Uranium deal to net Harmony R1,9bn

Harmony Gold Mining will receive a foreign-capital injection equivalent to R1,9-billion once all the conditions precedent in the $420-million transaction with the Pamodzi Resources Fund (PRF) have been fulfilled, Harmony CEO Graham Briggs said on Thursday.

The outstanding conditions to the transaction that will establish a new uranium player, Rand Uranium, are expected to be met by June this year. This will result in a massive inflow on Harmony’s books.

Harmony financial director Frank Abbott said the sale of the Cooke assets that form part of the Rand Uranium transaction will be reflected in the company’s June quarterly financials. “We will make a big profit,” he said of the proceeds of the sale.

“But this is not an operational profit,” he said, adding that as an exceptional, the profit will also not affect the company’s headline earnings.

Harmony’s sale of the uranium and gold assets at Cooke Section into Rand Uranium, which is jointly held with PRF, is part of the company’s strategy to optimise value from its latent assets.

The world’s fifth-largest gold producer will retain a 40% holding in the newly registered uranium company, while PRF will pay $252-million for the other 60%.

Briggs said it is Harmony’s intention to maintain this level holding in the uranium company, which means Harmony may consider selling some of its other uranium assets into the joint venture.

Previous CEO Barnard Swanepoel admitted that Harmony had been sitting on its uranium potential for about five years, and at one stage he considered exiting the uranium assets.

But now Harmony also wants to cash in on the uranium boom. Harmony’s South African rivals, AngloGold Ashanti and Gold Fields, are also planning to exploit the potential of uranium, whose prices have soared in the past two years.

Less than a year back, Harmony said it was mulling its various options to make sure it unlocked the most possible value from its uranium assets for its shareholders.

Swanepoel suggested that one way would be to crystallise this value by listing the uranium assets in a separate entity.

Of the 56 slimes dams owned by Harmony, 11 were prioritised for drilling based on historical gold and uranium values. The company’s Cooke dump, which now forms the base case for Rand Uranium’s introduction into the industry, was believed to offer the biggest yellowcake potential with a net present value of R1,4-billion at a uranium price of $75 a pound.

While the uranium price has dipped to $68/lb since, initial numbers indicated that the recovery percentage for the uranium in Cooke dump would probably range between 65% and 70%. This is much higher than the 54% recovery used to calculate the above net present value.

The company intends to explore potential within the asset and later consider acquisitions.

“The future listing of Rand Uranium should bring further upliftment value to Harmony,” said Briggs.

Briggs indicated that the company will consider a listing on a major stock exchange within two to three years, presumably when the company begins producing uranium. — I-Net Bridge

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