Bernard Swanepoel, CEO Harmony
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» Harmony fails the costs, grade test
» Harmony's share price fall is overdone
» Gold Fields wraps up South Deep deal
» Harmony loses new business GM
» Harmony shuts its gold refinery
» Harmony vindicated over Bendigo

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Porgera poser for Harmony Gold
Allan Seccombe
Posted: Fri, 02 Feb 2007

[miningmx.com] -- HARMONY Gold is interested in Emperor Mines’ 20% stake in the Porgera mine in Papua New Guinea, but it will take a pragmatic approach after the tough lessons it learnt in trying to acquire South Africa’s South Deep mine, Harmony CEO Bernard Swanepoel said on Friday.

Emperor, which is 79% owned by South Africa’s DRDGOLD, is undergoing a restructuring, which could see it divesting of ownership of some its assets and is looking for joint venture partners on others.

The key asset in the Emperor stable is the 20% stake in Porgera, a mine that is operated and managed by 80% owner Barrick Gold. In a production-affected December quarter, Porgera produced an attributable 23,664 oz at a cash cost of $289/oz for Emperor.

Emperor has shut its Vatukoula mine in Fiji and is actively considering disposing of the asset. Its other mine is Tolukuma in Papua New Guinea. Tolukuma produced 12,000 oz at $793/oz because of a damaged mill.
wouldn’t mind getting to our 500,00 oz target quicker
There has been speculation in some quarters of the market that Harmony might make an offer for DRDGOLD, sell off the South African assets and Vatukoula, keeping the Papua New Guinea assets for itself, particularly the Porgera stake.

Harmony is pouring capital into exploring its property holdings in Papua New Guinea where it is working on bringing into production its Hidden Valley mine and is finalising a pre-feasibility study over the next six months into the Wafi gold and copper deposit, where it is looking for a partner with copper expertise.

Harmony is in "advanced discussions" with Rio Tinto about a royalty payment at Hidden Valley. It could pay Rio Tinto between $20m to $30m as a once-off payment, which would reduce cash costs at the 280,000 oz gold and 3.9m oz silver mine by $10/oz, Swanepoel said.

Harmony is cautious on a number of counts when looking at the Emperor assets. It wants to know how the restructuring is going to turn out and what exactly the plans are for the Papua New Guinea assets. It is also mindful that Barrick has the majority stake in the prime asset.

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“We wouldn’t mind getting to our 500,00 oz target quicker in Papua New Guinea, but Barrick has a bigger cheque book than us and there is a more compelling argument that they should own it,” Swanepoel said.

“We don’t want to get caught in a dead end situation again,” he said, referring to the recent developments around South Deep, where it owned a minority stake of Western Areas with no possibility of acquiring the remainder of the company.

Harmony’s bid for the South Deep mine, which has the country’s largest untapped gold deposit, came to naught when Gold Fields applied its superior financial firepower to buy out Barrick’s 50% stake in South Deep for cash and shares and then made a successful all-share offer for Western Areas, which owned the other half of the mine.

Harmony, which owned 29% of Western Areas, now has a stake of just under 16 million Gold Fields shares worth R1.9bn, which it appears to be in no rush to sell.

There has been speculation that Harmony would be forced to sell the shares to cover a R1bn loan due from RMB repayable on mid-March, but Swanepoel said RMB and Harmony were renegotiating the terms of the loan and it could be rolled over.

"The loan will not force us to sell those shares," he said. He said RMB had a deeper sense of comfort with Harmony holding Gold Fields shares than Western Areas shares.

Swanepoel said Barrick was widely expected to buy Emperor’s 20% stake if it came up for sale and that if Harmony bought it there would be a perception it had overpaid.

“Tactically, it’s something that Barrick should own. Like Gold Fields and South Deep,” Swanepoel said.