Harmony Gold’s long-running talks to buy AngloGold Ashanti’s South African assets have stalled because of uncertainty about the country’s new mining regulations, according to people familiar with the matter.
The discussions, which started two years ago, recently hit a snag as the government and mining industry wage a court fight over the Mining Charter, according to two people, who asked not to be identified because the proposed deal was not public.
The charter calls for more black ownership of assets and says prospecting rights must be 51%-owned by black economic empowerment partners, which will impose extra costs on mining companies.
The assets could potentially be valued at $500m to $650m, said another person.
An alternative option being considered is a partial sale, with Harmony buying AngloGold’s Vaal River operations for about $150m, the person said.
When asked about the proposed deal, a Harmony spokeswoman called it "pure speculation" and declined to comment further.
An AngloGold spokesman also declined to comment.
AngloGold — the world’s third-largest gold miner — has been held back by its South African assets for the past three years as their high costs eroded the group’s earnings.
CEO Srinivasan Venkatakrishnan attempted to spin them off in 2014, but the plan was scuppered after investors baulked at an accompanying rights issue.
AngloGold pared losses, trading 3.7% lower at R128.20 a share after earlier falling as much as 6.1%. Harmony declined 2.4%.
Harmony, which has a market value of $760m, mainly operates end-of-life mines in the country and has spoken often about needing acquisitions to boost declining reserves.
Some of its existing mines were previously owned by AngloGold. "We have to look for something fairly big," Harmony CEO Peter Steenkamp said in August 2016.
With the Harmony deal uncertain, AngloGold has started restructuring the mines to stem cash losses. In June, the company said 8,500 jobs, about a third of the total, were at risk.