[miningmx.com] – THE two-year slide in the gold price has claimed the scalp of Harmony Gold’s Phakisa decline project which the company said today it would discontinue and impair for R1.4bn.
“A total impairment of approximately R1.4bn will be recorded in Harmony’s financial results for the year ended 30 June 2014,” the firm said.
This followed an updated feasibility study which showed a large amount of capital was required to develop the decline project.
The write-down would reduce the net profit of the company but would not have an impact on its cash balance and free cash flow, it added.
“Our planning process was specifically aimed at ensuring that Harmony is a safe, profitable and cash generative company,” said Graham Briggs, CEO of Harmony Gold who added that business planning for its 2015 financial year took cognisance of issues such as future gold prices, exchange rates, life of mine plans and operating and capital cost estimates.
“A portion of the Phakisa project area will be more efficiently mined from Tshepong and this has been included in the business plan of Tshepong,” he said.
“We will re-consider the Phakisa decline in future, as the project as a whole is worth investing in’, said Briggs.
Harmony’s Phakisa mine produced 78,000 ounces of gold in the 2013 financial year with the decline shaft expected to extend the life of mine to about 21 years at a production of 90,000 to 100,000 oz/year.
“We are not saying yet what the life of mine at Phakisa has been adjusted to ahead of the year-end financial presentation,” said Henrika Ninham, investor relations manager for Harmony Gold.
There were no other immediate write-downs envisaged in the group although how the group plans to allocate capital to its Wafi-Golpu project in Papua New Guinea still to be made public.
The project was to be developed at a capital cost of R6bn but following the decline in the gold price, a more modular programme of development was adopted. Briggs has also recently suggested the project could be spun out of Harmony Gold.
The gold price was trading at about $1,800 in mid-2011 before falling about $500/oz by the beginning of 2014, a decline of nearly 28%.
