Harmony cut costs at Hidden Valley

[miningmx.com] — HARMONY Gold Mining Company said on Tuesday it had cut costs at its Hidden Valley mine in Papua New Guinea though had unscheduled “mechanical downtime” on an ore conveyer.

The company also gave estimates for productiom at its Wafi-Golpu project but analysts said while they were promising they remain so wide that it is difficult to assign a valuation based on them.

Production costs in the second quarter were 20% lower than the first, and should fall further, the gold miner said on its website.

It said further reductions would be driven by increasing production and the establishment of reliable hydro power.

Harmony shares roared higher last week after a research note said it was vulnerable to a takeover.

Hidden Valley, which officially opened in September 2010, is expected to produce 250,000 ounces of gold per year and 4 million ounces of silver.

“Quarterly production levels have shown a positive trend in H1. However Q3 is likely to show only modest improvement,” Harmony said.

“The main influence has been unscheduled mechanical downtime on the overland conveyor resulting in a restricted ore supply to the mill.”

At Wafi-Golpu, the company said production could eventually reach 300,000 to 700,000 ounces of gold each year and 200,000 to 320,000 metric tonnes of copper.

It is estimated to contain around 16 million ounces of gold and 4.8 million metric tonnes of copper.

“A valuation at this point is difficult because it is such a wide range,” said one London-based mining analyst.

RBC Capital Markets last week that Wafi-Golpu would figure in earnings forecasts for the company down the road and eventually it could add $1.5bn to $2bn to the value of Harmony, 40% of its market value then.