PERTH (miningweekly.com) – Australian gold miner Newcrest Mining has agreed to sell its half of the Hidden Valley mine, in Papua New Guinea, to its South African joint venture (JV) partner Harmony Gold.

Harmony will buy the 50% interest in the Hidden Valley JV for a cash consideration of $1, the companies announced on Monday. 

“Having completed the strategic review of Hidden Valley, Newcrest determined that the best outcome was to exit the operation and focus our attention on safe, profitable growth at our other assets,” said Newcrest MD and CEO Sandeep Biswas said in a statement.

Harmony CEO Peter Steenkamp said that the acquisition of the Hidden Valley mine was aligned with the South Africa-based group's overall aspiration to increase its yearly production profile to 1.5-million ounces within three years.

"We believe that Hidden Valley has the potential to contribute approximately 180 000 oz/y of gold to Harmony’s production profile at an all-in sustaining cost of less than $950/oz within the next three years,” he said.

At June 30, 2016 the Hidden Valley mine had an estimated mineral reserve of 1.4-million ounces of gold at 1.6 g/t and 27-million ounces of silver at 31 /t, resulting in total gold equivalent ounces of 1.8-million ounces at 2 g/t. The estimated mineral resource includes four-million ounces of gold at 1.6 g/t and 73-million ounces of silver at 29 g/t.

Harmony stated that mining the stage 5 and 6 cutback would extend the current mine life by seven years and require an initial capital investment of about $180-million.

Harmony will assume all liabilities and expenses related to the mine, including all closure, rehabilitation and remediation obligations, effective from August. Newcrest said that it would reverse the $35-million provision for rehabilitation obligations for Hidden Valley, which it made at the end of the financial year in June.

As part of the transaction, Newcrest has funded its Hidden Valley vehicle Newcrest PNG 1 with $22.5-million, which represents the company’s one-off contribution towards the future Hidden Valley closure liability partially offset by the option value of the possible future cash flows of the asset.

Harmony has made commitments to Newcrest in relation to the standard of closure to be undertaken at the mine.

In addition to its 50% shareholding in Hidden Valley, Newcrest has also signed an agreement to sell its 50% interest in certain regional exploration tenements adjacent to Hidden Valley, to Harmony.

The completion of the sale is subject to South African regulatory approvals.

Harmony and Newcrest will continue to work together on the Wafi-Golpu project, also in Papua New Guinea.

“Acquiring 100% of the Hidden Valley mine and its surrounding exploration tenements meet our acquisition criteria. After the initial investment phase Hidden Valley will generate strong free cash flows, which could be applied to the development of the Wafi-Golpu project and our exciting exploration portfolio in Papua New Guinea,” Steenkamp added.