South Africa’s Harmony Gold expects its proposed new US$3-billion Wafi-Golpu copper-gold mine in Papua New Guinea to come into production in 2016. Now in pre-feasibility stage in a joint-venture with Newcrest Gold of Australia, Wafi-Golpu is set to follow Harmony’s Hidden Valley copper-gold mine that came into production last September, also in a joint-venture with Newcrest.
“Even at this early stage, we can confidently say that Wafi-Golpu is going to be a mine. There’s no doubt about it,” Harmony Gold CEO Graham Briggs tells Mining Weekly Online.
The US$3-billion price tag is linked to mining taking place at a rate of 20-million tonnes a year. However, current thinking is that actual output using the block-cave mining method may be 30-million tonnes a year, which would increase the amount of capital required. The JSE- and NYSE-listed Harmony is committed to providing half of whatever capital is required.
Harmony Gold’s financial director Hannes Meyer said the high quality of the grade was positioning Wafi-Golpu as a relatively low-cost future mining operation. Total cost of mining is expected to be US$25/tonne, against expected revenue of US$100/tonne to US$300/tonne, which makes it a high-margin business. “It’s really capital insensitive,” Meyer said.
By 2014-15, when Harmony will have to arrange the capital for Wafi-Golpu, its South African Phakisa, Doornkop, Kusasalethu and other local projects will no longer be requiring high levels of capital and will begin generating strong cash flows, which will be able to underpin the financial requirements of the project. Also, Wafi-Golpu has significant copper, which Harmony may use for commodity-backed financing for the project. Meyer envisages that selling a third of the copper could provide between US$500 million and US$1 billion in project funding.
The anticipated profitability of the business also provides scope for the introduction of considerable debt into the financing structure. “Equity will be the last route that we’ll pursue. We’ll explore all other avenues before we dilute shareholders,” Meyer said.
Harmony’s Hidden Valley mine is expected to produce at a rate of 280,000oz per year for the next 14 years. The Wafi part of Wafi-Golpu is a gold-only resource and the Golpu part is copper-gold porphyry. Continual exploration drilling since 2007 indicated the potential presence of 38 million oz of gold equivalent, with recent drilling unearthing an 883m strike at 5g/t to 7g/t gold equivalent.