HAR - Harmony - Realises value for its Uranium assets at Randfontein and Release Date: 19/12/2007 08:00:02 Code(s): HAR HAR - Harmony - Realises value for its Uranium assets at Randfontein and
participates in the future development of these assets
Harmony Gold Mining Company Limited
("Harmony")
Incorporated in the Republic of South Africa
Registration number: 1950/038232/06
JSE Limited: HAR
New York Stock Exchange, Inc.: HMY
NASDAQ HMY
London Stock Exchange plc: HRM
Euronext Paris: HG
Euronext Brussels: HMY
Berlin Stock Exchange: HAM1
JSE share code: HAR
Issuer code: HAPS
ISIN: ZAE000015228
HARMONY REALISES VALUE FOR ITS URANIUM ASSETS AT RANDFONTEIN AND PARTICIPATES IN
THE FUTURE DEVELOPMENT OF THESE ASSETS
Introduction
In line with Harmony`s stated strategy of realising value for its uranium
assets, Randfontein Estates Limited ("Randfontein"), a wholly owned subsidiary
of Harmony, has entered into binding agreements ("Transaction Agreements") with
Pamodzi Resources Fund 1. LLP ("PRF"), whereby certain of the uranium and gold
assets of Randfontein, known as Cooke Section, are to be sold into a special
purpose vehicle ("Newco"). Newco is a wholly owned subsidiary of ARMgold/Harmony
Joint Investment Company (Proprietary) Limited ("Investco"), which is in turn a
wholly owned subsidiary of Harmony.
Newco and Randfontein have further agreed to enter into a sale agreement, in
terms of which the Old Randfontein Section assets are to be sold by Randfontein
to Newco ("the Old Randfontein Sale Agreement").
The purchase price payable by Newco for Cooke Section and the Old Randfontein
Section assets shall be US$420 million.
PRF is to acquire a 60% shareholding in Newco from Investco for a purchase
consideration of US$252 million, with Harmony retaining a 40% shareholding in
Newco ("the Proposed Transaction").
Rationale for the Proposed Transaction
With the significant increase in the uranium spot price over the past four years
from approximately US$10 per pound to the current spot price of more than US$90
per pound, the Proposed Transaction provides for a new lease of life and value
realisation for Cooke Section. Further highlights of the Proposed Transaction
include:
- in line with Harmony`s stated "Back to Basics" strategy, a new dedicated
executive management team will assume responsibility for developing the
uranium potential of Cooke Section;
- a credible and experienced financial partner, PRF, has been selected to
partner with Harmony in pursuance of its uranium strategy;
- Harmony retains a significant (40%) shareholding in Newco, which provides
for future upside participation;
- with the introduction of PRF as a 60% shareholder in Newco, Harmony is able
to realise some of the future potential of Cooke Section upfront;
- a capital injection into Cooke Section over the next three years will
extend the life of the existing gold operations through the joint
exploitation of the uranium resource; and
- through the reprocessing of various dumps within Cooke Section and Old
Randfontein Section, a significant amount of environmental rehabilitation
will take place.
Future strategy for Newco
Harmony and PRF have agreed on a common strategy for Newco, whereby the initial
focus will be to recapitalise and develop the full potential of both the uranium
and gold resources at Cooke Section. Newco will be responsible for concluding
its own project finance arrangements, to the extent possible. The proceeds of
the proposed transaction will be utilised in Harmony`s capital expenditure
programme as well as for partial repayment of debt.
Post project development stage, it is currently the intention to publicly list
Newco on a recognised securities exchange, which will present an attractive
investment opportunity to investors seeking dual exposure to both uranium and
gold.
Terms of the Proposed Transaction
Randfontein has agreed, with effect from the date of successful fulfilment of
the conditions precedent to the Transaction Agreements, to sell Cooke Section
and the Old Randfontein Section assets as a going concern to Newco for a
purchase consideration of US$420 million.
The Cooke Section assets include:
- Cooke 1,2 and 3 Shafts;
- Cooke Plant;
- Fixed Assets;
- Immovable Property;
- Goodwill;
- Stock;
- New Order Mining Right;
- New Order Prospecting Right; and
- Tailing Dumps.
The Old Randfontein Section assets include:
- Lindum Dumps;
- Dump 20;
- the Lindum Dump and Dump 20 Mineral Rights; and
- the Old Randfontein immovable property.
PRF is to acquire 60% of the shares and claims in Newco for an amount of US$252
million which will be settled in cash in one lump sum. The remaining
shareholding of 40% is to be retained by Harmony.
