harmony gold lists five potential jv partners

This article illustrates the interest of the Big mining houses in the region.

Harmony to release cash flow valve
Allan Seccombe
Posted: Tue, 22 Jan 2008
[miningmx.com] -- HARMONY Gold is introducing a partner into its Papua New Guinea (PNG) assets to free up cash for its South African mines and projects – a development that would position it to grow, said Johannes van Heerden, MD of Harmony International.


Currently, a third of Harmony’s capital budget is bein spent in the PNG; mainly its Hidden Valley gold project. But there are other projects where the world’s fifth-largest gold miner would also like to spend cash, it said.

“There are projects in South Africa we want to explore and develop,” Van Heerden told Miningmx in an interview. The projects include the Evander South greenfields mine and a massive dump treatment project. And there are other avenues to grow the company.

“As a group we want to pursue a growth strategy, and we need robust cash flows to do that,” said Van Heerden, whose appointment at Harmony International was announced earlier this month.

Harmony has a short list of five potential partners that will conduct site visits in coming weeks to the Wafi/Golpu copper gold porphyry exploration prospect as well as Hidden Valley.

The potential partners are thought to include Barrick Gold which in the opinions of some analysts is leading the race to partner Harmony owing to the US group’s growing presence and experience in PNG. Newcrest, Newmont Mining and AngloGold Ashanti are also thought to have an interest in partnering Harmony.

Harmony will decide at the end of March which partner it will choose with the aim of wrapping up the transaction in June.

The deal, which could be structured as a farm-in arrangement for up to 50% of the project, is intended to wipe out Harmony International’s capital expenditure on projects. It hopes to release cash flow that will be used in the group’s South African growth projects and therefore add cheaper ounces into the group’s production profile.

Harmony has already spent R1.3bn in PNG over the past two years and needs a further R1.2bn between January and June this year, straining its already groaning finances.

Harmony has sold a number of assets, but it will take time for the cash to flow into the company. The largest sale is a 60% stake in a new uranium company for $252m.

It wants to conclude the sale of the South Kal nickel tenements in Australia for A$20m by end-February and the sale of Mount Magnet, for A$65m in cash and shares, in April. Harmony will then begin searching the South East Asian region for more gold projects.

Base metals interest

The exploration tenements in PNG are throwing up strong base metal anomalies, says Van Heerden who adds the group is interested in adding revenue from such metals.

“It’s not that we want to lose our focus on gold, but gold and base metals occur together on our tenements. If a deposit is base metal heavy, we would have to understand what we are looking at and we’d allocate exploration funds to do that,” he said.

While Harmony would be highly unlikely to develop such a project, it would partner with another company that could.


Click Here to subscribe to our daily newsletter“In that way we retain the upside and we reward our exploration budget,” he said. “If it were just a base metals play we would sit back, but if there was gold involved we’d have to apply a different model.” The Wafi/Golpu tenements are showing strong indications for zinc and lead.

Harmony wants to use the PNG partnership to transfer skills into the company, positioning it to develop on its own any further porphyry deposits it may find in the future, Van Heerden said.

“We don’t want to be a passive partner in this joint venture.”