4 days ago
Harmony's $1bn (R18bn) copper deal a 'sweet spot' for the company
South Africa's biggest gold producer Harmony Gold estimates that by the 2035 financial year, 45% of its production will come from Australasia after agreeing to buy Australia's Mac Copper for $1bn (R18.42bn).
The MAC Copper acquisition is its second foray into copper after buying the Eva Copper project in Queensland in 2022, a mine that is likely to produce up to 60,000 tonnes of the metal a year from 2029.
CEO Beyers Nel said MAC Copper's CSA Copper mine in New South Wales, which produces 40,000 tonnes of the metal a year, represented a 'sweet spot' for the group.
'There is a scramble for copper mines in the market at the moment, people pay top dollar. But we believe because this mine is a deeper mine — it is more of a mine that suits Harmony's skills set — it potentially kept other bidders out of the mine.
'It is too big for the juniors and probably too small for the majors. The 40,000 tonnes of copper from a size point of view is ideal and a sweet spot for a company like Harmony to take it. It is production from day one because it is an operating mine. It is also in a tier-one mining jurisdiction; New South Wales in Australia is a good place to mine,' said Nel.
Nel said the shift enhanced profitability, reduced geographical concentration risks, and positioned Harmony to deliver sustainable long-term returns.
He said the mine also presented near-term copper into Harmony's production mix as opposed to its Eva project in Australia and Walfi-Golpu, a gold/copper project in Papua New Guinea (PNG) it jointly owns with Newmont Corp.
He said the Walfi-Golpu project had been frustratingly slow. However despite violence at Barrick Gold Corporation's Porgera Gold Mine in Papua New Guinea's Enga province, the area was calm.
'I would not say there are problems there. It is calm. People sometimes throw one blanket over Papua New Guinea and think what is happening at Porgera with Barrick is happening everywhere in Papua New Guinea. That is not th e case. Where our mine is, things are calm and the communities are supportive of the mine,' he said.
The Harmony share traded 6% lower after the announcement this week. Nel said the market still needs to digest the deal.
'It is still $1bn, it's a lot of money. It is typical that when a big transaction takes place that the buying company's share price comes under pressure.
'We are not fixated about the day trade, we think this is a good asset for Harmony's skills set and we can add a lot of value to it, there is a lot of blue sky, upside potential beyond the current mine life. We are very bullish about the copper price long term. if you think about the global energy transition and supply and demand. We need to look at the long-term perspective.'
