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Anglogold Limited
(Registration number 1944/017354/06)
(Incorporated in the Republic of South Africa)
("AngloGold")
ISIN Code : ZA000014601
JSE Share Code: ANG
Sale of AngloGold's Free State assets
1. INTRODUCTION
The Board of Directors of AngloGold ("the Board") is pleased to announce
that agreement has been reached with African Rainbow Minerals (Proprietary)
Limited ("ARM") and Harmony Gold Mining Company Limited ("Harmony") for the
sale by AngloGold of its entire interests in the gold mining operations
comprising the Bambanani, Joel, Matjhabeng and Tshepong mines, as well as
their related infrastructure, assets and associated liabilities ("the
transaction"). These assets are located in the Free State goldfields, Free
State Province, South Africa and are therefore commonly referred to as the
Free State assets. ARM and Harmony ("the Joint Venture") will hold equal
joint venture interests in the Free State assets upon the implementation of
the transaction. The terms and conditions of the transaction are set out
below.
2. RATIONALE FOR THE TRANSACTION
It is the strategic objective of AngloGold to develop, acquire and operate
long-life, low-cost, world-class gold mining assets. Consequently, in recent
years, AngloGold has closed or sold certain operations approaching the end
of their profitable lives to operators who are focussed on, and therefore
better suited to, operating and extracting value from such assets.
Similarly, AngloGold has also disposed of under-performing assets with the
objective of realising cash proceeds and freeing up capital and management
resources, which can be more profitably applied to its remaining assets to
the maximum benefit of AngloGold's shareholders.
AngloGold has previously sold certain of its assets in the Free State and
Vaal River goldfields to, amongst others, ARM and Harmony and, most
recently, has sold the Elandsrand and Deelkraal mines to Harmony.
Simultaneously, AngloGold has continued to acquire and develop world-class,
low-cost, surface and shallow underground assets, has reduced its mining and
geographical risk and has focussed upon improving the operational
performance of its remaining assets.
AngloGold has previously announced its intention to close the Joel and
Matjhabeng mines in the Free State. The Bambanani mine is a mature asset
with a medium-term remaining life. Therefore, the sale of these Free State
assets is consistent with AngloGold's strategy outlined above. Although, the
Tshepong mine is a long-life, low-cost, world-class asset, it is
inextricably linked to the remaining Free State assets and would have to be
sold as part of a transaction involving all of AngloGold's Free State
assets.
AngloGold has long advocated further consolidation in the South African gold
mining industry in the interests of ensuring the optimal extraction of value
from these assets to the benefit of all of the industry's beneficiaries. ARM
and Harmony already own and operate assets in the Free State goldfields,
certain of which were acquired from AngloGold. The acquisition of the Free
State assets will result in ARM and Harmony becoming the principal operators
in a substantially consolidated Free State goldfields region.
The transaction will allow for meaningful participation by previously
disadvantaged groupings in both the ownership and the management of a
substantial gold mining asset.
The transaction will result in a reduction in AngloGold's total cash cost of
production and enhance its profitability, thereby increasing its
competitiveness as a global gold producer.
3. OVERVIEW OF THE FREE STATE ASSETS
The Free State assets comprise:
* the gold mining operations known as the Bambanani, Joel, Matjhabeng and
Tshepong mines, including their respective underground mine infrastructure,
mineral rights and mining leases ("the Free State mines");
* all surface infrastructure and equipment related to the Free State mines
including all mining equipment, all metallurgical plants, all surface
rights, all on-mine surface infrastructure, all commercial and residential
properties and the Ernest Oppenheimer Hospital and all assets and equipment
used in such hospital ("the related assets");
* all employees of the Free State mines and the related assets unless
otherwise agreed with ARM and Harmony;
* all immovable property and all movable property, including vehicles and
equipment, used primarily in or by the Free State mines or the related
assets;
* all shares in Jeannette Gold Mines Limited owned either directly or
indirectly by AngloGold;
* all other mineral rights in the Free State goldfields presently owned by
AngloGold;
all stock in trade, including gold in process and consumable and capital
stores which relate directly to the Free State mines or the related assets;
and
* all liabilities which relate to either the Free State mines or the related
assets.
