Facing pressure from South Africa’s Reserve Bank to consolidate ownership or cut bait with respect to overseas projects,
The first deal saw Harmony sell its 31.7% interest in Russian gold miner Highland Gold to
Barrick picked up a 10% stake at US$3.93 per share, or US$43 million in all. London-listed Highland Gold has also conditionally agreed to issue the major another 29.6 million like-priced shares, which would bring Barrick’s stake to 29%. Pending due diligence, the transaction is slated to close by mid-December.
As part of the equity deal, Barrick and Highland have agreed to team up in Russia’s promising gold sector; Barrick will nominate two directors to Highland’s board and have the right to second the nominations of certain personnel.
Says Barrick CEO Gregory Wilkins: “Highland Gold is an attractive and growing mid-tier producer, and this transaction represents a strategic investment opportunity for Barrick Gold. It provides us with a window into one of the world’s most prospective gold mining areas. We are making this investment because of the markedly improved investment climate in Russia, and an abundance of quality gold targets in this region.”
Highland Gold’s key asset is the Mnogovershinoe gold mine, near the Russian border with China and Mongolia. The company also recently acquired JSC Mayskoye, which holds the licence for the high-grade Mayskoye gold deposit in the Chutkota region of northeastern Russia.
Highland Gold plans to use the proceeds from the share issue to refinance existing bank debt, as well as finance its development projects. The company says it will use any surplus funds for potential acquisitions and investments.
For its part, Harmony gained some US$73.2 million on its original investment in Highland, netting US$119 million on the sale.
Just three days later, Harmony dumped its 16.2% interest in
Harmony says the sale generated US$22.5 million in proceeds, representing a 55% return on its original, US$14.5-million investment in High River in November 2002. However, with the rand strengthening by about 28% during that period, the net profit comes in at about US$2.2 million.
In a prepared statement, Harmony says: “Following the company’s disposal of its 31.7% shareholding in Highland Gold earlier in the week, the board was of the opinion that the relevance of the stake in High River Gold had decreased and a decision to disinvest was taken.”
The company had warned, in its June-quarter financial statement, it would need to reassess the relevance of its investment, as it was unable to gain “operational control.”
High River’s Russian portfolio includes a fully diluted 54.1% interest in Russian gold-mining company OJSC Buryatzoloto, which owns and operates the Irokinda and Zun-Holba gold mines in southern Siberia’s Buryatia autonomous region, east of Lake Baikal.
The company also has a feasibility study under way at its Berezitovoye gold project in the Amur Region of southern Siberia.
A recent audit of the Russian-classified reserves for the Berezitovoye gold deposit by Roscoe Postle Associates revealed an indicated resource of about 14 million tonnes grading 2.52 grams gold and 12.7 grams silver per tonne. The estimate employs the results from a 25-hole core-drilling program and a cut-off grade of 0.9 gram gold. High assay values were cut to 20-35 grams gold, depending on the zone from which they were derived. Under the old Russian standards, Berezitovoye’s near-surface resource totalled 14.1 million tonnes grading 3.05 grams gold and 14.3 grams silver per tonne.
Micon International is preparing an optimized pit based on the new resource estimate, which is compliant with standards set by the Canadian Institute of Mining, Metallurgy and Petroleum. Buryatzoloto will act as operator of any mine at Berezitovoye.
Be the first to comment on "Harmony Gold cuts Russian ties"