PATRICE Motsepe said he was overruled when the board of African Rainbow Minerals (ARM), of which he is executive chairman, elected not to follow the company’s rights in subscribing for Harmony Gold shares in June.
Harmony Gold issued 60.28-million shares, raising about R3.47bn (then about $200m), in order to pay the upfront cash element of the $300m purchase of Mponeng and Mine Waste Solutions from AngloGold Ashanti.
“I wanted personally to follow the Harmony rights issue as a good thing for ARM,” said Motsepe when asked at the group’s annual results presentation why the company had not followed its rights as an 13.77% shareholder in Harmony Gold.
“If management view is different to mine then 90% of the time I go with management because it is right. We have smart, bright people,” Motsepe said. “If this is at board level (when there’s disagreement), then 99.97% of the time they are right and I’m wrong.”
He later said the decision was based on a preference in ARM for “cash preservation” and that he’d been assured the diversified minerals group would be able to claw back its position in Harmony.
Motsepe said ARM remained a long-term supporter of Harmony Gold. “We will continue to deal with Harmony in the most value accretive manner.
“It’s an issue of cash preservation as to why we didn’t follow our rights. We will make the right announcements. It is strategic and it has copper assets in Papua New Guinea (PNG).” ARM is Harmony’s largest single shareholder in a relationship which dates back to the merger of ARMGold with Harmony Gold’a assets in 2003, a transaction that at the time created the world’s fifth largest gold producer.
Harmony is a joint venture partner with Australian firm, Newcrest Mining, in the PNG’s Wafi-Golpu project, a gold deposit that also contains significant amounts of copper by-credits.
ARM reported cash at its year-end (June 30) of R3.79bn, an increase of more than R1bn year-on-year. It announced a full-year dividend of R7 per share, taking the total dividend for its 2020 financial year to R12/share, but analysts think it might not be enough.
“The 2H dividend amounts to R7/s, bringing the R12/s and the full year payout ratio to 42% – which is disappointing, especially given a build up of cash,” said RMB Morgan Stanley analysts in a morning note following publication of ARM’s results.
Motsepe said the company was keeping cash aside for acquisitions. “We are engaged in discussions regarding copper investment,” said Motsepe at one point in the presentation. “We are engaged and will continue to engage in discussions,” he also said.