Following the transaction the only assets which AngloGold will retain in the
Free State goldfields will be its Technical Development Services Division
and those assets which are part of its wholly owned subsidiary, ISS
International Limited.
For the nine months ended 30 September 2001, the Free State assets produced
908,000 ounces of gold at a total cash cost of US$229 per ounce, resulting
in earnings before interest, tax, depreciation and amortisation ("EBITDA")
of R322 million (US$40 million). This compares to AngloGold's total
production, total cash costs and EBITDA, for the same period of 5,264,000
ounces, US$184 per ounce and R3,920 million (US$483 million) respectively.
The book value of the Free State assets, as at 30 September 2001, is R2,700
million (US$299 million).
4. STRUCTURE AND TERMS OF THE TRANSACTION
AngloGold will sell the Free State assets to a wholly owned subsidiary of
AngloGold ("New Freegold") for a consideration of R2,200 million ("the
initial sale"). AngloGold has applied to the Commissioner of the South
African Revenue Services ("the Commissioner") for the necessary exemption to
allow the initial sale to be considered as a scheme of rationalisation in
terms of section 39 of the Taxation Laws Amendment Act ("the section 39
relief"). The consequences, amongst others, of this step will be that the
initial sale will:
* be exempt from stamp and transfer duties;
* be exempt from value added tax; and
* not attract any recoupment tax in the hands of AngloGold.
AngloGold will then sell its entire interests in the ordinary share capital
of, and any claims on loan account against, New Freegold, to the Joint
Venture for a cash consideration of R2,200 million which cash consideration
will be payable as follows:
* R1,800 million on 1 January 2002; and
* R400 million on 1 January 2005.
The effective date of the transaction is 1 January 2002. However, the
transaction is subject to certain conditions, as discussed in paragraph 5
below. The date on which all conditions will be satisfied is referred to as
the implementation date.
New Freegold will assume all liabilities associated with the Free State
assets from the effective date, which liabilities include:
* all employee related liabilities, in accordance with the provisions of
section 197 of the Labour Relations Act, 1995; and
* all environmental rehabilitation liabilities.
AngloGold will remain liable for all health-care related liabilities for
those persons who became continuation and widowed members of AngloGold's
health-care programmes prior to the effective date.
On the implementation date AngloGold will transfer control of a dedicated
environmental rehabilitation trust fund, with cash resources equivalent to
the cost of the environmental rehabilitation liability in respect of the
Free State assets as at the effective date, to New Freegold.
New Freegold will repay AngloGold for the value of all consumable stores
relating to the Free State assets and acquired as part of the transaction in
12 equal monthly instalments commencing 31 January 2002.
AngloGold will continue to manage the Free State assets up until the
effective date. All profits and losses in this period will be for
AngloGold's account.
The Joint Venture will manage the Free State assets from the effective date.
All profits and losses from the effective date will be for the account of
New Freegold. However, should the conditions as set out in paragraph 5 below
not be satisfied, these profits and losses as well as the management of the
Free State assets will revert to AngloGold.
5. CONDITIONS PRECEDENT
The transaction is subject to, amongst others, the fulfilment of the
following suspensive conditions:
* the conclusion of a "black hole" due diligence by the Joint Venture and it
advisers to the reasonable satisfaction of the Joint Venture and its
advisers by 7 December 2001;
* the conclusion of the formal transaction agreements by 15 December 2001 or
such later date as agreed between AngloGold and the Joint Venture;
* the Commissioner granting the section 39 relief by 31 December 2001;
* approval for the transaction in terms of the Competition Act, 1998, by 31
March 2002 or such later date as agreed between AngloGold and the Joint
Venture;
* the obtaining of all necessary board and shareholder approvals by 31 March
2002 or such later date as agreed between AngloGold and the Joint Venture;
and
* the consent of the Minister of Minerals and Energy to the cession of all
mining leases relating to the Free State mines to New Freegold, the granting
of a temporary mining authorisation in terms of section 10 of the Minerals
Act, 1991, to New Freegold in respect of the Free State mines and the
granting of all necessary permits to New Freegold in terms of the Nuclear
Energy Act, 1999, by 31 March 2002 or such later date as agreed between
AngloGold and the Joint Venture.
