HARMONY GOLD MINING COMPANY LIMITED - Availability of circular, notice of GM and information of Moab Khotsong

Release Date: 07/12/2017 10:30
Code(s): HAR
 
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Availability of circular, notice of GM and information of Moab Khotsong

Harmony Gold Mining Company Limited
Registration number 1950/038232/06
Incorporated in the Republic of South Africa
ISIN: ZAE000015228
JSE share code: HAR
(“Harmony” or "the Company")


Availability and posting of circular and further details in relation to the
proposed acquisition of the Moab Khotsong operations


Johannesburg. Thursday 7 December 2017. Harmony advises that further to the
announcement of the proposed acquisition of the Moab Khotsong operations, which
incorporates the Great Noligwa underground mine and related infrastructure (the
"Target Assets") on 19 October 2017, Harmony has made available to download on
its       website,   www.harmony.co.za/investors,      today,   a      circular   to   Harmony
shareholders. The circular will be posted on or about Friday, 8 December 2017.
Defined terms used but not defined in this announcement have the meaning set out
in the circular.


The circular provides further information in relation to:
      -   The acquisition of the underground mine Moab Khotsong, which incorporates
          the   Great   Noligwa   underground   mine   and   related    infrastructure   from
          AngloGold Ashanti Limited for a consideration of US$300 million in cash;
      -   Proposed amendments to Harmony's memorandum of incorporation;
      -   The specific authority for the issue of Ordinary Shares to the ESOP Trust
          to facilitate a Black Economic Empowerment transaction;
      -   The specific authority for the issue of Preference Shares and Conversion
          Shares to the Harmony Community Trust to facilitate a Black Economic
          Empowerment transaction;
      -   Salient details pertaining to the establishment of an empowerment partner
          equal to an equity interest of 3% in the Harmony SPV and funding related
          to this specific BEE transaction. No shareholder authorisation required;
          and
      -   A potential capital raising to refinance the acquisition bridge facility.


Further information on Target Assets
By acquiring the Moab Khotsong underground mine, which incorporates the Great
Noligwa underground mine and related infrastructure, Harmony believes it will
significantly improve its overall operating cash flows, increase its average
overall underground recovered grade and significantly grow its South African
underground Mineral Resource base.




                                                1
Harmony believes that there is the potential to increase the Moab Khotsong and
Great Noligwa Mines’ Life of Mine (as understood in the context of the SAMREC
Code) by mining additional high grade Isolated Blocks of Ground (IBGs), extraction
of the high grade Great Noligwa shaft pillar, as well as optimising the current
plant facilities to treat the Mispah Tailings Facilities. Harmony believes that
there is also further optionality in the Zaaiplaats project.


Relating to the foregoing, the underground Mineral Reserves above infrastructure
totalled approximately 1.7 million ounces at 8.8 g/t as at 31 December 2016,
while the underground Mineral Resources above infrastructure at the Moab Khotsong
and Great Noligwa mines as at 31 December 2016 were approximately 4.98 million
ounces at 18.5 g/t.


a) Moab Khotsong
Harmony believes that Moab Khotsong is a high quality, cash generating gold mine
with well-invested and maintained infrastructure which can underpin near term
cash flows and support the creation of value. Harmony's assessment of the value
is broadly in-line with the preferred value of US$260 million recommended by the
independent competent valuator as part of the Competent Persons Report.


b) Great Noligwa
The Great Noligwa Mine, which has been placed on care and maintenance in recent
years by AngloGold Ashanti has existing infrastructure utilised to service the
Moab Khotsong mining operations. The Mineral Reserve of the Great Noligwa Mine
is currently being extracted through the Moab Khotsong Mine.


Harmony has performed due diligence on Great Noligwa and believes that additional
value can be extracted by mining additional high grade IBGs as well as the high
grade shaft pillar.


Extraction of the shaft pillar is technically similar to what Harmony has
successfully achieved at its Bambanani operation in or around the city of Welkom
in the Free State, where since February 2010, Harmony has been able to extract
479 252 oz of gold at an average recovered grade of 9.89 g/t, and extend the Life
of Mine (as understood in the context of the SAMREC Code) to 2022. Total project
capital to mine the Bambanani shaft pillar was ZAR610 million.


Harmony believes that the extraction of the Great Noligwa shaft pillar will yield
a similarly positive outcome. The technical nature of the mining is similar and
Harmony has proven expertise in this area.


Further to the above and based on its experience in mining IBGs, Harmony believes
that it will be able to extend the life of the Moab Khotsong and Great Noligwa
Mines from 5 to at least 10 years subject to the outcome of the necessary studies
after completion of the Acquisition.


