[miningmx.com] — HARMONY made record operating profits of R2.1bn in
the December quarter as the group increased gold production by 5% and cashed in
on the average gold price of R438,183/kg.
That gold price was 11% higher than the R396,405/kg achieved in the September
quarter, reflecting the depreciation of the rand against the US dollar. The dollar price
of gold actually dipped 3% to $1,683 for the December quarter.
Key developments from the group’s South African mines were the 14% increase in
underground grade and the 6% drop in cash costs to R249,356/kg (September
quarter – R265,288/kg) through an operating performance that CEO Graham Briggs described as “very pleasing’.
Persistent criticism levelled against Harmony is that the group has been mining at
yields well below the reported average grade of its ore reserves.
The reason for that has been the level of development work underway at the group’s
various mines, which has diluted the overall yield because of the amount of waste
rock that had to be mined.
Briggs has repeatedly stated over the past 18 months that the grade would pick up
as the development work was completed and greater volumes of ore were mined.
In a presentation to investors held in Cape Town on Monday, he said “there has
been a lot of focus placed on grade. In future you will see less dilution and results
getting closer to the overall reserve grade.’
Harmony reported a cash operating margin of 43%, which is more than double the
21% margin reported for the 2010 September quarter.
“We have had five consecutive quarters of positive operational cash flow which is a
nice trend,’ said Briggs.
Turning to the Wafi/Golpu project in Papua New Guinea (PNG) – which is a 50/50 JV
with Australian gold producer Newcrest – Briggs highlighted the lack of investor
reaction in South Africa to the latest drilling results which had been released two
weeks prior by Newcrest.
These contained “spectacular’ results from borehole WR406, showing the ore body
extended to the north. The borehole returned 961m of ore body at an average grade
of 1.37% copper and 1.39g/t gold included in which was 199m grading 2.57% copper
and 2.87g/t gold.
“That’s a kilometre of ore body we are talking about, but there was no reaction from
South African investors to these results.
“It seems investors in South Africa do not understand this kind of ore body. The
closest comparison would be with Palabora Mining, where that ore body averaged
only between 0.6% and 0.7% copper.
“Wafi/Golpu is the highest-grade copper/gold porphyry deposit around in the world,
which is why the banks have been prepared to put in money even though it is only
at the exploration stage.’
Briggs added that Harmony did not plan to approach its shareholders for cash to fund
its share of developing Wafi/Golpu.
“Our planning indicates we will have enough cash from our current operations to pay
for Wafi/Golpu, and that excludes the R1.4bn we will receive from the sale of
Evander.’
