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/year. These payments would be made for six years from the start of 2021.
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, including Mponeng, Savuka and TauTona. The Mponeng mine has 8.5-million ounces of gold reserves in a planned extension to the mine that would take its life to 20 years.
AngloGold is selling the assets as Chief Executive Officer Kelvin Dushnisky focuses on more profitable mines in Ghana, Australia and the Americas.
“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,” Dushnisky said on Wednesday. The proceeds will be used to repay debt, he said.
Who benefits from this Deal?
Harmony is looking at potential acquisitions in South Africa and has a plan to finance the deals, The company is looking at assets with at least 1 million ounces of reserves and a 10-year life span, he said. AngloGold’s mines could be used as “criteria if we are to evaluate any assets” in South Africa, Steenkamp said.
Harmony, which bought the Moab Khotsong mine from AngloGold in 2018 for $300m, said the Mponeng purchase would add to its cash flows and boost its gold production by 350,000oz a year.
“The acquisition has the potential to improve our overall recovered grade and increasing our cash flow margin,” said CEO Peter Steenkamp.
“The acquisition represents an opportunity to acquire a portfolio of SA gold assets which have an excellent strategic, financial, operational and geographical fit with Harmony’s current operations and is in line with its stated merger and acquisition criteria.”
AngloGold, the world’s third-largest gold miner, has a range of projects offshore that will deliver better returns on investments compared with the billions of rand needed to extend the life of Mponeng, the world’s deepest mine at 4km below surface, beyond eight years, Dushnisky has said.
AngloGold said last week that it plans to provide an update on the asset sale on Feb. 21. In November, AngloGold narrowed the list of bidders for its South African assets to Harmony and Sibanye Gold Ltd., people familiar with the matter said at the time.