Business Day

Newcrest woes bad news for Wafi-Golpu project

- Allan Seccombe Resources Writer seccombea@bdfm.co.za

The last thing the partners in the undevelope­d Wafi-Golpu gold and copper prospect in Papua New Guinea want right now is for one of them to have difficulti­es with their flagship mine.

Harmony Gold and its Australian partner Newcrest Mining share the Wafi-Golpu deposit in Papua New Guinea and they are finalising an updated feasibilit­y study on building a mine, processing plant and tailings facility. The study is due for completion at the end of March.

The bad news for the partnershi­p is that Newcrest has shut its flagship Cadia mine in New South Wales, Australia, after an earthquake damaged one of its tailings facilities.

“Whilst it is too early in the evaluation and recovery process for Newcrest to provide an indication of the extent to which financial year 2018 production, capital and cost guidance will be [affected], this event will adversely [affect] guidance for financial year 2018 given the contributi­on of Cadia to the overall outcomes of Newcrest,” the company said.

For Newcrest to think of starting a project costing hundreds of millions of dollars in Papua New Guinea when it is losing revenue and faces the bill for repairing its tailings dump is going to be difficult.

The study, which will be made public in coming months, will precede a decision from the Papua New Guinea government on whether to exercise its right to earn into a 30% stake in the project and subsequent mine, something that will leave Harmony and Newcrest with a 35% stake each in the mine and, consequent­ly, a lower capital bill. A decision on whether to build a mine is some months away, but it is still unclear how long Cadia will be out of operation.

Cadia was the most important mine in Newcrest, said RBC Capital Markets analyst Paul Hissey. He calculated the mine accounted for A$12bn ($9.44bn) of the company’s A$17bn value.

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