Blueprint
UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 6-K
REPORT OF FOREIGN
PRIVATE ISSUER PURSUANT TO
RULE 13a-16 OR
15d-16 UNDER THE SECURITIES
EXCHANGE ACT OF
1934
For October 19,
2017
Harmony Gold Mining Company
Limited
Randfontein
Office Park
Corner Main Reef
Road and Ward Avenue
Randfontein,
1759
South
Africa
(Address of principal executive
offices)
*-
(Indicate by
check mark whether the registrant files or will file annual reports
under cover of Form 20- F or Form 40-F.)
(Indicate by
check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.)
Harmony Gold
Mining Company Limited
Registration
number 1950/038232/06
Incorporated in
the Republic of South Africa
ISIN:
ZAE000015228
JSE share code:
HAR
(“Harmony”)
Proposed acquisition of AngloGold Ashanti's Moab Khotsong
operations
Johannesburg. 19 October 2017. Harmony
Gold Mining Company Limited (“Harmony” or “the
Company”) has entered into a definitive agreement
("Transaction Agreement") with AngloGold Ashanti Limited
("AngloGold Ashanti") to acquire the underground mine Moab
Khotsong, which incorporates the Great Noligwa underground mine and
related infrastructure from AngloGold Ashanti for a consideration
of US$300 million in cash (the "Transaction").
The Transaction
is subject to approval from Harmony’s shareholders and other
conditions precedent, including regulatory approvals. The Board of
Harmony has unanimously approved the Transaction and has resolved
to recommend the Transaction to its shareholders.
Harmony believes
the Transaction is value accretive and will enhance its position as
a robust cash-generative gold mining company, with a proven
track-record of running assets effectively and
efficiently.
"Buying Moab
Khotsong means we boost our cash flows by more than 60%, increase
our average overall underground recovered grade by 12% and grow our
South African underground resource base by 38%. The
Transaction benefits all our stakeholders. It creates value
for our shareholders, preserves jobs and sustains the surrounding
mining communities with the potential to significantly extend the
life of mine of the Moab Khotsong operations. We believe the South
African gold mining environment creates opportunities which Harmony
has chosen to capitalise on,” Peter Steenkamp, chief
executive officer of Harmony said.
The Transaction
represents a unique opportunity to acquire a portfolio of South
African gold assets which have an excellent strategic, financial,
operational and geographical fit with Harmony's current operations
in line with its stated merger and acquisition (M&A) criteria.
The Transaction:
●
enhances Harmony's near-term
production at an attractive all-in sustaining cost
(AISC)
●
adds annual gold production
in excess off 250koz at an AISC below Harmony's target of
US$950/oz;
●
increases Harmony's South
African underground resource base by 17.5Moz (an increase of
38%);
●
is a natural strategic fit
with Harmony's current asset base providing multiple opportunities
to optimise operational performance of the assets and realise
synergies
●
increases cashflow and
earnings per share at current gold prices from year
one;
●
consolidates Harmony's
position as a leading gold producer in South Africa;
and
●
results in an improved
cashflow profile and scale, facilitating Harmony's ability to fund
future growth projects.
Harmony believes
the Transaction is beneficial to all its stakeholders, in that
it:
●
creates value for Harmony's
shareholders and delivers on its strategic objectives;
●
creates further investment
and employment opportunities in the South African gold mining
sector through the potential extension of the life of mines of the
target assets;
●
benefits South Africa and its
social transformation agenda; and
●
delivers on Harmony's Black
Economic Empowerment ("BEE") commitment.
3.
Target
assets, liabilities and Transaction structure
The target assets
include two mines:
●
Moab Khotsong mine and
related infrastructure; and
●
Great Noligwa mine and
related infrastructure.
The Moab Khotsong
and Great Noligwa underground mines are located in the Vaal River
region and exploit the Vaal reef. Moab Khotsong is the newest
undergound mine currently operating in South Africa and has been in
operation since 2006. Great Noligwa's operating infrastructure and
employees have been incorproated into Moab Khotsong since 2015. The
mines produced 280koz of gold in aggregate at an AISC of US$884/oz
for the 12 months ended 31 December 2016 and produced 130koz of
gold in aggregate at an AISC of US$998/oz for the six months ended
30 June 2017.
As of 31 December
2016, the combined 'above infrastructure' reserves consisted of
1.7Moz of gold at an average grade of 8.8g/t. In addition, Moab
Khotsong, including Great Noligwa has a substantial resource base
of 17.5Moz of gold with an average grade of 15.7g/t.
In addition,
Harmony will acquire:
●
Mispah tailings storage
complex;
●
The Great Noligwa and Mispah
Gold Plants including the South Uranium Plant
●
The Nuclear Fuels Corporation
of South Africa ("Nufcor"), a 100% owned uranium calcining facility
and AngloGold Ashanti’s members interest in the Margaret
Water Company NPC ("MWC");
●
A pro-rata cash amount
currently held in trust for the rehabilitation and environmental
liabilities relating to the Target Assets; and
●
All ancillary services and
assets related to the above assets.
(collectively the
“Target Assets”)
All relevant
actual and contingent liabilities (but excluding silicosis claims)
(collectively, the “Liabilities”), will be transferred
to Harmony.
The Mispah
tailings storage complex contains a resource base of over 70
million tonnes of ore with an average gold grade of 0.30g/t.
Harmony belives there is considerable scope to convert the acquired
facilities to a tailings retreatment operation, in line with its
current operations at Phoenix and Central Plant.
