Tag Archives: Newcrest Mining

Newcrest trying to dump Hidden Valley

Hidden Valley

Banks are believed to have been tapped for the possible sale of Newcrest’s Hidden Valley PNG mine

The Australian | April 17, 2016

Investment banks Citi or Credit Suisse are believed have been engaged by the listed gold miner Newcrest to sell its stake in the Hidden Valley asset in Papua New Guinea.

The official line is that the company has engaged advisers to explore various options for the mine, which could include further spending on the operation to extract more value or a divestment.

However, the appointment by an investment bank typically creates the impression around the market that the asset is for sale.

It is thought to be worth tens of millions of dollars rather than hundreds of millions, sources told DataRoom.

China’s Xijin and South Africa’s Gold Fields were been named as two of the most likely candidates to bid for Newcrest’s share of the mine earlier this year.

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

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Ceremony marks end to Lihir mine conflict

lihirisland

Post Courier | March 14 2016

A RECONCILIATION ceremony marked the end of a six-year conflict over the ownership and benefits from the Lihir Gold Mine in New Ireland Province.

The ceremony marked an understanding that was signed in Kavieng by Governor Sir Julius Chan, Nimamar Local Level Government president Ambrose Silul and LMALA chairman James Laketan in March 2015 to work together for the best interest of the people of Lihir and New Ireland.

The reconciliation process concluded that there would be two parts to the peace process: the first being the spiritual reconciliation held on February 26-27.

The second part was performed on Lihir Island at Potzlaka, a Government station on March 5. A provincial Government delegation led by chairman sports and youth representative Engelberth Lutham attended the reconciliation ceremony at Potzlaka. Mr Lutham congratulated the leaders of Lihir, especially the LMALA chairman James Laketan and Nimamar president Ambrose Silul for their initiative, dedication and commitment through hard work towards the preparation of the successful event.

“Working together, there is nothing we cannot do,” Mr Lutham.

The reconciliation process paves the way forward for the six-year conflict over the ownership and benefits of Lihir sustainable development plan as stipulated in their integrated benefits package 2 signed in 2007. The six clans and 15 wards, with all the leaders of Lihir Island stood together to express great satisfaction as a result of the successful ceremony after suffering from past years’ difference over the benefits from Lihir gold mine.

Governor Sir Julis Chan, who was overseas and could not attend, said this was a significant event not experienced elsewhere in the country.

“Once again, New Ireland has shown the way to a peaceful and lasting settlement of disputes,” he said.

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Harmony and Newcrest plan 65km pipeline

Business Day Live |17.02.2016

HARMONY Gold and its partner, Australia’s Newcrest Mining, plan to build a pipeline traversing about 65km of Papua New Guinea to pump a copper and gold concentrate from their Wafi mine to the port of Lae.

The Wafi pipeline will be far shorter than the 529km pipeline Anglo American built to pump iron-ore slurry to the coast. Another critical difference is that Harmony does not foresee that permit challenges will stall its project — something that gave Anglo executives sleepless nights and led to project cost and time overruns.

Johannes van Heerden, the CEO of Harmony’s East Asia unit, said the pipeline would be installed along areas that already had infrastructure in the form of power lines or a highway.

While he was sanguine on the pipeline, experience of operating in Papua New Guinea, where Harmony and Newcrest built and operate the loss-making Hidden Valley gold and silver mine, has meant the partners have given themselves a two-year window to secure approvals from a broad range of stakeholders for the Wafi mine.

The mistakes the partners made at Hidden Valley, which is under consideration for sale, closure or reinvestment, have proved an expensive but valuable lesson in building and operating a big mine in Papua New Guinea.

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New Gulpu mine will blow a hole in Vision 2050 and the Constitution

According to the government’s Vision 2050, strong economic growth has not translated into better living standards for the majority of the population and therefore Papua New Guinea needs to move away from an economy based on resource extraction and mineral exports to a more stable and resilient future based on local industries.

Vision 2050 says we need to shift an economy currently dominated by the mining and energy sectors, to one that is dominated by agriculture, forestry, fisheries, eco-tourism and manufacturing. This means reducing the level of mineral and energy export from their current 80% level to just 30% by 2050. Only in this way can we improve our human development and living standards.

But instead of following its own Vision, and honouring our National Goals, which demand self-reliance and national sovereignty and a respect for PNG ways, our government is committing itself to continuing along the same failed path that we have seen over the last twenty or thirty years – more mining, more logging and more misery for ordinary people while foreign corporation and a small elite make massive profits…

Zero external funding a possibility for new $2.6bn Harmony mine 

Martin Creamer | MIning Weekly | 15.02.2016

Gold mining company Harmony said on Monday that its current expectation was that it would not require any external funding to build the Golpu copper/gold mine with its 50% joint venture partner Newcrest and buy-in from the government of Papua New Guinea (PNG).

