target
to 1.35 million ounces, from the previous target of 1.55 million
"It is a concern in the general mining operations in South
Africa. I don't think we have a good track record," said Abri du
Plessis, chief investment officer at Gryphon Asset Management,
about industry safety. "But one must also remember, we're
working a bit deeper than average."
South Africa has some of the world's deepest gold mines,
increasing both the risk for mineworkers and the cost to extract
Shares of Harmony jumped 3.6 percent to 96.49 rand as
investors overlooked the lower output target and focused instead
output on the stronger-than-expected earnings.
Harmony posted headline earnings per share of 242 cents in
the October-December quarter, up from 95 cents in the preceding
quarter. That far outstripped the average estimate of 159 cents
in a Reuters poll of five analysts.
Safety stoppages have also hurt the platinum sector, which
accounts for about 80 percent of the global supply of the
Lonmin, the world's third-largest platinum
producer, lost 177,000 tonnes of production to safety stoppages
in its first quarter.
Aquarius Platinum, the world's fourth-largest, last
week joined the industry in warning the government's drive to
slash fatality rates was leading to lengthier and more costly
halts to production.
National Union of Mineworkers spokesman Lesiba Seshoka said
that by cutting production forecasts, companies were already
assuming they would have more fatalities in the coming year.
"We have always been of the view that if companies meet
their safety targets there is no way they will not meet their
production targets," he said.
The average gold price during the quarter in rand terms
scaled 12 percent to a record, helped by a weaker local
Harmony said it expected even higher gold prices in the
"We expect that gold will reach an average price of
$1,850/oz for calendar year 2012 and we may even see it as high
as $2,000/oz later this year," the company said.
While South African miners sell gold for dollars, the bulk
of local producers' costs are in rand, so a weaker local
currency fattens their margins.
Production for the quarter was 344,592 ounces (10,718
kilograms), up 5 percent quarter on quarter, and brought first
half production to 673,000 ounces.
Harmony declared a dividend of 40 cents.