AngloGold Ashanti has reached an agreement to sell its remaining South African producing assets and related liabilities to Harmony Gold Mining Company Limited.
Consideration for the transaction is in cash and deferred payments with expected proceeds of around $300 million, subject to subsequent performance, and with additional proceeds if the West Wits assets are developed below current infrastructure.
AngloGold Ashanti announced in May 2019 that it was undertaking a process to review sale options for the portfolio of assets, principally comprising the Mponeng underground mine, where further capital, necessary to extend the mine life was in competition with other, higher-return AngloGold Ashanti priorities; Mine Waste Solutions, the mine waste retreatment operation; and a surface rock dump processing business.
The sale is part of the process of streamlining AngloGold Ashanti’s portfolio, in line with its clear capital allocation framework, to create a more focused business with enhanced operating and financial metrics.
A rigorous nine-month sales process identified Harmony as the most suitable party to acquire these assets, given its financial capacity and proven technical capability in operating ultra-deep, hard-rock mining assets in South Africa.
“From the beginning of the process an objective has been to sell our SA assets to a strong, capable and responsible operator that will ensure their long-term sustainability; we believe that this transaction achieves that,” Kelvin Dushnisky, CEO of AngloGold Ashanti said. “This sale helps deliver on our commitment to sharpen our management focus and capital allocation on the highest return investment options available to us.”
The Transaction will include the following assets and liabilities:
- The Mponeng mine and its associated assets and liabilities;
- The Tau Tona and Savuka mines and associated rock-dump and tailings storage facility reclamation sites, mine rehabilitation and closure activities located in the West Wits region and their associated assets and liabilities;
- First Uranium (Pty) Limited which owns Mine Waste Solutions (Pty) Limited and Chemwes (Pty) Limited as well as associated tailings assets and liabilities;
- Covalent Water Company (Pty) Limited, AngloGold Security Services (Pty) Limited and Masakhisane Investments (Pty) Limited; and
- Certain rock-dump reclamation, mine rehabilitation and closure activities located in the Vaal River region and their associated assets and liabilities.
Together these assets produced revenue of ZAR8,047 million and profit after tax of ZAR331 million for the year ended 31 December 2019. The book value of these assets as at 31 December 2019 was ZAR9,901 million.
AngloGold Ashanti will retain its interest in Rand Refinery Limited as well as its obligations relating to the post-retirement medical cost for its applicable retired and remaining employees and its obligations under the Silicosis Class Action Settlement Agreement.
The Transaction consideration comprises three elements:
- US$200m in cash payable at closing; and
- Two components of deferred consideration
The Agreement provides for terms customary in agreements of this nature and is subject to customary conditions precedent. Key conditions precedent includes:
- Approval from the South African Competition Authorities in terms of the Competition Act, 1998; and
- Section 11 approval from the Minister of Mineral Resources and Energy in terms of the MPRDA in relation to West Wits Mineral Right.
AngloGold Ashanti and Harmony have committed to engage with the relevant authorities and other stakeholders in order to ensure the conditions precedent are fulfilled as soon as possible with earliest closing anticipated on or about 30 June 2020.