In the media
Pan African, Wits Gold bid R1.7bn for Harmony’s Evander [Mining Weekly]
30 January 2012
Author: Martin Creamer
JOHANNESBURG (miningweekly.com) – JSE-listed gold juniors Pan African Resources and Wits Gold have entered into an agreement with Harmony to acquire 100% of the Evander gold mine for R1.7-billion.
“This has been a three-year journey,” says Pan African CEO Jan Nelson, who once worked at Evander as a mineral-resource manager.
Wits Gold CEO Philip Kotze, who is a former Evander operations director, is delighted that the transaction allows his company, which is currently a purely exploration play, to become an instant producer.
Nelson says that Pan African is able meet the deal's financial demands from existing resources, Kotze has given notice of his company's intention to go to the market to raise more equity capital.
The Evander operations, in Mpumalanga province, are made up of the Evander 8 operation, the Rolspruit, Poplar, Evander South and Libra development opportunities and the Kinross metallurgical processing plant.
The total underground resource represents 32.5-million ounces of gold from 147-million tons at 6.88g/t and a reserve of 7.6-million ounces from 29.5-million tons at 8.02g/t.
Evander 8 has a ten-year life of mine and is producing between 85 000 oz/y and 95 000 oz/y.
The new bidders believe that there is a potential for the under-explored Evander to be given a far greater longevity at a production of more than 100 000 oz/y.
Pan African and Wits Gold, which will be in 50/50 joint venture, will immediately each get about 45 000 oz of attributable gold a year.
The deal is being done at a cost of R208 000/kg compared with the current kilogram gold price of some R450 000/kg.
The asset has been stress-tested at low gold prices and 10% less production and still found be a good buy.
Harmony CEO Graham Briggs says that Evander, which requires considerable capital to reach full potential, does not fit the current Harmony business strategy of geographic diversification.
The mine has been producing gold since 1956, mainly from the Winkelhaak areas.
Exploration drilling has had to be redone at Poplar, owing to the loss of core samples by the previous owner, with the re-drilling of exploration holes at Rolspruit still to be done.
Harmony has managed to stop the losses at what Nelson describes as “an extremely high-grade asset” with growth potential at relatively shallow depth.
Kotze sees the “very doable transaction” as having the potential to create a new mid-cap producer.
“The resource is worthy of development,” adds Briggs.
Harmony will receive R1.4-billion in cash followed by four cash payments of R25-million each, payable quarterly and commencing three months after the April 2 closing date.
A further R100-million in cash, shares or cash and shares is payable 19 months after April 2, provided the average rand gold price is more than R410 000/kg over the 12 preceding months.
No payment will be due if the average gold price for the period is not achieved.
Pan African currently produces 100 000 oz of gold and 12 000 oz of platinum group metals a year and Wits Gold has 14 new order prospecting rights over 1 195km² in the southern Free State, Potchefstroom and Klerksdorp.
Briggs explains that Harmony’s decision to sell Evander is based on it requiring significant project capital, which is not in line with the JSE-listed company’s growth strategy, and the proceeds from the sales will be used to fund Harmony's capital-hungry Wafi-Golpu project in Papua New Guinea.
Source: http://www.miningweekly.com/article/pan-african-wits-gold-acquire-harmony-evander-2012-01-30