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Harmony bails out Pamodzi Posted: Mon, 29 Dec 2008 [miningmx.com] -- THE Pamodzi Gold funding saga drags on and on. The latest revelation is that Harmony Gold has had to come to the party again to keep the cash-strapped company alive. The refinancing terms announced on Monday are complex and appear to indicate limited support for Pamodzi from backer and shareholder Pamodzi Resources. Harmony has agreed to convert R103m "of its current exposure into equity to support the company". Pamodzi owes this to Harmony for "capital expenses incurred and losses incurred" in terms of the management agreement with Harmony since October 2007. Harmony CEO Graham Briggs commented that the ultimate aim was still for Harmony to get R103m in cash as Pamodzi would subsequently undertake a rights issue at 113c a share to raise the money. Harmony had previously agreed to drop the price Pamodzi paid for its Orkney shafts to R300m from R550m and take full payment in shares instead of cash and shares. That gave Harmony a stake of 32% in Pamodzi. This situation is despite claims chairperson Ndaba Ntsele made on October 24 that Pamodzi had arranged funding of R400m to secure its future, and that the money would come into the company within a month. According to Ntsele, the R400m was sourced 50-50 between the Industrial Development Corporation (IDC) and shareholder Pamodzi Resources. However, it now turns out that Pamodzi Resources is not actually putting up the money itself. Instead, it has sourced the loan on a "back to back" basis with a funder called Best Rock Investments. Creditors have been waiting anxiously since October 24 to be paid, with a number of them sitting on accounts that had been stretched past 180 days. It seems many of them are still waiting. No one available for comment Latest update from Pamodzi is that "all the conditions precedent in the loan agreements were met on December 24". Ntsele said on December 15 that "the capital raising has been finalised 100%. That money is there sitting in a trust account." Pamodzi acting chief financial officer Kobus du Plooy said on December 19 that "we will receive the R400m as planned either today or early next week". Ntsele, Du Plooy and PZ Gold CEO Peter Steenkamp could not be reached for comment on Monday. The terms of the refinancing - as revealed so far - are punitive. Pamodzi is paying interest through the nose on the IDC loan and has had to agree to two call option schemes. The IDC is charging an effective interest rate of 35% which, according to Ntsele and Steenkamp in their quarterly review, "is a market-related interest rate for the company based on its current risk profile". Click Here to subscribe to our daily newsletter
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