Anko, Harmony is predominantly a real growth story...once Elandsrand and Deelkraal are digested, it will produce almost 3m. oz., vs. the 600K oz. that the stand-alone Harmony mine produced a scant 3 years ago.
Harmony is also getting active in Australia, and i believe it will end up as one of a handful of global players of significance in the industry.
interestingly, both DROOY and Harmony used to be part of the Randgold stable, the SA mining house that began to flounder in the mid '90's mainly due to ill-timed investments in platinum (the Northam mine, which is nowadays highly profitable, but was a big drag on Rand
Mines cash flow way back when) and deteriorating gold assets.
however, the break-up of Rand Mines led to a revolution in the industry (mining houses e.g. began exchanging management contracts for additional equity stakes in their subsidiary operating mines) and was the kick-off to the consolidation process that is still ongoing.
the JSE All Golds list used to be very long...e.g. what is NOW DROOY, used to be Durban Deep, Doornfontein, WestRand Cons, ConsMining, Egoli, Knights, Blyvooruitzigt, Buffelsfontein and Hartebeestfontein, all separate cos.
similarly what is now Harmony used to be a whole host of different mines with separate listings. a major impetus for the consolidation was not only the weakening gold price, but also the removal of the so-called 'ring fencing' rule, a rule concerning mining taxation. essentially, neighboring mines were not allowed to merge financially, as the state wanted to tax each mine separately.
on a more general note, while gold mining is certainly an industry that has been in steep decline in South Africa, as more and more deposits were mined out and the stagnation in the gold price coincided with sharply rising costs, the SA mines gold reserves are STILL the largest in the world, and what is regarded as 'practically mined out' there would set off a gold rush anywhere else. assets like Blyvoor and Deelkraal are a bit of a headache at current gold prices, but imbue their owners with immense earnings leverage in a gold bull market.
historic hb. |
