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Pamodzi Gold sizes up Free State future Posted: Thu, 06 Sep 2007 [miningmx.com] -- GERARD KEMP, the newly appointed CEO of Pamodzi Investment Holdings’ R9.6bn private equity fund – Pamodzi Resources Fund I – may regret quipping at the fund’s launch that he could start by bidding for Harmony Gold. That’s what private equity funds traditionally do: bid for distressed companies, take them private and relist them in a much-improved format. “It’s only a joke,” said Kemp, who will leave the Rand Merchant Bank resources unit that he heads. “Harmony is a R25bn company and we don’t have the funds.” Still, there’s nothing amiss with asset-stripping Harmony, which has announced it intends to scale back its loss-making operations. Kemp mentioned the fund could invest in infrastructural projects, such as railway lines for the Waterberg, which is relatively undeveloped but rich in coal. He also spoke of co-investing in smelters, as well as projects in sub-Saharan Africa, such as the Democratic Republic of Congo, Zambia and Namibia. “We’ve already had approaches,” he says. But his team could make no better start than finding more acquisitions for Pamodzi Gold, the 51% listed subsidiary of Pamodzi Resources, part of the Pamodzi Group. Pamodzi Gold has already announced it’s concluded buying shafts from Harmony for R550m and that it hoped to buy the President Steyn mine from Thistle Mining, a London-listed company. Ken Steenkamp, chairman of Pamodzi Gold, says: “Harmony is an obvious opportunity, although I understand they’re trying to batten down the hatches at the moment.” Pamodzi Gold can buy itself, bedding down its new acquisitions and recapitalising its existing assets on the East Rand over the short term, Steenkamp says. But having bought President Steyn, Pamodzi Gold now has a platform for growth in the Free State – which is Harmony’s stomping ground. And neighbouring President Steyn is Harmony’s Steyn shaft and Bambanani, an asset that hasn’t performed lately. A so-called “leveraged” asset, Bambanani was partly responsible for the 9% reduction in gold output at Harmony in the June quarter. “Bambanani needs a lot of improvement,” says Graham Briggs, acting CEO at Harmony. Georges Lequime, the former fund manager and RBC Capital analyst that Bernard Swanepoel employed to manage the divestment of Harmony’s “non-core” assets, is currently twiddling his thumbs waiting for a mandate from the restructured board to resume the non-core strategy. Revisiting Pamodzi Gold as a buyer of its ailing assets must be an obvious next deal, although Steenkamp says selling assets won’t be good for morale at Harmony at the moment. As for Kemp, he’s hoping to find enough mining prospects in sub-Saharan Africa and SA to cap out the fund in three years, making way for Pamodzi Resources Fund II. Says Kemp: “We’re not afraid. There’s not a country I can think of we won’t go to. It just depends on the number of rifles.” Click Here to subscribe to our daily newsletter
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