JOHANNESBURG (miningweekly.com) – South Africa’s Harmony Gold is now in the next significant special-mining-lease milestone on the journey towards the co-development of the rich Wafi-Golpu project in Papua New Guinea (PNG), 65 km south-west of the Port of Lae, PNG’s industrial hub and second largest city.

Harmony owns 50% of this tier-one gold/copper asset, which a study shows will generate significant free cash flows of $900-million a year in the first ten years of steady state production. (Also watch attached Creamer Media video).

The PNG government holds an option to buy 30% of the project, located in the Morobe province.

An updating of the feasibility study has rendered the project considerably more fundable than in the past, with total life-of-project capital now A$1-billion lower at A$5.38-billion.

“We believe that in this financial year, we’ll have completed all the work and all the negotiations with government. So, by the end of this financial year, we should be in the position where we actually have all the agreements in place in terms of how we are going to take this forward.

“Then, obviously, we need to work on our funding plan because we need to give the market and everybody comfort that we’re able to build the project,” Harmony CEO Peter Steenkamp told Mining Weekly Online in the attached video interview.

Wafi-Golpu’s long 28-year mine life and ultra-low expected production cost makes it what the South African mining fraternity generally refers to as “a dripping roast”. Remarkably, the copper credits will result in the gold being provided free, gratis and for nothing.

“It’s such a big copper deposit that if you just measure the gold you can actually mine the gold at negative cost,” said Steenkamp.

At steady state production, the mine will produce 266 000 oz of gold a year, and more than 1.4-million gold equivalent ounces a year when one includes the yearly output of 166 000 t of copper.

The updated feasibility study highlights an internal rate of return of 18.2% and the lowest decile cost copper production of $0.26/lb.

Harmony’s production profit in the 12 months to June 30 rose by 20% to R5.3-billion and, excluding the impairment, the company had headline earnings of R763-million for the year, of which it invested R500 000 in the Wafi-Golpu project.

The funding of Wafi-Golpu is the capital allocation task ahead of Harmony.

“This project, after we’ve redone the feasibility study, is a much more fundable project than we had in the past, and certainly something that is attracting the attention of the investors,” Steenkamp added.

ORGANIC GROWTH OPPORTUNITIES

Harmony is carrying out several prefeasibility, feasibility studies and exploration in South African asset spaces that are providing ample organic growth opportunities to fill a sharp projected production decline in 2023 and 2024.

On the radar are six projects in South Africa that were all advanced in the last financial year.

The first on the list is the optimisation of Harmony’s only opencast mine at Kalgold, where drilling results are pointing to a potential enlargement of this asset.

Entering the investment decision phase is the expansion of the company’s Central Plant tailings retreatment operation from a 300 000 t a month throughput to one of 500 000 t a month. Also in tailings, the feasibility study into the development of the Mispah tailings project is scheduled for completion by June next year.

The completion of the study into the feasibility of extracting gold from the pillars at the Great Noligwa mine acquired in the Moab Khotsong transaction is imminent and under the spotlight too, as part of the same transaction, is the development of Zaaiplaats, a high-grade orebody that looks like a “very lucrative proposition”.

In the longer term, Target North is expected to come into focus with current exploration drilling yielding encouraging results.

“Zaaiplaats is a big high-grade orebody, that looks like a very lucrative proposition. Target North is a little further down the line. We have managed to get the Target North prospecting right into a mining right and certainly from where we sit we believe that we need to go drill that now and find out what is available there. We have concepts in terms of what we think is there on the back of quite a lot of drilling that’s been done in the past, but we need to firm up on these theories,” Steenkamp said.

Target North is said to have major mechanised mining potential, interspersed with conventional mining.

Harmony is striving to have the correct quality of gold ounces and is prepared to cut back on production in the interests of improving margins.