Tag Archives: Newcrest Mining

Harmony in a spot over Hidden Valley

Peter Steenkamp. Picture: RUSSELL ROBERTS

Peter Steenkamp. Picture: RUSSELL ROBERTS

Allan Seccombe| BD live | 6.02.2016

HARMONY Gold, which expects to be debt-free at the end of this year, has run into a conundrum at its Hidden Valley mine in Papua New Guinea, and it may be the first tough decision for new CEO Peter Steenkamp.

Harmony shares the Hidden Valley mine with Australia’s largest gold miner, Newcrest Mining, and the partners have grappled for years to make the mine a sustainably profitable gold and silver producer since it opened in September 2010.

Now, it appears Newcrest has reached the end of its patience after it appointed Sandeep Biswas its new CEO in 2014 to head a programme of restructuring and appease shareholders angry about multiple production downgrades by focusing on generating cash and running a more operationally disciplined firm.

One of the mines that came under scrutiny was Hidden Valley, a marginal mine, difficult to access and which has run into safety issues that have led to long shutdowns. Harmony impaired the mine by R2.1bn last year.

While Newcrest may want to sell or close the mine, it will remain a partner with Harmony on the undeveloped Golpu project, which will deliver a copper and gold mine in Papua New Guinea in coming years.

“They want to remain as long-term partners. The big issue is really about Hidden Valley. It’s had quite a bad run in the past few quarters and, at the current dollar gold price, it really is a marginal asset,” Mr Steenkamp said on Friday.

“Newcrest certainly is very excited about Golpu,” he said.

At the prevailing rand-gold price, Harmony would be debt-free by the end of December, said chief financial officer Frank Abbott. Harmony will release its Golpu feasibility study on February 15.

“The study will show that for the next two or three years, it is very fundable for Harmony, at Golpu and we probably wouldn’t need to incur any debt.

“After that, capital would ramp up and we would look at our options at that stage,” he said, adding there would be enough cash flow from the South African mines to fund dividends and early work at Golpu.

The partners are negotiating a pre-mining agreement for Golpu with the government and are understandably coy when it comes to saying exactly what their intentions are with Hidden Valley. As part of a review of the mine, which has enough ore exposed to continue mining this year, it will decide whether to invest $50m to push back the edges of the open cast mine and expose more material.

The other options include suspending the mine or selling it outright. Harmony is unlikely to want to take full ownership and mine it alone.

A decision will be made by end-June, the financial year-end for Harmony and it will mark the first major decision around Harmony’s assets for Mr Steenkamp, who has been in the CEO role for six weeks.

“We are looking at strategic options at Hidden Valley,” he said.

Mr Steenkamp has visited the mine in which all pre-stripping of waste material to expose ore has stopped until metal prices improve “significantly” and mining will focus on remaining cash flow neutral or, at best, positive.

“It’s probably one of the nicest mines I’ve ever visited. The pit conditions are fantastic; the fragmentation is great. The conveyors, the crushers and the plant are all working well, but the problem is that it’s a marginal ore body,” he said.

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Harmony back in black, eyes Golpu advancement

Harmony Gold and partner Newcrest Mining look for further profits out of PNG

Natasha Odendaal | Mining Weekly | 05.02.2016

Shares in dual-listed Harmony Gold surged some 15% on the Johannesburg bourse on Thursday after the gold mining group turned the corner in the second quarter of the current financial year, posting positive earnings after a prolonged period in the red.

Harmony achieved headline earnings of R74-million for the three months to December 31, a jump of more than 100% on the headline loss of R523-million reported in the quarter to September.

Headline earnings a share reached 17c, compared with the headline loss a share of 120c in the September quarter.

“We ticked all the boxes [this quarter . . . and] revealed a solid set of results for the second quarter of this financial year,” new CEO Peter Steenkamp said in Sandton on Thursday, presenting his first set of results after five weeks at the helm.

Harmony’s production profit increased 84% to R1.29-billion quarter-on-quarter, as the average gold price increased 7% in rand terms to R507 490/kg, or $1 109/oz.

Revenue for the quarter under review increased 10% to R4.57-billion, attached to a 3% increase in gold sold to 289 323 oz during the second quarter.

Gold production increased 2% to 287 074 oz and underground grade was 7% higher, with the majority of Harmony’s operations producing higher kilograms and generating net free operational cash flow.

Despite a traditionally weak March quarter, owing to late start-ups post the December quarter and the upcoming Easter holidays, Harmony’s guidance for the full year of 1.1-million ounces would be maintained.

“Higher production means that Harmony’s cash flow is strengthened, our margins are growing, we are able to repay our debt and [we are able] to fund Golpu. The higher rand per kilogram gold price is simply an added bonus,” said Steenkamp.

During the period under review, all-in sustaining costs for all operations decreased 7% to R434 834/kg in the December quarter, compared with R466 061/kg in the September 2015 quarter. This translated into a 15% decrease to $950/oz.

