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Harmony Gold Mining Company Limited
Registration number 1950/038232/06
Incorporated in the Republic of South Africa
ISIN: ZAE000015228
JSE share code: HAR
NYSE share code: HMY
(“Harmony” and/or “the Company”)
HARMONY TRANSFORMS BY ADDING NEAR-TERM COPPER PRODUCTION IN
A TIER 1 MINING JURISDICTION
Acquires 100% of the low-risk Eva Copper Project and surrounding
exploration tenements from Copper Mountain Mining Corporation
Highlights:
Adding near-term copper to Harmony’s production profile; diversifying
its revenue and increasing its long-term value proposition
‒ Potential to add 10% to 15% more in gold and gold equivalent
production1 placed in the first half of the Wood Mackenzie global
C1 copper cost curve2 over a 15-year life of mine
‒ Excellent growth potential through exploration in a world-class
mining jurisdiction
‒ Copper as a future-facing metal is critical in supporting the
global energy transition
De-risking the overall asset portfolio and meeting all Harmony’s
strategic objectives
‒ Capital allocated towards a lower-risk, higher-margin asset
o Adding near-term production from an open pit mine in a Tier 1
jurisdiction
o Low execution risk in building the mine
‒ Meets all environmental, social and governance (ESG) requirements,
demonstrating responsible stewardship
Sufficient headroom to finance the acquisition in cash and secure
capital to build the mine:
1
Assuming the same parameters applied in Harmony’s Mineral Resources and Mineral Reserves statement for the year ended
30 June 2022.
2
C1 cash costs represent the costs for mining. Processing, administration, including accounting movements for stockpiles. It
does not include capital costs for exploration, mine development or processing mill capital works. It includes net proceeds from
by-product credits. It does not include the cost of royalties.
1
‒ Harmony will fund the acquisition with existing cash and available
debt facilities
o Net debt/Ebitda remains manageable and well below 1 times post
Transaction close
o Cash offer of US$170 million with a future contingent payment
of up to a maximum of US$60 million (see details below)
‒ Timing of the development capital will dovetail with Harmony’s
current capital expenditure profile
1. Introduction
Johannesburg. 6 October 2022. In line with its strategic objective of
transitioning into a low-cost gold and copper mining company, Harmony
announces that it has entered into an agreement to acquire the entity which
owns 100% of the Eva copper project (“Eva Copper”) and a package of regional
exploration tenements from Copper Mountain Mining Corporation (“Copper
Mountain”) for an upfront cash consideration of US$170 million (approximately
R3 billion) plus a contingent payment of up to a maximum of US$60 million
(approximately R1.1 billion) (“the acquisition and/or the transaction”).
Eva Copper and the acquired tenements comprise 2 295 square kilometres of
tenure within the
world-class North West Minerals Province in Queensland, Australia. The
acquisition of Eva Copper will add 1.718 billion pounds of copper and 260
000 ounces of gold to Harmony’s Mineral Reserves and extend the Company’s
diversification into copper, a future-facing metal critical to the energy
transition.
Peter Steenkamp, Chief Executive Officer of Harmony, said: “Acquiring Eva
Copper is strategically important to our growth journey. It opens a new
copper-gold frontier for Harmony within a highly attractive Australian mining
area, supplementing our 50% interest in the Tier 1 copper-gold Wafi-Golpu
project. Eva Copper lowers our risk profile, providing additional scale and
meaningful diversification that positions Harmony for the future.”
2. Rationale for the offer
As a gold mining and exploration company, with a Tier 1 copper footprint
(the Wafi-Golpu copper-gold porphyry), this acquisition is aligned with
Harmony’s strategy. Diversifying into copper enables Harmony to participate
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in the global transition to a low-carbon economy. This Transaction will lower
Harmony’s overall risk profile and strengthen its cash flow in the medium to
long term through:
a. Introducing copper exposure while diversifying internationally:
Australia is a Tier 1 mining jurisdiction and the acquisition
supports the strategic intention of growing Harmony’s margins and
increasing its exposure to copper via investment in high-quality
assets. Mining leases and an environmental authority for Eva Copper
have been granted, and an amendment, which reflects updates to the
project configuration, is well advanced. The acquired assets
furthermore present excellent exploration potential both on-site
and in the region.
b. Low execution risk: The project will have a short construction
period of two to three years. Ramp-up to full production will be
quick due to the shallowness of the orebody. Supporting
infrastructure in the surrounding region further mitigates
execution risks. Ultimately, Eva Copper will be a large, high-
volume conventional open pit mine, with a low strip ratio,
a simple process plant and attractive copper and gold recoveries.
