SA gold miner Aurous to go public in R6.7bn US deal

Aurous owns and operates the Blyvoor gold mine. Photo: File

Aurous owns and operates the Blyvoor gold mine. Photo: File

Published Mar 12, 2024


South African privately owned gold producer Aurous has announced plans to go public and list under the Nasdaq index under a scheme that includes a business combination with US-based Rigel Resource Acquisition Corp at a value of R6.76 billion.

Aurous owns and operates the Blyvoor gold mine, also known as Blyvooruitzicht, as well as the Gauta tailings retreatment project on the West Rand in Gauteng. On completion, which is expected for the second half of this year, the transaction involving Aurous and Rigel Resource will become one of the first significant gold industry deals in South Africa in a long time.

“This transaction and associated influx of foreign investment into South Africa has the potential to enable further meaningful job creation, continued revitalisation of the local community and recapitalisation of Africa’s precious metals industry, all of which we expect will be well received by the relevant South African authorities,” said Aurous CEO Richard Floyd.

The company generates cash from the Blyvoor gold mine and its tailings retreatment project.

“This transaction represents one of the first significant gold industry deals in South Africa in some time and is expected to enable Blyvoor to expand its underground infrastructure, enhance surface infrastructure and optimize operations by achieving economies of scale,” added Floyd.

Since the start of production from Blyvoor in 2022, Aurous has re-employed about 1 500 workers who had been jobless since the closure of the mine in 2013.

“We are thrilled to combine with a cash-positive, debt-light target such as Aurous that has already achieved impressive operational milestones and is expected to deliver market-leading growth,” said Rigel Resource Acquisition Group CEO Jon Lamb.

Aurous’s plans for the Blyvoor mine include raising gold production to an average 150 000 ounces per year at an all-in-sustaining-cost of $815 (R15 243) per ounce. There is additional upside potential from the Gauta tailings project.

With the transaction valuing Aurous at a pre-money equity value of $362 million, the resulting company from the deal is expected to be particularly debt-light, with anticipated debt levels of approximately $6m when the transaction closes.

Proceeds from the transaction will be used to fund organic production growth at the Blyvoor mine as well as optimisation projects and the build-out of the Gauta tailings project.

Upon closing of the transaction, Rigel’s non-redeeming shareholders are expected to receive a combination of shares in the resulting company, RRAC Newco and cash.

Aurous’s existing management team, led by Floyd and executive chairperson Alan Smith, will continue to lead the business post the close of the deal. The respective boards of directors of Aurous and Rigel have “unanimously approved” the deal, which is now subject to approvals by Rigel shareholders, the Financial Surveillance Department of the South African Reserve Bank and other customary closing conditions.

“The gold price remains close to record highs after last week’s surge. Some may read gold’s strength as an indicator of confidence in summer rate cuts, but continued geopolitical tensions have also been a key contributor,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

Sentiment in gold as a safe haven has been uptrending. Some analysts are bullish against intermediate targets of $240 to $250 per ounce on gold “which could be seen over the next one to two” years. In the long term, targets of $350 to $370 are seen over the next several years.

Some South African gold miners such as Harmony have committed to further investment into their South African operations as the precious metal’s allure brightens up against the backdrop of poor price performance in other precious minerals such as diamond and platinum.