In the media
Harmony’s Evander sale game changer for Wits Gold and Pan African [Mineweb]
30 January 2012
Author: Geoff Candy
Pan African Resources and Wits Gold have joined forces to buy Harmony's entire interest in the Evander project from Harmony Gold for R1.7bn ($216m).
For Pan African Resources the deal adds 50 000 ounces of attributable gold production per year to the company as well as another 34m ounces in terms of a project pipeline that can be fairly quickly developed.
According to Jan Nelson, Pan African CEO, the deal also provides access to an attractive partnership with Wits Gold. "One of the issues for junior gold miners is access to skills and this transaction gives us access to their skills sets."
Speaking on a conference call earlier in the day, Nelson added that there have been a lot of questions asked of late about how junior miners in South Africa are likely to grow. This deal, which he says is a first in the South African mining space, is a very good answer to that question.
For Wits Gold, the transaction is even more of a game changer. According to CEO, Philip Kotze, it turns the exploration company into a producer overnight.
"This is a very exciting time for us," Kotze said on the conference call, we signalled the market in September last year that we wanted to become a producer, and this does it for us."
He added that, the some of the cashflows from their portion of the Evander project could also be used to fund the building of a mine at the group's BDM project. And, while it doesn't make as much of a differnce to its resource base as it does to Pan African, it does increase the group's reserve base significantly.
For Harmony, the sale represents the end of a significant turn-around at the asset following a restructuring process that has taken the better part of 3 years.
As CEO Graham Briggs explained, three years ago the operation was running the numbers 2,5, 7 and 8 shafts. "those operations were really looking at remnant pillars mainly from operations, relatively difficult infrastructure, fairly old infrastructure from an equipment point of view and the grade that they were getting out of that was in the region of 3.5, 4g/tonne at most and with gold prices where they were, we decided to restructure the whole operation.
All but the number 8 shaft have now been closed down and that has been refocused to mine the declines and, currently, the operation has a mine life of around 10 plus years.
But, according to Briggs, if money is invested in the project, the operation has a life of 50-plus years.
Nelson and Kotse, who have both worked at the Evander operations during their career are very positive about the prospects for the mine with Nelson going so far as to say he believes it to be even better than Harmony's Wafi Golpu asset, although there was an element of tongue about his cheek when making that comment.
But, he says, " The Evander 8 Shaft orebody has gold grades in excess of 14g/t in the measured and indicated resource category, an extremely experienced management team and workforce, as well as good infrastructure, I don't know where else in Africa you can find that."
In terms of the management of the mine iteself, Nelson explained the plan was too keep a fairly hands off approach and let the management that is already in place take most of the reins.
When asked, which of the two partners would be in control, he answered that, "the moment one party has more control than the other, that is when the problems begin."
The deal is structured so that the consortium will make an initial payment of R1.4bn (R178m) on the closing date of the transaction. This Kotze says could be as late as sometime between October and December. the effective date for the transaction, however, is the 2nd of April. This means as much as R200m could be deducted from the price in the form of dispersments by Evander in the intervening period.
After the closing date, the consortium will pay four equal quarterly amounts of R25m ($3.18m) (. And, the remaining R200m ($25.5m)will be paid in two equal tranches, the first 19 months after the closing date, if the average rand gold price for the preceding 12 month period is greater than R410,000 per kilogram (US$1,700 per ounce.
The second tranche is payable, 31 months after the original closing date, if the average rand gold price for the preceding 12 month period is more than ZAR450,000 per kilogram (US$1,865 per ounce).
Source: http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=144438&sn=Detail&pid=102055