DARREN SCHUETTLER, Johannesburg | Tuesday
WORLD number one gold producer AngloGold has agreed to sell two South African mines to rival Harmony Gold for R1bn in cash.
In the latest example of consolidation in South Africa’s gold industry, the two companies said the deal would deliver substantial benefits to their respective operations.
Harmony said the Elandsrand and Deelkraal mines would be acquired by its wholly-owned subsidiary, Randfontein Estates, which has contiguous properties located about 50 kms from the two AngloGold mines.
”The company expects to unlock synergies between Randfontein and Elandsrand/Deelkraal,” Harmony, the country’s third largest gold company, said in a statement.
The two mines will boost Harmony’s annual output by about 500000 ounces to 2.7 million ounces, and provide another 10 million ounces of reserves.
Shares in Harmony were off 40 cents at R33.50 after opening up 10 cents to R34 on the Johannesburg bourse.
AngloGold also opened up 260 cents to R215, but later surrendered those gains to trade flat at R212.40.
Elandsrand and Deelkraal, located on the West Witwatersrand line, no longer fit with AngloGold’s strategy of concentrating on higher margin, long life operations, AngloGold said.
The sale will have a ”positive impact” on AngloGold’s earnings, and reduce cash costs at its underperforming South African operations to $208/oz from $233/oz.
On a company-wide basis, cash costs are expected to fall to $197/oz from $237/oz.
”The sale also reduces AngloGold’s capital commitments in South Africa by R730m over the next six years,” the company said.
The deal is subject to a formal sale and purchase agreement by January 31, 2001, as well as various shareholder and regulatory approvals.
Harmony, which has gained a reputation for being a turnaround specialist in the industry, is expected to take operational control of the mines on February 1.
Harmony beat out a rival bid from South African gold producer Durban Roodepoort Deep, also worth about R1bn.
Under the agreement, Harmony will employ all existing employees at Elandsrand and Deelkraal, which have a staff of more than 9000. – Reuters