Brendan Ryan | Business Day Live
HARMONY Gold and Australian joint venture partner Newcrest Mining said on Friday they had agreed to complete a feasibility study to evaluate an underground exploration programme at the Wafi-Golpu gold-copper project in Papua New Guinea.
This follows the strategic business shift announced by Harmony CEO Graham Briggs in August when he told investors that development of Wafi-Golpu was being revised to drop the estimated capital cost and reduce the associated investment risk.
The mine would be developed on a much smaller, modular scale which could then be “scaled up” as market conditions allowed.
The reasons were the dramatically changed business circumstances facing the gold industry, with intense pressure coming from shareholders to conserve cash and focus on returns to investors instead of growth.
Mr Briggs told Business Day on August 14, “times have changed. Big capital projects are no longer in vogue.”
The prefeasibility study on Wafi-Golpu called for capital expenditure of $4.8bn to bring the mine into production from 2019 with total capex over the life-of-mine estimated at $9.8bn of which Harmony would have to fund 50% as its share. Part of the new approach involves the sinking of a vertical exploration shaft into the ore body from which bulk samples can be taken to get a more accurate assessment of the nature of the deposit.
According to a joint statement from Harmony and Newcrest, “the next phase of work requires a feasibility study on an exploration shaft and associated underground staging platforms to complete deep underground drilling and bulk sampling of the ore body. Underground access to the ore body through the exploration shaft would generate essential ore body knowledge required to support a future development decision.”
The statement said: “The joint venture anticipates a final investment decision for the proposed exploration shaft during the second half of calendar 2014 subject to the receipt of necessary regulatory approvals”. It “also aims to finalise an agreement with the Papua New Guinea government to provide a framework for the underground exploration phase, ongoing technical and economic studies” and the project’s future development and operation.
The Harmony share price has come under extreme pressure in the past year, dropping to a 12-month low of R26.35.