Harmony estimates that the net present value from extracting the shaft pillar and
mining     the    IBGs   has    the   potential   to    be    substantial,      based   on   a   set    of
macroeconomic, technical and operational assumptions consistent with Harmony’s
customary planning assumptions.


Harmony’s internal assessment of the value of mining additional high grade IBGs
as well as the high grade shaft pillar at Great Noligwa Mine is broadly in line
with the valuation of the Moab Khotsong Mine.


c) Mispah Tailings Retreatment
The Mispah 1 tailings facility specifically, contains a Mineral Resource of over
70 million tonnes of surface tailings with an average gold grade of 0.30 g/t.
With the current installed plant excess capacity and the treatment and processing
of waste rock nearing the end of its life, Harmony believes that there is
considerable scope to convert these facilities to a surface tailings re-treatment
operation, similar to those currently operated by Harmony at the Phoenix plant
and the Central plant operations situated in or around the city of Welkom in the
Free State.


Harmony believes that optimisation of current plant facilities would have minimal
capital requirements and low technical risk, and would create a relatively low
cost, long life operation.


The necessary studies, including obtaining the necessary permissions, still have
to   be    completed     to    ensure   value   can    be    unlocked   after    completion      of    the
Acquisition. Harmony estimates a potential net present value of approximately
US$20-40 million based on its prior experience of developing similar plants and
on   a    set    of   macroeconomic,    technical      and   operational     assumptions     that      are
consistent with its customary planning assumptions.


d) Zaaiplaats project
The Zaaiplaats project is potentially an extension of the Moab Khotsong Mine
which contained a Mineral Resource base of 6.8 Moz with an average gold grade of
17.2 g/t as at 31 December 2016. It is currently in pre-feasibility stage and
Harmony will assess its attractiveness after completion of the Acquisition.
Zaaiplaats is expected to provide Harmony with optionality, particularly in a
rising Rand gold price environment. Harmony has attributed no value to Zaaiplaats.
It is currently viewed as a potential future expansion opportunity.
Further studies will be conducted, after completion of the Acquisition and the
appropriate decision will be made subject to the outcome of those studies.


e) Synergies
Through its analysis and due diligence investigation, and in applying the “Harmony
Operational Excellence and Operating Model” to Moab Khotsong Mine's operations,
Harmony believes that it will be able to realise substantial cost savings. These
are reflected in its operating model and valuation.


Harmony believes that the main source of these cost savings will be through a
reduction   in    central    support      services   costs   allocated       to   the   Mine    i.e.
incorporating the Moab Khotsong Mine into its existing centralised management
structures and support services. Alongside these savings, Harmony has also
identified certain procurement and metallurgy-related savings which it believes
can be achieved.


In   estimating    these    cost    opportunities,   Harmony   has    been    cognisant    of   the
environment in which it operates and its social responsibilities and these factors
have been factored into Harmony's estimates.


f) Conclusion
Harmony believes the Acquisition is value accretive and will enhance its position
as a higher-grade producer and cash-generative gold mining company. Harmony
anticipates that the Acquisition will boost Harmony's operational cash flows by
more than 60%, and increase its average overall underground recovered grade by
11% and grow its South African underground Mineral Resource base by 38%, in each
case as compared to performance in FY17.


Furthermore, Harmony’s assessment of value of the Target Operations is based on
what Harmony believes is a conservative set of macroeconomic, technical and
operational      assumptions       that   are   consistent   with    its   customary      planning
assumptions indicates significant upside to the Purchase Price.


1. Notice of General Meeting


Notice is hereby given to the Shareholders that a General Meeting of the
Shareholders will be held at the Hilton Hotel, 138 Rivonia Road, Sandton,
Johannesburg, South Africa at 11:00 (South African Standard Time) on Thursday,
01 February 2018.
2. Salient dates and times


Posting Record Date to be eligible to receive the                       Friday, 01 December 2017
Circular and Notice of General Meeting
Posting Circular to Shareholders                                        Friday, 08 December 2017
Last Day to Trade in order to be eligible to                            Tuesday, 23 January 2018
participate and vote at the General Meeting
Voting Record Date to participate in and vote at                         Friday, 26 January 2018
the General Meeting
Last Day and time to give notice to Transfer                             Monday, 29 January 2018
Secretaries to participate in the General Meeting
electronically by 11:00 on
Last day and time to lodge Forms of Proxy with the                      Tuesday, 30 January 2018
Transfer Secretaries, by 11:00 on
General Meeting of Shareholders at 11:00 on                        Thursday, 01 February 2018
Results of General Meeting released on SENS                        Thursday, 01 February 2018



Notes:
(1)   All dates and times above are South African local times unless otherwise
   stated.
(2)   The above dates and times are subject to amendments. Any such material
   amendment will be released on SENS and published in the South African press.


