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HARMONY
Harmony takes a beating on loss forecast, Swanepoel's surprise exit
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By: Matthew Hill
Published: 6 Aug 07 - 15:05
The latest casualty in an exodus of South African mining executives over the past week is Harmony Gold Mining (Harmony) CEO Bernard Swanepoel, who sprung his resignation on the market on Monday afternoon.

On the same day, the company posted a trading statement warning investors of a below-expectations results performance for the quarter ended June 30.

Shares in the company plunged on the two sets of news, to R80,00 a share by 16:13, down 16,49% for the day. The shares closed 15,87% down, at at R80,60 a share, up from an earlier low of R77,11.

The company did not give reasons for Swanepoel's exit, but 16% shareholder in Harmony, African Rainbow Minerals CEO Andre Wilkins told Mining Weekly Online later on Monday that Swanepoel left because of the poor results that were forecast.

“He just said that he was not happy with the results, so he tendered his resignation, and the board accepted it,” he said.

“As a major shareholder in Harmony, we weren’t very happy with the performance either,” stated Wilkins.

He went on to say that he believed the plunge in the firm’s share price was more strongly linked to its results forecast that Swanepoel’s resignation.

“I spoke to a number of shareholders today, and they were all very unhappy with the results forecast,” stated Wilkins. “I would say the drop in the share price is more strongly linked to the results than Swanepoel’s resignation.”

RESIGNATION 'A LONG TIME COMING' - SWANEPOEL
The exiting CEO himself was tightlipped in a telephone interview with Mining Weekly Online.

He said that he was still a Harmony employee, although he had stepped down from the top job.

"With this sort of thing, you have to give 90 days notice," he said.

Asked what his next move might be, Swanepoel said that he had “a couple of ideas”, but that it was “premature to say”.

When questioned on his reasons for leaving, he noted that his resignation had been a long time coming.

'He just said that he was not happy with the results'“I’ve been contemplating it for some time now,” he stated."I've been in the post for 12 years now, which is an extremely long time."

“Is it ever a good time to leave?” he questioned.

He would be replaced by acting CEO Graham Briggs, previously South East Asia MD, who would, in turn, be replaced by another South African, Johannes van Heerden, acting in the position.

“I am confident that Harmony will continue to grow under new leadership and benefit from the strategy that we have developed over the past few years," said chairperson Patrice Motsepe.

“Swanepoel joined Harmony in 1995 and grew the company from a single mine to the fifth-largest gold mining company in the world, with a market capitalisation of $5,5-billion,” he added. “It has been an honour and privilege to work with him and we wish him well."

Production dives while costs soar
The company said on Monday that it expects to post a headline loss of between R1,30 and R1,60 a share for the quarter, compared with a headline profit of 58c a share for the previous three months.

Gold production was expected to be down by between 8% and 12%, the company said.

Cash costs per kilogram, which had been affected by the lower production levels and increased input costs, were expected to rise by between 35% and 45% quarter on quarter, pushing total cash operating costs up by between 25% and 28%.

Old Mutual Investment Group South Africa fund manager/analyst Mandla Mapondera said that he suspected that the it was not a coincidence that the news of Swanepoel’s resignation was included in the same trading statement as the announcement of below-expectation results.

“It would suggest that the two are linked,” he added.

Meanwhile Public Investment Corporation analyst Fidelis Madavo was somewhat more frank.

“It’s the CEO who carries the cow,” he said. “And it’s [Harmony’s performance] a balls-up in an otherwise bullish market.”


Market caught by surprise again
Swanepoel's announcement was the second bolt from the blue by a prominant local mining chief executive.

“His announcement was surprising on many fronts, I was certainly surprised,” Briggs said, speaking in a telephone interview with Mining Weekly Online.

Last week Monday, Anglo Platinum (Angloplat) CEO Ralph Havenstein shocked the market with his sudden resignation from the world's biggest platinum producer, and the next day AngloGold Ashanti CEO Bobby Godsell announced his retirement.

In the same statement to shareholders, Harmony said that Wilkens, who had"extensive" knowledge of the company and vast experience in the gold mining industry, had been appointed to the Harmony board as nonexecutive director.

Wilkens served as Harmony COO in 2003, after the merger with ArmGold.

Market speculation was that Swanepoel could have been recruited by another resources company, with Angloplat

Permanent chief to be announced in 3 - 6 months
Briggs said that the Harmony board would likely decide on who would fill the top position permanently in three to six months.

“I think three to six months would be the order of the day,” he said.

Asked if he would be in the running for the permanent position, Briggs stated “hopefully my name will be in the hat”.

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