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HARMONY GOLD MINING COMPANY LIMITED - Proposed acquisition of Anglogold Ashanti's Moab Khotsong mine operations

Release Date: 19/10/2017 07:05:00      Code(s): HAR       PDF(s):  
Proposed acquisition of Anglogold Ashanti's Moab Khotsong mine operations

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

Proposed acquisition of AngloGold Ashanti's Moab Khotsong operations

Johannesburg.   19 October 2017. Harmony Gold Mining Company Limited (“Harmony”
or “the Company”) has entered into a definitive agreement ("Transaction
Agreement") with AngloGold Ashanti Limited ("AngloGold Ashanti") to acquire the
underground mine Moab Khotsong, which incorporates the Great Noligwa
underground mine and related infrastructure from AngloGold Ashanti for a
consideration of US$300 million in cash (the "Transaction").

The Transaction is subject to approval from Harmony’s shareholders and other
conditions precedent, including regulatory approvals. The Board of Harmony has
unanimously approved the Transaction and has resolved to recommend the
Transaction to its shareholders.

Harmony believes the Transaction is value accretive and will enhance its
position as a robust cash-generative gold mining company, with a proven track-
record of running assets effectively and efficiently.

"Buying Moab Khotsong means we boost our cash flows by more than 60%, increase
our average overall underground recovered grade by 12% and grow our South
African underground resource base by 38%.    The Transaction benefits all our
stakeholders.   It creates value for our shareholders, preserves jobs and
sustains the surrounding mining communities with the potential to significantly
extend the life of mine of the Moab Khotsong operations. We believe the South
African gold mining environment creates opportunities which Harmony has chosen
to capitalise on,” Peter Steenkamp, chief executive officer of Harmony said.

1.    Transaction rationale

      The Transaction represents a unique opportunity to acquire a portfolio
      of South African gold assets which have an excellent strategic,
      financial, operational and geographical fit with Harmony's current
      operations in line with its stated merger and acquisition (M&A)
      criteria.   The Transaction:

     -   enhances Harmony's near-term production at an attractive all-in
          sustaining cost (AISC)

     -   adds annual gold production in excess off 250koz     at an AISC below
         Harmony's target of US$950/oz;

     -   increases Harmony's South African underground resource base by 17.5Moz
         (an increase of 38%);

     -   is a natural strategic fit with Harmony's current asset base providing
         multiple opportunities to optimise operational performance of the
         assets and realise synergies

     -   increases cashflow and earnings per share at current gold prices from
         year one;

     -   consolidates Harmony's position as a leading gold producer in South
         Africa; and

     -   results in an improved cashflow profile and scale, facilitating
         Harmony's ability to fund future growth projects.

2.   Stakeholder benefits

     Harmony believes the Transaction is beneficial to all its stakeholders,
     in that it:

     -   creates value for Harmony's shareholders and delivers on its strategic

     -   creates further investment and employment opportunities in the South
         African gold mining sector through the potential extension of the life
         of mines of the target assets;

     -   benefits South Africa and its social transformation agenda; and

     -   delivers on Harmony's Black Economic Empowerment ("BEE") commitment.

3.   Target assets, liabilities and Transaction structure

     The target assets include two mines:

     -   Moab Khotsong mine and related infrastructure; and

     -   Great Noligwa mine and related infrastructure.

     The Moab Khotsong and Great Noligwa underground mines are located in the
     Vaal River region and exploit the Vaal reef. Moab Khotsong is the newest
     undergound mine currently operating in South Africa and has been in
     operation since 2006. Great Noligwa's operating infrastructure and
     employees have been incorproated into Moab Khotsong since 2015. The mines
     produced 280koz of gold in aggregate at an AISC of US$884/oz for the 12
     months ended 31 December 2016 and produced 130koz of gold in aggregate at
     an AISC of US$998/oz for the six months ended 30 June 2017. As of 31
     December 2016, the combined 'above infrastructure' reserves consisted of
     1.7Moz of gold at an average grade of 8.8g/t. In addition, Moab Khotsong,
     including Great Noligwa has a substantial resource base of 17.5Moz of
     gold with an average grade of 15.7g/t.

In addition, Harmony will acquire:

-   Mispah tailings storage complex;

-   The Great Noligwa and Mispah Gold Plants including the South Uranium

-   The Nuclear Fuels Corporation of South Africa ("Nufcor"), a 100% owned
    uranium calcining facility and AngloGold Ashanti’s members interest in
    the Margaret Water Company NPC ("MWC");

-   A pro-rata cash amount currently held in trust for the rehabilitation
    and environmental liabilities relating to the Target Assets; and

-   All ancillary services and assets related to the above assets.

(collectively the “Target Assets”)

All relevant actual and contingent liabilities (but excluding silicosis
claims) (collectively, the “Liabilities”), will be transferred to

The Mispah tailings storage complex contains a resource base of over 70
million tonnes of ore with an average gold grade of 0.30g/t. Harmony
belives there is considerable scope to convert the acquired facilities
to a tailings retreatment operation, in line with its current operations
at Phoenix and Central Plant.

The Target Assets produced revenue of R5,327 million, EBITDA (excluding
special items) of R2,090 million and profit after tax of R852 million
for the year ended 31 December 2016 and produced revenue of R2,195
million, EBITDA (excluding special items) of R664 million and profit
after tax of R214 million for the six months ended 30 June 2017. The
value of the net assets of Target Assets and Liabilities (excluding
shareholder loans) at 31 December 2016 was R3,027 million and R3,032
million at 30 June 2017. The above numbers remain unaudited and
unreviewed and final audited and reviewed numbers will be included in
     the circular to be sent to shareholders.

