Iron ore majors ramp up supply even as China faces challenges
Iron ore is one of the year’s worst performing major commodities, slumping by almost a quarter as China’s property crisis drags on.
American Depository Receipts of Harmony Gold Mining (NYSE:HMY) on Thursday dropped to a new 52-week low of $10.60 in morning trade only to recover in the final hour to end up 13c at $10.83.
The mining sector was generally positive on the day with the TSX Global Mining Index up 0.8%
Around 1.5 million shares in the $4.7 billion Johannesburg-based company had changed hands compared to the daily average of 2.1 million.
The counter is showing losses for 2012 – it is down 7% year to date compared to an 11.5% gain in the broader S&P 500 market index.
Harmony said earlier in March it is giving its employees a 3% direct shareholding in the company and it is considering a Hong Kong listing once its massive Wafi-Golpu project, a 50-50 JV with Australia’s Newcrest Mining, is up and running. Harmony sold the half for $525m four years ago.
Harmony also told Reuters bringing the project to production would cost around $4 billion. A pre-feasibility is expected in June.
Harmony CEO Graham Briggs said in August Wafi-Golpu was a “game-changing asset” for the company.
The latest drilling results showing a 1 billion tonne resource bring the Wafi-Golpu deposit into the same league as Freeport-McMoran’s Grasberg mine across the border in West Papua, Indonesia.
Harmony, which is fast diversifying from its South African base and said it will produce some 1.35 million ounces this year, has long been rumoured as a takeover target.
As the value of Wafi-Golpu climbs – Deutsche Bank put it at almost $10 billion last year – suitors may be lining up for the assets.
M&A activity in the gold sector is at a 10-year high and top takeover candidates are Harmony’s South African peer Gold Fields, Canada’s Barrick Gold, Newmont Mining and partner Newcrest itself.
