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Copper sales to account for 80% of Harmony’s part-owned Papua New Guinea mine

GOLPU PROJECT DRILL SITES The first stage of the project targets first production in 2020 from an orebody containing about 20-million ounces of gold and 9.4-million tonnes of copper

GRAHAM BRIGGS The Golpu project will extend the life span of Harmony Gold’s asset base and will provide shareholders with lasting financial benefits

Photo by Duane Daws

30th January 2015

By: Ilan Solomons

Creamer Media Staff Writer

  

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Copper production sales are to account for about 80% of gold mining companies Harmony Gold and Newcrest Mining’s $2.3- billion Golpu project, in Papua New Guinea, Harmony CEO Graham Briggs tells Mining Weekly.

Harmony and Newcrest each own 50% of the Golpu project through the Wafi-Golpu joint venture (JV), which was approved last month, enabling the Golpu project to proceed to feasibility study level.

The first stage of the project targets first production in 2020 from an orebody containing about 20-million ounces of gold and 9.4-million tonnes of copper.

With a grading of 1.6% copper and 1.02% gold for Stage 1, the deposit ranks among the higher grades of copper/gold deposits worldwide, Briggs notes.

“When mining starts . . . in 2020, we will produce a 28% copper concentrate, which will be shipped out to smelters in nearby Asian countries, such as China, South Korea and India, as there are no smelting facilities in Papua New Guinea,” he explains.

The concentrates will account for about 7.5% of the raw materials mined at the project.

Briggs highlights that, as global demand for more copper for infrastructural development projects – particularly from developing countries such as China and India – and for technologies increases, the need for copper will remain strong.

“This provides the Golpu project with positive long-term prospects,” he enthuses.

South African Benefit

Briggs points out that JSE-listed Harmony’s shareholders, the majority of whom are South African, will directly benefit from the dividends that are paid out once the project is generating profits.

“The shareholders could also decide to reinvest the dividends in local projects, which would further benefit the country.”

Additionally, he highlights that there are opportunities for local engineering and mining contracting companies to tender for work on the project.

Briggs believes that the Golpu project – with an expected life-of-mine of 70 years – will ensure long-term sustainability for the company, as it extends the life span of its asset base and will provide shareholders with lasting financial benefits.

Harmony and Newcrest will share the project’s early-stage development costs (50:50), with Harmony investing in the project during the early-stage development period using its internal cash flows over the next three years.

“For the current financial year (FY), Harmony is investing $15-million, with $55-million to be invested during FY2016 and $105-million in FY2017,” notes Briggs.

He says that, after FY2017, there will be another three years of negative cash and, at that time, the company will consider other funding mechanisms such as debt finance.

However, Briggs adds that the company could also sell the future copper that the mine will produce to investors to raise additional funding for the project.

Briggs acknowledges that there are always challenges that have to be overcome when operating in another country, as one has to familiarise oneself with the climate, the terrain, the business environment, the language, the culture and the politics of the country.

He highlights that, as Harmony has been operating the Hidden Valley gold and silver mine, in Papua New Guinea, since 2003, the company has developed a good understanding of the region.

Further, Briggs notes that the Golpu project is only about 65 km from the country’s largest port city of Lae, which has sufficient infrastructure, such as an established port terminal, to enable the company to export its copper and gold concentrate.

He adds that the JV will have to undertake only minor infrastructure developments for the project, such as the building of several small roads and a bridge.

The mine is expected to employ about 1 500 people and will also create further indirect job opportunities for locals by enabling them to establish businesses to supply the mine with equipment and other basic essentials.

The project will also use significant amounts of electricity and the JV is seeking government’s assistance in contracting third-party power suppliers, as it has previously done at its Hidden Valley operation.

“This will ensure that an oversupply of electricity is created in the long term, which will enable large- and small-scale manufacturing operations to be established in the area surrounding the mine, thereby creating many hundreds of additional job opportunities for locals and providing the country broadly with new sources of revenue production,” Briggs concludes.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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