6. EFFECTS OF THE TRANSACTION ON ANGLOGOLD
On 5 September 2001, AngloGold announced that it was to make an offer for
the entire issued share capital ("the offer") of Normandy Mining Limited
("Normandy"). The offer to Normandy shareholders other than those located in
the United States and Canada opened on Tuesday, 6 November 2001 and to
Normandy shareholders located in the United States and Canada on Friday, 9
November 2001. The earliest closing date of the offer is Friday, 14 December
2001. Consequently, because the acquisition of Normandy is incomplete, the
effects of the Freegold transaction on AngloGold set out below consider the
impact on AngloGold including and excluding Normandy.
6.1 Impact upon production, reserves and other technical factors
The impact of the transaction in relation to the acquisition by AngloGold
(excluding Deelkraal and Elandsrand) of Normandy is set out in the following
table:
Excluding sale of Assuming sale of
Free State assets Free State assets
Prior to After Prior to After
acquisition acquisition acquisition acquisition
of Normandy of Normandy of Normandy of Normandy
Total gold
production
for 12 months
ended
30 June 2001
(`000 ounces) 6,889a 9,354a 5,587a 8,052a
Proportion
of gold
production
from
South Africa 67%b 50%b 60%b 42%b
Proportion of
gold production
from shallow
underground
and surface
operations 40%b 56%b 48%b 64%b
Proportion of
EBITDA from
South Africa 49%c 34%c 45%c 31%c
Proportion of
EBITDA from
shallow
underground
and surface
operations 56%c 70%c 58%c 72%c
Total gold
reserves
(`000 ounces) 80,200d 106,646d 67,800d 94,246d
Proportion of
gold reserves
in South Africa 69.7%d 52.4%d 64.2%d 46.2%d
Total gold
resources
(`000 ounces) 373,500e 432,813e 306,000e 365,313e
Total unit
cash costs
(US$/ounce) 188f 179f 179f 171f
Notes:
a. Determined on a pro forma basis, using publicly available information for
Normandy and AngloGold and excluding production from Elandsrand and
Deelkraal but including a full year of production from Normandy's Midas (Ken
Snyder) mine.
b. Determined on a pro forma basis, using publicly available information for
Normandy and AngloGold, based on production for AngloGold (excluding
Elandsrand and Deelkraal) and Normandy for the six months ended 30 June
2001.
c. Determined on a pro forma basis in accordance with International
Accounting Standards, using publicly available information for Normandy and
AngloGold, based upon EBITDA for AngloGold (excluding Elandsrand and
Deelkraal) and for Normandy for the six months ended 30 June 2001.
d. Determined on a pro forma basis, using publicly available reserve
information as published by AngloGold as at 31 December 2000 (excluding
Elandsrand and Deelkraal) and as published by Normandy as at 30 June 2001.
e. Determined on a pro forma basis, using publicly available resource
information (measured, indicated and inferred) as published by AngloGold as
at 31 December 2000 (excluding Elandsrand and Deelkraal) and as published by
Normandy as at 30 June 2001.
f. Determined on a pro forma basis, in accordance with International
Accounting Standards, using publicly available information as published by
Normandy and AngloGold (excluding Elandsrand and Deelkraal) for the six
months ended 30 June 2001.
6.2 Financial impacts of the transaction
The table below shows the per share effects of the sale of the Free State
assets for the nine months ended 30 September 2001. The financial effects
are determined in accordance with International Accounting Standards.
