On Wednesday, May 6, 2020, Harmony Gold Mining Company Ltd revealed its plans to raise $200 million through a share issue to partially complete its purchase of AngloGold Ashanti’s last assets in South Africa.
Early in February 2020, AngloGold Ashanti disclosed that it will sell its assets including Mponeng, the world’s deepest gold mine, and Mine Waste Solutions (MWS) for about $300 million to Harmony, turning the latter into the country’s largest gold producer. The sale will end AngloGold Ashanti’s long history in South African mining, as it focuses on Ghana and regions outside of Africa.
As part of the process of streamlining AngloGold Ashanti’s portfolio, Kelvin Dushnisky Chief Executive of the company stated: “From the beginning of the process an objective has been to sell our SA assets to a strong, capable and responsible operator that will ensure their long-term sustainability; we believe that this transaction achieves that.”
Harmony, which is currently valued at R36.3billion believes that the AngloGold acquisition has the potential to improve its overall recovered grade and increase cash flow margins. Also, Harmony said that the fundraising would allow the company to benefit from balance sheet flexibility and optionality given the current uncertainty caused by the COVID-19 pandemic. Shares in Harmony fell this week after the company said it was seeking authority to issue the ordinary shares for cash.
Mining operations were halted in South Africa for a five-week lockdown period so as to curb the spread of the novel coronavirus. However, from May 1, mines have been allowed to start operations with 50 percent of their workforce. “Due to the impact of COVID-19 and the continued uncertainty as to when our mines will be allowed to return to full production, we have decided to withdraw our annual production guidance,” Harmony said in a statement.
Nevertheless, Miningmx reports that Harmony CEO Peter Steenkamp, in a third-quarter production results conference call stated: “we are going to mine all the high-grade panels to start with just to get a bit better production out,” despite the operational performance caused by COVID-19.
The agreement to buy Mponeng and MWS from AngloGold consists of $200 million on deal closure with the balance payable by means of a royalty of $260 per ounce on underground gold mined in excess of 250,000 ounces a year. The latter will last for six years starting January 1, 2021. Harmony announced previously that absorbing the assets into its portfolio would add 350,000 oz annually to production, which has been guided to about 1.4 million oz in the current financial year.
Additionally, the deal increases Harmony’s South African reserves by 8.27 million oz excluding Mponeng’s reserves below existing infrastructure. The purchase of Moab Khotsong added some 250,000 oz to Harmony’s annual gold production. A general meeting of shareholders has been called for by the company on June 11, 2020, to consider the possibilities of the share issue.