Johannesburg, South Africa — MININGREVIEW.COM — 04 March, 2008 – In line with Harmony Gold Mining Company Limited’s drive to optimise value from its latent and low-priority assets, the company – fifth-largest gold producer in the world – has entered into two separate transactions with African Precious Minerals (APM) and its subsidiary Taung Gold Holdings (Pty) Ltd (Taung).
Freegold – a wholly-owned subsidiary of Harmony – holds the prospecting rights on several farms north of Tshepong and east of Target in the Free State, where the shafts of Jeanette Gold Mines Limited were sunk during the 1950s.
A news release released here late yesterday said Harmony had entered into a sale agreement in terms of which the prospecting rights – considered low-priority Harmony assets – are to be acquired by APM, which is a gold exploration company seeking early-stage exploration properties in South Africa, but more specifically in the Free State, Evander and Balfour regions, as well as Africa.
The purchase consideration payable to Harmony by APM will be as follows:
- 1 500 000 ordinary APM shares and 1 500 000 half warrants. Based on the capital raising conducted by APM during the last quarter of 2007, the shares and warrants to be granted to Harmony are estimated to be worth US$7.5 million (R52.5million).
- 1.5% Net Smelter Royalty (NSR) on all minerals extracted from the prospecting right area, subject to a maximum aggregate amount of R150 million.
In addition to the above transaction, Harmony also entered into earn-in agreements with APM for the Evander 6 shaft and Twistdraai assets in the Evander basin. The Evander 6 shaft and Twistdraai areas are located on the eastern and south-eastern side of the Evander basin respectively.
The earn-in agreements between Harmony and APM for the Evander 6 shaft and Twistdraai areas respectively is subject to and conditional upon the fulfillment of the following significant conditions precedent by APM:
- Completion of a scoping study within two years with no earn-in.
- Completion of a pre-feasibility study within three years. At least 70% of the ounces during the pay-back period in the study must be of the indicated resource class, and 60% of the agreed minimum requirement exploration work plan must be completed for APM to earn-in 25%.
- Completion of a full bankable feasibility study within five years. At least 100% of the ounces during the pay-back period in the study must be of the indicated resource class, and the agreed minimum requirement exploration work-plan must be completed for APM to earn-in 52%.
- On completion of the bankable feasibility study – and if both parties agree – an unincorporated joint venture (UJV) will be created, and Harmony will share 48% and APM, 52% of the development costs and revenue of the project.
Harmony will also earn a 1.5% net smelter royalty on all minerals extracted from the lease area covered by the Evander 6 shaft and Twistdraai earn-in agreements, subject to a maximum aggregate amount of R500 million.
Harmony CEO Graham Briggs commented: "The earn-in agreement with African Precious Minerals is an excellent way of progressing our low priority projects to bankable feasibility stage in the current positive gold-price environment. In addition, the formation of strategic alliances with other companies allows us to optimise the use of our resources without placing additional pressure on our capital expenditure."