JOHANNESBURG (miningweekly.com) – With the streaming agreement between Franco-Nevada and Mine Waste Solutions (MWS) over, Harmony Gold will from now on benefit fully from the soaring gold price that is coinciding with the delivery on time and on budget of Phase 1 of the 15-year-life Kareerand tailings retreatment facility (TSF), a high-margin gold-from-dumps project.

Consequently, MWS's free cash flow is poised to increase by more than R1-billion a year, assuming gold’s current spot rand per kilogram price.

In addition, inclusive environmental, social and governance (ESG) upliftment is spreading across Klerksdorp/Stilfontein/Orkney and Vaal River areas.

Phase 1 of the Kareerand TSF expansion project has increased storage capacity to enable ongoing re-mining of old tailings in the region and extend MWS’s life-of-mine (LoM) by 15 years to 2040.

Importantly, this facility has been constructed in line with the guidelines of the global industry tailings management standards and now covers an area totalling 900 ha at MWS, which is one of several retreatment entities operated by the Johannesburg-listed Harmony.

With this contract completed, MWS's average gold price received will now be in line with market prices instead of 25% of all the gold produced through MWS going to Franco-Nevada at a predetermined price.

Construction of the reclamation and pumping stations at TSFs 4 and 5 has been completed. Having been commissioned in August, they are now operational in retreating 14 historic tailings facilities.

The Phase 2 scope of work entails completing all outstanding aspects related to the construction of the entire area covered by the Kareerand TFS, which includes the installation of the necessary infrastructure and services, to reticulate the tailings for cyclone deposition.

While Phase 1 (55% of the project) involved preparing the low-lying basin of the facility, Phase 2 (45%) – which is scheduled to be commissioned by the end of calendar year 2025 – applies to the north-western side of the basin.

In addition to the operation recovering gold at a cost of $1 500/oz, MWS also reflects ESG in action.

On the environmental front, it has already distanced host communities from waste material.

“We’ve been able to take away many of the tailings that were very close to the community. From an environmental perspective that will continue to happen and rehabilitation of those areas is already taking place,” Harmony CEO Peter Steenkamp said in response to Mining Weekly at question time during Wednesday’s media briefing.

Moreover, from the social side, the news is also very good. “Just in building this project, 30% of the contractor cost in terms of the building work, I’m talking about physically putting down the liners and civil work, had to go to local community businesses.

“So, that’s quite a big number and for the Klerksdorp region, extending Mine Waste Solutions, which would have reached its end, now has another 15 years of life, which has a massive impact on the buying power of the people in that area,” an upbeat Steenkamp added amid Harmony’s upcoming project horizon, which will also take the company into copper production.

The expansion includes 87 km of drain pipe to prevent groundwater contamination and creates 2 400 jobs, with 1 700 of those employed from local communities.

Many local businesses have benefited from the construction part of the project. Moreover, MWS’s fourth stream will create long-term jobs in the area.

Currently, MWS processes three tailings streams – the fourth stream reflecting part of broader expansion plans to increase daily processing capacity from 78 000 t to 86 000 t.

This is equivalent to 28-million tonnes annually, for which the expanded mega Kareerand TSF will have capacity to accommodate the additional residue deposition.

Gold production at MWS will be elevated to a likely 110 000 oz/y over the current planned LoM to 2040.

On the clean energy front, Harmony is close to turning the first sod for its 100 MW renewables plant, which will not only provide MWS with green energy, but also provide sustainability to the group’s underground Moab Khotsong gold mine.

“We’ve finally got all the contracts in place so we’re now ready to commence construction of that 100 MW facility, which we’ll own and build ourselves,” Steenkamp enthused.

With this contract completed, MWS's average gold price received will increase and will now be in line with market prices.

Consequently, MWS's free cash flow increased by more than R1-billion on an annualised basis, assuming the current spot rand per kilogram gold price.

The broader expansion plans for MWS also include the addition of a fourth processing stream, increasing plant throughput capacity from 25-million to 28-million tonnes annually. As a result, gold production at MWS is forecast to average 110 000 oz/y over the life of this operation.

A total of R2.3-billion was allocated to the TSF extension project in Harmony's 2024 financial year (FY24) and FY25, with the bulk being used to complete Phase 1.

The conclusion of the work will help to open the way for the project to be repaid within three years.

“The profitability of this operation more than justifies the capital invested at Mine Waste Solutions. Expanding our surface retreatment business is in line with our strategy to invest in low-cost, high-margin quality ounces,” Steenkamp outlined.

It was Harmony's subsidiary, Chemwes, as MWS’s owner, that entered the contract that entitled Franco-Nevada to receive 25% of all the gold produced through MWS at the lower of the quoted spot gold price as per the London Metals Exchange, or $400/oz, adjusted with an annual escalation adjustment.

As part of the acquisition of Mponeng and related former AngloGold Ashanti assets in 2020, MWS was included in the transaction. Harmony assumed the obligations determined in the Franco-Nevada contract and delivered the outstanding 100 686 oz. The contract was a streaming agreement that began in 2008. Franco-Nevada paid $125-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 is 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 LoM and would terminate once the required gold had been delivered.