Conditions precedent to the Proposed Transaction
The Proposed Transaction is subject to, inter alia, the fulfilment of the
following conditions precedent:
- the approval by the Minister of Minerals and Energy and the necessary
approvals required in terms of the Minerals and Petroleum Resources
Development Act, 2002;
- the entering into of the Old Randfontein Sale Agreement;
- the entering into of a written toll milling agreement between Newco and
Randfontein, in terms of which the Newco is granted the right to make use
of certain of the toll milling capacity at Randfontein`s processing plant
known as the "Doornkop Plant";
- the entering into a shared services agreement between Newco and
Randfontein; and
- the approval by the Competition Authorities in terms of the Competition
Act, 1998.
It is anticipated that all conditions precedent will be met in the second
quarter of 2008.
Profile of Pamodzi Resources Fund
Pamodzi Investment Holdings (Proprietary) Limited ("Pamodzi") is a fund advisor
to PRF, South Africa`s largest private equity fund. With US$1.3 billion in funds
available for investment and a strong and experienced management team, PRF is
well-positioned as strategic partner to Harmony.
Pamodzi, South Africa`s Black Management Forum Progressive Company of the Year
2007, is a leading diversified investment company. Founded in 1996 by black
South African professionals and entrepreneurs, the company has raised more than
R16 billion in debt and equity over the past decade, of which R12 billion has
come from offshore investors.
Since inception, the company has built a solid reputation in local and
international markets for bringing strategic value to its investments and
generating superior financial returns.
Overview of Cooke Section
The Cooke 1, 2 and 3 gold mines, which are situated approximately 35 kilometres
south-west of Johannesburg, are part of Randfontein. The mines are serviced by
an excellent network of mining and civil infrastructure, with electrical power
and water readily available. Tailings and waste disposal sites have been
identified and are currently in use. The Cooke 3 mine is a historical producer
of gold and uranium, with the uranium section closing down in the late 1980`s
due to the poor state of the uranium market. Production commenced at the Cooke 1
mine in 1973, at the Cooke 2 mine in 1977 and in 1983 at the Cooke 3 mine. The
underground orebodies are exploited by means of conventional hard rock mining
methods involving drilling, blasting, scraping, tramming and hoisting. Ore is
currently treated at the Doornkop Plant. This plant comprises Run of Mine
("ROM") milling, thickening, cyanide leaching, CIP adsorption, carbon elution,
electro-winning, smelting, regeneration and tailings disposal. The Dump 20 sand
resources are currently treated at the Cooke Plant. Current production for the
financial year to June 2007 at Cooke 1 was 386,000 tons treated, yielding 2,354
kg of gold, at Cooke 2 was 349,000 tons, yielding 1,780 kg of gold and treatment
at Cooke 3 was 564,000 tons, yielding 2,841 kg of gold. The surface operation at
Cooke Plant treated 811,000 tons of sand, yielding 590 kg of gold. Total gold
production planned for the 2007/08 year is 8,425 kg of gold. The Life of Mine
("LOM") plan for Cooke 1 includes mineable reserves to 2009, for Cooke 2 to 2011
and for Cooke 3 to 2019. However, the Cooke 3 LOM plan only takes into account
the current reserve blocks of gold. The dual (gold and uranium) pay limits are
expected to increase both the production volumes and the life of the operations.
The recent rise in uranium prices has made the uranium resources economical. The
tailings dumps will be mined using high-pressure water cannons to re-pulp the
slurry, which will then be pumped to processing plants and separated into gold
and uranium using a leach process. The location, ease of processing and the dual
commodity mix should combine to make Cooke Section a viable, low-cost operation.
