JOHANNESBURG (miningweekly.com) – Dual-listed Harmony Gold is aiming to increase its yearly gold production from the current 1.1-million to 1.5-million ounces over the next three years.

This would be achieved by undertaking expansions at its operations in South Africa, the rest of Africa and Papua New Guinea, while also potentially acquiring low-cost, high-value assets.

Speaking during a Deutsche Bank Virtual Investor Conference webcast, on Wednesday, Harmony corporate and investor relations executive Marian van der Walt said the company had very particular criteria for any potential acquisitions.

She outlined that these included that the asset have gold reserves of between one-million and two-million ounces; is able to produce in excess of 100 000 oz/y of gold; has a mine life of at least ten years and is a low-cost, cash-generative asset with all-in sustaining costs of less than $950/oz.

However, Van der Walt stressed that asset acquisition would have to be value-accretive.

Further, she said the company had a strategy to mine safe, profitable ounces and increase margins. Van der Walt said Harmony had been achieving this goal as it had returned to a profit for the six months ended December 31, with earnings lifted by gains from gold and currency hedges.

She noted that the higher rand and US dollar gold prices received over the past year had improved the profitability of Harmony’s operations and enabled the company to enter into favourable hedging arrangements. “Positive cash flow generation from our operations enabled the company to pay a dividend and reduce net debt from R1.1-billion at the end of June 30, 2016, to R289-million at the end of December 31.”

Van der Walt said it was “vitally important” to the bullion producer to continue to strengthen the company’s cash flow, to pay dividends and to finance its growth ambitions, while also ensuring that Harmony’s share price correctly reflected its true value.

“It is important that shareholders acknowledge that we have a sustainable investment case based on prudent financial planning and capital allocation that is aimed at enhancing the value of our portfolio,” stated Van der Walt.

She explained that this all formed part of the company’s goal of achieving “operational excellence”.

GAME CHANGER
Moreover, Van der Walt stressed that Harmony saw its greenfield Golpu gold project, in Papua New Guinea, as a potential “game changer”. The project is owned by the Wafi-Golpu Joint Venture (JV), one of three Morobe Mining JV entities, and a 50:50 JV between Harmony and Australian gold miner Newcrest Mining.

She pointed out that the feasibility study (FS) results for the project stated that there could be robust returns on a large block cave mine and that the project offered staged development opportunities.

The financial metrics, according to the FS, for Stage 1 of Golpu, indicate a net present value of R1.1-billion, an internal rate of return of about 16%, a 28-year mine life and maximum negative free cash flow of $1.8-billion.

“Once in operation, sustaining production cost per pound for the project would be $0.89,” Van der Walt noted.