Harmony Gold Digging World’s Third-Richest Mine Emerges as Takeover Target

BLOOMBERG 

Harmony Gold Mining Co.’s Papua New Guinea mine is shaping up to be the world’s third-richest gold and copper deposit, raising speculation its partner in the venture, Newcrest Mining Ltd. (NCM), may make a takeover bid.
“I understand they’ve tried to buy it off Harmony and Harmony is obviously not selling it,” said Prasad Patkar, who helps manage about $1.8 billion at Platypus Asset Management Ltd., including shares in Melbourne-based Newcrest. “One option for them is to buy Harmony out completely and then spin out all of the other assets.”
The partners are set to give an update as early as July on the potential size of the Wafi-Golpu deposit, which they’ve compared with Freeport-McMoran Copper & Gold Inc.’s Grasberg mine, site of the world’s largest recoverable reserves of copper and the biggest single gold reserve. Harmony shares rose to the highest in more than two years in April as optimism for the project triggered takeover speculation.
“Every major copper company in the world would be interested, along with every major gold company,” said Jo Battershill, an analyst at UBS AG in Sydney.
Newcrest fell 0.3 percent to A$38.65 at 10:27 a.m. in Sydney trading, down 4.4 percent since the start of the year. Harmony fell 1 percent yesterday in Johannesburg.
Gold reached a record last month and has risen for 10 straight years, driving acquisitions last year to the highest since at least 1998. Copper rose to a record in February. A lack of new projects is forcing gold and copper producers to expand through acquisitions, BlackRock Inc., owner of the world’s largest mining fund and third-largest shareholder in Harmony, said last year.

Major Find

Newcrest doesn’t respond to speculation, spokeswoman Kerrina Watson said by phone. Johannesburg-based Harmony doesn’t comment on speculation, spokeswoman Marian van der Walt said in an e-mail.
Wafi-Golpu is valued at about A$9.3 billion ($9.9 billion), Deutsche Bank AG said in a report. Only Grasberg, in neighboring Indonesia, and Ivanhoe Mines Ltd.’s Oyu Tolgoi deposit in Mongolia, contain higher gold-equivalent ounces per ton of ore, Harmony said in a March presentation.
“Golpu is the first major copper discovery in 20 years, the richest in 20 years” said James Bruce, who helps manage $3.5 billion at Perpetual Ltd., including Newcrest shares.
First production is scheduled to start in 2016 and the “massive” ore body, located in mountains about 80 kilometers (50 miles) from the port of Lae, may cost about $5 billion to develop, Goldman Sachs & Partners Australia Pty. has estimated.

Rising Costs

Harmony is trading at 36 times estimated earnings, the most of the 14 members in the BI GL Senior Gold index of global producers. It’s the best performing gold company in the Bloomberg World Mining Index in the past three months.
Harmony’s Chief Executive Officer Graham Briggs, struggling with aging mines and rising costs in South Africa, said in April that the company hasn’t been approached about any takeover.
The company intends to retain its stake in Wafi-Golpu and may fund its share of the development costs through bonds and forward copper sales from the project as well as with cash and bank debt, spokeswoman van der Walt said in the e-mail.
Newcrest would be happy to talk to Harmony if the company couldn’t, or didn’t want to finance its full half of the project, the Australian Financial Review said last month, citing Newcrest Chief Executive Officer Ian Smith. Newcrest spokeswoman Watson didn’t respond to requests for comment on the report.
There have been $12.12 billion of gold takeovers announced so far this quarter, the strongest second quarter in at least ten years, according to data compiled by Bloomberg.

Partner List

Three years ago Harmony shortlisted a “handful” of unnamed potential partners to develop the project, eventually choosing Newcrest who agreed to pay Harmony $525 million for half of its Papua New Guinea operations, including Wafi-Golpu. Rio Tinto Group sold Wafi-Golpu for $35 million in 2002, while BHP Billiton Ltd. sold Oyu Tolgoi for $48 million in 2003.
Barrick Gold Corp. (ABX), Newmont Mining Corp. (NEM) and Gold Fields Ltd. (GFI) could be interested in the assets, said Anna Kassianos, an analyst at Austock Securities Ltd. Barrick, which has agreed to buy Equinox Minerals Ltd. for C$7.3 billion ($7.5 billion), is well-positioned to make a bid as are copper producers Freeport and Antofagasta Plc, she said.
“A Harmony takeover still makes sense strategically and now, even more so, post the Equinox acquisition” for Barrick, Sydney-based Kassianos said by phone. “Harmony’s aging, high- cash cost South African assets” and some or all of the Equinox assets could be funneled into African Barrick Gold Ltd. (ABG), she said.

