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Harmony to reduce debt with cash inflow

Publication: Miningmx
Journalist: Julie Bain

HARMONY may use the R4bn raised through the sale of a 50% stake in its Papua New Guinea (PNG) gold operations plus the sale of a stake in its Randfontein uranium assets to pay down its R4bn in debt.

Harmony sold 60% of the Randfontein uranium assets to the Pamodzi Resources Fund while its partner in the PNG operation will be Newcrest Mining.

The money should reach Harmony's bank account in June when all the conditions have been met, said CEO Graham Briggs.

As it stands, Harmony has a R2bn loan with Nedbank and a R1.7bn convertible bond. Briggs said it is unclear exactly how the money will be used but it was likely some would be used to pay off debt. Other funds might be use to progress a number of early stage projects in the company.

"We have effectively wiped out the debt," said Briggs. He added that, with Newcrest now going to be paying some of the development costs in PNG, Harmony will be in a "cash positive" position.

Harmony is selling 50% of its PNG assets to Australian gold miner Newcrest Mining for $525m.

The sale includes the Hidden Valley gold mine and the Wafi-Golpu deposits as well as prospecting areas around Wafi-Golpu, which has significant copper and gold resources.

Hidden Valley is expected to produce more than 250,000oz of gold and 3.6Moz of silver annually over a 14 year mine life. Production is scheduled to start around the middle of next year.

Harmony had a rough ride last year, failing to meet its production targets as well as being knocked by an accounting bungle and the departure of former CEO Bernard Swanepoel.

New CEO Briggs is tackling the company's problems in a methodical fashion. He said he hoped that the current June quarter will be the one which shows Harmony is back on track.

Briggs said the March quarter was a difficult one but that Harmony was now in a more comfortable operating and financial position, having carried out a "huge amount" of restructuring in South Africa.

"We are in a better state now than we have been in before," said Briggs who commented Harmony was now in a position to reap the benefits of the restructuring exercise.

He indicated that, when the dust settled on the recent sale of assets with the money safely in the bank, Harmony may once again look to add to its resource base.

Briggs commented that, "Harmony needs to start a new frontier somewhere. We have good skills in Australia. South East Asia is a good area and we are getting to know the projects there," said Briggs who is a geologist by training and played a key role in the development of Harmony's PNG assets.

"We have skills in Africa and we just need to have a look and see what opportunities are open in Africa," he added.

Harmony's exploration expenditure in the 12 months from last July to the end of June this year will amount to around R17m and most of that was spent in PNG, said Briggs.

There had also been some additional exploration at Harmony's Evander mine as well as assaying of the company's mine dumps in South Africa.

Harmony is expected to produce between 1.7 million to 1.8 million ounces of gold this financial year. It will report its results for the March quarter on May 8.

Annual report

Integrated annual report 2016
Integrated annual report 2017


Investor brief

Harmony Investor brief, Sep 2017
September 2017 -
Harmony Investor brief

(PDF - 6.5MB)

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