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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PNG gold and copper mine to cost JV partners an extra $1bn upfront

Newcrest managing director Sandeep Biswas. Philip Gostelow

Darren Gray | Sydney Morning Herald | 19 March 2018

Newcrest Mining will plough an an extra $US1 billion ($A1.3 billion) in upfront capital into developing a new gold and copper mine in Papua New Guinea.

Australia’s biggest gold miner released the estimate for the Wafi-Golpu project on Monday showing total capital expenditure for the life of mine,  situated about 65 kilometres south west of PNG’s second-biggest city Lae,  would fall by about the same amount to $US5.38 billion.

The cost of the project will be split between Newcrest and Harmony Gold Mining Company.

The Wafi-Golpu project is a key part of Newcrest’s future, and is considered the company’s top growth asset. It has an expected “life of mine” of about 28 years.The updated feasibility study estimates it would produce on average about 161,000 tonnes of copper per year, which is about double the group’s copper guidance for fiscal 2018. The study estimates it would produce about 266,000 ounces of gold per year.

Newcrest attributed the higher upfront capital cost, relative to earlier studies, to the “adoption of deep sea tailings storage” to deal with tailings from the mining operation, construction of an on-site power plant, a larger processing plant and a deeper and larger initial block cave.

In a statement the company said its latest feasibility research identified deep sea tailings storage as the preferred option for managing tailings, and came after examination of 45 possible sites considered for land-based tailings storage dams or dry-stacking sites.

Newcrest highlighted a number of disadvantages from using a land-based storage, determining that the amount of storage volumes required “would result in a large disturbance footprint over an area which can have high traditional heritage and economic value, high biodiversity, and/or displacement of communities and their livelihoods”.

The miner also cited the project area’s “high seismicity and complex geology, including active faulting, which could at some sites result in liquefiable soils. Complex design would be required to partly mitigate such factors, and that would carry high risk and high cost in both construction and ongoing operation.”

The area’s high rainfall was also mentioned, a factor requiring costly and significant management and treatment plans. “Any structure would contain very large amounts of water with commensurate risks.”

The Wafi-Golpu update comes less than two weeks after mining operations at Newcrest’s Cadia mine in NSW were suspended because of a slump in a tailings dam wall.

Executive project director Bryan Bailie told Fairfax Media in an interview from PNG that the selection of deep sea tailings placement as the preferred option for tailings management “had nothing to do” with the recent Cadia dam incident.

Mr Bailie said the PNG government recognised the potential of the project to make a significant economic and social contribution to PNG.

“If developed the project is expected to create economic benefits across Papua New Guinea and the Morobe province, including an estimated 2500 direct jobs during construction and about 850 during operations.

“The project will also contribute at a local, provincial and national level through the payment of royalties and taxes, through social investment programs etcetra,” he said.

“In all the time that I’ve certainly been involved in the project the PNG government has been very supportive of this project, the local communities are the same,” he said.

Newcrest managing director Sandeep Biswas said the company had a clear path forward for the project.

“The improved business case set out in the updated Feasibility Study clearly demonstrates the world-class nature of this multi-decade project,” he said.

Shares in Newcrest rose two cents to close at $19.75.

Wafi-Golpu to cost $US2.8b and will dump toxic tailings in the ocean

Newcrest managing director Sandeep Biswas believes Wafi-Golpu is the company’s best growth asset. Philip Gostelow

See also: New Campaign Seeks End to Ocean Mine Waste Dumping

Newcrest to spend more on $US2.8b Wafi-Golpu mine, chooses ocean tailings

Peter Ker | Australian Financial Review | 19 March 2018

Newcrest Mining’s top growth project Wafi-Golpu will cost $US200 million ($259 million) more to build under updated plans that envisage a larger mine being built and mine wastes being piped into the ocean.

Last estimated to cost $US2.6 billion, Newcrest said on Monday it would now cost $US2.8 billion to build a mine at the Wafi-Golpu site in Papua New Guinea, with the mine expected to last 28 years and offer an 18.2 per cent rate of return.

Capital spending over the life of the mine would rise to $US5.4 billion.

Wafi-Golpu will produce copper and gold, and is expected to be a cheaper producer of copper than 90 per cent of the world’s copper mines once gold credits are taken into account.

Monday’s updated study suggests each pound of copper produced at Wafi-Golpu will have a unit cost of US26¢, well below the $US3.11 per pound that copper was fetching on Monday morning.