Legal Case

Sven Lunsche, corporate affairs manager for Johannesburg- based Gold Fields, declined to comment in an e-mail. Patrick Bindon, Barrick’s public affairs manager in Perth said the company doesn’t comment on market speculation. Brian Watt, principal adviser communications and public relations for Newmont, declined to comment.
Harmony’s attraction to a suitor may be dimmed by possible worker compensation claims in South Africa. While the ultimate number of claims and their size is impossible to determine, mining companies may face a liability of as much as $100 billion, Leon Esterhuizen, an analyst at RBC Capital Markets in London, said in a May 6 note to clients. A settlement at a significantly lower level is more likely, he said in a May 16 interview.
“Harmony has a number of challenges based on this recent South African labor court case to do with miner health,” said Saxon Nicholls, who helps manage the equivalent of $970 million at Herschel Asset Management Ltd. in Melbourne, including shares in Newcrest. “We can’t see any company wanting to get involved with a potentially uncapped liability.”
Harmony isn’t fully valued because of its operations outside Papua New Guinea, while Golpu was turning out to be a significant copper resource, said Warren Edney, senior resource analyst at Royal Bank of Scotland Group Plc. “It’s potentially attractive to anyone.” 

To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

Comments

Post a Comment

Please free to leave comments.

Popular posts from this blog

HIGHLANDS FRAUD F*CKS RUNNING GOVERNMENT AGENCY,,,

Image
A Fraudster and unqualified person has been shortlisted for NEC submission for the position of CEPA Managing Director. The candidate in question is Jude Tukulyia. His academic credentials are subject to scrutiny. Further investigation is required to verify the authenticity and legitimacy of his qualifications, particularly the reported diploma in accounting, Bachelor of Laws, MBA from Divine Word and UPNG respectively. It is very suspicious and unprofessional  when the Minister for Environment Conservation and Climate Change, Hon Simo Kilepa, wrote to UPNG Vice Chancellor asking to confirm Jude’s questioned education qualifications. This very due diligence work is the core responsibility of the Public Service Commission and Department of Personnel Management. What authority does the portfolio minister have to write to the Universities? Dumbfounding indeed if one asks. Ulterior motives written all over the letter. This amounts to  Questionable Academic Qualifications of Mr Tukulyia.    
Read more

AUGUSTINE MANO PNG'S PREMIER CORPORATE CROOK

Image
by  MICHAEL J. PASSINGAN In a significant setback for Mineral Resources Development Corporation (MRDC), the Supreme Court of Papua New Guinea has dismissed the company's appeal to stop criminal investigations into its dealings with landowner funds held in the Pacific Balance Fund (PBF). The court ruled that MRDC's appeal was an "abuse of process" and ordered the company to pay costs of the proceedings. MRDC, a unit holder in PBF, had taken legal action against the National Court's decision to dismiss its case, arguing that the court had no jurisdiction to hear the matter. However, the Supreme Court disagreed and held that MRDC's appeal was nothing more than an attempt to interfere with the police's criminal investigative process. The court found that MRDC had no authority to conducted its own investigation into the activities of the Melanesian Trustee Services Limited (MTSL), the fund manager of PBF, and that its actions were in violation of the Trust Deed
Read more

PNG, VERY RICH YET STILL A VERY VERY POOR COUNTRY

Image
by GARY MONDULAME Papua New Guinea (PNG), a nation blessed with abundant natural resources, continues to grapple with economic challenges that belie its potential wealth. The nation's economic narrative is a paradox—rich in resources yet burdened by poverty. The explanation for this paradox lies not only in economic mismanagement but also in deep-seated corruption that has permeated the political landscape since independence in 1975. Following its independence from Australia, PNG was entrusted to leaders who lacked a vision for a holistic national development. This absence of foresight is evident from the lack of long-term development plans that could have distributed the country’s wealth fairly across all regions and communities. Successive governments failed to establish foundational strategies such as building satellite townships or creating robust rural housing schemes. Instead, they resorted to short-term, reactive measures that did not foster sustainable growth. The nascent l
Read more

