Compiled by Sharyn Macnamara

On 23 October 2024, Harmony Gold Mining Company Limited announced that the final delivery has been made into the streaming agreement between Franco-Nevada and Mine Waste Solutions (MWS).1 Furthermore, Phase 1 of the Kareerand tailings storage facility (TSF) expansion project has been commissioned and delivered on time and within budget – injecting 15 additional years of life into MWS – benefitting the economy of the region both directly and indirectly. This project in the Vaal River region is just one of three similar projects to be completed in South Africa.

Kareerand Extension Project.

Kareerand Extension Project. Supplied by Harmony Gold Mining Company Limited

MWS is a tailings retreatment operation near Klerksdorp in North West province. It reprocesses low-grade material from old TSFs scattered across the region to reduce the tailings footprint. It was acquired in 2020 as part of the Mponeng related assets transaction. With the contract completed, MWS’s average gold price will now be in line with market prices and flow directly into Harmony’s bottom line. Consequently, MWS’s free cash flow will increase by more than R1-billion on an annualised basis, assuming the current spot rand per kilogram gold price.

Harmony allocated a total of R2.3-billion to the Kareerand TSF expansion project in FY24 and FY25, and intends to invest a further R1.2-billion next year to complete phase 1 of the extension.

 

ESG in action in Phase 1

Apart from the generation of high margin free cash flows, this project is enabling the rehabilitation of land and is moving old tailings facilities away from communities. The Kareerand TSF has been constructed in line with the guidelines of the Global Industry Standards on Tailings Management and now covers an area of 900 hectares in total – equivalent in size to around 700 rugby fields. Harmony said that the advantage of having a single site here is that long term environmental impact can be concentrated and controlled in a contained environment. Piping, 87km in length, is being installed to drain water out over the next 100 years, to ensure there is no ground water contamination.

The increased storage capacity resulting from the completion of the expansion and the extension of the LOM to 2040 will enable the continued re-mining of old tailings in the region. The range of benefits this expansion has created includes the creation of work for local contractors during construction – 30% of the budget on construction was spent with local contractors – and the maintenance of long term job opportunities.

 

Phase 2

The broader expansion plans for MWS included the addition of a fourth processing stream, increasing plant throughput capacity from 25 to 28 million tonnes annually. As a result, gold production at MWS is forecast to average approximately 110 000 ounces per annum over the life of the operation.

While phase 1 (55% of the project) involved preparing the low-lying basin of the facility, phase 2 (45%) applies to the north-western side of the basin. The phase 2 scope of work entails completing all outstanding aspects related to the construction of the entire area covered by the Kareerand TSF. This includes the installation of the necessary infrastructure and services to reticulate the tailings for cyclone deposition. Phase 2 is scheduled to be completed and commissioned by the end of the 2025 calendar year, after which operating free cash flow margins will be further boosted.

MWS will be supported by green energy supplied by a Harmony built and owned 100MW solar plant.

“The conclusion of the Franco-Nevada streaming contract will allow MWS to fully deliver on the value of its production and contribute meaningfully to the broader Harmony group. This project will be repaid within 3 years. The profitability of this operation more than justifies the capital invested at MWS. Expanding our surface retreatment business is in line with our strategy to invest in low-cost, high-margin quality ounces,” said Harmony’s CEO, Peter Steenkamp.

Steenkamp noted that, in his opinion, MWS is going to be a very profitable, asset and is testimony to the fact that South Africa is worth investing in.

Source: Harmony Gold Mining Company Limited

Reference:

  1. Quarter 2 of financial year 2025

Streaming agreement history:

Harmony’s subsidiary, Chemwes, the owner of the MWS operation, entered a contract with Franco-Nevada Barbados (Franco-Nevada) where Franco-Nevada was entitled to receive 25% of all the gold produced through MWS at a predetermined price. MWS was included in the acquisition of Mponeng and related assets transaction on 1 October 2020. Harmony assumed the obligations determined in the Franco-Nevada contract and delivered the outstanding 100 686 ounces.

The contract was a streaming agreement that commenced on 17 December 2008. Franco-Nevada paid USD125-million upfront for the right to purchase 25% of the gold production through MWS for a fixed amount of consideration until the balance of the gold cap was delivered. The gold cap was a provision included in the contract, which stipulated the maximum quantity of gold to be sold to Franco-Nevada over the term of the agreement. It was calculated that the gold would be delivered throughout the original life of the mine and would terminate once the required gold had been delivered. The consideration for the contract was determined as the lower of the quoted spot gold price as per the London Metals Exchange, or USD400 per ounce, adjusted with an annual escalation adjustment.