In the media
Evander ‘can revive junior gold miners’ [Business Day]
31 January 2012
Author: Allan Seccombe
PAN African Resources and explorer Wits Gold have teamed up to spend R1,5bn to R1,7bn to buy the Evander gold mine owned by Harmony Gold in a deal that could breath new life into SA’s junior gold mining sector.
As reported by Business Day in November, Pan African and Wits have joined forces to buy Evander from Harmony which has restructured the loss-making mine with resources of 34-million ounces, of which 8-million ounces are in the higher confidence category of reserves.
Harmony is in effect selling these resources for $5/oz, far cheaper than the typical price of $20/oz to $30/oz.
Harmony CEO Graham Briggs said the company had been at pains to make sure the consortium was buying a sustainable asset that would be cash generative from the start. Harmony sold the Orkney mines to Pamodzi Gold, which went into liquidation and those mines have since been stripped of assets and left idle.
Combined with the disasters of Pamodzi and Aurora Empowerment Systems, there has been little growth by juniors in the South African gold sector, apart from Gold One, Mr Briggs said.
"With this combination of good assets with good management teams that can eke out the best from Evander, which is cash generative and does not immediately need cash, we have the makings of a revived junior gold mining sector in SA."
There is a gap between SA’s three large gold miners and the juniors. The consortium hopes to rise into the vacant mid-tier ranks, which could bring it more deals.
In response to Pan African CEO Jan Nelson’s comment that it had taken three years of tough talks to wrest the assets away from Harmony, Mr Briggs said: "It was critical for Harmony to restructure Evander, which was a costly and risky exercise, so that it was profitable. You can’t sell rubbish. If the buyers don’t make a success of the mine it’s a blot on your record."
Philip Kotze, CEO of Wits Gold, said : "In our life, those projects will certainly see more sunlight than what they’ve seen with Harmony purely because Harmony in its own ranking of assets has other projects it will develop." He said the consortium would rank the three projects — Rolspruit, Poplar and Evander South — and see what it could fund. The consortium was likely to sell the project or projects it was unable to develop itself.
The consortium will ring-fence R800m of the debt funding within Evander. Wits and Pan African will each pay R300m.
The consortium will pay R25m a quarter over four quarters. The remaining R200m will be paid only if the rand gold price is above a certain level.
Mr Nelson will talk to Pan African shareholders in the coming days to assure them Evander is a good buy.
Source: http://www.businessday.co.za/articles/Content.aspx?id=163702