c. Acquisition meets all Harmony’s investment criteria and de-risks
the Harmony portfolio: This acquisition de-risks Harmony through a
more diversified commodity mix, lower costs, good grades, and
capital affordability. This project will be prioritised over higher
risk, lower ranking capital projects in the company.
d. Strong and highly experienced team close to the acquired assets:
Harmony’s established and highly experienced team operating from
Brisbane, Australia has conducted an extensive and comprehensive
due diligence. They will also be the team leading the integration
of the acquired assets.
e. Ability to finance acquisition in cash and secure capital to build
the mine: Harmony will fund the Transaction with existing cash and
available debt facilities. Studies conducted by Copper Mountain
estimated development capital of US$597 million would be required
to build Eva Copper. Harmony is currently undertaking a detailed
review and optimisation of the existing feasibility study. Once
Harmony has completed this review, it will provide the market with
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an updated development capital figure and its funding strategy.
Harmony expects this process to take approximately 12 months and
will take into account the prevailing market conditions.
The construction of Eva Copper is expected to take between two and
three years to complete. Timing of the development capital will
dovetail with Harmony’s current capital expenditure profile. The
peak brownfields expansion, namely Mine Waste Solutions, will be
almost complete by the time construction of Eva Copper begins. Eva
Copper will boost Harmony’s capacity to fund further projects such
as Wafi-Golpu.
f. Favourable ESG (environmental, social and governance) credentials:
Project approvals and development are underpinned by comprehensive
environmental and socioeconomic studies, further supported by a
stable regulatory regime. Eva Copper supports Harmony’s sustainable
development strategy, further bolstering our commitment to
responsible stewardship.
3. Description of the Eva Copper and surrounding exploration tenements
Eva Copper is an Iron Oxide Copper gold deposit and, together with the
exploration package, sits within the world-class North West Minerals
Province. It is located 75 kilometres (“km”) from the town of Cloncurry and
95 km north-east of Mount Isa in north-west Queensland, Australia. The
project area has five mining leases and 16 granted exploration permits over
2 100 square km.
Eva Copper has a Mineral Resource base, including the Inferred Resource, of
307 million tonnes (“Mt”) at 0.42% Cu, 0.04g/t Au for 2.85 billion pounds
contained copper and 381koz Au and a Mineral Reserve of 171 Mt grading
0.46% Cu and 0.05 g/t Au for 1.718 billion pounds contained copper, and
260k oz contained gold3:
The May 2020 Feasibility Study and December 2021 update completed by Copper
Mountain highlights attractive economics and project parameters, including4:
3
Copper Mountain Mining Company August 2022 Mineral Reserve and Resource Estimate and technical reports filed to date.
See www.cumtn.com.
4
Source: Copper Mountain Corporate August 2022 Presentation and technical reports filed to date. See www.cumtn.com.
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Eva Copper is envisioned to be a conventional open pit with a
conventional crush, grind, and flotation circuit;
Expected production of 100Mlbs Cu per annum and 14koz Au per annum
over an expected mine life of 15 years;
A development capex estimate of US$597 million5;
The property is easily accessible by air and road and has sufficient
water and power available via a 220kV power line;
Mining leases and an environmental authority for Eva Copper have been
granted, and an amendment which reflects updates to the project
configuration is well advanced;
Community and landowner relations are well established;
Approximately 95% of the Mineral Reserve is contained in the Little
Eva, Blackard, Scanlan, and Turkey Creek deposits. The Bedford, Lady
Clayre and Ivy Ann satellite deposits compose the remaining 5% of the
Mineral Reserves;
Eva Copper has potential for mine life extension and regional
exploration upside, including near surface oxidised ore not included
in the mine plan and 2 100 square kilometres of highly prospective
tenure in the world class Mt Isa inlier region;
Recent developments announced by Copper Mountain highlight broader
exploration potential;
The exploration tenements encompass a 50km long copper geochemical
anomaly in which wide spaced drilling has obtained similar styles of
mineralisation to those at Eva Copper, with significant copper and
gold drill intercepts6. Emerging target areas along the trend include:
- Companion target: CPR670: 84m @ 0.6% Cu, 0.2 g/t Au (from
surface)
CPR660: 11m @ 1.35% Cu, 0.74 g/t Au (52m)
- Quamby target: QMR018: 39m @ 0.5% Cu, 0.13 g/t Au (12m)
QMR025: 135m @ 0.37% Cu, 0.03 g/t Au (33m)
- Reaper target: RED010: 95m @ 0.3% Cu, 0.04 g/t Au (29m)
Following completion of the Transaction, Harmony will undertake a detailed
review and optimisation of the project feasibility study and exploration
drilling results.
