Bernard Swanepoel
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» Bidding for South Deep to intensify
» Barrick to sell South Deep
» Gold Fields shows hand on South Deep
» South Deep poser for Barrick

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South Deep under due diligence

Posted: Wed, 30 Aug 2006

[] -- GOLD Fields and Harmony Gold are carrying out due diligence examinations of the South Deep mine on South Africa’s west Rand, and AngloGold Ashanti may be about to do the same, according to a gold industry source.

Harmony CEO Bernard Swanepoel confirmed that he and a number of other Harmony executives had been underground at South Deep recently, but said that this was just a “facility visit.”

Said Swanepoel: “We have a R2bn investment in the mine through Western Areas. We put in a request to go and look at the operation which was granted.” He declined to comment on whether Harmony is or will be carrying out a due diligence assessment of South Deep.

A due diligence exercise is a fundamental process carried out by a potential buyer to allow its technical staff to make their own base-line assessment of the operation.

During such an exercise the executives would be provided with detailed and often confidential operating and technical information about the mine by its present management.

South Deep is a 50/50 joint venture between Barrick Gold and Western Areas but is managed by Barrick Gold. Warwick Morley-Jepson, MD of Barrick Gold SA, could not be reached for comment.

Barrick Gold SA corporate affairs director Jean Chawapiwa-Pima commented: “This is market speculation and we do not react to market speculation. However, as you know, both Gold Fields and Harmony are major shareholders in our partner, Western Areas.

"We cannot stop their executives going into the mine and Barrick would not be concerned if they did so," she said. Chawapiwa-Pima would not be specific on whether executives from either of the two groups had been down South Deep recently.

Approached for comment that Gold Fields was carrying out a due diligence at South Deep, Gold Fields spokesman Willie Jacobsz said: “We cannot comment on this kind of market speculation.” AngloGold Ashanti spokesman, Alan Fine, also declined to comment.

Speculation has been rife in South African gold mining circles that Barrick may be prepared to sell its 50% of South Deep which it acquired in January though the takeover of Placer Dome.

Suggested reasons are that the Canadian major may not be happy operating in South Africa because of the technical and safety issues associated with deep-level, hard rock mining as well as the country’s political risk profile. But the attraction of South Deep is the huge size of the mine’s long-life resource at a time when all the world’s gold majors are battling to find reserves to replace the millions of ounces of gold they are mining out annually.
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All three of the major South African gold groups have expressed interest in owning South Deep with Harmony and Gold Fields buying strategic stakes of 29% and 19% respectively in Western Areas.

The gold industry source said that Barrick’s willingness to allow the due diligence exercises to be carried out does not necessarily imply a decision by the group to sell its stake in South Deep. “Barrick could just be testing the waters to see what sort of reaction it gets from the various gold groups. If they come up with attractive proposals then Barrick might react,” the source said.