Tag Archives: African Rainbow Minerals

Harmony adamant that can find funding for Wafi-Golpu project


Allan Seccombe | Business Day | 19 March 2018

Harmony Gold will have to find $1.41bn to fund its stake in the Wafi-Golpu copper and gold project in Papua New Guinea over five years once it secures a mining right, but management said it would keep the mine and that it was fundable.

Harmony CEO Peter Steenkamp has since last year spoken of exploring options to realise value from the project, with deep scepticism from shareholders and analysts about Harmony’s ability to financially participate in the project. The project has not been reflected in Harmony’s share price.

The options Harmony was exploring included an outright sale of its 50% stake in the undeveloped Wafi-Golpu deposit, bringing in a partner to share the costs and rewards, or keeping its share, with the potential decrease in capital expenditure if the Papua New Guinea government exercised its right to a 30% stake in the venture.

On Monday, Steenkamp said it was a project Harmony wanted to keep and that the new feasibility study showed it to be one that Harmony could fund along with Australia’s Newcrest Mining.

“We are delighted with the results of the feasibility study,” Steenkamp said.

The cost of building the mine and all associated infrastructure like on-mine power generation, pipelines to the coast and processing plants rose to $2.825bn from $2.67bn in the 2016 study, but the overall cost of the project, including sustaining capital gave a total life of project capital bill of $5.38bn, down from $6.38bn before.

Harmony FD Frank Abbott said during a media briefing that Harmony would fund the first three years of construction off its balance sheet, using cash flows from its mines in SA and the restarted Hidden Valley gold and silver mine in Papua New Guinea.

For the next two years Harmony would need funding and plans for that expenditure would be finalised in the next 12-18 months waiting for the Papua New Guinea government to grant the project a special mining lease.

The projections are for the project to start positive cash flows from the seventh year and for it to generate $1bn for the partners from year eight, which for Harmony means $500m if the Papua New Guinea government doesn’t take up its option, said Abbott.

African Rainbow Minerals, a 15% shareholder in Harmony, has been touted as a potential partner or buyer of Harmony’s stake, but Steenkamp declined to comment whether ARM, which is on the hunt for copper after pulling out of a Zambian mine, would be included.

One of the potentially controversial aspects of the proposed mine is the option to dump tailings in the sea rather than setting up tailings deposition sites on land, which the study showed to be fraught with problems and risk.

There are three mines in Papua New Guinea pumping their tailings in the sea, said Johannes van Heerden, the head of Harmony in South East Asia, arguing it was a viable and acceptable option that the partners had explored with local authorities.

The project, which will deliver on average 161,000 tonnes of copper and 266,000oz of gold a year, will be one of the lowest cost copper and gold mines in the world, Steenkamp said.

The boards of Harmony and Newcrest will finalise and approve the study once they have secured the special mining lease from the Papua New Guinea government.


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ARM may join Harmony in funding Wafi-Golpu gold project

Patrice Motsepe, executive chairman, ARM

Brendan Ryan | Mining Mx | March 16, 2018

AFRICAN Rainbow Minerals (ARM) may be considering getting involved with associate Harmony Gold over the development of the Wafi-Golpu copper/gold project in Papua New Guinea (PNG) which is a joint venture between Harmony and Newcrest Mining.

That possibility was raised thanks to ARM chairman Patrice Motsepe’s rambling reply to an analyst’s pointed question at today’s presentation held in Johannesburg of ARM’s interim results for the six months to end-December.

Motsepe tap danced around the issue in his lengthy answer during which he – effectively – neither confirmed nor denied the suggestion of a joint venture over Wafi-Golpu.

“A very good question,” Motsepe commented when the question was put to him. He then went into the history of ARM’s relationship with Harmony going back to when ARMGold was merged with Harmony so giving ARM its current 14.3% stake.

Motsepe added: “There are on-going discussions between Harmony and ARM on a number of issues. We continue to be very excited and confident about the future of Harmony.

“The issue relating to copper is that we are looking at opportunities in different parts of the world and, of course, Harmony and ARM have their own on-going discussions in terms of how their partnership could work to the benefit of both parties.

“Very, very important – particularly for us because Harmony has been a critical part of our strategic future. There are opportunities in copper and we are looking at them and the plan is not to make the same mistake we made in Zambia.”

That mistake was the Lubambe mine which ARM finally got rid of in December at a huge loss realising net proceeds of just R492m after spending more than $400m on the development of the mine with partner Vale. Both Motsepe and ARM CEO, Mike Schmidt, have on several occasions stated that the group intended getting into another copper venture despite the setback at Lubambe.

The perennial criticism by analysts of Harmony’s involvement in Wafi-Golpu has been that the gold producer lacks the financial resources to fund its share of what would be a multi-billion dollar development.

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Filed under Financial returns, Mine construction, Papua New Guinea