Harmony Gold hunts for deals amid depleting South Africa reserves

By Felix Njini

(Bloomberg) – Harmony Gold Mining Co. is assessing the acquisition of new assets, including AngloGold Ashanti Ltd.’s last underground operation in South Africa, as it seeks to replace depleting reserves.

While gold output rose 17% in the year through to June, Harmony needs new capacity as its South African mines run out of viable ore and a project in Papua New Guinea stalls amid regulatory challenges, said Chief Executive Officer Peter Steenkamp. The Mponeng mine being sold by AngloGold is one “opportunity,” but the company is also looking for deals across Africa, Australia and Southeast Asia, he said.

“We are constantly, constantly looking at opportunities in those three regions,” Steenkamp said in an interview on Tuesday. Indonesia and Ghana are two countries of particular interest, he said, even though no projects have been identified yet.

Harmony is still heavily dependent on South Africa, where the gold industry is shrinking amid the geological challenges of exploiting the world’s deepest mines. Potential deals in its home country are complicated by government rules intended to redistribute the benefits of mining more widely to make up for racial discrimination during apartheid, the CEO said.

“Harmony will be operating in South Africa for a very long time,” Steenkamp said. “We are not against any investment in South Africa provided it matches our criteria and we can make money out of it.”

Papua policy

Production in the last fiscal year was boosted by Moab Khotsong, a South African mine it previously bought from AngloGold, and its existing Hidden Valley operation in Papua New Guinea. Harmony expects its output to be little changed at 1.46 million ounces in the current financial year.

The company is looking at operations that produce more than 100,000 ounces a year at an average cost of $950 an ounce, Phillip Tobias, chief operating officer for new business development, said on a conference call.

“You need to find the right combination of reserves that will have the right impact for your company,” Steenkamp said.

The CEO said there’s no timetable for when work will resume on the $5.4bn Wafi-Golpu mine as he only expects talks about the project to restart once Papua New Guinea has finalised discussions with Total SA over its liquefied natural gas joint venture. The project has been in limbo since a new government, led by Prime Minister James Marape, swept to power in May pledging to get better resource deals for the country.

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