Harmony Gold reported increased gold output and operating profit for the first quarter of its 2018 financial year, with the potential for further improvements coming from the addition of AngloGold Ashanti’s Moab Khotsong mining complex in the coming months.
The Moab mine, one of SA’s lowest-cost mines, will not only boost Harmony’s output, but it will lower the average production costs and raise the average grade of its South African production base. Harmony is buying the mine and associated tailings for $300m.
AngloGold CE Srinivasan Venkatakrishnan said during a results call on Monday that the parties were hoping for the Moab transaction to be finalised early in 2018.
“Operational excellence has strengthened our margins at our South African operations significantly. The recently announced Moab Khotsong acquisition will further enhance free cash flows and enforces Harmony’s belief that it offers an attractive investment case” said Harmony CE Peter Steenkamp.
Harmony produced 290,644 ounces of gold in the September quarter, up from 277,461oz in the matching period a year earlier.
It reported a production profit of R1.397bn for the quarter compared with R1.369bn a year earlier and R1.176bn in the June quarter. The increased gold production came from a higher tonnage from its underground mines in SA and improved grades.
The all-in sustaining cost fell to R488,176/kg from R516,116/kg a year earlier.
The received gold price was R571,664/kg compared to R605,224/kg.
Harmony said it would start processing ore again at its Hidden Valley gold and silver mine in Papua New Guinea at the end of November, after it bought out its partner, Australia’s Newcrest Mining. It said the mine would deliver 180,000oz of gold a year.
“Commercial levels of production at Hidden Valley are expected to be achieved during the June 2018 quarter,” it said.
“Increased cash flow generated from the South African operations supported the funding of the investment capital at Hidden Valley,” it said, pointing out net debt was R906m at the end of September, slightly up from R887m at the end of June.
Harmony and Newcrest are busy with a feasibility study at the Golpu copper and gold deposit in Papua New Guinea and expect the work completed by the end of March 2018.
Steenkamp recently spoke of the board assessing Harmony’s option around Golpu, including bringing in a partner, with some in the market suggesting African Rainbow Minerals, an outright sale, or forging ahead with the project.