[miningmx] — HARMONY Gold Mining Company CEO Graham Briggs said he was
astonished about the scepticism the group was facing over its ability to finance the
future development of the Wafi-Golpu resource in Papua New Guinea.
The development of Wafi-Golpu, a major copper and gold resource already hosting
27 million ounces of gold and 9 million ounces of copper, is expected to cost between
$4bn and $5bn, of which Harmony would have to contribute 50%. Australia’s
Newcrest Mining holds the remaining stake. The results of a pre-feasibility study
would be released on August 29.
Presenting the group’s quarterly and annual results for the period to end-June in
Sandton on Thursday, Briggs was repeatedly asked by analysts how Harmony
planned to put together the minimum $2bn needed to get the project off the ground
once development starts in three to four years time. As at June 30, the group had a
cash balance of $216m and $221m in debt.
Briggs has so far ruled out the possibility of a rights offering, saying Wafi-Golpu
would be financed by self-generated funds and debt facilities.
JPMorgan Cazenove analyst Steve Shepherd asked Briggs whether the group might
consider selling some of its other promising prospects in PNG, while Citi’s Johan
Steyn enquired whether some of Harmony’s South African assets might be flogged in
return for development capital.
Imara SP Reid’s Percy Takunda, while not raising the issue at the presentation, also
suggested in a note to clients he expected Harmony’s management to make a
number of key investment decisions with regard to its Unisel and Joel mines in
South Africa, with potential suitors likely to be medium-tier or emerging producers.
However, Briggs said he “struggled’ with the issue on how people were cynical about
Harmony’s prospects of putting the money together.
“When 98% of us go out into the market and buy a house we don’t know how we’re
going to finance that house other than the assumption that we’re still going to have
a job and earn a salary,’ he said. “Our plans at the moment are very healthy.’
He said Wafi-Golpu was a great project with excellent grades and would be at low
end of the cost curve.
“If this is going to be one of those projects where we need to find finance, we’ll find
it easily,’ he said, adding one option was to raise money by selling forward the
copper production from the mine.
“We [continuously] see the massive capital expenditure made by other companies,’
he said. “They finance it from debt and cash-flow. We just don’t see the problem that
everyone else seems to see in financing this.’
Speaking to journalists after the results presentation, Briggs in fact didn’t rule out
the possibility of increasing its South African asset base should an opportunity come
along, although he qualified this with the provision that such an acquisition shouldn’t
put strain on Harmony’s ability to finance Wafi-Golpu.
“If we were to add any asset now we will need to keep in mind what we plan to do in
future,’ he said. “Whatever we do shouldn’t jeopardise our potential of bringing
Wafi-Golpu on stream.’
