Newcrest ready to buy out Harmony’s Golpu stake

But Newcrest not interested in buying Barrick’s troubled Porgera mine

Newcrest is interested in increasing its stake in the Golpu copper and gold development in Papua New Guinea

Newcrest is interested in increasing its stake in the Golpu copper and gold development in Papua New Guinea

The Australian

Newcrest Mining chief Sandeep Biswas says he would be willing to buy out his 50 per cent partner in the $US2.3 billion ($2.9bn) Golpu copper and gold development in Papua New Guinea if the stake came on to the market.

Harmony Gold, the South ­African company that owns half of the deposit, is looking at strategic options to fund the Golpu project that makes up nearly 50 per cent of Harmony’s reserves, including splitting the company. Harmony management has bemoaned the fact that Golpu’s value is not reflected in the share price and says while the deposit is not on the block, it would sell for the right price.

“If that stake came on the market at the right price, and we do have a pre-emptive (right) on this to some extent, we’d look at it, absolutely,” Mr Biswas told investors at a Bank of America Merrill Lynch mining conference in Barcelona this month, but he said it was not something Newcrest was counting on.

Credit Suisse analyst Michael Slifirski valued the Golpu project at $2.95bn. Taking into account Papua New Guinea’s right to take a 30 per cent stake in the project, which it indicated it would do, and leaving Newcrest and Harmony with 35 per cent each, Harmony’s stake is worth $1.03bn.

Last week, Harmony’s total market value was just 7.95 billion rand ($850m).

Speaking a week before Mr Biswas spoke in Barcelona, Harmony chief Graham Briggs said he would look at all options for the looming finance commitment for Golpu, including splitting the company. He did not rule out a sale.

“I’m not sure anybody is buying these assets right now,” Mr Briggs said when asked if he would sell the Golpu stake.

“It’s not on the block, but if somebody were really cheeky and wanted to pay lots of money for it, that’s something that would have to go the board, and, because it takes up 50 per cent of reserves, probably not only board but shareholder approval,” he said.

In December, Newcrest revealed a slimmed-down $US2.3bn development of Golpu that envisaged development being split into two stages. The first stage would target the higher-grade upper core of ore body, ranked as one of the world’s biggest with a resource of 9 million tonnes of copper and 20 million ounces of gold. First production would be possible in 2020, with production to peak in 2025 at 150,000 tonnes of copper and 320,000 ounces of gold.

“Golpu is Newcrest’s most exciting growth development option, given the size and grade of the ore body,” Mr Biswas said in Barcelona.

In its May 8 quarterly report, Harmony said it would evaluate strategic options to realise shareholder value and fund Golpu.

“One has to look at the classes of assets and say ‘does this make sense from a shareholders perspective?’,” Mr Briggs was quoted by Bloomberg as saying after the report was released. “Are there shareholders in Harmony that would only invest in Golpu, or only invest in South Africa?”

In Barcelona, Mr Biswas said Newcrest was not interested in buying the Porgera mine in PNG that Barrick Gold had put on the market and for which Credit Suisse is conducting the sales process.

1 Comment

Filed under Exploration, Financial returns, Mine construction, Papua New Guinea

One response to “Newcrest ready to buy out Harmony’s Golpu stake

  1. Fred Hela

    Deals are being done. What does the resource owner get out of this? Probably the same ..its called who cares, they don’t know what they are missing out and worse still, their so called leaders think they are educated but have no idea on what to do to make a dent on our mission, ie PROFIT,

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