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Ain’t no mountain high enough for Harmony Gold



Ain’t no mountain high enough for Harmony Gold

As it closes old mines in SA, all eyes are on the start of the giant Wafi-Golpu project in Papua New Guinea

Allan Seccombe

Harmony Gold is not the company it was just a few years ago, with improved grades, a better set of longer-term assets and a pipeline of what promises to be decent projects.
It does have one glaring problem in the next five years, which, by its own admission, is an astonishing drop off a production cliff, when output falls by some two thirds to below 500,000oz.Peter Steenkamp, Harmony’s CEO, strikes a sanguine note when talking about the gap that’s coming as the company closes old mines in SA, the base of the company’s annual production, and the start of the large Wafi-Golpu mine in Papua New Guinea where it is partnered with Australia’s leading gold miner Newcrest Mining.
He outlined a host of projects in SA and Papua New Guinea that will go some way towards filling the gap, but exactly how much of the one million ounces they will replace is unknown with many of those projects the subject of feasibility studies.The funding mechanism of Wafi-Golpu, where Harmony has to fund R20.4bn for its half of the $2.85bn mine, plant and infrastructure development, has long been a source of debate among analysts and management. Steenkamp said Harmony will come up with a funding model before June next year by when it expects the mining licence to be awarded.
With shareholders getting a tantalising glimpse of the cash that could come their way from Hidden Valley and the newly acquired Moab Khotsong, it’s an open question whether they will have the patience to wait for Harmony to repay a chunk its R4.9bn net debt as well as fund a massive capital bill in Papua New Guinea – then wait five years before the mine comes into production and another decade to repay the investment.

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