Tag Archives: African Rainbow Minerals

African Rainbow Minerals considers Wafi-Golpu buy

Since selling the jointly held Lubambe operation in Zambia, ARM is still scouting for copper opportunities

Alan Seccombe | Business Day | 10 September 2018

African Rainbow Minerals (ARM) is assessing the undeveloped Wafi-Golpu copper and gold deposit half-owned by Harmony Gold, but the diversified miner’s executives declined to be drawn on any further details on its copper strategy.

Since selling the jointly held Lubambe operation in Zambia, ARM is still scouting for copper opportunities, with much speculation in the market that the company could join Harmony, in which it holds a 14% stake, in the multibillion-rand investment in Papua New Guinea in the large Wafi-Golpu project.

Capital move: Patrice Motsepe’s Batho Bonke stuck with Sanlam after its agreement matured and he is now expanding his footprint with African Rainbow Capital. Arnold Pronto

However, analysts remain cautious about any investment ARM could make in growth through mergers & acquisitions, particularly now that the company has swung to a net cash position of R995m in the year ended June from net debt of R1.3bn a year earlier.

Johann Pretorius, an analyst with Renaissance Capital, asked ARM executive chair Patrice Motsepe and CEO Mike Schmidt at an annual results presentation on Friday for assurance that the company would not make a bad investment decision now that it is generating strong cash flow.

“The bigger concern is that ARM might decide to invest this money in what could be a value-destructive project or acquisition,” Pretorius said, pointing out investors said they want clarity on a dividend policy.

Motsepe said greenfield developments, or building brand new mines, are not on the cards for ARM.

He said: “We are looking at some very exciting growth opportunities. Our balance sheet is in a very good position … greenfield, brownfield is not for us. Whether a transaction is value accretive or destructive, the shareholders will decide. They will punish you if you do a transaction that destroys value.”

Schmidt said that ARM is actively looking at potential copper investments and the Wafi-Golpu deposit shared by Harmony and its Australian partner Newcrest Mining, is one that is being assessed.

“Wafi has a strong credit in terms of copper and gold and it’s one that we do assess. We are a shareholder in Harmony and they speak to us on where they stand and intend doing on a continual basis,” he said.

Harmony needs about R21.5bn for its half of the $2.825bn tag to develop Wafi-Golpu and its CEO, Peter Steenkamp, has spoken of investigating various funding options.

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Harmony adamant that can find funding for Wafi-Golpu project

Picture: PHILL MAGAKOE

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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