Harmony’s Wafi project may be three times bigger than its largest mine

Wafi-Golpu could be one of the biggest, even the biggest, gold mine in the world. But how much of that value will be retained in Papua New Guinea and how much will basic government services improve for ordinary people once the mine is operational?

And should Harmony Gold and Newcrest Mining be trusted to develop the Wafi-Golpu mine when their existing, smaller, Hidden Valley mine is already causing huge environmental problems and negative social impacts?

By Carli Lourens, Bloomberg

Harmony Gold Mining Co., Africa’s third-largest producer of the metal, said the company’s Wafi- Golpu joint venture with Newcrest Mining Ltd. (NCM) in Papua New Guinea may be three times the size of its next biggest mine.

Wafi may yield as much as an annual 700,000 ounces of gold and 320,000 metric tons of copper, Harmony told analysts at the site, according to a copy of the presentation posted today on its website. The company is still working on establishing the size of the resource, the Johannesburg-based mine operator said.

Harmony, which produced 1.43 million ounces of gold last fiscal year, is digging mines abroad as depleted South African reserves become more difficult and dangerous to excavate, and as labor and electricity costs rise. In the financial year ended June 30, Harmony’s Tshepong mine yielded about 217,000 ounces.

The company climbed 2.66 rand, or 2.7 percent, to 99.61 rand, the highest level since April 2, 2009, by the 5 p.m. close of Johannesburg trading, giving Harmony a market value of 43 billion rand ($6 billion). Wafi may add $1.5 billion to $2 billion, or about 40 percent, to the value and make the company a takeover target, RBC Capital Markets said last week.

Wafi’s content is estimated at 16 million gold ounces, 4.85 million metric tons of copper and 55,000 tons of molybdenum, or a total gold equivalent of 38.5 million ounces, according to the presentation, which added that only Freeport-McMoran Copper & Gold Inc. (FCX)’s Grasberg mine in Indonesia and Ivanhoe Mines Ltd.’s Oyu Tolgoi deposit in Mongolia have higher gold equivalent grades. Harmony’s management last year estimated the cost of building a mine at Wafi at $2.5 billion to $3 billion.

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Filed under Financial returns, Papua New Guinea

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