[miningmx.com] — PAN African Resources (Pan African) and Wits Gold
have set up a 50/50 joint venture to buy Evander Gold Mines (Evander) from
Harmony for R1.7bn.
The deal has been structured so that R800m of this will be raised as debt, which
would be ring-fenced within Evander.
Pan African CEO Jan Nelson said that, as a result, each partner would only have to
kick in R300m by the closing date for the transaction.
“We can fund that amount ourselves without recourse to shareholders if needs be,”
he said at a presentation in Sandton on Monday. “There will be no impact on Pan
African’s dividend policy as a result of this deal.”
Nelson said Pan African had already received approval from BEE partner Shanduka
Resources for the transaction and would be canvassing other major shareholders in
Cape Town on Tuesday for support.
“Management would not carry out a deal of this nature without the support of the
shareholders,’ he said.
Nelson described Evander as “a quality asset” on a par with Harmony’s much-vaunted
Wafi/Golpu project in Papua New Guinea (PNG), and said Pan African had been
working on this deal for the past three years.
That’s despite the fact that Harmony was selling out of Evander and that various
proposed expansion projects at the mine such as Rolspruit, Evander South and Poplar
had been looked at since the mid-’80s but never received a go-ahead.
Nelson defended his assessment, pointing to the high grade of the Evander reserves
and resources.
“That’s a very resilient ore body. If there’s one thing we have learnt from our
experiences with the Barberton mine it’s that a high-grade ore body can offset some
of the sins that inevitably happen in mining operations.”
Harmony CEO Graham Briggs said previous problems at Evander had been largely
associated with mining operations on remnant reefs at the 2 and 5 shafts, which had
now been shut down.
He said the remaining 8 shaft operation had been dramatically turned around over
the past year and had “huge potential,” with the Kinross payshoot extending into
Rolspruit.
Briggs said Evander would probably produce “north of 100,000oz” from 8 shaft this
year and he estimated the remaining life of the Evander complex at around 50 years,
at an annual production of between 200,000oz and 250,000oz.
He repeated previous comments that Harmony’s strategy was to concentrate on
diversifying its operations base into PNG and the group was not prepared to invest
the “significant capital” required to expand Evander.
Nelson said the partners had “stress tested’ Evander in their evaluations by dropping
the expected gold price to around R350,000/kg and varying expected production
volumes.
“We have not played around with gold price estimates to make this deal work,’ he
said.
Wits Gold CEO Philip Kotze described the structure of the deal as “a first” for the SA
gold sector.
He said the JV made it possible for Wits Gold and Pan African to buy an asset that
neither company could have afforded on its own.
– The writer owns shares in Pan African.