Prior to the acquisition of Normandy
Historical After the %
(Base) transaction Change
Amounts in Rands per share
Net asset value (1) 99.36 95.81 (4)
Net asset value
(excluding goodwill) (1) 69.09 65.54 (5)
EBITDA (2) 36.61 33.60 (8)
Basic earnings (3) 12.00 8.39 (30)
Diluted earnings (4) 11.84 9.82 (30)
Headline earnings (5) 14.06 13.99 -
Headline earnings
before unrealised
gain/(loss) on
hedging activities (6) 15.04 14.99 -
Weighted average number
of shares in issue 107,080,120 107,080,120
Weighted average diluted
number of shares in issue 108,544,987 108,544,987
Number of shares in issue 107,181,237 107,181,237
Amounts in US dollars
per share
Net asset value (1) 10.99 10.60 (4)
Net asset value
(excluding goodwill) (1) 7.64 7.4 (5)
EBITDA (2) 4.51 4.13 (8)
Basic earnings (3) 1 1.48 1.21 (30)
Diluted earnings (4) 1.46 1.20 (30)
Headline earnings (5) 1.74 1.71 -
Headline earnings before
unrealised gain/(loss)
on hedging activities (6) 1.85 1.82 -
Total unit cash costs (US$/ounce) 184 175 5
Total unit production
costs (US$/ounce) 220 210 5
Notes:
1. Computed by dividing shareholders' equity by the number of shares in
issue.
2. EBITDA is the earnings before exceptional items, net interest, realised
and unrealised gain/(loss) on hedging activities, taxation, depreciation and
amortisation. The EBITDA per share computation has been based on the
weighted average number of shares in issue.
3. The "after the effects" basic earnings per share is after exceptional
items of R599 million (US$ 74 million) and unrealized losses on hedging
activities of R107 million (US$12 million), net of taxation. Included in the
R599 million is an exceptional loss on the sale of the Free State assets of
R380 million (US$ 48million). The basic earnings per share is computed by
dividing net profit by the weighted average number of shares in issue.
4. The "after the effects" diluted earnings per share is after exceptional
items of R599 million (US$ 74 million) and unrealized losses on hedging
activities of R107 million (US$12 million), net of taxation. Included in the
R599 million is an exceptional loss on the sale of the Free State assets of
R380 million (US$ 48million). The diluted earnings per share is computed by
dividing net profit by the weighted average diluted number of shares in
issue.
5. The "after the effects" headline earnings per share is before exceptional
items of R599 million (US$ 74 million) . Included in the R599 million is an
exceptional loss on the sale of the Free State assets of R380 million (US$
48 million). Headline earnings removes items of an exceptional nature and
goodwill amortisation from the calculation of earnings per share. Headline
earnings per share is computed by dividing headline earnings by the weighted
average number of shares in issue.
6. Computed by dividing headline earnings before unrealised gain/(loss) on
hedging activities by the weighted average number of shares in issue.
The table below shows the pro forma per share effects of the transaction for
the six months ended 30 June 2001. These financial effects are based on the
consolidated pro forma income statement and balance sheet, as detailed in
Annexure 2 of the circular to AngloGold members related 26 October 2001. The
financial effects are determined in accordance with International Accounting
Standards.
After the acquisition of Normandy (1)
After the %
Pro forma transaction Change
Amounts in Rands
per share
Net asset value (2) 163.55 161.10 (2)
Net asset value
(excluding goodwill) (2) 126.45 124.00 (2)
EBITDA (3) 24.29 22.80 (6)
Basic earnings (4) (8.66) (11.30) (30)
Diluted earnings (5) (8.57) (11.18) (30)
Headline earnings (6) (0.44) (0.47) (7)
Headline earnings
before unrealised
gain/(loss) on
hedging activities (7) 7.29 7.27 -
Weighted average number
of shares in issue (8) 145,873,659 145,873,659
Weighted average
diluted number
of shares in issue (9) 147,377,109 147,377,109
Number of shares
in issue (10) 155,140,649 155,140,649
Amounts in US
dollars per share
Net asset value (2) 19.80 19.50 (2)
Net asset value
(excluding goodwill) (2) 15.29 14.99 (2)
EBITDA (3) 3.06 2.88 (6)
Basic earnings (4) (1.12) (1.45) (30)
Diluted earnings (5) (1.11) (1.44) (30)
Headline earnings (6) (0.06) (0.06) -
Headline earnings
before unrealised
gain/(loss) on
hedging activities (7) 0.91 0.91 -
Total unit cash
costs (US$/ounce) 180 172 4
Total unit production
costs (US$/ounce) 224 217 3
Notes:
1. It is assumed for the purposes of the above pro forma calculations that
100% of Normandy shareholders accept the offer by AngloGold of 2.15 shares
for each 100 Normandy shares held.
