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Pamodzi Gold ready to deal again
David McKay
Posted: Thu, 28 Jun 2007
[miningmx.com] -- THERE are -plans to turn Pamodzi Gold into a one million oz/year gold producer over the next two years, according to market sources.
Three deals have been lined up, with “in principle” agreements already in place, the first of which may be consummated within weeks.
One possibility is that Pamodzi will take more of Harmony Gold’s marginal assets in a similar vein to its R550m paid for the Orkney shafts (1 to 7) unveiled on 24 April.
In that deal, Pamodzi paid in cash and shares for gold that will lift production to 323,000 oz/year for its 2008 financial year from forecast output of 186,000 oz this financial year.
However, the Orkney shafts are unpredictable. They netted Harmony R50m in one quarter and less than R10m the next.
To its credit, Pamodzi Gold has a capable management team in Ken and Pieter Steenkamp (not related). Ken has become non-executive deputy chairman of Pamodzi in terms of long-standing succession planning, while the equally well-regarded Pieter, formerly of Harmony Gold, will run the operations.
OPPORTUNITIES
* Unlike some of its peer group, Pamodzi’s assets are all producing gold with potential to reach 325,000 oz over the next financial year.
* The company is fully black-owned – 51% by Pamodzi Resources – so it should find deal-flow relatively easy to come by as empowerment in the gold market gathers momentum.
* Has huge resources – around 18m oz of gold in the ground – and a capable management team.
Click on image to enlarge
RISKS
* A small free float of around 13%, which makes it difficult for the investor-in-the-street to gain access.
* Some of its mines, particularly on the East Rand (formerly owned by Petra Gold) are complex and difficult to manage.
* Pamodzi is hindered by a hedge book, which accounts for around 10% of production for the next six years at a ridiculously low US$350/oz against a gold price of about $650/oz.
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