The bucks are rolling into Harmony’s Mine Waste Solutions (MWS) dump retreatment operation near Klerksdorp which – according to CEO Peter Steenkamp – stands as a key example of how the marginal gold group is turning its fortunes around.
Harmony acquired MWS from AngloGold Ashanti in 2020 as part of the deal to buy that group’s Mponeng mine but, according to Steenkamp, MWS was included at “zero value” because of its short remaining life of mine (LOM) which was estimated at three years.
“We took the decision in 2021 to invest R2.3bn to expand production by expanding Kareerand which is MWS’ primary tailings deposition facility so that we could process additional dump sources.
“ This project will bring annual gold production from MWS to around 110,000oz/year over the current planned LOM through to 2040. This shows you it is still worth your while to invest in South Africa and make money from the assets that we have here, ” Steenkamp commented.
The cherry on the top is that, with immediate effect, MWS will generate an additional R1bn in gold revenues annually for Harmony on its existing output thanks to the end of the “streaming” agreement between MWS and gold royalty company Franco-Nevada.
MWS was built with funding from Franco-Nevada which provided $125m up-front in 2008 in return for the right to buy 25% of all the gold produced by MWS at a pre-determined price.
That price was the lower of the quoted spot gold price on the London Metal Exchange or $400/oz adjusted with an annual escalation adjustment. That means Franco-Nevada has been buying gold from MWS at around $400/oz for the past 18 months while the gold price has surged through $2,000/oz to current record levels around $2,700.
The deal ended today – October 23 – when the final delivery to Franco-Nevada was made. The streaming contract included a cap on the amount of gold to be sold and, when Harmony took over MWS, it assumed the obligation to deliver the outstanding balance of 100,686oz of gold. Steenkamp quipped that, “fortunately the arrangement was not open-ended.”
Steenkamp said the Kareerand expansion was an example of what was to come at Harmony which is looking at a series of expansions into copper internationally as well as additional gold recovery dump operations in the Free State and also on the West Rand.
He commented, “the next ten years at Harmony will be defined by the group’s ability to build these projects that we are talking about. If we get it right then ten years from now Harmony is going to look totally different to what is now.
“We will have a big proportion of our income coming from copper – Wafi-Golpu and the Eva mine – as well as our Moab and Mponeng gold operations and the new dump projects in the Free State and West Rand. This will transform the group dramatically from its current cost structure.
“MWS is a very good testimony to our ability to build these projects. Phase one of Kareerand was commissioned and delivered on time and within budget. It is going to be a very profitable asset for the long term in our hands. We are on the right track here with that kind of performance.”
