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A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
South Africa’s Anglogold Ashanti is to sell two gold mines for a total $307 million in the latest retreat from a sector which is in a state of steep decline.
Anglogold will sell its newest mine to Harmony Gold for $300 million and another mine for 100 million rand ($7.4 million) to China’s Heaven-Sent SA Sunshine Investment Company, the companies said on Thursday.
Anglogold, after suffering heavy losses in its home market, had said in June it would restructure its South African mines which could lead to 8,500 workers, or around 30 percent of its workforce, being laid off.
Yet Harmony, which agreed to buy the Moab Khotsong mine where operations started in 2006, for $300 million in cash, said it was committed to boosting production at the mine. “We may even increase the workforce,” Harmony Chief Executive Peter Steenkamp told Reuters.
Harmony shares fell more than 5 percent after it said it might consider a rights issue of new stock to repay a loan it will use to finance the transaction, a rare acquisition in South Africa’s gold industry which has been impacted by a range of political and geological issues.
After over a century of mining, shafts are plunging to depths of up to 4 kilometres, costs have been soaring, and government policy is shrouded in uncertainty, curtailing investment.
“$200 million will be funded through a fully underwritten$200 million bridge loan facility. Harmony is assessing various alternatives to optimally repay the bridge, including a potential rights issue,” the company said.
AngloGold Ashanti Chief Executive Srinivasan Venkatakrishnan said the sale was in line with the company’s capital allocation strategy and its aim to improve its portfolio, which includes 17 operations in nine countries.
Harmony said the mine would add 250,000 ounces of gold to its annual production and increase its underground resource base by 38 percent.
Anglogold will also sell its Kopanang mine, a gold plant and related infrastructure to Heaven-Sent SA Sunshine.
“The purchase consideration will be settled … by a payment of 100 million rand in cash and the transfer of certain gold-bearing rock dumps from VMR to AngloGold Ashanti,” Anglogold said. ($1 = 13.5603 rand) (Reporting by TJ Strydom and Ed Stoddard; Editing by David Holmes)
