Seeking golden oldies
Harmony Gold could reprise its role as the buyer of old gold mines from other companies, says CEO Graham Briggs. This harks back to the 1990s, when Harmony grew from a single mine to one of the world’s biggest gold producers.
Under then-CEO Bernard Swanepoel, Harmony bought assets, primarily from AngloGold Ashanti, to build a company that boasted of its ability to cut costs to a minimum and eke out many more years of life from mines sellers no longer wanted.
Harmony shut a number of mines in recent years where the ore bodies have been depleted. It has also sold some mines. The R1,3bn sale of Evander was a notable success story for new owner Pan African Resources.
In the current environment, where cost pressures have risen rapidly and show no signs of slowing, profit margins are paper-thin or have vanished. Harmony has embarked on a range of restructuring exercises, most noticeably at Kusasalethu, near Carletonville, its largest mine. It has rolled out the process at Masimong (Welkom) and Doornkop (outside Johannesburg) as it adopts a strategy of a smaller work force mining the higher-grade areas.
“We are not bad operators, despite what some people think. We mine efficiently because our grades are lower than everyone else’s grades,” Briggs says.
“We’ve been able to mine operations where other companies have given up . . . maybe, just maybe, we will again probably have to buy assets where other people have said we can’t mine them any more.”
In 10 years, assets like Unisel, Bambanani and Masimong will be mined out. Others like Tshepong and Phakisa will still be going. “If we are a serious gold company and we’re paying dividends and so on, we’ll buy other mines,” he says.
In the SA gold industry the only owner of sizeable assets that would attract Harmony’s interest is AngloGold Ashanti, but analysts warn it would face stiff competition from Sibanye Gold, headed by canny dealmaker Neal Froneman.
Harmony was interested in Barrick Gold’s Porgera mine in Papua New Guinea when it was put up for sale, Briggs says. Barrick, however, chose to enter a joint venture with China’s Zijin Mining. Harmony is a 50% partner with Australia’s Newcrest Mining in the Hidden Valley gold mine in Papua New Guinea and the undeveloped Wafi-Golpu copper and gold deposit there too.