THE inclusion of production from the recently acquired Moab Khotsong would take Harmony Gold’s gold output in its 2018 financial year to 1.18 million ounces, an increase of 80,000 oz over the firm’s previous guidance.
The mine, which Harmony said in October it would buy from AngloGold Ashanti for $300m, had added 24,563 oz in the March (third) quarter.
Commenting in the firm’s published March quarter numbers, Harmony CEO, Peter Steenkamp, said production would also be boosted by Hidden Valley, the Papua New Guinea mine in which Harmony has invested $180m in an effort to double previous production to 150,000 oz/year. The mine was currently ramping up, he said.
Annual guidance for Hidden Valley of some 90,000 oz was intact, Harmony showed in its March numbers. Interestingly, the mine produced a cash operating margin of 38% in the March quarter against a margin of 22% in the previous year. Some analysts have been sceptical of Harmony’s ability to impose a turnaround at Hidden Valley which was heavily loss-making in Harmony’s 2015 financial year.
Group production and underground grade remained flat at 256 660 oz, and 5.02 grammes per tonne respectively in the March quarter. Cash operating costs increased 5% to R467,090/kg representing a 16% increase in US dollar terms to $1 215/oz when compared to the comparative quarter ended 31 March 2017. As a result, the group’s all-in sustaining costs (AISC) would remain as previously forecast at some R520,000/kg.
Harmony has currency and production hedges in place, however. This has protected its margin against the stronger rand/dollar exchange rate that has played havoc with other precious metal producers since January. The rand strengthened by about 10% in the March quarter on a year-on-year basis, but the group’s price received was 2% stronger year-on-year at some R559,538/kg compared to R546,772/kg in the March quarter last year.
Harmony’s Unisel and Joel mines, where either restructuring or development is underway, continued to lose money in the March quarter. Harmony said mining of the Leader Reef at Joel had been stopped to accelerate mining of the higher grade pillar areas – a step it announced in December. “The operation was successfully restructured during the March 2018 quarter and the majority of employees transferred to other operations with vacancies. An improved performance is expected from Unisel during the June 2018 quarter,” it said.
At Joel, a decline project was nearing completion and development in the footwall areas had commenced. Development is expected to continue for 12 to 18 months whereafter grades are expected to increase to reserve grade, said Harmony.
Harmony is scheduled to announce its full-year numbers in August where focus will fall on the impact of Moab Khotsong. Harmony said the integration of its information technology systems, management, and operating processes at the mine was “… progressing well”. Questions will also be posed about the impact on the group’s balance of both Moab and Wafi Golpu, a significant copper/gold prospect in Papua New Guinea.
Harmony said in March it would spend $1bn less on the project and that it would produce about 29% more copper and gold over a shorter time frame following completion of a new feasibility study. The project is shared with Newcrest Mining, an Australian firm.