Further, cash operating costs for the quarter decreased 6% to R360 153/kg and 15% to $787/oz.

The group had also repaid R1.12-billion of its debt and reported net debt of R2.52-billion as at end-December.

EXPLORATION

Now all eyes were on Papua New Guinea (PNG) as exploration activities rated high on Harmony’s “creating future value” agenda.

Harmony and its joint venture partner Newcrest Mining completed the feasibility study for Stage 1 and the prefeasibility study for Stage 2 for the Golpu project in December, with the outcomes expected to be released mid-February.

Harmony said discussions continued with PNG’s government on the appropriate terms to progress the premining development agreement, the completion of which would add more certainty to the development of the mine.

The greenfield copper-gold Golpu project was expected to expose Harmony to a one-billion-tonne resource, comprising 9.3-million tonnes of copper and 20.2-million ounces of gold, providing the group with a heavier exposure to copper than its mature South African gold assets.

Stage 1 would see the development of two block caves, with first production in 2020, ramping up to six-million tonnes a year in 2024.

Stage 2 would entail the development of an additional block cave.

Harmony noted that it had sufficient funding for the first three years of development; thereafter, the directors would seek out the best option for further funding.

Meanwhile, drilling activities had been accelerated at Harmony’s other exploration site, the Kili Teke copper-gold deposit, also in PNG, which was thought to be another Golpu.

The Kili Teke resource was the first new porphyry copper-gold deposit defined in PNG since the Golpu discovery in the early 1990s.

Following the declaration of the greenfield project’s maiden resource of four-million gold-equivalent ounces last year, current drilling efforts would be amplified by the addition of a second drill rig during the third quarter.

The drilling programme of the copper-gold deposit on Harmony’s 100%-owned exploration licence EL2310 showed an initial inferred mineral resource of 128-million tonnes at 0.4% copper, 0.3 g/t gold and 170 parts per million molybdenum, containing 506 000 t of copper, 1.2-million ounces of gold and 22 000 t of molybdenum.

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Gold majors in mix for PNG pit

Another piece of PNG is up for sale on the international market with no say for the landowners or even the PNG government…

Hidden Valley

Bridget Carter and Gretchen Friemann | Business Spectator

Some of the world’s major gold miners could be eyeing one of Newcrest’s troubled Papua New Guinea assets, with suggestions China’s Xijin and South Africa’s Gold Fields may be among a list of bidders for its Hidden Valley ­project should it come up for sale.

However, Australian groups Northern Star and Evolution Mining aren’t expected to be in the mix.

Newcrest yesterday indicated it was mulling options for Hidden Valley, a gold and silver operation about 300km northwest of the PNG capital Port Moresby, that it jointly owns with Harmony Gold Mining.

The mine, one of three owned by Newcrest in PNG, has struggled to turn a profit since it started producing in 2010, and some question whether the asset, which produces more silver than gold, should be shut down rather than sold due to its troubled history.

For the December quarter, 17,000 ounces of gold and silver were produced.

It is understood the mine has operational issues and a cost structure that makes generating a profit challenging.

Still, every asset has a price, and offered at the right price it could prove attractive for an offshore bidder.

Xijin and Gold Fields were both understood to be among the suitors for Newcrest’s Telfer gold and copper mine in Western Australia when it was placed on the market last year through adviser Bank of America Merrill Lynch.

However, it was withdrawn for sale after offers for the asset failed to live up to Newcrest’s expectation, understood to be around $500m.

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Newcrest ponders options for PNG’s Hidden Valley gold operation

Is Newcrest about to sell or close down its Hidden Valley mine?

gold

The Hidden valley operation started producing gold in 2010

Rhiannon Hoyle | Wall Street Journal

Newcrest Mining is mulling its options for a troubled gold operation in Papua New Guinea that it owns with one of South Africa’s largest gold producers, which could include selling or closing the mine.

The Australian gold company runs the Hidden Valley operation, about 300km northwest of the nation’s capital, Port Moresby, jointly with Harmony Gold Mining, but has struggled to turn a profit from the business, which started producing gold for sale in 2010.

The mine–which, at five times higher than its flagship Cadia operation in Australia, is by far its costliest to run–has been hampered by poor ore grades and safety issues.

The mine sits in the mountains near the towns of Wau and Bulolo, at an altitude of roughly 2000 metres, where the terrain is steep, rainfall high and earthquakes not uncommon.

Macquarie in late November valued Newcrest’s Hidden Valley asset at $70 million. Since starting production, Newcrest has written down the value of Hidden Valley by hundreds of millions of dollars.

Hidden Valley has been one of a raft of strains for the gold producer, one of the world’s biggest, which has in recent years faced setbacks of almost every sort: from engineering faults at its mines and rain disrupting operations to unexpected tax bills. It was forced to write down its assets by billions of dollars as gold’s decade long bull-run ended and found itself in a regulatory tangle in 2013 when Australia’s securities watchdog investigated the company’s disclosure practices.

