Harmony is over its near-death experience

Harmony Gold’s recovery from a “near-death experience” a few years ago was further evidenced by its bold R4.1bn purchase of a suite of gold and uranium assets from AngloGold Ashanti and positioning the company to make a decision on what to do with the Golpu copper and gold project in Papua New Guinea.

Harmony CEO Peter Steenkamp hailed the purchase of the profitable Moab Khotsong mine and its sister Great Noligwa mine, which was mothballed, along with 70-million tonnes of gold-carrying tailings and the entire Nufcor.

Nufcor is SA’s only uranium calcining operation, which treats material from Moab and third parties.

“When I got the job two years ago, Harmony was in very big trouble. It had very high levels of debt of R5bn, half its market capitalisation.

“It had a near-death experience, but since then we’ve stabilised our production at 1-million ounces a year, a sustainable level, we’ve done good acquisitions at Hidden Valley in Papua New Guinea and now

these assets from AngloGold,” Steenkamp said.

Analysts said Harmony was paying a full price for the AngloGold assets including Nufcor, which Steenkamp said he doubted Harmony would keep, considering the prevailing low uranium price of about $20 per pound.

“There is lots of value that can be unlocked, but this will require capital and a bit more risk in terms of mining, as a lot of this upside will come from mining pillars not in the AngloGold plan,” said Nedbank mining analyst Arnold van Graan.

“Pillar mining obviously carries a higher safety risk, but Harmony is expert in pillar mining. From the market’s perspective though, there is probably a perception that the risk increases,” Van Graan said.

While the purchase of the cash-generative Moab puts Harmony in a better position when it comes to deciding on Golpu, Steenkamp sounded an unusually noncommittal note when referring to a great asset and one for which a final feasibility study is under way and due for completion in 2018.

“If we have to put 50% of the capital in we will never have that kind of money.

“If the Papua New Guinea government takes their 30% of Golpu, then we can have a look at what we have.

“Everyone sees Golpu as a threat for Harmony, but it’s not. It’s an opportunity. We could sell right out of Golpu, or we could remain partially in the project or keep our full stake,” Steenkamp said.