JOHANNESBURG – Harmony Gold concluded the R5 billion ($300 million) acquisition of AngloGold Ashanti’s South African assets, the Mponeng mine and Mine Waste Solutions, the company said yesterday.
The transaction is scheduled to close at the end of the month after all conditions precedent have been met, including the approval by the Department of Mineral Resources and Energy to transfer the West Wits mineral rights from AngloGold Ashanti to Harmony.
Harmony, which is expected to take effective control of the assets in October, said aside from improving its portfolio mix between the surface and underground operations, the transaction had the potential to improve the group’s overall recovered grade and increased cash flow margins.
Harmony chief executive Peter Steenkamp said the group would only be in a position to estimate the full benefit of the integration once it had taken ownership of the assets.
“This is a proud moment for Harmony, further demonstrating our well-established belief in and commitment to the sustainability of gold, our confidence in South Africa and our determination to grow value for all of our stakeholders,” Steenkamp said.
AngloGold Ashanti, the world’s third-biggest gold mining house, sold the assets to Harmony in a bid to streamline its portfolio in line with its capital allocation framework.
AngloGold Ashanti’s interim chief executive, Christine Ramon, said the group was well-positioned to safely deliver better returns as its focus narrowed on growing free cash flow and shareholder dividends while investing in its next generation of opportunities.
“While the decision to sell our South African assets was not an easy one, we are pleased that the assets are going to Harmony, a capable and responsible operator that will ensure their long-term sustainability. We can now sharpen our focus to pursue high return projects at several of our key assets, deliver new ounces from the world-class Obuasi mine in Ghana, and advance studies in Colombia, a new frontier for our business,” Ramon said.
The proceeds from the transaction were to be applied to further debt reduction, said the company.
Harmony will pay $200m (R3.35bn) in cash on completion of the transaction and a further compensation of $260 per ounce on underground gold production from the Mponeng, Savuka and TauTona mines that exceeds 250 000 ounces a year for six years commencing on January 1, 2021.
This is valued at $100m, based on AngloGold Ashanti’s current production forecast and a contingent compensation of $20 per ounce to underground production sourced within the West Wits mineral rights comprising the Mponeng, Savuka and TauTona mines below the current infrastructure if it is developed. Mponeng, Savuka and TauTona mines are some of the world’s deepest mines and are AngloGold Ashanti’s remaining South African assets.
In June Harmony had raised $200m after issuing more than 60 million shares to partly fund the acquisition. Harmony was compelled to tap on investors’ shoulders to support the rights issue.
Harmony shares closed 0.46 percent lower at R103.06 on the JSE on Monday.
BUSINESS REPORT