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Harmony in no hurry on Evander unbundling


Publication: miningmx.com
Source: miningmx.com
Journalist: André Janse van Vuuren

[miningmx.com] -- HARMONY Gold said on Monday a decision on a proposed separate listing for the company’s Evander operations would be made within two years, as it was considering all sorts of options to make the most of the asset’s potential wealth.

CEO Graham Briggs first hinted in August that a separate listing for Evander was back on the cards, following an abandoned process in 2010, saying Harmony’s shareholders had wanted the group to direct its capital and management focus on the expansion projects in Papua New Guinea (PNG).

"Our major shareholders want us to stay focused on our operations and projects in PNG," Briggs said in August. "They won't support us on an expansion of Evander because of the South African investment issues."

The effect of Evander’s turnaround was again demonstrated in the quarter to end-September, with gold production up 13.9% at 854kg, and the recovery grade much higher at 6.94g/t, from 5.68g/t in the June quarter. The asset, however, has the potential to deliver much more, with a total of 610,000kg gold resources in the indicated category as opposed to 42,000kg of measured resources being mined at the operational Evander 8 shaft.

“Evander has a current life-of-mine of 11 years, so you can’t wait longer than two years before deciding on how you’ll proceed,” Briggs said. “Nothing is certain, we’re looking at all sort of options of what would work best for Evander.”

Harmony’s total production for the latest three months remained flat when compared to the July-quarter, at 328,162 ounces - up 0.5%. The 25% increase in the rand gold price translated into a 45% increase in operating profit (R1.3bn), but this failed to dampen analysts’ concerns over whether Harmony would achieve its production guidance of between 1.45 and 1.55 million ounces for the full financial year (to end-June).

Analysts attending the result presentation also pointed to the fact that the overall achieved grade of 2.09 g/t remained disappointing.

Briggs responded that the past quarter was affected by “a few issues”, including the sector wide wage strike that accounted for 500kg of lost production, as well as a safety stoppages at Tshepong. “Getting back to operational levels (following an outage) is always problematic,” said Briggs, adding he remained confident that the year’s production guidance would be met.

WAFI-GOLPU

Briggs confirmed earlier guidance that Wafi-Golpu’s prefeasibility study would be completed by June 2012, and that Harmony’s 50% share of estimated development costs of between $3bn and $4bn could be funded from the group’s own bank account if the price of gold remained high.

“That decision (on financing) is still two to three years out,” said financial director Hannes Meyer.

TRANSPARENCY

Briggs said Harmony enjoyed fantastic relationship with PNG’s authorities and that both the company and South Africa could learn a lot from how things are done in that country.

“I’ve spent a week there where I’ve met the Prime Minister and half the cabinet,” he said. “It was no big fanfare, just a constructive discussion around a table.”

Harmony in August created an executive director’s position for government relations, filled by Mashego Mashego, to improve liaison with South Africa’s regulatory authorities.

Briggs said what South Africa lacked was some common thinking around how mutual objectives could be achieved.

“We need a lot more transparency to know who owns what,” he added, saying that the online rights system was “not as transparent as it should be”.

Harmony’s shares were trading up 3.9% at R107.10 around 14:15, despite falls of 1.31% and 1.04% in the All Share Index and gold price respectively.

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