One of the major decisions facing Newcrest and its joint venture partner Harmony Gold was how to manage the mine wastes or tailings from Wafi-Golpu, given the mine is located in hilly terrain, in an area known for its seismic activity and its heavy rainfall.

Newcrest confirmed on Monday that mine wastes would be piped into the ocean, under a method dubbed “deep sea tailings storage”.

Newcrest already pipes mine wastes into the ocean at its Lihir mine in Papua New Guinea, and said the method was chosen for Wafi-Golpu after a detailed study of 45 potential sites for the construction of tailings dam on land.

The company said an on-land tailings dam would disturb land that was valuable for biodiversity, heritage and economic reasons.

“The project area has high seismicity and complex geology including active faulting which could at some sites result in liquefiable soils. Complex design would be required to partly mitigate such factors and that would carry high risk and high cost,” the company said on Monday.

“Any (dam) structure would contain very large amounts of water with commensurate risks.”

On the contrary, Newcrest said the nearby Western Huon Gulf was a “highly suitable environment” for tailings storage.

“It hosts a deep canyon leading to a very deep oceanic basin with no evidence of upwelling,” the company said.

In February Newcrest boss Sandeep Biswas said deep sea tailing storage at Wafi-Golpu would probably cost more than building an on-land tailings dam initially, but would probably be a cheaper option over the life of the mine.

The decision to pipe wastes into the ocean comes barely a week after a tailings dam wall slipped at Newcrest’s flagship Cadia mine in New South Wales, leaving the operation suspended indefinitely.

Newcrest currently owns 50 per cent of Wafi-Golpu, but that stake could fall to 35 per cent if the PNG government takes up an option to buy 30 per cent of the mine.

Studies conducted in 2012 estimated a larger version of the mine would cost $US4.8 billion, with such a project producing 400,000 ounces of gold annually and 250,000 tonnes of copper.

But subsequent studies have considered smaller development options.

A 2016 study into the project envisaged a mine producing 202,000 ounces of gold and 130,000 tonnes of copper per year.

Monday’s updated study envisages a mine that produces 266,000 ounces of gold per year and 161,000 tonnes of copper per year.

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.

APEC to promote foreign plunder of PNG resources

Newcrest’s Ian Kemish signed the agreement with Chairman of PNG ABAC Secretariat, Wayne Golding

Australian mining giant, Newcrest, paying K841,000 to sponsor the APEC CEO’s meeting in November tells us all we need to know about who stands to benefit from the APEC pantomime in PNG this year.

It sure as hell is not going to be PNG’s 3 million farmers or 7 million customary landholders!

First platinum sponsor for APEC CEO’s Summit

Freddy Mou | PNG Loop | February 22, 2018

Seven platinum sponsor spaces are yet to be lled, with nine months remaining for the Asia-Pacific Economic Cooperation (APEC) CEO’s Summit in November this year.

Newcrest Mining Ltd was the first company to sign an agreement with the APEC Authority in Port Moresby today for the platinum sponsor.

Witnessed by APEC Authority chairman Sir Charles Lepani, ABAC chairman David Toa and APEC senior official Kelly Taureka, Newcrest’s executive general manager, Ian Kemish, signed the agreement with Chairman of PNG ABAC Secretariat, Wayne Golding.

Kemish said Newcrest is proud to sponsor the APEC CEO Summit and to tell the PNG story to the rest of the world.

“The PNG Government has placed a top priority on hosting a successful APEC year. “Newcrest is standing alongside the Government as a platinum sponsor.”

He added that Newcrest injects considerable economic and social value into PNG, including employment, contract for local goods and supplies and community contributions, and such sponsorship is timely.

He said with the Government’s priority to host the APEC Summit, Newcrest is committed in supporting the government in hosting such big events.

Meantime, Chairman of PNG ABAC Secretariat, Golding, thanked Newcrest for its sponsor and is looking forward to welcome other sponsors as well.

“This hosting of the 2018 APEC Year is an honour and will require all PNG’s skills and capabilities, supported by friends of PNG, to host the Asia Pacific’s largest economic grouping,” he stated.

“We thank Newcrest and other sponsors for their generosity.”

There are two categories for the sponsors: Platinum and Gold, with about eight sponsor placings in each category. Gold sponsors cost about US$150,000 (K459,000) while Platinum is US$275,000 (K841,000).

