JOHANNESBURG (miningweekly.com) – The exciting part of the Eva Copper project is the near-term production prospect that it brings with it, says Harmony Gold Mining Company investor relations head Jared Coetzer of the Johannesburg- and New York-listed company’s purchase of the Australian copper project, that comes with 2 100 km² of exploration land, for a cash consideration of $170-million and up to $60-million in contingent payments.

“The project itself is a quick build,” says Coetzer, who was speaking to Mining Weekly in a Zoom interview. (Also watch attached Creamer Media video.)

“We understand the risks. We understand what needs to happen. It's 100% owned and operated. We’re in full control of this project”, sold off by Canada’s Copper Mountain, whose president and CEO Gil Clausen highlighted the transaction as demonstrating the value that the Toronto-listed company had developed in Eva since its acquisition of Altona Mining in 2018.

The acquisition has brought forward Harmony’s copper story, adding 1.718-billion pounds of copper and 260 000 oz of gold to Harmony’s mineral reserves.

Harmony’s existing cash and facilities will see to the $170-million needed now, with the strength of its balance sheet leaving the company in a comfortable net debt to earnings position.

“We're very comfortable to pay the cash required for this now," says Coetzer, and then cross the capital expenditure (capex) bridge required for project development when it arrives at that point in a few years’ time.

Studies conducted by Copper Mountain estimate development capital of $597-million will be required to build Eva Copper.

Over the next 12 months, Harmony will be undertaking a detailed review and optimisation of the existing feasibility study.

The closing of the transaction, which is expected to take place in the first quarter of next year, is subject to certain customary conditions, including approval from the Foreign Investment Review Board in Australia and Copper Mountain bondholder approval.

"Eva Copper lowers our risk profile, providing additional scale and meaningful diversification that positions Harmony for the future," said Harmony CEO Peter Steenkamp in a statement. 

Harmony has already received approval from the South African Reserve Bank.

Timing of the development capital will dovetail with Harmony’s current capex profile. The peak brownfield expansion, namely Mine Waste Solutions, will be almost complete by the time construction of Eva begins. 

The construction of Eva will take between two and three years to complete. Ramp-up to full production will be quick, owing to the shallowness of the orebody. 

Mining Weekly: For many years, Harmony has held on to the still-undeveloped Tier 1 copper/gold Wafi-Golpu project in Papua New Guinea. Why should Harmony now want another undeveloped project on its hands?

Coetzer: It's a good question and certainly one that's come up a lot. I think the important thing to understand is that this Australian asset is permitted whereas Wafi-Golpu is not permitted, and that’s been the real Achilles’ heel for us over the last few years, getting the special mining lease in place. One of the big decisions behind the Eva Copper acquisition was the fact that it's in a tier-one jurisdiction, has low operating risk and is permitted. We feel that this really does transform our business. What it does is bring forward the copper gold story. We've been talking about Wafi-Golpu for many years now. It’s the perennial gorilla in the room. We were in Denver a couple of weeks ago, the first question that gets asked is where is Wafi-Golpu and the copper gold story Harmony has been talking about for the last number of years. It's very important to us and I think it's a great opportunity for us to fast-track that story. The exciting part with this Eva Copper project is that introduces a producing copper asset well before Wafi-Golpu reaches its peak capex. It dovetails really well between where we are now and where we want to be in a couple of years.

Why is the owner of Eva Copper opting to dispose of it at a time when copper is a sought-after metal?

Copper Mining Corporation has a very large flagship asset in British Columbia, Canada, and they’ve earmarked that asset for expansion. As with all big projects in first world jurisdictions, they are capex-intensive. We've seen a large creep in the cost of capex for the last couple of quarters, and that really was their intention – to monetise the Eva asset for the growth of their British Columbia Copper Mountain asset.

To what extent will the potential $230-million price weigh on Harmony’s current capital expenditure profile, which includes funding the still-incomplete Mine Waste Solutions?

The timing of the capex deployment is very important, and how the purchase price of this particular transaction has been structured is also important to understand. It's actually $170-million in cash with a $60-million payment contingent on two things, the one being the copper price going above $3.80/lb and the other on any additional resources discovered. For example, if we discover a large deposit, up until a certain point, we’ll pay three cents per pound, after which it gets capped. So, there is $30-million in additional resources and $30-million from the additional price of copper, not payable now, but at a future date.

Why should there be confidence that the proposed deal will likely close in the first quarter next year?

The Reserve Bank approval is in place, we're busy with approvals from the Australian regulator. The big thing that we need to ensure is that the Copper Mountain bondholders give their approvals. From their perspective, this derisks their positions substantially because they are seeing a cash injection into the business, and from a bondholder perspective, that vastly improves their chances of lowering their credit risk, if you can call it that. We think that's a very, very low risk, and, in our view, it's almost a given that this transaction will be approved.

What, in your view, should be the biggest takeaway from this acquisition announcement?

We've been talking about our capital allocation for a couple of months now and you might have seen our financial year 2022 presentation with a little diagram showing a circle cut  into four slices. We talk about our equity in four parts. We've got our existing or older underground portfolio, our newer assets with a high-grade portfolio, our surface source business, the Kareerand project we’re investing in, and then we’ve got the international portfolio made up of Hidden Valley, Wafi-Golpu, and now acquired Eva so we've got a far larger international contribution coming from gold and gold equivalents. I think the exciting story is that Harmony's production is going to be diversified across numerous jurisdictions, and that we have copper, a green future-facing metal, as well as gold. From an overall risk perspective, it really does transform our business and plays nicely into the overall Harmony copper gold narrative that we've been talking about for the last few years.