Investors get behind Harmony’s purchase of gold assets
Harmony Gold, which is edging closer to a decision on its Wafi gold and copper project in Papua New Guinea, secured full investor support for its $300m purchase of gold assets from AngloGold Ashanti in SA.
Harmony, which is bringing the suspended and now wholly owned Hidden Valley mine into full production by the middle of 2018 at a budgeted cost of $180m after buying out Australian partner Newcrest Mining, saw the addition of the Moab Khotsong mine in SA as a critical development for the company, CEO Peter Steenkamp said.
The two mines would add 500,000oz of relatively low-cost gold to Harmony’s output, ahead of a forecast fall in South African production in the next four or five years as old mines reached the end of their lives and closed, he said. The Moab mine came with the mothballed Great Noligwa mine, where Harmony saw potential to extract the shaft pillar and other blocks of ground isolated during AngloGold’s ownership of the mine, he said.
Harmony specialises in mining pillars and Steenkamp labelled it as one of the main attractions of the transaction, due to close before June.
Hidden Valley and the Moab deal are a game changer for us. They add 500,000oz to our production and at a low costPeter Steenkamp
Shareholders voting on the deal on Thursday gave 99% approval for the transaction. Steenkamp said there was "great traction" with the Department of Mineral Resources to transfer the mining right to Harmony from AngloGold and with the Competition Commission to approve the deal.
He hoped to secure these approvals sooner than June.
Harmony had sent a team of experts to Moab since the deal was announced in October to observe operations and develop a strategy to seamlessly integrate the mine into Harmony, bringing improved cash flows to the group and raising the company’s overall grade in SA.
"Hidden Valley and the Moab deal are a game changer for us. They add 500,000oz to our production and at a low cost."
Harmony was open to all options to realise value for shareholders from its 50% stake in the Wafi-Golpu copper and gold porphyry deposit it shares with Newcrest in Papua New Guinea, he reiterated.
He was blunt in his assessment that Harmony could not go it alone in funding the construction of a new mine and processing plants at the prospect deep in the Papua New Guinea jungle and that it would have to assess its options, including bringing in a partner, finding innovative funding options to keep its stake, or its selling its holding.
Harmony and Newcrest launched a study into an optimised mine at Wafi-Golpu, including the option of dumping tailings in the sea. The results of the study were due to be presented to both companies’ boards in March and made public in April, said Steenkamp.
A big factor in Harmony’s decision would be whether the Papua New Guinea government exercised its option to buy a 30% stake in the mine, including paying for costs already sunk in the project. This would reduce Harmony’s contribution to the capital expenditure to 35%, perhaps putting it within the company’s reach, he said.