Empowerment hits gold
Johannesburg - African Rainbow Minerals Gold (ARMgold), the empowerment mining company, exploded on to the JSE Securities Exchange yesterday with its share price rocketing 25 percent in the first few seconds of trading.
Shares placed at R44 jumped by R11 to R55 on the day, giving ARMgold a market capitalisation of R5 billion.
ARMgold is the first purely South African company to list on the gold index since the country's democratic elections of 1994.
Patrice Motsepe, the executive chairman of African Rainbow Minerals (ARM), said that while the listing had been a phenomenal success, the company would not rush into doing the same thing with its platinum interests.
He said the next plan of attack would be to buy more gold mines.
"Our short-term goal is to add ounces through acquisition, but it must be under the right terms and conditions. ARMgold will not buy for the sake of buying."
ARMgold, the country's fifth-largest gold producer, must grow its contained gold ounces to maintain its 1 million ounces a year status beyond 2003. "This is just the start for us; now we must deliver," said Motsepe.
As the country's biggest black-controlled gold producer, ARMgold has been tagged a golden child. The company is perfectly positioned to benefit from a firm gold price - which has already added 11 percent so far this year - and the pending promulgation of the country's Minerals and Petroleum Resources Development Bill, with its mandate to speed empowerment in the industry.
Motsepe said ARMgold would focus on local acquisition opportunities in the short term, then turn to the rest of Africa before adding global assets.
ARMgold operates six gold mines in the Free State, four of them under the Freegold Joint Venture with Harmony Gold Mining. Like Harmony, ARMgold has established a track record of turning underperforming shafts into productive assets.
Motsepe said the successful introduction of continual operations had added up to 30 percent to ARMgold's production.
The company is believed to be negotiating the acquisition of St Helena, a Gold Fields Free State mine, which would become the fifth mine to be owned and operated by the Freegold partnership .
"The main reason for the listing was to ensure that we had the investor base to back us for future growth," said Motsepe, adding that 60 percent of the shares were held offshore.
"International investors have realised that we are here for the long run," he said. "The listing has taken two years. We have never been rushed into a decision and certainly have no intention of changing that now."
Local analysts felt the listing was well timed, saying it gave investors the choice of another gold firm for the first time in a decade.
Top gold analyst Nick Goodwin of SG Securities thought ARMgold would have joined the index at a higher price of "about R60 to R65 because of its good margins and links to Harmony".
But he warned that overall, gold shares seemed overpriced and investors could be in for a nasty shock should the bullion price take a tumble.