Hidden horror

HARMONY Gold has warned there will be a write-down in the value of the struggling Hidden Valley gold and silver mine it owns 50:50 with Newcrest Mining in Papua New Guinea.
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Like other gold miners, South Africa-based Harmony is reviewing its costs and annual business plans in the wake of what is an 18% fall in spot gold prices for 2013 as of today.

"At this early stage it appears likely that there will be a write-down of a portion of the carrying value of Hidden Valley in Papua New Guinea, due to its recent poor performance, and the reduction in the US dollar gold and silver prices," Harmony warned.

"Harmony will advise the market of the outcome of the impairment testing, which the company anticipates to be towards the end of July 2013. It should be noted that the write-down of the carrying value of Hidden Valley will reduce the net profit of the company, but will not have an impact on reported cash balances and free cashflow."

The level of impairment will be based on Harmony's estimates of future gold prices, exchange rates, life-of-mine plans, operating and capital costs.

PNG's newest mine, Hidden Valley is yet to hit its nameplate capacity of 250,000 ounces per annum gold since production started in September 2010.

The open cut mine clocked up March quarter operating costs of $A1790/oz, following cash costs of $1584/oz for the December quarter and $1355/oz for the September quarter. All of these figures are dangerously high in the context of spot gold prices, which are trading around $US1368/oz today.

Both Harmony and Newcrest aim to make big cost savings at the mine by replacing the primary crusher and restoring full use of the overland conveyor, which first ran into strife in March 2011, along with other plant and mobile equipment upgrades.

Newcrest executives are expected to meet PNG Prime Minister Peter O'Neill, who plans to offer industry assistance to safeguard mining investment in the country, this week.

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