Go deep or go away

Should Harmony deepen an already 3.7km-deep mine in power-starved SA or go large in copper in Australia? It’s a tougher call than it seems

● Harmony Gold’s nonexecutive directors will be earning their fees this year with one weighty, strategy-defining decision pending. That is whether to build a new copper mine in Australia or stick to its knitting by deepening an existing gold mine in South Africa.

If feasibility studies due at the end of this year check out, the projects could fly simultaneously, at least in theory. In practice,

TOUGH CHOICES

Harmony may be hard-pressed to do both. It reported a ratio of debt to earnings before interest, tax, depreciation and amortisation (ebitda) of 0.6 as of end-December. While that ratio comfortably falls within its debt covenant, the board thought it prudent to pass the interim dividend ahead of a R17bn stay-in-business capital programme for 2023 and 2024.

The Eva copper project was acquired last year for $170m and, based on a study completed by its former owner, Copper Mountain Mining Corp which Harmony is updating it will cost another $600m to build. However, the project has a short lead time of two years before production of a metal the world desperately needs. Harmony expects there to be no shortage of financiers especially given the project’s location in a developed economy.

In the other corner is Gauteng’s Mponeng mine, which Harmony bought from AngloGold in 2020 for $200m in cash excluding add-ons. Mponeng is a treasure but it operates at 3.7km, making it the world’s deepest gold mine. The Mponeng “Deeps” project therefore represents a technical frontier and an economic stretch. There are also sovereign risks with which local mining industry toils daily, including electricity inflation and safety.

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