Harmony Moves Forward With Plans To Expand World’s Deepest Gold Mine in South Africa

Harmony Gold Mining, the biggest gold-producing corporation in South Africa by volume, recently announced its plans to begin deepening its flagship Mponeng mine. The major corporation operates in both South Africa and Papua New Guinea, controlling nine underground operations, including the Mponeng mine, which is the deepest gold mine in the world, sitting at just over 2.4 miles below the Earth’s surface.

The Johannesburg-based gold-mining force wants to extend the Mponeng mine’s lifespan by deepening it, though these plans will require additional board approvals upon further study completion later this year.

According to Harmony, the Mponeng mine delivered “stellar” performance levels this fiscal year, boosting output by 22% and allowing the company to rebound from previous losses. Last year, the company had a net loss of $48 million, though the Mponeng mine has allowed Harmony to increase its annual profit to $275 million.

“My personal belief is it will be a mine that’s got a very long life, it’s a very high grade ore, and it’s certainly something that’s worth pursuing,” Peter Steenkamp, the Chief Executive Officer of Harmony Gold Mining, stated on a conference call.

Harmony is one of the few remaining gold producers in South Africa that are still trying to drain resources from the nearly dried, aging, deep, and costly mines in the area. The region contains some of the world’s oldest and deepest mines that have been squeezed almost dry for years now, though companies like Harmony continue finding innovative ways to extend their lifespans. South Africa used to be the top gold-producing nation in the world, though since then, it has struggled with increased crime rates, electricity outages, and other supply shortages, cutting its profit levels and allowing China to take the lead.

Harmony hopes to increase the mine’s current depts of 2.4 miles. According to Steenkamp, the company “has a good handle in terms of mining at those depths.”

“It’s not significantly deeper than where we are currently mining, so we are quite comfortable we could do it safely,” Steenkamp continued.

In September 2020, Harmony Gold Mining purchased the Mponeng mine from AngloGold Ashanti at a purchase price equivalent to $200 million. AngloGold Ashanti wanted to move away from its operations in South Africa to shift its focus to more lucrative projects across other portions of Africa, the Americas, and Australia.

Harmony had high hopes for the mine at the time of purchase and still does. The company expects the Mponeng mine to produce around 1.38 million to 1.48 million ounces this year. For reference, Mponeng produced 1.47 million ounces in 2022.

While drilling deeper may not significantly increase output, it would allow the Mponeng mine to continue yielding steady reserves for additional time rather than drying up. Given how much support the mine provided to this company in recent years, this proposal could be necessary.

Harmony recently published its fiscal year 2023 report, showing an increase in revenue by 15.3% or $2.8 billion compared to the year prior. The company’s production profit also increased by $786.8 million, or 46.4%.

“Mining with purpose is our commitment to the sustainable creation and preservation of shared value for our stakeholders,” Steenkamp explained in the company’s FY2023 report.

“At Harmony, we believe in action over words because the decisions we make today affect our future. We have made significant strides in future-proofing the business by protecting the safety and health of our people, consistently meeting production targets, investing in growing our reserves, including copper, and continuing on our decarbonisation journey as we aim to be net-zero by 2045,” Steenkamp concluded.

As gold prices continue to surge on a global scale, it only makes sense that numerous gold producers want to capitalize on the opportunity to increase production rates. As South Africa’s largest gold company, Harmony Gold Mining plays an integral role in supplying gold to its local region and exporting to other nations.

South Africa typically exports gold to nations like China, India, Switzerland, the UK, and the United Arab Emirates. On average, China purchases around $5 billion worth of gold from South Africa per year, with India and Switzerland following closely behind at 2.69 billion and $1.95 billion, respectively.

Because of South Africa’s critical role in the gold trading market, major corporations like Harmony Gold Mining can easily influence the greater gold market. Low production levels from the Mponeng mine could equate to supply constrictions and high demand levels or the reverse if the mine flourishes. As always, investors should consult their financial advisors before making any portfolio decisions.

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