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Harmony sets 1,7Moz target, says Joel mine life may double

Journalist: Martin Creamer

JSE-listed gold major Harmony has given guidance that it will produce 1,7-million ounces of gold in its 2011 financial year as its suite of new gold projects ramp up - and sprung a surprise that the life of Joel gold mine may double.

While there is very little unforeseen in the reported build up of Kusasalethu - formerly Elandsrand - where 310 000 oz a year is being targeted over 25 years; Phakisa, which is expected to produce 250 000 oz a year for up to 21 years; and Doornkop, where production of 210 000 oz a year is expected over 15 years, new exploration drilling pointing to 80 000 oz/y Joel's life-of-mine perhaps rising from seven years to 14 came out of the blue.

"The six boreholes at Joel really indicate that we have another level to go in Joel, potentially that could double the life of Joel," Harmony Gold CEO Graham Briggs tells Mining Weekly Online.

Harmony's 1,7-million ounces of gold projected for the upcoming year follows its production of 1,46-million ounces in the 2010 financial year to June 30.

"The 1,7-million ounce target is going to be a stretch, and operating guys are sure going to have their work cut out," says Briggs.

The previous target of 2,2-million tons by 2012 - set prior to it taking 170 000 oz out of its production by closing nonprofitable shafts - has been cut.

"Two-million ounces by 2012 is now the target because we have closed a lot of operations. But the build up from the new operations is strong, so we're confident of out new projections," Briggs says.

The company overall is on the production ascendancy: "We're really set to grow, generating our own cash to develop our own projects, and to pay dividends," Briggs says.

He estimates that Harmony is two-and-half years away from firing on all cylinders, which will provide the cash to fund the Wafi/Golpu project, of which Harmony owns 50%.

"Wafi/Golpu is going to be a great mine. Fortunately, feasibility studies take time and when the real demand for cash comes at Wafi/Golpu, then our cylinders here in South Africa are going to be pumping enough cash to support that growth. We're looking good as far as timing goes with that cash demand," he says.

Harmony, which produces more than 90% of its gold in South Africa, is looking to diversify geographically beyond this country and Papua New Guinea, but has nothing definite in its sights yet.

In South Africa, as part of the Pamodzi acquisition, Lorraine has been renamed Target 3 and form part of Harmony's Target operations.

"We're down the main shaft. The sub shaft, where the higher basal reef is, is taking some time to fix up. But that will get going, and we have good plans for it," Briggs tells Mining Weekly Online in a video interview.

Moderate mining is taking place at President Steyn 2 shaft: "It's been quite challenging improving the infrastructure."

A clean up of the President Steyn plant is also under way.

"We're producing some revenue from the Steyn plant and spending a bit of capital on the two shafts."

Separate Evander Listing Off

Harmony has decided not to list the Evander assets separately.

"We've looked at all the angles at Evander and have decided not to list," Briggs tells Mining Weekly Online.

It would have been a difficult listing if the company had decided to go ahead with a hiving off of Evander, as the collective assets there did not realise the benchmark of being worth R3-billion-plus.

Evander South, which turned out to be less robust than initially believed, has been taken out of the company's gold reserves. The Libra project still requires development and, with drilling still under way, the Poplar area could not be banked.

Despite all the drilling that has been done at Poplar over the years, the core from previous drilling programmes was destroyed, and would have delayed the compilation of the competent person's report required for a listing.

Evander South, because of grade limitations, will require further enhancement and a focus on the higher-grade portions of both Evander South and Evander 8.

The capital cost also rose to R2,5-billion, which was higher than expected, but a positive outcome is that the study has enabled the company to restructure Evander 8 shaft and solve many of the environmental conditions.

Harmony Gold CEO Graham Briggs tells Mining Weekly Onlineā€™s Martin Cramer that the company plans to produce 1,7-million ounces of gold in its 2011 financial year.

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