Harmony to raise more than R3bn to buy AngloGold mines
With its SA mines at two-thirds of capacity, Harmony has secured overwhelming shareholder support to raise money to buy more mines
Harmony Gold secured overwhelming support from its shareholders to raise $200m (about R3.3bn) via equity to pay the cash portion of its purchase of AngloGold Ashanti's last operating assets in SA.
With approvals comfortably topping 97% for a range of resolutions at SA's largest gold producer’s extraordinary general meeting on Thursday, Harmony is now waiting for just the approval from the government for the transfer of mineral rights from AngloGold, to complete the deal, CEO Peter Steenkamp said.
There was no communication from the department of mineral resources and energy that gave any indication of delays or requests for details, he said after the shareholder vote.
The reason for any delay could stem from the lockdown of the economy since March 27 and the gradual easing of those conditions since the start of June as the economy reopened, he said, adding the deal should be concluded by the end of June.
Harmony had planned to use debt and cash to fund the transaction but the onset of the global coronavirus pandemic made it imperative for the company to conserve its cash in uncertain times, Steenkamp said.
Harmony is buying the Mponeng gold mine — the world's deepest at 4km below surface — near Carletonville, the Mine Waste Solutions tailings retreatment operation as well as two mothballed mines.
The sale marks the end of an era for SA's gold mining industry as its long-time champion turns its focus purely to its international portfolio, where it sees better returns than those that could be achieved by running and investing in deep-level, labour-intensive mines in its historic homebase.
Harmony will pay $200m in cash and $260/oz of gold from Mponeng and other underground assets included in the transaction based on production above 250,000oz a year. These payments would be made for six years from the start of 2021 and are capped at $100m.
Harmony will pay a further $20/oz on gold output coming from any extensions of mining below existing infrastructure at the three mines included in the transaction, Mponeng, Savuka and TauTona.
Harmony could ramp up production from Mponeng, Steenkamp said, without giving details of how it would achieve this.
Harmony has a history of mining old areas left behind by other companies and it would do a full assessment of what opportunities like this were at Mponeng and the other two suspended mines.
Mponeng has 8.5-million ounces of gold reserves in a planned extension to the mine that would take its life to 20 years.
Steenkamp said there was no urgency in deciding on the expansion project that would boost Mponeng's life more than threefold from the eight years of operation based on existing underground infrastructure.
Harmony would make a decision in two or three years and would closely scrutinise the detailed feasibility studies AngloGold had conducted into the extension.
Steenkamp said one of the most immediate value creators was merging the tailings that came with its Moab Khotsong and Great Noligwa mine purchase from AngloGold into the Mine Waste Solutions business.
Harmony had about 65% of its staff back at work after SA eased the conditions of lockdown for the mining industry, after shutting it down from March 27 to curtail the spread of the coronavirus.
Steenkamp estimated the company’s mines would be back at normal production by mid-July as it recalled employees back from the Eastern Cape, KwaZulu-Natal and neighbouring countries in phases.
Harmony had limited quarantine facilities that were needed to house these employees for two weeks before they could return to work, he said.