* PNG project funding now "well within reach"
* Harmony undertaking independent safety review
(Adds Papua New Guinea project details)
By Ed Stoddard
JOHANNESBURG, May 5 South Africa's Harmony Gold
has scaled back the size and expenditure on building
its Papua New Guinea Wafi-Golpu mine, enabling it to raise
funding for the project, its chief executive said.
The gold and copper project, a joint venture with Newcrest
Mining, sits on deposits with a metal content estimated
to be worth $85 billion at current prices. The plans unveiled in
2012 called for spending of almost $6 billion to develop it.
The mining firm is now looking at a "significantly lower
capex, something that will be well within our reach to fund",
CEO Graham Briggs told Reuters on Tuesday, after Harmony
released its results for the March quarter.
"August is the time when we will be able to release more
information on that," he added.
Harmony has scaled back its original plans as mining
investors globally have shied away from big capital expenditures
on projects in the face of rising costs and falling prices.
"The timing of big builds and the raising of that sort of
money, and debt levels and shareholder views changed our minds,
and now we are talking about a significantly smaller mine,"
"In 2012 we were looking at roughly a mine that would be
producing somewhere between 20 and 25 million tonnes a year. We
are now looking at between 1 and 5 million tonnes a year," he
Harmony said on Tuesday it had a cash balance of over 2
billion rand ($190 million).
That level would have made it difficult for Harmony to raise
almost $3 billion to fund its share of Wafi-Golpu in the current
environment of investor caution.
Briggs also said the mine's start-up date would probably
move forward now from a previous estimate of 2019.
BACK IN THE BLACK
Harmony also said it had swung back to a quarterly profit
despite a fall in production as it benefited from a smaller
foreign-exchange loss on a U.S. dollar-denominated loan.
The company said it had begun a safety improvement drive to
avoid a repeat of a February accident at its Doornkop mine,
where a fire and rock fall killed nine miners.
Briggs said the company was taking "fairly drastic measures"
"We have independent outsiders doing a complete safety
review on all our operations ... We have to have a safe mine
environment," he said on a conference call. The review's outcome
will be known in around two months.
South Africa's gold mines are the deepest and among the most
dangerous in the world, but the industry has made strides to
improve safety in recent years.
Because of the Doornkop incident and other operational
problems, the company's gold production fell 12 percent in the
quarter to 269,000 ounces.
But Harmony cashed in on a higher rand price for gold, which
increased 8 percent to 451,000 rand/kg because of a weakening of
the domestic currency. This benefits metals producers in South
Africa because most of their costs are in rand.
The company reported headline earnings per share of 12 cents
for the quarter to the end of March after a loss of 21 cents in
the previous three months.
Headline earnings are the main profit measure in South
Africa, stripping out various one-off items.
The grade of the ore that Harmony is mining improved by 5
percent to 5.1 grams per tonne in the third consecutive quarter
of improvement, a trend that will also flow to its bottom line.
($1 = 10.5157 South African Rand)
(Editing by Tom Pfeiffer and Jane Baird)