| |
Harmony switches offshore strategy
Allan Seccombe
Posted: Tue, 15 Jan 2008
[miningmx.com] -- HARMONY GOLD will actively hunt for acquisitions in South East Asia once it has fully disposed of its Australian mines, the newly appointed MD of Harmony’s international arm, Johannes van Heerden, said on Tuesday.
As part of portfolio restructure, it must find a partner for its multi-billion rand Papua New Guinea (PNG) projects, he said.
Harmony plans to produce 500,000 oz of gold from its international division, which so far, includes just PNG, by 2012. Van Heerden said bringing in a partner to equally share the Hidden Valley and Wafi/Golpu projects in PNG would still leave it on track for that target.
“Buying in reserves will help us get to our target of 500,000 oz,” Van Heerden said during a visit to Harmony’s PNG projects.
Harmony will soon be hosting site visits to the remote and geographically challenging sites after it whittled down a list of
potential partners to five.
The gold, copper, silver, molybdenum and zinc deposits lie on the same mineralised belt that stretches southeast from neighbouring Indonesia, home of the Grasberg mine, and includes the Ok Tedi, Porgera and Tolukuma gold mines.
Harmony isn’t naming companies courting Harmony for a role in the PNG projects but analysts speculate they could include Barrick Gold, Newmont, AngloGold Ashanti and possibly even one of the major diversified resources companies.
“No partner has been selected yet and we won’t have selected someone in the next week or month. By June 2008 we will have concluded the transaction in its entirety,” van Heerden said.
Hidden Valley
Harmony is constructing the Hidden Valley project, which is expected to pour gold in March 2009 and ramp up to full production of 280,000 oz by June.
The capital cost to build a mine and plant at the predominantly copper deposit at Golpu is estimated at
$1.3bn, the Wafi gold project will add another $500m, while a bankable feasibility study on the two neighbouring prospects will cost $120m. It’s the kind of money Harmony just doesn’t have and can’t raise, Briggs said.
The reason for the large capital spend at Golpu is the current mine plan to use the block cave method, which requires capital to be spent up front, as well as the need to sink a decline shaft as part of the feasibility study.
Harmony has already spent R1.3bn in PNG over the past two years and needs a further R1.2bn between January and June of this year.
Harmony wants Wafi to be a 350,000 equivalent oz mine by 2012, something van Heerden admits is a “very tight target”.
By bringing in a partner, Harmony’s capital expenditure on the projects could come to nil depending on the financing arrangements to bring in the other company.
“If, for example, the partner farms into the projects, they’d have to put in, say, $450m over a few
years for 50%. Then our capex would drop to zero,” said Harmony CEO Graham Briggs.
Harmony finances
Harmony’s financial models from the June 2008 year end are modelled on the company not paying any more towards PNG, he added.
Money will be diverted into further exploration of the eight tenements, outside the one mining lease, and more land coming in from five more exploration applications in the Morobe province of PNG. “We have more exploration targets here than we can fund,” van Heerden said.
Free cash will also go towards three South African growth projects, which have their highest capital demand this year and next, Briggs said.
In the 2008 financial year to end-June, the capital budget is R3.8bn, dropping to R1.8bn in the next and then down to R800m a year after that, said acting financial director Frank Abbott.
Harmony has agreed to sell its Mount Magnet and South Kal mines in Australia, and the ownership transfer of the
mines has yet to be completely finalised.
Harmony needs to clear the decks of these two transactions before it can look from its regional offices in Brisbane for further growth in South East Asia, pushing its output higher with the acquisition of a project that can produce 200,000 oz or more.
It is unlikely to be a large acquisition, given the current gold price making such a transaction too expensive. Harmony is looking at a possible joint venture with a junior company, for example.
In a strategy document, Harmony talks of producing a million equivalent ounces of gold by 2012, something van Heerden called a “stretch target.”
“We’ve not taken action on our aspirations yet, but once the disposals and partnerships are done then we can look around us and see what’s available,” van Heerden said during a visit to Harmony’s mines in PNG.
Briggs has visited the Philippines, but nothing was found. Harmony is looking at countries like Laos, China and
Vietnam as well as Indonesia and up to the ‘Stans, like Kazakhstan.
| |
0% 
