Harmony tackles surface gold/uranium

Allan Seccombe | Mon, 26 Oct 2009 12:04
[miningmx.com] -- Harmony Gold has 17 short- and medium-term projects in its growth pipeline as it looks inward for growth of gold and uranium production because of the scarcity of attractive external projects, CEO Graham Briggs said.

Harmony will continue looking outside the group for growth, but so far nothing has fitted the criteria of lowering production costs, improve the quality of Harmony’s asset portfolio and be able to produce 150,000 oz/year of gold for at least eight years.

“Most operations for sale require substantial capital to bring them to an acceptable level of profitability and the few projects available would incur enormous developmental costs,” Briggs said in Harmony's 2009 annual report.

“Our search will continue of course but, as an unhedged gold producer, our tolerance for debt is limited, and serves as a constant reminder to us of the need for prudence.”

Harmony has cash of R2bn, is net-debt free and it's targeting output of 2.2 million oz in 2012 from 1.46 million oz in 2009, increasing production from five growth projects nearing completion in South Africa and Papua New Guinea. Its acquisition of the Free State assets from Pamodzi Gold could add another 110,000 oz to that 2012 target.

Harmony is increasingly looking at surface operations to bring cheap gold – and uranium -- production into its portfolio.

Harmony plans to treat arisings, or mined ore, from its Tshepong, Phakisa and Masimong mines, by diverting milled ore bound for the Harmony 1 plant to a dedicated plant to extract uranium before the gold concentrate is then passed back into the circuit for gold extraction, a process that should improve recovery rates.

Harmony will complete a pre-feasibility study into the plan during November followed by a nine-month full feasibility study into building a R1.4bn uranium treatment plant. The full feasibility entails the construction of pilot and demonstration plants. It will take two years to build the final plant if the decision is to go ahead with the project.

There were no other details on the project regarding production or cost numbers.

Harmony’s first foray into surface retreatment is Phoenix at the Virginia operations, where there are surface reserves of 1.15 million oz of gold and a similar amount in resources. Harmony is looking into expanding monthly production to 900,000 tonnes from the current 500,000 tonnes, with a possible life of up to 20 years. There were no cost details.

Phoenix produced 22,345 oz in 2009, a year in which cash costs more than double to R154,000/kg because of lower grades, water availability, contractor problems and higher reagent costs. It made a cash operating profit of R68m.

A second surface operation, Project Saints will be located in the Free State, where Harmony has the bulk of its operations. In this project, Harmony will re-commission the mothballed St Helena plant to treat a million tonnes of material a month. It will target eight tailings dams in Virginia and Welkom, comprising about a third of the total available resources.

The first phase of Project Saints will cost R622m, with a second tranche of R345m to be funded internally and spent in the eighth year on a second tailings dam. The project will yield around 6,000 oz/month over 20 years. “Various funding models are being investigated and development is due to begin in financial year 2010.” Production will start 15 months after the start of construction.

Harmony is looking into extracting uranium at the Phoenix and Saint projects.

A third tailings operation, Project Libra will treat tailings at Evander. It will treat a million tonnes of material a month in a plant that is yet to be built. Work done in a pre-feasibility will be advanced to a full feasibility once design work for Saints is completed.

For underground projects, Evander South, a potential R3bn stand-alone mine, is at least six years away from production using first declines and then a vertical shaft to mine between 600 metres and a kilometre below surface. The preliminary indications are that the mine, with a recovered grade of 4.5 grams/tonne could produce 180,000 oz/year at peak production during its 17 year life.

A 24,000 metre, 43 hole drilling programme will be completed by end-December this year and the data collated by third-quarter 2010. A decision will be taken in about three years and it will take a similar amount of time before the mine will be in production.

Drilling will start at the nearby Poplar once the programme is completed at Evander South. Again, this has the potential to be a relatively shallow stand-alone mine for which a pre-feasibility study was completed in 2003.

“The pre-feasibility study raised certain questions about the ore body, resulting in the planned drilling programme and, as at Evander South, once drilling has been completed, the study will be revised and updated,” Briggs said.

Harmony is investigating whether to re-open the St Helena 10 shaft last operated by Gold Fields in 2001. “It is likely that, should this shaft be re-opened, production from here will be used to replace tonnage from Harmony’s more marginal operations as the close at the end of their economic lives,” he said.

He has said there are some shafts at Virginia, described in the annual report as “the oldest and most difficult to mine of our operations”, as well as shafts 2 and 5 at Evander, which are under special care in the current high cost environment where dollar gains in the gold price have been offset by a strong rand and have basically remained unchanged since early this year.

Analysts have speculated that the shafts could be mothballed unless the rand gold price rises strongly.