Harmony optimistic of greenfield PNG copper-gold venture

JOHANNESBURG (miningweekly.com) – JSE-listed Harmony Gold Mining is making strides at its Papua New Guinea (PNG) projects, where diversity in the gold miner’s portfolio will add a strategic advantage, says CEO Graham Briggs.

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.

The feasibility study for Stage 1 and the prefeasibility study for Stage 2 of the prospective Golpu project would be completed by December, with the outcomes expected to be released early in 2016.

“Everything is aligning well in the Golpu world,” Briggs told media and analysts during a conference call on Thursday, adding that the mine would become a “fantastic asset” with the upside of benefiting from commodity price increases when the mine goes into production in 2020.

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.

The completion of a predevelopment agreement with the PNG government was expected to add more certainty to the development of the mine at Golpu.

Meanwhile, Briggs pointed to the success of Harmony’s exploration programme in locating copper-gold mineralisation, such as the Kili Teke copper-gold deposit, also in PNG, and the strategy of investing in copper and gold projects when capital costs were extremely competitive.

“In an environment where very little is being spent on exploration and with the scarcity of new major copper and gold discoveries, the results from the Kili Teke grassroots prospect are very encouraging,” he commented.

Kili Teke was thought to be another Golpu, which experienced a tenfold increase in its resource within a ten-year period, as drilling to convert the prospect into a new copper-gold resource continued.

Current drilling, which had shown “very encouraging” initial intercepts, could result in a maiden resource declaration by December.

“As the extent of the surface copper-gold geochemical footprint is yet to be tested, there is potential to develop this find into a major copper-gold deposit similar to Golpu, Ok Tedi or Frieda River, which have resource cutoff grades of around 0.2% copper,” Briggs noted.

This emerged as Harmony’s restructuring efforts across its South African operations continued to deliver “excellent results” in the first quarter of the 2016 financial year, with the group on track to meet its full-year production guidance of 1.1-million ounces, the improvement of grade performance and an increase in the generation of free cash flow from the company’s underground operations amid “well-managed” costs.

“Combined with a much higher-than-expected rand per kilogramme gold price, our margins are dramatically improved, enabling Harmony to repay its debt and finance the development of Golpu,” he said.

PRODUCTION
Total gold production increased 10% quarter-on-quarter to 281 385 oz for three months to September 30.

All-in sustaining costs (AISC) for all operations decreased 10% from $1 233/oz in the quarter ended June 30, to $1 115/oz during the three months under review, with the South African operations' AISC decreasing 14% to $1 045/oz.

Underground gold production increased 17% to 246 790 oz, at an AISC of $1 040/oz, while underground recovered grade increased 8% to 4.99 g/t.

FINANCIAL PERFORMANCE
Harmony narrowed its loss a share for the period under review to 120c from the 725c posted in the June quarter.

Production profit lifted 12% to R701-million, while revenue ticked up 7% to R4.1-billion in the first quarter.

The company generated free cash flow of R122-million in the quarter under review.