JOHANNESBURG - South Africa’s Harmony Gold will be approaching shareholders to raise R1.3 billion through a rights issue, or lead a private share placement, in a bid to fund part of its recent R4bn acquisition of AngloGold Ashanti’s Moab Khotsong Mine, it said yesterday.
It also said the acquisition was funded through R1.3bn from internal cash resources and R1.3bn from existing bank facilities.
Earlier this year, Harmony’s financial director, Frank Abbott, said the company was expected to launch a rights offer by February next year for the deal.
“We will send out a circular at the beginning of December for a shareholder meeting in January for shareholder approval,” he said. “The last time we went to the market for capital was 10 years ago,” he noted. “We will determine the size of the capital raising; the maximum is $200 million (R2.7bn), or it could be significantly lower."
Harmony acquired Moab Khotsong, one of South Africa’s largest and most profitable gold mines, in October as part of a target to become a 1.5 million-ounce-a-year gold producer by 2019.
Harmony yesterday also highlighted the benefits of the transaction, saying the inclusion of Moab Khotsong operations in its 2017 financial results would have seen a 25percent increase in local production, a 62percent increase in domestic operational free cash flow and a 20percent lower than its average local all-in-sustaining cost profile, among others.
The company said it planned to produce 1.1million ounces in 2018 at an average underground recovered grade of 5.18gram/ton, and an all-in sustaining cost of $1180 an ounce or R520000 a kilogram at an exchange rate of R13.74 to the dollar.
Moab Khotsong incorporates the Great Noligwa mine and the Kopanang mine, situated in the Vaal River region.
Potential extension
It also includes a brownfields mine-life extension option, currently at pre-feasibility stage, which indicates a potential extension of the life of operations by more than 15 years.
The company told investors in a brief that the transaction was expected to increase earnings and cash flow from year one. It would reposition the company with increased quality ounces and improved margins.
The transaction requires a pending Competition Commission Section 11 approval from the Department of Mineral Resources and the transfer of the underground water of the Klerksdorp, Orkney, Stilfontein and Hartbeesfontein Water Directive to Harmony.
The company said this transaction would be empowered through an employee share ownership plan, a community trust and black industrialists.
Harmony shares dropped 5.10percent on the JSE yesterday to close at R22.35.