Vancouver — A consortium led by South Africa’s third largest gold producer has won the race to buy AngloGold’s (AU-N) operations in the Free State province.
Harmony Gold and black empowerment company – African Rainbow Minerals, out bid other rivals for the purchase of four mines, which crank out 1.3 million oz. of gold a year. The price tag is US$226 million (2.2 billion rand) with US$185 million payable on closing and US$41 million payable in three years
The deal includes four mines – Bambanani, Joel, Matjhabeng and Tshepong; all surface infrastructure and equipment, commercial and residential properties, the Ernest Oppenheimer Hospital in Welkom; all shares in Jeannette Gold Mines; and all minerals rights in the Welkom and southern Free State
“It is our strategic objective to close or to sell mines approaching the end of their profitable lives to operators who are better suited to extracting value from such assets,” says AngloGold’s CEO, Bobby Godsell. “With the exception of Tshepong, the Free State mines fall into the category.”
AngloGold stated that Tsephong, which was a long-life, low-cost, world-class mine, was inextricably linked to the Free State assets and could not be excluded from the transaction.
The mines produced 17.3% of AngloGold’s total output but added only 8.3% to its earnings in the nine month period ended Sept. 30. The total cash costs of the Free State mines over this period came in at US$229 per oz., compared with US$184 per oz for all of AngloGold’s operations.
ARM and Harmony will hold equal joint-venture interests in the assets when the transaction takes effect on January 1, 2002.
The deal marks a continuing rise in the growth story behind Harmony. In 1997, the company produced some 500,000 oz. of gold from a single operation and now looks to tally over 2.5 million oz. per year.
Both ARM and Harmony have operations in the region and are currently in talks with Gold Fields (GOLD-Q) to buy its St Helena and Oryx mines, also in the Free State. If successful, all but one mine in the southern Free State, Gold Fields’ Beatrix operation, will be under the control of the joint venture partners.
“We have long advocated further consolidation in the South African gold mining industry in the interests of ensuring optimal extraction of value from existing operations to the benefit of all,” stated Godsell. “The acquisition of AngloGold’s assets will result in ARM and Harmony becoming the principal operators in the Free State goldfields.”
This deal is still subject to the transaction being recognized by the South African tax authorities as a rationalization scheme, which will allow AngloGold to pay no recoupment tax on the proceeds of the sale.
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