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You are here: Home > 2000 > AngloGold Sells Its Deelkraal And Elandsrand Mines To Harmony For R1 Billion

AngloGold Sells Its Deelkraal And Elandsrand Mines To Harmony For R1 Billion

Tuesday, December 19, 2000
AngloGold Limited has announced that it has reached agreement in principle on the sale of two of its South African gold mines, Elandsrand and Deelkraal, to Harmony Gold Mining Company Limited for R1 billion in cash.

The transaction is subject to the fulfilment of the following suspensive conditions:

- completion of purchase and sale agreements to the satisfaction of both parties;

- obtaining the necessary regulatory approvals for the transfer of the mineral rights and the cession of the mining leases from the Minister of Minerals and Energy;

- granting the necessary mining authorizations to Harmony;

- obtaining approval of the transaction by the shareholders of Harmony in general meeting;

- obtaining approval of the transaction from the Competitions Tribunal and the Minister of Trade and Industry in terms of the Competition Act (Act 89 of 1998); and

- Harmony securing the underwritten commitment for the finance from its bankers to fulfill its obligations to AngloGold.

The assets acquired by Harmony include:

- all the mineral rights and mining title (other than a portion of the Carbon Leader Reef horizon which is being mined by AngloGold’s Savuka mine), mining equipment, metallurgical facilities, underground and surface infrastructure of Elandsrand and Deelkraal necessary for the continuation of mining, ore treatment and gold extraction at these operations as a going concern; and

- contributions to a rehabilitation trust fund equivalent to the current rehabilitation liability of Deelkraal and Elandsrand.

The transaction excludes existing gold hedging positions and liabilities in respect of continuing and widow members of the medical aid fund related to these operations.

Harmony will employ all existing employees of Elandsrand and Deelkraal, other than any employees that AngloGold wishes to retain. Elandsrand and Deelkraal employ approximately 5,900 and 3,200 people respectively.

AngloGold will maintain certain services relating to the continuation of employee benefits and certain operational matters for a period of up to three months after the completion date to facilitate a smooth handover of the assets.

Elandsrand came into production in 1978 with an anticipated life to 2001. The subsequent commissioning of the sub-vertical shaft in 1984 and the acquisition of Deelkraal from Gold Fields in 1997 (which allowed access to further reserves) extended this life significantly.

Elandsrand has been and continues to be one of AngloGold’s labour productivity flagships. Changes in mining method and work structure have led to some of the highest levels of labour productivity in the gold industry. These improvements have been sustained over time and have now also been spread broadly throughout AngloGold’s operations. However, Elandsrand is now in a mature stage of its life and is experiencing declining grades, resulting in a decline in profitability.

Management and the Board have carefully evaluated the offer made for these two assets, and have determined that a higher return on capital can be achieved by accepting the Harmony offer and investing the cash in other major projects.

AngloGold Chairman and CEO, Bobby Godsell said:

"These disposals are consistent with AngloGold’s strategy of concentrating on higher margin, long life operations through accelerated asset re-alignments. The transaction should reduce the company’s cash costs to $197/oz and total costs to $237/oz on a consolidated basis and will have a positive impact on AngloGold’s earnings. It will also reduce AngloGold’s annual gold production from South African sources by approximately 500,000 ounces. With respect to AngloGold’s remaining South African operations, it should reduce cash costs to $208/oz and total costs to $233/oz.”

The sale also reduces AngloGold’s capital commitments in South Africa by R730 million over the next six years.

Harmony will assume operational control of Deelkraal and Elandsrand from 1 February 2001.

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