Harmony bags President Steyn

Ines Schumacher | Fri, 26 Jun 2009 12:01
[miningmx.com] -- SOUTH African gold producer Harmony Gold has been selected as the preferred bidder for embattled junior gold producer Pamodzi Gold's flagship President Steyn mine.

"Considering the current gold price and our valuation of the mines we have obtained a reasonable, fair and realistic offer for Pamodzi's Free State operations," joint provisional liquidator Enver Motala told Miningmx.

Motala would not release the amount Harmony bid for the assets, other than to say that it is "substantially in line with our valuation of the operations".

Pamodzi bought President Steyn for R300m from Thistle Mining in 2007.

The bidding process formally closed two weeks ago. Harmony was one of those vying for the mine contiguous to its own Free State assets, which creates synergies that other bidders are unlikely to have.

"We also take this opportunity, to thank Harmony Gold for the professional manner, in which it negotiated with the joint provisional liquidators," Motala said.

The bid is subject to formal approval from the major secured creditor, the Industrial Development Corporation and the major trade unions.

It was also subject to signing of the relevant agreements and fulfilment of all conditions, the joint liquidators said in a statement.

In the case of a liquidation, the mining licenses fall back under the control of the government. Following the normal process of applying would take six months. "We remain optimistic the government will work with Harmony to help secure the mining licenses as soon as possible," Harmony spokesperson Marian van der Walt told Miningmx.

She said Harmony is definitely going ahead with buying Pamodzi's Free State assets. Van der Walt said she was not in a position to reveal the purchase price.

The National Union of Mineworkers (Num) has expressed its support of Harmony as the preferred bidder. "We are grateful that Harmony has come on board to save the Free State operations," Num spokesperson Shane Shoshane told Miningmx.

He said Num's members were in a difficult situation and new management would help them earn a decent living. "As long as the company has the interests of its employees at heart, we are ready to engage with Harmony," Shoshane said.

Virgil Mining and an as yet unnamed mining group were also in the running to purchase President Steyn.

These bidders did not fulfil all the conditions set by the joint provisional liquidators. Harmony CEO Graham Briggs told Miningmx the interest in the mine lay not so much in the existing workings, which are focused on the southern part of the mine where there is largely pillar mining left. The really significant part is the ore body in the mine’s northern section, home to the bulk of its 12 million resource ounces.

Harmony has processing plants nearby, which means it could dismantle the President Steyn plant and extract the gold from that. These old processing plants are usually a rich source of gold left after decades of operation.

Not only that, but President Steyn comes with tailings dumps that have gold and uranium, which would slot in nicely with Harmony’s plans to build up a tailings retreatment operation.

Bringing President Steyn into production would take some pressure off Harmony’s perennially underperforming Target mine - which lies to the north of President Steyn - and allow management a breathing space to give it a proper tweak.

Friday is the closing date for bids on the East Rand assets, which comprise three mines and a processing plant. The assets are likely to have become a lot more attractive to potential buyers since an onerous 100,000 oz hedge book within Pamodzi Gold East Rand, a wholly-owned Pamodzi Gold subsidiary, was cancelled.

The Orkney mines, which used to belong to Harmony until it sold them to Pamodzi, are the other assets up for sale. Simmer & Jack has withdrawn its bid. "We have not received a new bid from Simmers, but we have the left the door open to them. The ball is in their court," Motala said.