All the sponsors will be for the main APEC CEO Summit in November which will be steered by APEC Business Advisory Council (ABAC) working in close consultation with PNG’s business and industry community.

Hidden Valley Landowners Want Minister To Intervene

Frank Rai | Post Courier | February 1, 2018

A local landowner group from the Hidden Valley Gold mine in Morobe province have called on the Minister for Lands and Physical Planning to intervene and stop a dubious land deal between a certain group and public servants over the existing mining lease area.
The Nauti Landowners Grievance Committee of Nauti village in Hidden Valley made the call yesterday after several attempts made to the Department of National Lands and Physical Planning and the Registrar of Incorporated Land Group to cease the issuance of an ILG Certificate have fallen on deaf ears.
According to a National Gazette published on March 30, 2016 – a Nautiya Land Group Incorporated was recognised as an ILG of the same demarcated boundaries of Hidden Valley Gold mine.
Committee chairman Ben Joseph said they lodged a formal complaint with supporting documentations with the Registrar of ILG and the Department of National Lands and Physical Planning to halt the awarding of the ILG in question since March 2017 but to no avail.
“The department is not responding or corresponding with us (Nauti Landowners). Our attempts have fallen on deaf ears so we a now calling on the Minister for Lands and Physical Planning Justin Tkatchenko to use his ministerial power to intervene, put a stop and investigate those responsible for the issue of this dubious ILG certificate,” Mr Joseph said.
He said the Nauti landowners Grievance Committee officially wrote to the Minister in September last year (Sept 28, 2017) for his ministerial intervention to launch an investigation and hold those responsible for exploiting and abusing the process of Customary Land Registration.
The chairman said the matter was of grave concern because of the validity on how Nautiya Land Group was awarded ILG certificate despite some iconic landmark features like the Hidden Valley Gold mine and a 1987 Provincial Land Court Decision that has competently identified customary landowners of the mine.
Mr Joseph said the land was owned by Yatavo Family of Nauti village which is from the Northwest part of the mine and the Biangais of Kwembu and Winima villages of Wau towards Southeast part of the mine.
He said the Nauti, Kwembu and Winima were the current beneficiaries and parties to the Hidden Valley Gold mine under the Memorandum of Agreement (MoA) signed in August 5 2005 and the Royalty Distribution Agreement signed in September 15, 2009.
All relevant documentation including correspondence to the Director of Customary Lands Registration, Registrar for Incorporated Land Group, Minister for National Lands and Physical Planning, dating back to March last year were sighted by this reporter.
“There is evident that there was no proper consultation and verification of important detracting features made by the Nautiya Land Group leaders and the designated Government Officers which inevitably is a normal requirement in processing any ILG in the country,” Mr Joseph said.
He added that the oversight of a high government impact project of national interest by government employees and the Nautiya Land Group is completely incomprehensible, unscrupulous and deceptive with intentions to a disrupt major government project.
Mr Joseph appealed to the Minister for Lands to come down hard on those responsible and revoke the issuance of ILG certificate to Nautiya Land Group to avoid further inconveniences.

Wafi-Gulpu mine to dump toxic tailings in the ocean

Tailings placement site identified

Cedric Patjole | Loop PNG | December 26, 2017

The Huon Gulf deep sea trenches have been identified as a suitable location for deep sea tailings placement [toxic waste dumping] from the Wafi-Golpu Project [mine].

The Wafi-Golpu Joint Venture (WGJV) presented during the PNG Mining and Petroleum Conference that the Huon Gulf deep sea trench was highly suitable.

Wafi-Golpu Joint Venture executive project director, Bryan Bailie, said in the presentation that local rivers, including the Markham, discharged 60 million tons per annum of natural sediment into the Markham Canyon, which reports to the New Britain Trench which is 9000 metres deep.

He said it was a highly disturbed environment, with regular purging of sediments through mass flow events and has low bio accumulated risk.

Huon Gulf is located on the northern coast of PNG, occupied by Morobe Province.

Huon Gulf offers spectacular scenery, accessible diving spots and a range of climates from sub-alpine and alpine to tropical.

Meanwhile, the Joint venture says a stable legislative and fiscal regime is critical to the development of the Wafi-Golpu Mine Project.

The component is among five key areas which the Joint Venture highlighted and include:

• The completion of the updated feasibility study, and Environmental Impact Statement;
• Completion of the permitting and approval by the Harmony and Newcrest boards;
• Sustained landowner and community support; and
• Ongoing close coordination between WGJV and Government agencies