Gold major Harmony has nabbed the provisionally liquidated Pamodzi Gold Free State resource for $2/oz.

Harmony CEO Graham Briggs, in a first-time revelation, says that Harmony has bought the Pamodzi asset for R405-million.

He calculates that, at R9,33 to the US dollar, the R405-million translates into a dollar purchase price of $43,3-million.

Analysed further, that translates into a dollar-an-ounce price of $2,33/oz for Pamodzi Gold Free State’s 18,6-million resource ounces, and $24/oz for the company’s 1,82- million reserve ounces.

Harmony, which has mines surrounding the Pamodzi Gold Free State assets and which, thus, expects to unlock a wide range of synergies from the stricken assets, expects even more upside, as it believes the calculation of the 1,82-million reserve ounces to be conservative.

“This is not a reserve that Harmony has signed off on, and we believe that the reserve is probably closer to between 2,5- million ounces and three-million ounces. “We have not been able to spend a lot of time auditing the reserve,” Briggs tells Mining Weekly, resulting in Harmony using the reserve figure that Pamodzi Gold has declared.

Briggs reports that both the labour unions and the State-owned Industrial Development, which is the preferred creditor, have accepted the transaction.

“The deal now has [to be processed] through the courts and, hopefully, that will happen during the next few weeks,” Briggs tells Mining Weekly.

Pamodzi Gold Free State is expected to add as much as 150 000 oz/y to Harmony’s gold output and eventually provide employment for 2 500 people

In the financial year to June 2009, Harmony produced 1,55-million ounces and the company has a target to produce 2,2-million ounces of gold a year from 2012.

The mines that will contribute to this additional production are Phakisa and St Helena, in the Free State, which will add 338 000 oz/y in 2012, Hidden Valley, in Papua New Guinea, another 150 000 oz/y, Doornkop and Elandsrand 200 000oz/y and productivity improvements and other mines another 150 000 oz/y.

Briggs expects a four-year payback on the Pamodzi investment: “It’s got lots of synergy and growth potential. “We can get synergy with management and different shafts and different parts of the organisation. “We don’t have to add more management to have to manage Pamodzi Free State,” Briggs adds.

The transaction is subject to Harmony obtaining the mining rights from the Department of Mineral Resources.

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