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ANGLOGOLD LIMITED
(REGISTRATION NUMBER 1944/017354/06)
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
("ANGLOGOLD")
SALE OF DEELKRAAL AND ELANDSRAND TO HARMONY GOLD MINING COMPANY LIMITED AND
FURTHER CAUTIONARY
1. INTRODUCTION
THE BOARD OF DIRECTORS OF ANGLOGOLD ("THE BOARD") IS PLEASED TO ANNOUNCE THAT
AGREEMENT IN PRINCIPLE HAS BEEN REACHED FOR THE SALE BY ANGLOGOLD OF THE ASSETS
AND LIABILITIES OF THE SOUTH AFRICAN GOLD MINING OPERATIONS KNOWN AS DEELKRAAL
AND ELANDSRAND ("THE TRANSACTION") TO HARMONY GOLD MINING COMPANY LIMITED
("HARMONY"). THE TERMS AND CONDITIONS OF THE TRANSACTION ARE SET OUT BELOW.
2. RATIONALE FOR THE TRANSACTION
ANGLOGOLD HAS PUBLICLY STATED ITS OBJECTIVE OF ACQUIRING AND DISPOSING OF
MINING OPERATIONS IN PURSUIT OF MAXIMUM BENEFIT TO SHAREHOLDERS. THIS HAS
RESULTED IN THE COMPANY CLOSING OPERATIONS AT THE END OF THEIR PROFITABLE LIVES
OR SELLING THEM TO OPERATORS MORE SUITED TO MATURE OPERATIONS AND ACQUIRING
ASSETS WHICH FIT THE COMPANY'S STRATEGIC OPERATIONAL AND GEOGRAPHIC PROFILE.
THIS STRATEGY INCLUDES THE SALE OF UNDER-PERFORMING ASSETS WHERE THE PROCEEDS
OF SUCH A SALE CAN BE USED TO GENERATE A HIGHER RATE OF RETURN.
THE ELANDSRAND MINE CAME INTO PRODUCTION IN 1978 WITH AN ANTICIPATED LIFE OF 23
YEARS. THE SUBSEQUENT COMMISSIONING OF THE SUB-VERTICAL SHAFT IN 1984 AND THE
ACQUISITION OF DEELKRAAL FROM GOLD FIELDS OF SOUTH AFRICA LIMITED IN 1997
(WHICH ALLOWED ACCESS TO FURTHER RESERVES) EXTENDED THIS LIFE SIGNIFICANTLY. IT
WAS THE STATED INTENTION OF MANAGEMENT TO ACCESS THE LOWER LEVEL RESERVES OF
THE DEELKRAAL MINE THROUGH THE ELANDSRAND INFRASTRUCTURE.
THE UPPER LEVEL PORTION OF THE DEELKRAAL MINE IS APPROACHING THE END OF ITS
ECONOMIC LIFE AND WE ARE PLANNING FOR ITS CLOSURE IN THE NEAR FUTURE.
ELANDSRAND HAS BEEN, AND CONTINUES TO BE ONE OF ANGLOGOLD'S LABOUR PRODUCTIVITY
FLAGSHIPS. CHANGES IN MINING METHOD AND WORK STRUCTURE HAVE LED TO SOME OF THE
HIGHEST LEVELS OF LABOUR PRODUCTIVITY IN THE GOLD INDUSTRY. THESE IMPROVEMENTS
HAVE BEEN SUSTAINED OVER TIME AND HAVE NOW ALSO BEEN SPREAD BROADLY THROUGHOUT
ANGLOGOLD'S OPERATIONS. HOWEVER, ELANDSRAND IS NOW IN A MATURE STAGE OF ITS
LIFE AND IS EXPERIENCING DECLINING GRADES RESULTING IN A DECLINE IN
PROFITABILITY. THIS HAS LED MANAGEMENT AND THE BOARD TO CONCLUDE THAT THE OFFER
RECEIVED WILL ENABLE IT TO GENERATE A HIGHER RETURN BY USING THE PROCEEDS ON
OTHER MAJOR PROJECTS THAN IT COULD EXPECT FROM THIS ASSET.
3. TERMS OF THE TRANSACTION
HARMONY WILL PAY ANGLOGOLD R1 BILLION IN CASH AS CONSIDERATION FOR THE ASSETS
AND LIABILITIES OF DEELKRAAL AND ELANDSRAND.
THE ASSETS AND LIABILITIES INCLUDE:
* THE MINERAL RIGHTS AND MINING TITLE (OTHER THAN IN RESPECT OF A PORTION OF
THE CARBON LEADER REEF HORIZON WHICH WILL CONTINUE TO BE MINED BY ANGLOGOLD'S
SAVUKA MINE), MINING EQUIPMENT, METALLURGICAL FACILITIES, UNDERGROUND AND
SURFACE INFRASTRUCTURE OF ELANDSRAND AND DEELKRAAL NECESSARY FOR THE
CONTINUATION OF MINING, ORE TREATMENT AND GOLD EXTRACTION AT THESE OPERATIONS
AS A GOING CONCERN; AND
* CONTRIBUTIONS TO A REHABILITATION TRUST FUND EQUIVALENT TO THE CURRENT
REHABILITATION LIABILITY OF DEELKRAAL AND ELANDSRAND.