Newcrest’s top ranks have repeatedly bemoaned the “unacceptable” performance of the Hidden Valley complex, singling it out as an underperforming asset and vowing to turn the site around. However, signalling they may give up on that operation to focus on more-profitable mines, the company today said Hidden Valley is under review.

“The joint-venture partners are concurrently assessing all strategic options in relation to the future of the asset,” said Newcrest, which also has gold mines in places such as Australia, Indonesia and Ivory Coast. A spokeswoman said she couldn’t comment on how long the review may take.

Newcrest isn’t alone in reconsidering the future of one of its mines. As commodity prices have plunged and shareholders become pickier about their resources investments, miners around the world including BHP Billiton and gold major Barrick Gold have raced to trim down and focus on the best-performing facilities to protect profits.

At Hidden Valley, the cost of mining remains a big challenge. “Although an improvement on the prior quarter, which had significant production outages due to a fatality, the continued high cost nature of this operation” has led the joint venture to scale back some mining activities there until metal prices improve significantly, said Newcrest. A spokesman for Harmony couldn’t immediately be reached.

Newcrest said it produced more gold overall last quarter, as higher output from its Lihir mine, also in Papua New Guinea, and Telfer mine in Australia offset weaker volumes from its Cadia site, where it ran into difficulties with processing equipment.

The miner reported a 6 per cent on-quarter rise in total gold output, to 620,691 troy ounces, in the three months through December. Copper output, however, fell to 17,581 tonnes from 21,337 tons, it said.

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Newcrest coy on Hidden Valley shutdown

Miner refuses to confirm or deny rumours but says operations ‘returning to normal’ after death closes road…

Hidden Valley

Rosalyn Albaniel | Post Courier

AUSTRALIAN Miner Newcrest has confirmed operations at Hidden Valley in Morobe Province, are returning to normal.

This was from the PNG country manager Peter Aitsi, who was responding to reports that had surfaced of a shutdown on site.

While this report was neither confirmed nor denied Mr Aitsi did however confirm that as of December 10 the company had begun using the long haul road, which had been closed.

“I can confirm that as of December 10, we were able to start using the long haul road for Hidden Valley – so essentially the mine is returning to normal operations,” he had stated.

Mr Aitsi had explained that the stoppage in the use of the road had come about as a result of a fatal accident which had occurred along this access road.

“A sub-contrator tow truck involved in recovering a broken down prime mover had lost control and crashed,” he said.

Reports are that the worker had died. He said the Hidden Valley Joint Venture and Mineral Resources Authority inspectors had conducted an investigation in November into the accident and the road access had been closed off to heavy vehicles. This was under the directive of the MRA inspectorate branch.

“We have worked closely with the various sections of MRA to resolve the identified safety improvements and as of December 10, heavy vehicles were once again able to use the road,” Mr Aitsi said.

Meanwhile, Newcrest chief executive officer Sandeep Biswas said in the sustainability report released recently, had reiterated the company’s vision to be the “miner of choice” in leading the way in safe, responsible, efficient and profitable mining.

Mr Biswas had reported fatalities both at its Hidden Valley and Cardia operations adding that this had been a source of profound sadness to the mining firm.

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Fiji landowner bemoans lack of mining consultation

A drill pad site. Photo: Namosi Joint Venture

A Namosi drill pad site

Radio New Zealand

A landowner in Fiji’s Namosi region says their views were barely taken into account in the decision to renew a controversial mining exploration permit.

The Minerals Department this week granted a five year extenstion to the Namosi Joint Venture to search for minerals in the Namosi highlands, west of Suva.

Affected landowners complained in October that they had not given their approval and were opposed to the licence, saying the venture had caused serious environmental damage.

The prime minister, Frank Bainimarama, called an urgent meeting between the government, the venture and landowners to resolve the dispute.

But one of the landowners, Pedro Leveni from Waivaka village, says the consultation was superficial and it appears the government had already made up its mind.

“This meeting, the government just came to seek clarification, eh? They just want to hear the landowners view regarding the renewal of the SPL. But they’ve already renewed the SPL. It’s like fooling around the landowners.”

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Fiji: NJV exploration to continue

namosi exploration

Aliki Bia | Fiji Broadcasting Corporation

The Mineral Resource Department has stated that the five year extension of the exploration license given to the Namosi Joint Venture (NJV)will remain.

Director of Mineral Resource Malakai Finau confirmed this to FBC News this morning.

Finau says despite ongoing consultation with various landowning unit in Namosi, exploration will continue.

The consultation was a directive from the Prime Minister Voreqe Bainimarama after he received complaints from villagers that the exploration is damaging and polluting the rivers in Namosi.

‘’A meeting was organized with the landowners about two weeks ago and this to be followed with the consultation with landowners and their various villagers which is currently in progress’’.

Upon the completion of the consultation process, the Mineral Resource Department will put together a report which will be submitted to the Prime Minister and a decision is expected to be made regarding the mineral exploration by NJV.

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