AngloGold Ashanti is selling its Mponeng mine and Mine Waste Solutions tailings recycling business to Harmony Gold for $300m (about R4.4bn), marking the end of its exposure to SA mining.
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 under Canadian CEO Kelvin Dushnisky, who took up the role in September 2018, wasted no time in disposing of assets, selling out of the Sadiola mine in Mali and now the last SA assets ahead of an anticipated shift in primary listing from the Johannesburg bourse.
“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.
The asset sale includes the mothballed Tau Tona and Savuka mines and associated rock-dump and tailings storage facility reclamation sites. The book value of all the assets is R9.9bn and they generated post-tax profit of R331m in full-year 2019.
Some analysts valued Mponeng and Mine Waste Solutions at $650m (about R9.6bn) and calculated they were generating free cash flows of $100m a year.
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’s sale of the mine comes as SA is once again experiencing rolling blackouts because of the inability of state-owned power monopoly Eskom to adequately or safely supply as much electricity as the country needs.
The sales price reflects the risk from Eskom.
Sibanye-Stillwater was the only other real contender for the assets, but CEO Neal Froneman told Business Day that unless the assets were sold at what Sibanye deemed the right value considering the risk associated with Eskom and historic water pumping agreements the company was not interested.