Opportunities exist for brownfield expansion at the Hidden Valley mine, Johannes van Heerden, Chief Executive Officer of Southeast Asia for Harmony Gold, tells Business Advantage PNG. He believes this gives the company a competitive advantage in the region.

An aerial view of the Hidden Valley gold mine. Credit: Morobe Mining Joint Venture/PNG Chamber of Mines and Petroleum

Volatile mineral prices have challenged the mining sector both globally and nationally, but van Heerden is confident in the gold price and the company’s capacity to expand in Papua New Guinea.

‘Harmony remains a gold bull.’

‘With so much global economic uncertainty, gold will retain its appeal as a store of value. We will take a measured view on any investment’s decent returns,’ he tells Business Advantage PNG.

Investment

Harmony Gold’s Johannes van Heerden speaking at the 2016 PNG Mining and Petroleum Investment Conference.

The South African miner is seeking to become a 1.5 million oz producer within the next three years, producing at a cost of less than $950/oz. To achieve this, the company is focused on opportunities for brownfield expansion at Hidden Valley.

Investment of up to K560 million at the Hidden Valley mine in Morobe Province will be implemented over the next two years, Van Heerden told the Lae Chamber of Commerce and Industry on November 22.

‘We are focused on the Hidden Valley acquisition and the plan to deliver the production required.’

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In a bid to improve operations following the acquisition of Newcrest Mining’s 50 per cent share in the mine in October, Harmony Gold has commenced waste stripping at stage five and is investing in an additional, and replacement, mobile fleet.

Nine trucks have been ordered and additional personnel will be recruited to operate and maintain the fleet, van Heerden says.

Stockpiles and Hamata ore will be processed to June 2017, followed by a five-month mill shut down. Maintenance and upgrade projects are planned at Hidden Valley mine during the shut down period.

‘There is potential upside for exploration within the PNG region.’

‘We are focused on the Hidden Valley acquisition and the plan to deliver the production required based on the reinvestment made by Harmony in the operation.’

Under-explored

With the Hidden Valley and Wau areas remaining under-explored, there is opportunity for the company to expand its operations in Papua New Guinea.

‘There is potential upside for exploration within the PNG region and also the potential for exploration in areas surrounding the Hidden Valley mine,’ van Heerden elaborates.

‘Brownfield opportunities will come from exploration around Hidden Valley.’

‘Taking advantage of the company’s established presence in the region, Harmony Gold Mining Company is committing to a 12 million kina exploration program in Wau H1 in 2017.’

‘As the infrastructure is developed, a smaller mine that may not (have been) developed in isolation can be developed and use the Hidden Valley mill,’ he says.

Having an operating process plant provides the company with a competitive advantage in the area, van Heerden explains. Taking advantage of the company’s established presence in the region, Harmony Gold Mining Company is committing to a 12 million kina exploration program in Wau H1 in 2017.

Drilling planned at Wau is located around 10 kilometres from the Hidden Valley plant.

In addition, a staged development, implemented at the company’s Wafi-Golpu project (still a joint venture with Newcrest), will allow for optimisation of capital efficiency and progressively de-risk the project prior to further investment.

Stages

Stage one at Wafi Golpu targets higher-grade sections of the deposit to achieve early production and reduce negative cash flow.

Golpu stage two prefeasibility study focuses on optimising stage one and expanding block cave two (BC2) throughput, before establishment of a third block cave below BC2.

‘Net profit of US$66 million was reported for the 2016 financial year.’

While development at Wafi Golpu is in its early stages, the company is working on feasibility optimisation and de-risking studies.

Local infrastructure is a challenge, in particular access via roads. The company is reviewing access to local ports and assessing alternative power sources for Wafi Golpu.

Harmony Gold reported a 61 per cent reduction in net debt in the 2016 financial year and a 49 per cent decrease in net debt to US$38 million in the first quarter of the 2017 financial year.

Net profit of US$66 million was reported for the 2016 financial year.

‘We have made very good headway in reducing our debt. We have a strong balance sheet and will be funding the growth at Hidden Valley from our cash flow,’ says van Heerden.