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Harmony, Newcrest to spend $2.3bn on Papua New Guinea mine

In a plan scaled down after bullion dropped 27% since the beginning of 2013.

Harmony Gold Mining Co. and Newcrest Mining Ltd. of Australia will spend $2.3 billion developing their Golpu deposit in Papua New Guinea in a plan scaled down after bullion dropped 27 percent since the beginning of 2013.

The funds will be invested in Stage 1 of the project, which will give Harmony 500,000 ounces of gold a year between 2024 and 2029 and have a mine life of 27 years, the Randfontein, South Africa-based company said today in a statement. The internal rate of return for the project, which will start production in 2020, will be 17 percent, Harmony said.

The two companies, each owning 50 percent of the Golpu operation, were forced to revise their plans for the mine after the price of gold failed to recover from last year’s fall. Investors speculated the U.S. will raise interest rates, reducing demand for the safe-haven precious metal. The project has 20 million ounces of gold resources and 9.4 million tons of copper.

“Golpu is a spectacular ore body with a large copper component, affordable and mineable,” Harmony Chief Executive Officer Graham Briggs said in the statement. “Key objectives of the study have been achieved by reducing the capital of the project, lowering operating costs and improving the rate of return.”

The first stage of the project gives the companies access to about 40 percent of Golpu’s gold and copper reserves. The remaining metal would be extracted later, using the same processing infrastructure as Stage 1, Harmony said.

The Papua New Guinea government has the right to buy a stake of as much as 30 percent in the project “at a price equal to the sunk costs at the date of acquisition,” Harmony said.

©2014 Bloomberg News

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