Yahoo Finance Harmony Gold: Could Golpu and Kili Teke Be ‘Game Changers’?
Harmony Gold: Rand Gold Price Leverage a Plus, Concerns Remain
Reserve replacement and beyond
The potential for future reserve replacement and growth is an important driver for gold miners. While mines have finite lives, the companies operating them don’t. In this part of our series, we’ll discuss what projects Harmony Gold (HMY) has in its pipeline to replace its reserves or increase them.
Golpu feasibility study
Golpu is an advanced exploration project in Papua New Guinea (or PNG). It’s jointly owned by Harmony Gold (50%) and Newcrest Mining (50%). This gold and copper project falls in the optimal quartile for copper and gold grades. The estimated resource for the project is 20.2 million ounces of gold and 9.4 million ounces of copper. Management is expected to release the results of its Phase 1 bankable feasibility study and Phase 2 pre-feasibility study for the Golpu project on February 15.
Discussions are also ongoing to finalize the pre-mining development agreement with the PNG government. This agreement aims to secure a mining area and fiscal certainty during early exploration works.
Funding for Golpu
During the recent earnings call, management maintained that financial flexibility should allow the company to fund its share of the Golpu project ($1 billion plus). The company believes it can fund the next two to three years of Golpu’s capital expenditure out of its current cash flows. It isn’t thinking of raising any capital at this stage. While this is what management thinks, questions from analysts suggest that the analyst community believes the company can’t afford to develop this project on its own. That is the main reason the company isn’t getting any credit for the project in its share price.
Kili Teke
Kili Teke is a 100% Harmony-owned gold-copper asset. The company announced maiden resources of 4 million ounces of gold equivalent. The mine contains 506,000 tons of copper, 1.2 million ounces of gold, and 22,000 tons of molybdenum. There could be significant upside from the asset. Only a portion of the overall “mineralized envelope” has been defined. Kili Teke is still quite a while a way from a pre-feasibility stage.
New Gold (NGD), Eldorado (EGO), Goldcorp (GG), and Newmont Mining (NEM) also have strong production growth potential due to strong or near-construction projects. On the other hand, growth options for AngloGold Ashanti (AU) and Kinross Gold (KGC) seem limited going forward. AngloGold and Kinross form 7.8% of the Market Vectors Gold Miners ETF (GDX).
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