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South Africa: Harmony to Make Most of Gold Boom
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Business Day (Johannesburg)
9 May 2008
Posted to the web 9 May 2008
Charlotte Mathews
Johannesburg
HARMONY Gold Mining was considering ways of extending the lives of its high-cost mines around Virginia in Free State, because they contained substantial reserves that could be profitable at current gold prices, CEO Graham Briggs said yesterday.
Harmony realised an average gold price of R225541/kg in the March quarter, when the price ranged as high as R250000 and as low as R185000/kg.
Briggs said Harmony management was bullish about the gold price but for long-term planning assumed a price of R180000/kg. In view of the price volatility, Harmony would invest in its short-life mines in Free State where it could quickly derive profits at grades of 3,5g /ton-4g/ton. It would not sink new shafts.
The group is also evaluating the potential of three deposits in the Evander basin, where drilling has shown relatively shallow ore bodies at Evander South and Poplar. Together with the deeper Rolspruit deposit, these ore bodies contain an estimated reserve of over 12-million ounces of gold.
Harmony also planned to accelerate its gold surface projects.
Briggs said Project Phoenix in Free State, which extracts gold from tailings (the residue of historic mining), was producing gold at R90000/kg and processing about 500000 tons of tailings a month, which could be increased to 1-million tons a month.
As Harmony had about a billion tons of slimes dams in Free State, there was a lot more potential for surface projects, he said.
Harmony is investigating the potential of uranium contained in tailings at its Phakisa, Tshepong and Msimong mines.
Once the size of the asset was understood, Harmony could inject it into its recently created 40%-held subsidiary, Rand Uranium.
Such a move was not inevitable, Briggs said, but Harmony had an interest in ensuring Rand Uranium was successful.
In the March quarter the group's production from continuing operations fell to 10347kg, from 12403kg in the December quarter, reflecting lower tons milled due to the 10-day Christmas break and power shortages.
All Harmony's production is now generated in SA because it has sold its Australian mines.
It is building a mine at Hidden Valley in Papua New Guinea in which it recently announced it had partnered with Newcrest Mining.
In SA, it has also sold its Orkney operations to Pamodzi Gold and 60% of its Randfontein uranium deposits to Rand Uranium.
The money from these disposals could be used to repay about R2bn of short-term debt owed to Nedbank, acting financial director Frank Abbott said.
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Cash operating profits almost doubled to R828m in March from R450m in the previous quarter, mainly because of the higher gold price and lower working costs after restructuring undertaken in the past six months.
Harmony has ceased continuous operations -- working 24-hours a day, seven days a week -- at three of its operations.
In the March quarter it retrenched 1421 staff.
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