HARMONY Gold plans to write-down its Target North gold resource in the Free State province for R2.79bn – a development that takes the gloss off a stellar production and financial performance for the 12 months ended June.
The South African gold miner said in a trading update on Monday that less gold was now potentially mineable at Target North following a five-year drilling campaign in which modern exploration techniques were applied.
Peter Steenkamp, CEO of Harmony said in a media conference that Target North had only been in concept study and that it was competing against a strong pipeline of near-term prospects, including the group’s Eva Copper project in Australia.
The key finding of the exploration at Target North was a preliminary inferred mineral resource estimate of 13.8 million ounces compared to a resource estimate of 67 million oz in 2004. “The latest Mineral Resource estimations were done focusing on a portion of the orebody and indicates reduced ounces at a higher grade than the previous estimate,” said Harmony in its update.
However, the mineral resource estimate is yet to be approved by Harmony’s newly appointed auditing firm, Ernst & Young which has the numbers under review. As a result, Harmony has postponed its full year results announcement planned for Wednesday (August 28) to September 5.
Steenkamp said the company was not involved in a dispute with its auditor. “We only got the drilling results from Target North in July, after the year-end closed,” he said. “We remain confident in our valuation.”
Despite the impairment on Target North, Harmony said it expected to report a 78% year-on-year improvement in earnings of R13,85/share for the 12 months.
This was owing to higher-than-guided gold production, as previously reported, of 1.56 million oz – six per cent higher year-on-year. This was due to higher average grade at the South African underground operations, mainly Mponeng and Moab Khotsong up by 6% to 6.11g/t from 5.78g/t previously. All-in-sustaining costs “will come in comfortably below R920 000/kg,” Harmony said.
Headline share earnings would be 100% better year-on-year coming in at R13.85/share.
Other factors behind the improved numbers was increased production of silver and uranium from Harmony’s Hidden Valley mine in Papua New Guinea, and Moab Khotsong. As with gold, both silver and uranium prices have increased in the period under review.
Harmony also said it remained confident in its group mineral resource and reserve statements, adding that Target North’s gold had not been included in its calculations since 2007.
A new recoverable amount of R888m has been imputed to Target North. The asset was impaired by R1.56bn in 2018 on the basis of lower resource multiple prices. Harmony lowered the multiple following its acquisition of Moab Khotsong from AngloGold in that year.
“Harmony delivered an exceptional combined performance across all our operations in FY24,” said Steenkamp. “This achievement was a result of clear strategic intent and successful execution, enabling us to deliver ahead of plan and capitalise on higher gold prices,” he added.
Shares in Harmony are nearly 60% higher year-to-date. The company is currently capitalised at R118.6bn, just off its August 20 record high.