THE TRANSACTION EXCLUDES EXISTING GOLD HEDGING POSITIONS AND LIABILITIES
RELATED TO CONTINUING AND WIDOW MEMBERS OF THE MEDICAL AID FUND RELATED TO
THESE OPERATIONS. HARMONY, SUBJECT TO THE PROVISIONS OF SECTION 197 OF THE
LABOUR RELATIONS ACT, 1995, WILL EMPLOY ALL EXISTING EMPLOYEES OF DEELKRAAL AND
ELANDSRAND, OTHER THAN THOSE WHICH ANGLOGOLD WISHES TO RETAIN. FURTHERMORE,
ANGLOGOLD WILL PROVIDE CERTAIN SERVICES RELATING TO THE CONTINUATION OF
EMPLOYEE BENEFITS AND TO CERTAIN OPERATIONAL MATTERS FOR PERIODS OF UP TO THREE
MONTHS AFTER THE IMPLEMENTATION DATE.
HARMONY WILL ASSUME OPERATIONAL CONTROL OF DEELKRAAL AND ELANDSRAND ONCE THE
FINANCING CONDITION PRECEDENT REFERRED TO BELOW HAS BEEN FULFILLED. THE
IMPLEMENTATION DATE OF THE TRANSACTION WILL BE WHEN THE TRANSACTION HAS BEEN
APPROVED BY THE COMPETITIONS TRIBUNAL AND BY HARMONY SHAREHOLDERS (WHICHEVER IS
LATER).
4. CONDITIONS PRECEDENT
THE TRANSACTION IS SUBJECT TO THE FULFILMENT OF THE FOLLOWING SUSPENSIVE
CONDITIONS:
* COMPLETION OF PURCHASE AND SALE AGREEMENTS TO THE SATISFACTION OF BOTH
PARTIES;
* OBTAINING THE NECESSARY REGULATORY APPROVALS FOR THE TRANSFER OF THE MINERAL
RIGHTS AND THE CESSION OF THE MINING LEASES FROM THE MINISTER OF MINERALS AND
ENERGY;
* GRANTING THE NECESSARY MINING AUTHORISATIONS TO HARMONY;
* OBTAINING APPROVAL OF THE TRANSACTION BY THE SHAREHOLDERS OF HARMONY IN
GENERAL MEETING;
* OBTAINING APPROVAL OF THE TRANSACTION FROM THE COMPETITIONS TRIBUNAL AND THE
MINISTER OF TRADE AND INDUSTRY IN TERMS OF THE COMPETITION ACT (ACT 89 OF
1998); AND
* HARMONY SECURING THE UNDERWRITTEN COMMITMENT FOR THE FINANCE FROM ITS BANKERS
TO FULFIL ITS OBLIGATIONS TO ANGLOGOLD.
5. EFFECTS OF THE TRANSACTION ON ANGLOGOLD
THE TRANSACTION WILL HAVE THE FOLLOWING FINANCIAL EFFECTS ON ANGLOGOLD:
30 SEPTEMBER 2000 ADJUSTED PRO-FORMA % CHANGE
(UNAUDITED) (UNAUDITED)
NET ASSET VALUE
(RAND PER SHARE) 102.90 101.43 (1.4)
EARNINGS
(RAND PER SHARE) 11.67 11.19 (4.1)
HEADLINE EARNINGS
(RAND PER SHARE) 12.57 13.13 4.5
NOTE: THE EARNINGS PER SHARE ARE CALCULATED FOR THE NINE MONTHS ENDED SEPTEMBER
2000.
THE TRANSACTION WILL REDUCE ANGLOGOLD'S ANNUAL GOLD PRODUCTION FROM SOUTH
AFRICAN SOURCES BY APPROXIMATELY 500,000 OUNCES. FURTHERMORE, ANGLOGOLD'S
OVERALL CASH COSTS SHOULD DECREASE TO APPROXIMATELY US$197 PER OUNCE.
ANGLOGOLD'S RESERVES WILL REDUCE BY 10 MILLION OUNCES TO 97 MILLION OUNCES.
6. APPLICATION OF THE CASH PROCEEDS
ANGLOGOLD WILL APPLY THE CASH PROCEEDS OF THE TRANSACTION TO THE COMPLETION OF
MAJOR CAPITAL PROJECTS IN SOUTH AFRICA.
7. FURTHER CAUTIONARY ANNOUNCEMENT
ANGLOGOLD IS CONTINUING TO CONSIDER ITS POSITION REGARDING CERTAIN OF ITS
ASSETS IN THE FREE STATE AND DISCUSSIONS ARE CONTINUING WITH VARIOUS PARTIES.
CONSEQUENTLY, SHAREHOLDERS ARE ADVISED TO CONTINUE TO EXERCISE CAUTION IN
DEALING IN ANGLOGOLD SHARES.
JOHANNESBURG
19 DECEMBER 2000
LEGAL ADVISERS: TABACKS
SPONSOR: MERRILL LYNCH
