Harmony Gold bounces Bendigo Mining

Harmony Gold Mining (HMY-N) has sold off its remaining 11.6% stake in Aussie miner Bendigo Mining for A$1.10 per share.

Bendigo’s flagship New Bendigo project in southeastern Australia’s Victoria state envisages annual production of 83,000 oz. of gold during the first three years of operation. That rate would be boosted to more than 570,000 oz. per year in 2011, and thereafter to 600,000 oz. per year for a further 19 years. Average cash operating costs are estimated at less than US$120 per oz. Initial capital costs are pegged at A$215 million. Initial production is slated for the fourth quarter of 2005.

The project centres on a 13-million-oz. "resource potential" situated below the historic workings at Bendigo in the state of Victoria, which was one of Australia’s richest gold fields, producing 20 million ounces of gold from 1851 to 1954.

Late last year, the company reclassified a portion of the resource potential into an inferred resource totalling 23.5 million tonnes grading 14.5 grams gold per tonne, calculated in accordance with Australian standards. Another 720,000 tonnes grading 10 grams gold are classified as indicated resources.

"While the Bendigo project has an exciting future, it does not fit our long-term business strategy," said Harmony CEO Bernard Swanepoel in a prepared statement.

Swanepoel says proceeds from the sale would best be applied to the company’s Hidden Valley and Wafi projects in Papua New Guinea.

Harmony originally took a 31.7% stake in Bendigo in September 2001 for A$50 million.That deal also saw the major granted options on an additional 360 million shares. Those option were later left to expire out of the money.

Last July, Bendigo wrapped up a global book building tour by selling A$100 million worth of shares to investors in Australasia, Europe and North America, and thereby diluting Harmony’s stake.

The project requires two waves of capital investment. The first, A$135-million tranche will finance construction of a 300,000-tonne-per-year processing plant at the nearby Carshalton mine site. Some of the initial capital will also go toward ramping up to production stages two and three. An additional A$80 will be required to double the plant capacity in the fourth year, and reach the design throughput rate in the seventh.