[miningmx.com] – HARMONY Gold said it was likely it would write-down a portion of the carrying value of its loss-making Papua New Guinea mine, Hidden Valley, an operation it owns in joint venture with Newcrest Mining.
In a separate development, Newcrest Mining is already facing the scrutiny of its Australian regulators who want to know why it didn’t halt trading of its shares ahead of an announcement on June 7 that it was to write-down up to $6bn worth of assets.
The poor performance of Harmony Gold’s Hidden Valley, and the future effects of the lower dollar gold price, were cited as the reasons for the write-down, the quantum of which had not yet been decided, said Frank Abbott, Harmony Gold’s financial director.
“At this early stage it appears likely that there will be a write-down of a portion of the carrying value of Hidden Valley in Papua New Guinea, due to its recent poor performance and the reduction in the US dollar gold and silver prices,” Harmony said
in an announcement on Tuesday evening.
“Harmony will advise the market of the outcome of the impairment testing, which the company anticipates to be towards the end of July 2013,” it said.
“It should be noted that the write-down of the carrying value of Hidden Valley will reduce the net profit of the company, but will not have an impact on reported cash balances and free cash flow,” Harmony Gold said.
Abbott added that restructuring of the asset was a certainty – a likelihood Harmony Gold raised in its March quarter results presentation in May.
At the results announcement, Harmony Gold said it had taken measures to improve the performance of Hidden Valley including replacing the primary crusher and making full use of overland conveyors to avoid the cost of hauling.
There was also a planned improvement in plant and mobile equipment as the group sought a one fifth reduction in Hidden Valley’s costs.
It expected to allocate a total of R519m in capital to Hidden Valley in Harmony Gold’s financial year which closes June 31.
Harmony produced an operating profit of R3.86bn in the nine months ended-March 31 and while its cash surplus increased to R574m, it was aided with the sale of its Evander Gold Mines to Pan African Resources for R1.26bn.