5
Converted from A$ to US$ using Copper Mountain’s assumed A$:US$ of 1.40.
6
Source: Copper Mountain press release October 12, 2021 and technical reports filed to date. See www.cumtn.com.
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4. Consideration payable in terms of the offer and other key financial
information
The acquisition consideration consists of the following:
- a cash offer of US$170 million (~R3.0billion); and
- up to a maximum of US$60 million (~R1.1 billion) future contingent
payment consisting of up to US$30 million (~R543 million) via a 10%
sharing of net incremental revenue above US$3.80/lb Cu and up to US$30
million (~R543 million) on a new copper resource discovered and declared
within the acquired tenements (calculated using a resource multiple of
US$0.03/lb Cu).
Harmony will pay the upfront purchase price using cash and available
revolving credit facilities. Once Harmony has updated the feasibility study,
it will determine the most effective way of financing the capital
requirements to bring the mine into production.
Harmony currently expects to remain comfortably within its debt covenants
following the conclusion of the transaction. Harmony’s lending group has
already consented to this acquisition.
Conditions precedent
The closing of the Transaction is subject to certain customary conditions,
including approval from the Foreign Investment Review Board in Australia and
Copper Mountain bondholder approval. The Transaction has received approval
from the South African Reserve Bank.
Board approval has been obtained from both companies and the legal agreements
have been finalised. The Transaction is expected to be completed early in
calendar year 2023.
5. CATEGORISATION
The Transaction constitutes a Category 2 transaction for Harmony in terms of
Section 9 of the JSE Limited Listing Requirements and accordingly, approval
from the shareholders of Harmony is not required.
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6. INVESTOR CALL AND PRESENTATION
A presentation in support of this announcement will be shared by Harmony’s
management team at 13:00 South African time today. Please see the details
for the webcast on Harmony’s website: www.harmony.co.za.
7. ADVISERS
Harmony’s financial adviser is Rothschild & Co and its legal adviser is
Ashurst.
8. JSE SPONSOR
J.P. Morgan Equities South Africa Propriety Limited.
9. ABOUT HARMONY
Harmony, a world-class gold mining and exploration company, has operations
and assets in South Africa and Papua New Guinea (PNG). Harmony has more than
70 years’ experience in the industry. Company assets include one open pit
mine and several exploration tenements in PNG, as well as 9 underground mines
and 1 open pit operation and several surface sources in South Africa. In
addition, Harmony owns 50% of the significant Wafi-Golpu copper-gold project
– a tier 1 asset - in a joint venture in PNG.
The company’s primary stock exchange listing is on the JSE with a secondary
listing on the New York Stock Exchange. The bulk of our shareholders are in
South Africa and the United States. Additional information on the company is
available on the corporate website, www.harmony.co.za.
10. ABOUT COPPER MOUNTAIN MINING CORPORATION
Copper Mountain’s flagship asset is the 75% owned Copper Mountain Mine
located in southern British Columbia near the town of Princeton. The Copper
Mountain Mine currently produces approximately 100 million pounds of copper
equivalent per year. Copper Mountain also has the 100% owned development-
stage Eva Copper Project and an extensive 2,100 km2 highly prospective land
package in Queensland, Australia. Copper Mountain trades on the Toronto Stock
Exchange under the symbol “CMMC” and Australian Stock Exchange under the
symbol “C6C”. Additional information is available on the Company’s web page
at www.cumtn.com.
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Forward looking statements
This announcement contains forward-looking statements within the meaning of
the safe harbour provided by Section 21E of the Exchange Act and Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”), with respect
to our financial condition, results of operations, business strategies,
operating efficiencies, competitive positions, growth opportunities for
existing services, plans and objectives of management, markets for stock and
other matters. These forward-looking statements, including, among others,
those relating to our future business prospects, revenues, and the potential
benefit of acquisitions (including statements regarding growth and cost
savings) wherever they may occur in this presentation, and including any
climate change related statements, target and metrics, are necessarily
estimates reflecting the best judgment of our senior management and involve
a number of risks and uncertainties that could cause actual results to differ
materially from those suggested by the forward-looking statements.