The JSE-listed company estimated the first-stage project capital on a 100% basis at $2.6-billion, with an internal rate of return (IRR) of 16%.

Announcing the results of the initial feasibility study and the second-stage prefeasibility study to analysts and journalists, new Harmony CEO Peter Steenkamp said that both studies confirmed a robust investment case that supported proceeding with the project.

The first-stage feasibility study justifies the development of twin exploration access declines, with two proposed block caves designed to extract half of the contained copper and gold of the Golpu reserve.

Planned was for the 50% remaining reserve to be extracted by a deeper block cave below the second-stage block cave, Harmony South East Asia CEO Johannes van Heerden reported.

The outcome of the options once pursued points to the total resource having a net present value of $2-billion with a 17.5% IRR.

“The other benefit that comes through out of this is you’re actually able to fund this ongoing development as part of your mine development. So you are able to progress this without going cash flow negative,”

Van Heerden told the meeting attended by Creamer Media’s Mining Weekly Online.

Harmony’s half share of the ore reserve is 5.5-million ounces of gold and 2.4-million tonnes of copper.

The mine has a 28-year life-of-mine with low operating costs.

The targeting of the highest-grade sweet spot for first-stage production allows for very strong initial cash flows.

Once out of the porphyry, the grade profile decreases as does the cash-flow profile.

The project is currently considerably more valuable than it was two years ago and on the basis of Harmony’s latest quarterly financial results, would produce double the free cash flow of Harmony’s best performing South African gold mine, at some $32-million, from output of 70 860/oz.

However, given Harmony’s poor returns from its joint venture Hidden Valley gold mine, with Newcrest, in PNG, mining analysts peppered Harmony management with penetrating questions.

Citibank analyst Johann Steyn recalled that in 2002, Harmony also guided 300 000 oz/y from Hidden Valley by 2008, but that Hidden Valley had not ever managed to produce above 100 000 oz/y since development.

“The key trouble with something like Golpu is that it looks exceptionally exciting but execution risk on something so complex can really be the swing factor between this becoming very profitable and being massively value destroying,” Steyn said, adding that Harmony’s share of capital of $2.6-billion for Golpu was bigger than its current market capitalisation.

Harmony CFO Frank Abbott pointed out that the capital outlay would be spread over a long period and it was not as if Harmony would be required to come up with $875-million in year one.

“We believe the amounts required are very affordable and repayable and our current cash flow is substantially more,” Abbott said, adding that if the PNG government decided to exercise its right to buy a shareholding, the capital would be an even easier ask.

The plan is for the processing infrastructure of the first phase to be used to support the development of the second stage.

Engagement  with  key  stakeholders, including the PNG national government, the Morobe provincial government, landowners and community representatives was continuing to “ensure clear alignment on the project objectives”.

The Harmony share price fell 8.3% before 11 am on Monday to R40.35 a share.

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Foreign owned mining companies not good corporate citizens in PNG

Foreign owned mining companies operating in PNG are abusing our hospitality and trust by failing to pay any corporate tax.

Companies like Barrick Gold, Newcrest Mining and Harmony Gold make millions of dollars from their “World Class” gold, copper and silver mining in PNG.

But they manipulate their income and expenditure to avoid declaring profits and thereby avoid corporate income tax, according to figures released by the PNG government [pdf file].

The table below shows the corporate taxes paid by the mining industry in PNG in 2013.

corporate income tax

Foreign owned Barrick Gold (zero), Lihir Gold (K4.5million), Hidden Valley (zero), MCC Ramu nickel (zero), Simberi Gold (zero), and Harmony Gold (zero) paid a total of K4.5 million in Corporate Income tax.

In contrast, PNG owned Ok Tedi Mining paid a whopping K105 million – so clearly 2013 was not a bad year for mining in PNG.

To compound the injustice, Lihir, Porgera and Hidden Valley actually produce 3 times as much gold (1.5 million ounces) as Ok Tedi (500,000 oz) – so these foreign owned entities should be paying the most in tax, but they manipulate the rules to avoid their liabilities.

production

In stark contrast to their miserly corporate tax contribution, the total value of the gold, copper and silver exported from Porgera, Lihir and Hidden Valley in 2013 was over K4,500 million.

export value

YUP, FOUR THOUSAND FIVE HUNDRED MILLION KINA!

But these foreign mining companies paid NO corporate tax.

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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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