Harmony takes out ARM

Vancouver South Africa’s Harmony Gold Mining (HMY-N) has agreed to take over fellow African miner African Rainbow Minerals Gold in a move that creates the world’s fifth-largest gold producer with output of 4.1 million oz a year.

Shareholders of African Rainbow Minerals will receive two Harmony shares for every three Rainbow shares held. African Rainbow Minerals Gold agreed to pay a special dividend of five rand per share before the merger takes effect. The share and dividend deal is valued at US$2.8 billion.

The combined gold miner will keep the Harmony name and African Rainbow Minerals will be de-listed from the Johannesburg bourse.

Harmony and African Rainbow Minerals first joined forces back in 2001 when the companies bought four of AngloGold‘s mines in South Africa’s Free State.

The takeover announcement comes after the two companies agreed to purchase mining powerhouse Anglo American‘s (AAUK-Q) 34.5% stake in South African mid-tier miner Anglovaal Mining for US$231 million.

The move ends an attempt by Anglo American to unlock synergies by consolidating iron ore operations in the Northern Cape area of Africa. The major acquired its shareholdings in Avmin and Kumba Resources back in March 2002. However, it soon became apparent to the major that there were concerns about it owning an effective interest in both the Assmang and Kumba iron ore mines. Anglo American has elected to stay invested only in Kumba.

Kumba as the largest iron ore producer in South Africa (and the fifth largest in the world) is the most important component of the South African iron ore assets.

Based on the sale, Anglo American has elected to withdraw its notification currently before the Competition Tribunal in respect of Avmin but will continue to seek approval for the Kumba deal. The Competition Tribunal is slated to consider the Kumba notification in late May.