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Harmony Quarterly Results: The elephant in the room

Publication: Money Web
Journalist: Christy Filen

Harmony’s exploration results for their Wafi-Golpu joint venture in Papua New Guinea (PNG) was the proverbial elephant in the room today. The excitement was almost tangible as the exploration results may change the face of Harmony.

Chief Executive, Graham Briggs, commented that the exploration results achieved for Wafi-Golpu were reminiscent, if not better, than Freeport-McMoRan’s exploration results for their Grasberg mine when they were at the same stage. The Grasberg mining complex is one of the world’s largest single producers of both copper and gold, and contains the largest recoverable reserves of copper and the largest single gold reserve in the world.

The results of the significant borehole WR406 showed 861 metres at 1.51g/t gold, 1.48% copper and it included 199 metres at 2.87g/t gold and 2.57% copper from 1 286 metres with some assays still pending.

Briggs says that he expects this prospect to change the face of Harmony drastically as the revenue from the copper which is accounted for as a by-product is credited to costs. He sees this credit, which could make up as much as 80% of total revenues, potentially reducing cash costs from $1300/oz to $600/oz, depending on the copper price.

Peter Major, a mining specialist at Cadiz Financial Services Group says that the Wafi-Golpu exploration results are “unbelievable”, particularly the thickness of the high grade ore body. Major went on to say that either the gold or the copper results on their own would be cause to justify mining the ore. But to have both at the same time shows potential to make it one of the “richest big mines on the planet”. He added that one of the questions he would be asking Harmony would be what the metallurgy is like as it would be interesting to see what the recoveries are for each of the metals.

When asked to comment on the comparison with Grasberg, Major said “Wafi-Golpu appears as rich, but a lot easier to mine than Grasberg, which sits at elevations of 3000 to 5000 metres high, over 70 kilometres inland in steeply mountainous terrain and in a very remote area in Indonesia. Wafi-Golpu is much closer to civilization and I don’t think even a third of the elevation.”

Harmony reported a record profit of R1.3 billion for the quarter which was an improvement of 45% on the previous quarter. Overall grades and production remained stable with gold sold 4.5% down compared to the previous quarter.

What made these results more impressive is that they were negatively impacted by higher winter electricity tariffs as well as industrial action which resulted in lost production of approximately 500kg of gold.

The gold price for the quarter reported by the company ranged between $1500/oz and $1624/oz. The first month of the current quarter has already shown a 6% increase since the end of September. It can only be expected that, barring any unforeseen events, the next quarter could be even better.

Briggs joined the gold bulls and concluded by saying that he doesn’t believe that the gold price is a bubble and that it will continue to increase.

His view on the nationalisation debate is that there is a misunderstanding and miscommunication on what value mining companies add to the country in terms of employment, taxes and investment. “We need to create a more vibrant mining industry” he said.

Harmony’s share price broke through its 52 week high of R106.00 to reach R108.62 during the day, but losing lower at R104.51. This was an increase of 1.47% on the previous day’s close.

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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