Company announcements

Updated Wafi-Golpu Feasibility Study

March 19, 2018

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Monday, 19 March 2018, Harmony Gold Mining Company Limited (Harmony) has today released an updated Wafi-Golpu Feasibility Study prepared by the Wafi-Golpu Joint Venture (WGJV) project team.

This Study incorporates the findings from the earlier Pre-Feasibility and Feasibility Studies announced in February 2016, interpretation of the additional orebody data derived from further drilling and geotechnical studies, together with further work undertaken on mine design, hydrology, tailings and port and power options. The updated Study draws on extensive data collection undertaken since 2016, providing a deeper understanding of the project’s geotechnical, oceanographic, environmental and social parameters.

Summary of Study findings (100% terms)¹

• Lowest decile C1 cost copper production of US$0.26/lb (or minus US$2,128/oz AISC in gold production terms)
• Initial capital expenditure to commercial production of approximately US$2.8bn 
• Life of Mine capital expenditure of approximately US$5.4bn
• NPV of approximately US$2.6bn and IRR in real terms of approximately 18.2%²
• Life of Mine (LoM) of ~28 years³
• First ore milled estimated to be ~4.75 years from grant of Special Mining Lease (SML)

Summary of key changes from 2016 Preliminary Study findings⁴

• Proposed starter block cave is larger (16mpta) and deeper; three block caves in total
• Proposed processing plant to include onsite self-generation of bulk power and associated fuel handling
• Deep Sea Tailings Placement (DSTP) identified as the preferred method of tailings management
• Life of Mine capital expenditure ~US$1bn lower
• Port location confirmed and Memorandum of Agreement concluded with PNG Ports

Next steps

• Submission of amended supporting documentation for SML on 20 March 2018
• Targeting submission of Environmental Impact Statement (EIS) by end of June 2018
• Finalisation and approval of the Study by Harmony and Newcrest Mining Limited (Newcrest) boards to be post granting of SML

Peter Steenkamp, chief executive officer said “Harmony owns 50% of this tier 1 copper-gold asset.  Project economics set out in the Updated Study demonstrates significant free cash flow generation. Once in production, the asset has the potential of being one of the lowest decile cost copper-gold producers.  Current copper market trends highlight the potential for increased copper prices, further enhancing the economic fundamentals of the project.”

Peter added: “We look forward to working with the government of Papua New Guinea during the permitting process, which is a critical step in advancing this important project in the best interests of our shareholders and the people of Papua New Guinea”.

Area	Measure	Unit	2016 Pre -Feasibility Study5	2018 Feasibility Study
Production	Maximum Ore throughput	Mtpa	14	17
	Life of Mine (LOM)3	Years	35	28
	Ore mined	Mt	379	376
	Average copper grade	%	1.26	1.27
	Average gold grade	g/t	0.91	0.90
	Copper produced LOM	Kt	4,547	4,520
	Gold produced LOM	Koz	7,058	7,445
	Average annual copper production	Kt	130	161
	Average annual gold production	Koz	202	266
	Gold recoveries	%	64	68
	Copper recoveries	%	95	95
Capital	Project capital6	US$m (real)	2,656	2,825
	Sustaining capital7	US$m (real)	3,725	2,557
	Total life of project capital8	US$m (real)	6,381	5,382
Operating	Total operating cost9 (real)	US$/t	23.95	17.33
	Cash cost10 (C1) (copper-basis)	US$/lb Cu	0.60	0.26
	Total production costs (copper-basis)	US$/lb Cu	1.23	0.81
	All-In Sustaining Cost (gold-basis)	US$/oz sold	(1,685)	(2,128)
Economic assumptions	Gold price	US$/oz	1,200	1,200
	Copper price	US$/lb	3.00	3.00
	AUD/USD exchange rates	(real)	0.80	0.75
	PGK/USD exchange rate	(real)	2.85	3.10
	Discount Factor	% (real)	8.5	8.5
Financials	Net Present Value (NPV)	US$m	1,954	2,604
	Internal Rate of Return (IRR)2	% (real)	17.5	18.2
	Maximum cumulative negative free cashflow11	US$m (real)	1,763	2,823
	Payback period	Years	10	9.5
	Free cash flow generation	US$m (real) LOM	12,726	13,157

• ¹ These figures are estimates from the updated Feasibility Study (as at 19 March 2018) and as such were prepared with the objective of being subject to an accuracy range of ±15%, with the exception of block cave 40 (due to limited geotechnical data; further work is planned to obtain orebody data to confirm rock strength across the BC40 footprint) and associated infrastructure which was prepared with a prefeasibility accuracy range of ±25%. As timing for finalisation of the SML or a suitable fiscal and stability framework and supporting arrangements is uncertain, valuation outcomes are shown at the time of commencement of earthworks for the access Nambonga decline. Costs are based on December 2017 real estimates. Neither the costs nor real cost escalation impacts prior to commencement of earthworks are included in the valuation outcomes. The figures are subject to all necessary permits, regulatory requirements and Board approval and further works as described below.  Ore Reserves information can be found on page 9, based on Harmony’s 50% interest in the project. The production target utilises 98% of the full project’s probable Ore Reserves contained metal. The production target underpinning the forecast financial information is contained in the graphs on page 3
• ² Project IRR is after all taxes but before any withholding taxes on dividends or interest
• ³ From first production of the processing plant (excluding construction and closure phases)
• ⁴ Changes to 2016 Feasibility study update. Refer to market release 15 February 2016 entitled “Golpu feasibility study confirms robust investment case” for further information
• ⁵ 2016 Pre-feasibility Study estimates are based on December 2015 real estimates
• ⁶ Project capital up to commercial production (including US$200m of capitalised net revenue)
• ⁷ Sustaining capital is all capital incurred post the start of commercial production and includes both sustaining and expansionary capital
• ⁸ Including US$200m of capitalised net revenue
• ⁹ Total operating costs include mining costs, processing costs, infrastructure costs and general and administrative costs.
• ¹⁰ Cash costs are total operating costs plus realisation costs, less gold by-product revenue, divided by total copper production.
• ¹¹ Maximum cumulative negative free cashflow comprises undiscounted free cash flow from commencement of construction until first year of positive free cashflow

For more, download the full PDF: Press release: Updated Wafi-Golpu Feasibility Study (PDF 857KB)

For further information please contact:

Lauren Fourie
Investor Relations Manager
+27 (0) 071 607 1498

Marian van der Walt
Executive: Corporate and Investor Relations
+27 (0) 082 888 1242