Harmony Says Golpu May Produce 490,000 Ounces Gold a Year

Harmony Gold Mining Co., Africa’s third-largest producer of the metal, said the Wafi-Golpu deposit it co-owns with Newcrest Mining Ltd. could yield 490,000 ounces of gold and 290,000 metric tons of copper a year.

The reserve, in Papua New Guinea, probably contains about 12.4 million ounces of gold and 5.4 million tons of copper and first production could start in 2019 if an initial mine is built at a cost of about $4.85 billion, the Johannesburg-based company said in a statement today. The deposit may support a larger mine at a total cost of about $9.75 billion, it said.

Harmony, which mines more than 90 percent of its metal in South Africa, is expanding output through projects in the continent’s biggest economy and ramping up production at its existing Hidden Valley venture with Newcrest in Papua New Guinea to take advantage of gold prices that have increased for 11 straight years. It’s spending more on exploration in Papua New Guinea to reduce the proportion of production in South Africa, where mines are getting deeper and more costly to operate.

Harmony will aim to raise output from an estimated 1.3 million ounces this fiscal year to 1.7 million in fiscal 2016, Chief Executive Officer Graham Briggs told investors in Johannesburg today. Papua New Guinea now represents about 42 percent of Harmony’s metal reserves, compared with 11 percent in June last year, it said.

Project Funding

Harmony estimates it will be able to fund its share of the cost of the Wafi-Golpu mine, near Lae in the east of Papua New Guinea, largely from operating cashflow, Briggs said. Debt, project financing and bonds are also among funding options, he said. Harmony’s capital expenditure will probably increase to about 6.4 billion rand ($762 million) in fiscal 2017, he said.

The new mine “is going to generate some strong cash flows,” Briggs said at the presentation. It “oozes gold” in parts, he said. The mine would probably produce copper at a cost of $0.54 a pound, placing the operation among the world’s 25 percent lowest-cost producers, he said.

Harmony retreated 0.8 percent to 74.99 rand by the close in Johannesburg, giving a decline of 21 percent this year. Larger rival AngloGold Ashanti Ltd. has fallen 23 percent.

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