BLIND LEADING THE BLIND, WHY THE PNG ECONOMY STILL SUCKS

Image
Elizabeth Genia, Acting Governor Bank of PNG (BPNG) by MICHAEL JOSEPH PASSINGAN The economy of Papua New Guinea (PNG) is at a crucial juncture. Despite some signs of recovery, the country faces several structural challenges that continue to impede its economic progress. The March 2024 Monetary Policy Statement from the Bank of Papua New Guinea sheds light on these issues, providing a comprehensive overview of the economic landscape and the policy responses being implemented to navigate through these turbulent times. In 2023, PNG's economy grew by a modest 1.4%, a significant slowdown from the 5.2% growth witnessed in 2022. This tepid growth is largely attributed to delays in major projects and ongoing economic issues that have not been fully resolved. The anticipated growth for 2024 is around 3.0%, buoyed by the resumption of production at the Porgera gold mine. While this marks an improvement, it remains subdued compared to the potential of this resource-rich nation. One of the mo
Read more

James Marape's Missteps Openly Exposed at Australian Forum

Image
by  MICHAEL J. PASSINGAN  In a recent event that highlighted the complexities of international diplomacy and governance, Papua New Guinea's Prime Minister, James Marape, faced a challenging situation during his appearance at the Lowy Institute in Sydney, Australia. The Lowy Institute, known for its role as an independent think tank focusing on international policy, particularly in the Asia-Pacific region, provided a platform for a candid assessment of Marape's governance. Following his formal address, Marape engaged in a dialogue with Dr. Michael Fullilove AM, the Executive Director of the Institute. Dr. Fullilove, a respected figure in public and international policy, scrutinized Marape's past promises and statements, contrasting them with the current state of affairs in Papua New Guinea (PNG). The discussion took a critical turn as Dr. Fullilove revisited Marape's 2019 speech at the same venue, where Marape had outlined his vision for PNG in a speech titled “A New Boo
Read more

MARAPE & PAITA ABOUT TO SIGN AWAY PNG GOLD

Image
By: Andrew Arthur Prime Minister Hon. James Marape and his planning minister Reinbo Paita are the parties behind the theft of all Papua New Guinea’s gold for the next 100 years! They have given approval for the STATE of Papua New Guinea to sign away all gold rights to an Australian paper company in Refinery Holdings PTE LTD. First, they have done the deal with a paper company even before there is a LAW that says they have the right to do the deal. We see how the real manipulation works out. Marape and Paita now need to get the law passed by Parliament. The law is before the Parliament to set up Papua New Guinea’s first National Gold Corporation. The National Gold Corporation Bill first surfaced in 2012 but successive Government of Sir Michael Somare and Hon. Peter O’Neill, in their wisdom, had refused to pass this Bill as there have been some sinister motives and constitutional issues associated with the Bill. The new bill will allow Refinery Holdings LTD PTE to own 70% of the National
Read more

A Call for Local Ownership and Fairness

Image
by JUSTIN PARKER In recent discussions surrounding the establishment of a gold refinery in Papua New Guinea (PNG), concerns have been raised regarding various aspects of the proposed project. Spearheaded by foreign investors, the initiative has sparked debates over ownership, exclusivity, tax concessions, underwriting, management rights, control over currency, legal protections, and historical failures. These concerns, if unaddressed, could potentially undermine the interests of PNG and its people, particularly the hardworking alluvial miners who form the backbone of the nation's mining sector. At the heart of the issue lies the question of ownership. The proposed ownership structure, favoring foreign investors with a substantial 70% stake, raises eyebrows, especially considering PNG's past experiences with failed ventures like seabed mining. Instead of ceding majority control to foreign entities, many argue that PNG should assert full ownership over the refinery. With the coun
Read more