2. Computed by dividing shareholders' equity by the number of shares in
issue.
3. EBITDA is the earnings before exceptional items, net interest, realised
and unrealised gain/(loss) on hedging activities, taxation, depreciation and
amortisation. The EBITDA per share computation has been based on the
weighted average number of shares in issue.
4. The "after the effects" basic earnings per share is after exceptional
items of R1,580 million (US$203 million) and unrealized losses on hedging
activities of R1,128 million (US$142 million), net of taxation. Included in
the R1,580 million is an exceptional loss on the sale of the Free State
assets of R380 million (US$ 48million). The basic earnings per share is
computed by dividing net profit by the weighted average number of shares in
issue.
5. The "after the effects" diluted earnings per share is after exceptional
items of R1,580 million (US$203 million) and unrealized losses on hedging
activities of R1,128 million (US$142 million), net of taxation. Included in
the R1,580 million is an exceptional loss on the sale of the Free State
assets of R380 million (US$ 48million). The diluted earnings per share is
computed by dividing net profit by the weighted average diluted number of
shares in issue.
6. The "after the effects" headline earnings per share is before exceptional
items of R1,580 million (US$203 million). Included in the R1,580 million is
an exceptional loss on the sale of the Free State assets of R191 million
(US$ 48million). Headline earnings removes items of an exceptional nature
and goodwill amortisation from the calculation of earnings per share.
Headline earnings per share is computed by dividing headline earnings by the
weighted average number of shares in issue.
7. Computed by dividing headline earnings before unrealised gain/(loss) on
hedging activities by the weighted average number of shares in issue.
8. The weighted average number of AngloGold shares in issue was 107,041,537
and 1,806,145,187 Normandy shares for the six months ended 30 June 2001. At
the ratio of the exchange of 2.15 AngloGold shares for each 100 Normandy
shares, the weighted average number of shares in issue for the enlarged
group would have been 145,873,659.
9. The weighted average diluted number of AngloGold shares in issue for the
six months ended 30 June 2001 was 108,544,987. At the ratio of the exchange
of 2.15 AngloGold shares for each 100 Normandy shares, the weighted average
diluted number of shares in issue for the enlarged group would have been
147,377,109.
10. The number of shares in issue is based on 107,167,837 AngloGold shares
and 2,231,293,599 Normandy shares in issue as at 30 June 2001. At the ratio
of the exchange of 2.15 AngloGold shares for each 100 Normandy shares,
47,972,812 shares will be issued to Normandy shareholders giving a total of
155,140,649 AngloGold shares for the enlarged group.
AngloGold believes that the pro forma financial information, as set out, is
not entirely indicative of the future financial performance of the enlarged
AngloGold.
Shareholders of AngloGold are referred to the AngloGold circular dated 26
October 2001 and Normandy shareholders are referred to the offer documents
dated 6 November 2001 and 9 November 2001 for discussions regarding the
impact of the acquisition of Normandy on both historic and future earnings
and cash flows of AngloGold.
7. APPLICATION OF THE CASH PROCEEDS OF THE TRANSACTION
AngloGold will apply the cash proceeds of the transaction to the reduction
of debt, the settlement of certain liabilities and the completion of major
capital projects.
8. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
The cautionary announcement dated 10 October 2001 regarding the sale of the
Free State assets is hereby withdrawn.
Johannesburg
21 November 2001
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