As a consequence, these forward-looking statements should be considered in
light of various important factors, “forecast”, “potential”, “estimate”,
“expect” and words of similar meaning. By their nature, forward-looking
statements involve risk and uncertainty because they relate to future events
and circumstances and should be considered in light of various important
factors, including those set forth in this disclaimer. Readers are cautioned
not to place undue reliance on such statements. Important factors that could
cause actual results to differ materially from estimates or projections
contained in the forward-looking statements include, without limitation:
overall economic and business conditions in South Africa, Papua New Guinea,
Australia and elsewhere; the impact from, and measures taken to address,
Covid-19 and other contagious diseases, such as HIV and tuberculosis; rising
inflation, supply chain issues, volatile commodity costs and other
inflationary pressures exacerbated by the Russian invasion of Ukraine and
subsequent sanctions, estimates of future earnings, and the sensitivity of
earnings to gold and other metals prices; estimates of future gold and other
metal; estimates of future cash costs; estimates of future cash flows, and
the sensitivity of cash flows to gold and other metals, prices; estimates of
provision for silicosis settlement; increasing regulation of environmental
and sustainability matters such as greenhouse emission and climate change,
and the impact of climate change on our operations; estimates of future tax
liabilities under the Carbon Tax Act; statements regarding future debt
repayments; estimates of future capital expenditures; the success of our
business strategy, exploration and development activities and other
initiatives; future financial position, plans, strategies, objectives,
capital expenditures, projected costs and anticipated cost savings and
financing plans; estimates of reserves statements regarding future
exploration results and the replacement of reserves; the ability to achieve
anticipated efficiencies and other cost savings in connection with past and
future acquisitions, as well as at existing operations, fluctuations in the
market price of gold; the occurrence of hazards associated with underground
and surface gold mining; the occurrence of labour disruptions related to
industrial action or health and safety incidents; power cost increases as
well as power stoppages, fluctuations and usage constraints; supply chain
shortages and increases in the prices of production imports and the
availability, terms and deployment of capital; our ability to hire and retain
senior management, sufficiently technically-skilled employees, as well as
our ability to achieve sufficient representation of historically
disadvantaged persons in management positions, or sufficient gender diversity
in management positions or at board level; our ability to comply with
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requirements that we operate in a sustainable manner and provide benefits to
affected communities; potential liabilities related to occupational health
diseases; changes in government regulation and the political environment,
particularly tax and royalties, mining rights, health, safety, environmental
regulation and business ownership including any interpretation thereof; court
decisions affecting the mining industry, including, without limitation,
regarding the interpretation of mining rights; our ability to protect our
information technology and communication systems and the personal data we
retain; risks related to the failure of internal controls; the outcome of
pending or future litigation or regulatory proceedings; fluctuations in
exchange rates and currency devaluations and other macroeconomic monetary
policies; the adequacy of the Group’s insurance coverage; any further
downgrade of South Africa’s credit rating and socio-economic or political
instability in South Africa, Papua New Guinea and other countries in which
we operate.
These forward-looking statements speak only as of the date they are made.
The foregoing factors and others described under “Risk Factors” in our
Integrated Annual Report (www.har.co.za) and our Form 20F should not be
construed as exhaustive. We undertake no obligation to update publicly or
release any revisions to these forward-looking statements to reflect events
or circumstances after the date of this annual report or to reflect the
occurrence of unanticipated events, except as required by law. All subsequent
written or oral forward-looking statements attributable to Harmony or any
person acting on its behalf are qualified by the cautionary statements
herein. These forward-looking statements are the responsibility of the
directors and have not been reviewed and reported on by the Company’s external
auditors.
Competent Person’s statement
The information in this report that relates to Exploration Targets,
Exploration Results, Mineral Resources or Ore Reserves is based on
information reviewed by Patrick Redmond, Ph.D., P.Geo. Dr. Redmond is a full-
time employee of the Copper Mountain Mining Corporation and has sufficient
experience which is relevant to the style of mineralization and type of
deposit under consideration and to the activity being undertaken to qualify
as a Competent Person as defined in the JORC Code. Dr. Redmond does consent
to the inclusion in this news release of the matters based on their
information in the form and context in which it appears.
The information in this announcement that relates to Mineral Resources or
Ore Reserves has been extracted from Copper Mountain’s NI 43-101 Technical
Report for the Eva Copper Project – Feasibility Study Update with the
effective date of January 31, 2020 and a report date of May 7, 2020.
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