07 December 2017
Transaction sponsor: UBS
JSE Sponsor: J.P. Morgan Equities South Africa Proprietary Limited
South African Legal Advisor: Bowmans


For more details contact:
Lauren Fourie
Investor Relations Manager
+27 (0) 71 607 1498 (mobile)
or
Marian van der Walt
Executive: Corporate and Investor Relations
+27 (0) 82 888 1242 (mobile)


Disclaimers
The   release,   publication    or    distribution   of   this    announcement    in    certain
jurisdictions may be restricted by law and therefore persons in such jurisdictions
into which this announcement is released, published or distributed should inform
themselves    about   and   observe   such   restrictions.       This    announcement   is   for
information purposes only and does not constitute or form part of an offer to
sell or the solicitation of an offer to buy or subscribe to any securities of
Harmony. The securities referred to herein have not been and will not be
registered under the United States Securities Act of 1933 (the "Securities Act")
or with any securities regulatory authority of any state or other jurisdiction
of the United States and may not be offered, sold, resold, transferred or
delivered, directly or indirectly, in the United States except pursuant to
registration under, or an exemption from the registration requirements of, the
Securities Act.


The financial information of the Target Assets disclosed in this announcement has
been extracted from the historical combined financial information of the Target
Assets, which historical combined financial information had been derived from the
consolidated financial statements of AngloGold Ashanti using the historical
results of operations, assets and liabilities attributable to the Target Assets.
Having relied on the fact that the historical combined financial information of
the Target Assets has been derived from the consolidated financial statements of
AngloGold Ashanti, that are free from material misstatement, whether due to fraud
or   error,   and    that    AngloGold    Ashanti’s      directors    were    responsible      for   the
compilation of AngloGold Ashanti’s consolidated financial statements and the
internal controls as they determined is necessary to enable the preparation and
presentation of their consolidated interim financial statements, Harmony is
satisfied as to the quality of the historical combined financial information of
the Target Assets.


The reserves and resources information disclosed in relation to the Target Assets
have been extracted from the Mineral Resources and Ore Reserve Report for 2016
of   AngloGold      Ashanti.    The    report   states    that   VA   Chamberlain,       MSc   (Mining
Engineering), BSc (Hons) (Geology), MGSSA, FAusIMM, an employee of AngloGold
Ashanti, assumes responsibility for the Mineral Resource and Ore Reserve processes
for AngloGold Ashanti and is satisfied that the Competent Person have fulfilled
his responsibilities and has consented to the information to be included in the
announcement and for his name to be disclosed in this announcement.


Forward looking statements
Certain statements included in this announcement, as well as oral statements that
may be made by Harmony, or by officers, directors or employees acting on its
behalf related to the subject matter hereof, constitute or are based on forward-
looking statements. Forward-looking statements are preceded by, followed by or
include   the    words      “may”,    “will”,   “should”,    “expect”,       “envisage”,    “intend”,
“plan”,   “project”,        “estimate”,    “anticipate”,      “believe”,       “hope”,    “can”,     “is
designed to”, “confident” or similar phrases.


These forward-looking statements involve a number of known and unknown risks,
uncertainties and other factors, many of which are difficult to predict and
generally beyond the control of Harmony, that could cause Harmony’s actual results
and outcomes to be materially different from historical results or from any future
results expressed or implied by such forward-looking statements. Such risks,
uncertainties and other factors include, among others, Harmony’s ability to
complete    the    Transaction,     Harmony’s    ability   to   successfully    integrate    the
acquired assets with its existing operations, Harmony’s ability to achieve
anticipated       efficiencies    and    other   cost   savings    in    connection   with   the
Transaction, Harmony’s ability to increase production, the success of exploration
and development activities and other risks.             Harmony undertakes no obligation to
update publicly or release any revisions to these forward-looking statements to
reflect events or circumstances after the date of this announcement or to reflect
any change in Harmony’s expectations with regard thereto.


This release includes mineral reserves and resources information prepared in
accordance with the South African Code for the Reporting of Exploration Results,
Mineral Resources and Mineral Reserves.


Although Harmony believes that the expectations reflected in any such forward-
looking    statements    (or     this   announcement)   relating    to   the   Transaction   are
reasonable, the information has not been reviewed or reported on by the reporting
accountants and auditors and no assurance can be given by Harmony that such
expectations will prove to be correct. Harmony does not undertake any obligation
to publicly update or revise any of the information given in this announcement
that may be deemed to be forward-looking.

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