The following is a summary of the estimated mineral resources which has been
produced in accordance with the South African Code for the Reporting of Mineral
Resources and Mineral Reserves (The SAMREC Code) and the Australian Code (The
JORC Code) contained in the various sections that comprise the Cooke Section and
Old Randfontein Section assets as at 30 November 2007:
Total Resources - Gold
MEASURED
MINE TONNES GRADE
(Mt)
Au (g/t) Au (`000
ounces)
Surface 332.3 0.28 3,027
Underground 36 5.34 6,183
Total 368.3 9,210
INDICATED
MINE TONNES GRADE
(Mt)
Au (g/t) Au (`000
ounces)
Surface 0,9 0.48 14
Underground 32.2 3.68 3,810
Total 33.1 3,824
INFERRED
MINE TONNES GRADE
(Mt)
Au (g/t) Au (`000
ounces)
Surface 0 0 0
Underground 224,8 2.39 17,264
Total 224.8 17,264
TOTAL
MINE TONNES GRADE
(Mt)
Au (g/t) Au (`000
ounces)
Surface 333.2 0.28 3,041
Underground 293.1 2.89 27,257
Total 626.3 30,298
Underground Reserves - Gold
PROVEN
MINE TONNES GRADE
(Mt)
Au (g/t) Au (`000
ounces)
Surface 3 0.68 64
Underground 2.5 8.42 684
Total 5.5 748
PROBABLE
MINE TONNES GRADE
(Mt)
Au (g/t) Au (`000
ounces)
Surface 0.1 1.60 3
Underground 2.6 5.46 465
Total 2.7 468
TOTAL
MINE TONNES GRADE
(Mt)
Au (g/t) Au (`000
ounces)
Surface 3 67
Underground 5.2 6.91 1,149
Total 8.2 1,216
Total Resources - Uranium
MEASURED
MINE TONNES GRADE
(Mt)
U3O8 U3O8 (`000
(Kg/t) pounds)
Surface 311.5 0.098 67,555
Underground 7.1 0.424 6,638
Total 318.6 0.106 74,193
INDICATED
MINE TONNES GRADE
(Mt)
U3O8 U3O8 (`000
(Kg/t) pounds)
Surface 0.9 0.055 108
Underground 3.4 0.547 4,099
Total 4.3 0.445 4,207
INFERRED
MINE TONNES GRADE
(Mt)
U3O8 U3O8 (`000
(Kg/t) pounds)
Surface 0 0.000 0
Underground 27.2 0.500 29,968
Total 27,2 0.500 29,968
TOTAL
MINE TONNES GRADE
(Mt)
U3O8 U3O8 (`000
(Kg/t) pounds)
Surface 312.4 0.098 67,663
Underground 37.7 0.490 40,705
Total 350.1 0.140 108,367
Total Reserve - Uranium
PROVEN
MINE TONNES GRADE
(Mt)
U3O8 U3O8 (`000
(Kg/t) pounds)
Cooke Dump 0 0.000 0
Underground 0 0.000 0
Total 0 0.000 0
PROBABLE
MINE TONNES GRADE
(Mt)
U3O8 U3O8 (`000
(Kg/t) pounds)
Cooke Dump 83.2 0.215 39,446
Underground 0 0.000 0
Total 83.2 0.215 39,446
TOTAL
MINE TONNES GRADE
(Mt)
U3O8 U3O8 (`000
(Kg/t) pounds)
Cooke Dump 83.2 0.215 39,446
Underground 0 0.000 0
Total 83.2 0.215 39,446
Unaudited pro forma financial effects of the Proposed Transaction
The table below sets out the unaudited pro forma financial effects of the
Proposed Transaction on Harmony. The unaudited pro forma effects are prepared
for illustrative purposes only and may not fairly present Harmony`s results,
financial position and changes in equity after the Proposed Transaction. It has
been assumed for the purposes of the pro forma financial effects that the
Proposed Transaction took place with effect from 1 July 2006 for income
statement purposes and 30 June 2007 for balance sheet purposes.
The unaudited pro forma financial effects are the responsibility of the
directors of Harmony.
Before the Pro forma Change
Proposed after the (%)
Transaction Proposed
Transaction
Basic profit - cents 86 487 466%
per share
Headline profit - cents 43 63 46%
per share
Net asset value ("NAV") 5 902 6 291 7%
- cents per share
Net tangible asset 5 325 5 714 7%
value ("NTAV") - cents
per share
Number of shares in 397 910 797 397 910 797 -
issue
Notes:
The "Before the Proposed Transaction" financial information is based on
Harmony`s published audited results for the financial year ended 30 June 2007.
The "Pro forma after the Proposed Transaction" column is based on the assumption
that the disposal was effective on 1 July 2006 for basic profit per share and
headline profit per share. It is assumed that the cash proceeds from the
Proposed Transaction have been placed on deposit and generated interest at a
rate of 10.5% per annum before tax.
The "Pro forma after the Proposed Transaction" column is based on the assumption
that the Proposed Transaction was effective on 30 June 2007 for NAV and NTAV
purposes.
Randfontein
19 December 2007
Corporate advisor
Qinisele Resources (Pty) Limited
Legal advisor
Cliffe Dekker Inc.
Sponsor
Merrill Lynch South Africa (Pty) Limited
Tax advisor
Ernst & Young
Enquiries
Graham Briggs
Acting Chief Executive
+27(0)11 411 2012
+27 (0) 83 265 0274
Amelia Soares
General Manager, Investor Relations
+27 11 411 2314 or
+27(0)82 654 9241
Date: 19/12/2007 08:00:01 Supplied by www.sharenet.co.za
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