     The Transaction will be implemented as a sale of assets, except for
     Nufcor and MWC which will be implemented by a sale of shares and members
     interests, respectively.

4.   Consideration and financing

     The purchase consideration of US$300 million will be paid in cash on
     closing of the Transaction (the "Offer Consideration").

     US$100 million of the Offer Consideration will be settled from Harmony's
     existing US$350 million senior secured term and revolving credit
     facility. The remaining US$200m will be funded through a fully
     underwritten US$200 million bridge loan facility. Harmony is assessing
     various alternatives to optimally repay the bridge, including a potential
     rights issue.

5.   Black Economic Empowerment ("BEE")

     Harmony remains committed to promoting social and economic transformation
     in the South African mining environment. In this regard, Harmony has
     successfully concluded a number of BEE transactions that have resulted in
     empowering a broad-based group of South African citizens and is currently
     fully empowered under the Mineral and Petroleum Resources Development
     Act, 2002 (the "MPRDA") and the Mining Charter.

     Harmony’s anchor BEE investor, African Rainbow Minerals Limited holds an
     interest of 14.44%.

     Harmony believes that it is fully empowered under the MPRDA and current
     Mining Charter. Harmony believes the Transaction is positive for South
     Africa and should result in further investment and employment in the
     South African gold mining sector.

     Harmony has therefore, undertaken to work with AngloGold Ashanti and the
     DMR to ensure that the Transaction is implemented in a manner that goes
     beyond compliance and ultimately to the benefit of South Africa.

6.   Other salient terms of the Transaction Agreement

     The Transaction Agreement provides for terms customary in agreements of
     this nature and includes (amongst other things): (i) negotiated
     representations, warranties, undertakings, indemnities and limitation on
     liability customary for a transaction of this nature; (ii) a break fee of
     US$3 million in certain defined circumstances, which includes failure (in
     certain circumstances) to obtain the approval of the Minister in terms of
     Section 11 of the MPRDA for implementation of the Transaction and
     shareholder approval; (iii) provisions governing the operation of the
     Target Operations during the interim period; and (iv) a specific material
     adverse change.

7.   Conditions precedent

     The Transaction is subject to a number of conditions including, but not
     limited to:

     -   Harmony's shareholders' approval, as this will represent a Category 1
         transaction in terms of the JSE Listings Requirements;

     -   Approval from the South African Competition Authorities in terms of
         the Competition Act, 1998;

     -   Section 11 approval from the Minister of Resources in terms of the

     -   AngloGold Ashanti being released from the KOSH Water Directive issued
         in relation to the KOSH basin;

     -   Approval from the Financial Surveillance Department of the South
         African Reserve Bank;

     -   Transfer, waiver, assignment or cancellation of certain contracts,
         permits and directives;

     -   Approval of the circular by the JSE Limited ("JSE"); and

     -   Waiver by the financing providers of AngloGold Ashanti and Harmony, as

     Harmony and AngloGold Ashanti have committed to engage with the relevant
     authorities and other stakeholders in order to ensure the conditions are
     fulfilled as soon as possible.

     The Harmony shareholder circular is expected to be posted before the end
     of calendar year 2017, subject to JSE approval with the Harmony
     shareholders meeting being held in January 2018 to approve the necessary
     resolutions to implement the Transaction and the Transaction is expected
     to close in the first half of 2018.

8.   Harmony’s shareholder support
      African Rainbow Minerals Limited which owns 14.44% has provided a letter
      of support for the Transaction and intends to vote in favour of the
      transaction or all related resolutions.

9.    Memorandum of Incorporation of acquired companies

      Harmony confirms that the provisions of the memorandum of incorporation
      of those companies acquired will not frustrate Harmony’s compliance with
      the JSE Listings Requirements and that nothing contained in the
      memorandum of incorporation of the acquired assets will relieve Harmony
      from compliance with the JSE Listings Requirements.

10.   Categorisation of Transaction, circular and general meeting

      In terms of the JSE Listing Requirements, the Transaction is classified
      as a category 1 transaction. A circular providing further information and
      a notice of general meeting is expected to be posted to Harmony
      shareholders before the end of Calendar 2017 and a general meeting of
      Harmony shareholders will be held to approve the resolutions proposed.

19 October 2017

Financial advisor and transaction sponsor: UBS
Legal advisor: Bowmans
Technical   consultants:   SRK   Consulting   (South   Africa)   (Pty)   Ltd   and   Fraser
McGill Pty Ltd
Mandated bridge providers: UBS Limited, Nedbank Limited, Absa Bank Limited, JP
Morgan Securities plc
Sponsor: J.P. Morgan Equities South Africa Proprietary Limited

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. There will be no public offering of
securities in the United States or any other jurisdiction.

The financial information disclosed in paragraph 3 has been extracted from the
draft financial statements for the Target Assets prepared by AngloGold Ashanti.
Harmony is satisfied as to the quality of those financial statements.

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

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” 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

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.


For more details contact:

Lauren Fourie
Investor Relations Manager
+27 (0) 71 607 1498 (mobile)

Marian van der Walt
Executive: Corporate and Investor Relations
+27 (0) 82 888 1242 (mobile)

19 October 2017

J.P. Morgan Equities South Africa Proprietary Limited.

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