Support for Harmony to raise $200m
The shareholders gave the capital raise a thumbs up during a virtual extraordinary general meeting with a 99percent vote.
Chief executive Peter Steenkamp told the media on the sidelines of the meeting that the acquisition of Mponeng and MWS remained a perfect fit for the group.
“This is still a perfect fit for Harmony. The rationale for doing this transaction is still valid,” he said adding that the Covi-19 pandemic had a short term impact on the deal.
Initially, Harmony had expected to fund the transaction through debt facilities and cash, however, given the uncertainty caused by the Covid-19 pandemic it was compelled to approach its shareholders for funding.
The group previously said that the rights issue would help it to significantly benefit from balance sheet flexibility and optionality given the current uncertainty caused by the coronavirus pandemic.
Steenkamp said the group expected to finalise the transaction by the end of this quarter. He said the only outstanding condition for the transaction was Section 11 transfer of mining rights.
“The condition that is outstanding is Section 11 and we are hoping to conclude that by the end of the month,” said Steenkamp.
Shareholder support for the capital raise to fund the acquisition is expected to cement Harmony’s position as South Africa’s primary gold producer.
In February Harmony announced the acquisition of Mponeng and Mine Waste Solutions, saying that the incorporation of the assets into its portfolio enhanced its near-term production by adding about 350000 ounces of gold production a year.
It expected the transaction also increased the group’s reserves by 8.27million ounces excluding Mponeng below infrastructure reserves and improved its portfolio mix between surface and underground operations.
Harmony believed the transaction represented a natural strategic fit with its existing asset base, and the acquisition represented an opportunity to enhance the group’s cash-generative position, particularly at current gold price levels.
The rand gold price touched R1million a kilogram for the first time in history in mid-April amid growing market uncertainty on the Covid-19 pandemic, although prices have since stabilised to R922000 a kilogram.
Rene Hochreiter, a consulting mining analyst at Noah Capital Markets and Sieberana Research said that the acquisition was a win-win for Harmony, as the group needed better grades. “Harmony is good at cutting overheads as opposed to AngloGold Ashanti, which historically had higher costs across the board,” Hochreiter said. “Harmony does things cheaply. It has proven this at its Moab Khotsong Mine.”
Hochreiter said that given that Mponeng was the world, operating costs for the mine were high. “Costs will be high at Mponeng, nevertheless grades are high. We will have to wait and see how Harmony can manage ultra-deep level mines like Mponeng,” said Hochreiter.
Harmony rose 6.26percent on the JSE yesterday to close at R54.69.