The Target Assets
produced revenue of R5,327 million, EBITDA (excluding special
items) of R2,090 million and profit after tax of R852 million for
the year ended 31 December 2016 and produced revenue of R2,195
million, EBITDA (excluding special items) of R664 million and
profit after tax of R214 million for the six months ended 30 June
2017. The value of the net assets of Target Assets and Liabilities
(excluding shareholder loans) at 31 December 2016 was R3,027
million and R3,032 million at 30 June 2017. The above numbers
remain unaudited and unreviewed and final audited and reviewed
numbers will be included in the circular to be sent to
shareholders.
The Transaction
will be implemented as a sale of assets, except for Nufcor and MWC
which will be implemented by a sale of shares and members
interests, respectively.
4.
Consideration
and financing
The purchase
consideration of US$300 million will be paid in cash on closing of
the Transaction (the "Offer Consideration").
US$100 million of
the Offer Consideration will be settled from Harmony's existing
US$350 million senior secured term and revolving credit facility.
The remaining US$200m will be funded through a fully underwritten
US$200 million bridge loan facility. Harmony is assessing various
alternatives to optimally repay the bridge, including a potential
rights issue.
5.
Black
Economic Empowerment ("BEE")
Harmony remains
committed to promoting social and economic transformation in the
South African mining environment. In this regard, Harmony has
successfully concluded a number of BEE transactions that have
resulted in empowering a broad-based group of South African
citizens and is currently fully empowered under the Mineral and
Petroleum Resources Development Act, 2002 (the "MPRDA") and the
Mining Charter.
Harmony’s
anchor BEE investor, African Rainbow Minerals Limited holds an
interest of 14.44%.
Harmony believes
that it is fully empowered under the MPRDA and current Mining
Charter. Harmony believes the Transaction is positive for South
Africa and should result in further investment and employment in
the South African gold mining sector.
Harmony has
therefore, undertaken to work with AngloGold Ashanti and the DMR to
ensure that the Transaction is implemented in a manner that goes
beyond compliance and ultimately to the benefit of South
Africa.
6.
Other
salient terms of the Transaction Agreement
The Transaction
Agreement provides for terms customary in agreements of this nature
and includes (amongst other things): (i) negotiated
representations, warranties, undertakings, indemnities and
limitation on liability customary for a transaction of this nature;
(ii) a break fee of US$3 million in certain defined circumstances,
which includes failure (in certain circumstances) to obtain the
approval of the Minister in terms of Section 11 of the MPRDA for
implementation of the Transaction and shareholder approval; (iii)
provisions governing the operation of the Target Operations during
the interim period; and (iv) a specific material adverse
change.
The Transaction
is subject to a number of conditions including, but not limited
to:
●
Harmony's shareholders'
approval, as this will represent a Category 1 transaction in terms
of the JSE Listings Requirements;
●
Approval from the South
African Competition Authorities in terms of the Competition Act,
1998;
●
Section 11 approval from the
Minister of Resources in terms of the MPRDA;
●
AngloGold Ashanti being
released from the KOSH Water Directive issued in relation to the
KOSH basin;
●
Approval from the Financial
Surveillance Department of the South African Reserve
Bank;
●
Transfer, waiver, assignment
or cancellation of certain contracts, permits and
directives;
●
Approval of the circular by
the JSE Limited ("JSE"); and
●
Waiver by the financing
providers of AngloGold Ashanti and Harmony, as
required.
Harmony and
AngloGold Ashanti have committed to engage with the relevant
authorities and other stakeholders in order to ensure the
conditions are fulfilled as soon as possible.
The Harmony
shareholder circular is expected to be posted before the end of
calendar year 2017, subject to JSE approval with the Harmony
shareholders meeting being held in January 2018 to approve the
necessary resolutions to implement the Transaction and the
Transaction is expected to close in the first half of
2018.
8.
Harmony’s
shareholder support
African Rainbow
Minerals Limited which owns 14.44% has provided a letter of support
for the Transaction and intends to vote in favour of the
transaction or all related resolutions.
9.
Memorandum
of Incorporation of acquired companies
Harmony confirms
that the provisions of the memorandum of incorporation of those
companies acquired will not frustrate Harmony’s compliance
with the JSE Listings Requirements and that nothing contained in
the memorandum of incorporation of the acquired assets will relieve
Harmony from compliance with the JSE Listings
Requirements.
10.
Categorisation
of Transaction, circular and general meeting
In terms of the
JSE Listing Requirements, the Transaction is classified as a
category 1 transaction. A circular providing further information
and a notice of general meeting is expected to be posted to Harmony
shareholders before the end of Calendar 2017 and a general meeting
of Harmony shareholders will be held to approve the resolutions
proposed.
19 October
2017
Financial advisor
and transaction sponsor: UBS
Legal advisor:
Bowmans
Technical
consultants: SRK Consulting (South Africa) (Pty) Ltd and Fraser
McGill Pty Ltd
Mandated bridge
providers: UBS Limited, Nedbank Limited, Absa Bank Limited, JP
Morgan Securities plc
Sponsor: J.P.
Morgan Equities South Africa Proprietary Limited
Disclaimers
The release,
publication or distribution of this announcement in certain
jurisdictions may be restricted by law and therefore persons in
such jurisdictions into which this announcement is released,
published or distributed should inform themselves about and observe
such restrictions. This announcement is for information purposes
only and does not constitute or form part of an offer to sell or
the solicitation of an offer to buy or subscribe to any securities
of Harmony. The securities referred to herein have not been and
will not be registered under the United States Securities Act of
1933 (the "Securities Act") or with any securities regulatory
authority of any state or other jurisdiction of the United States
and may not be offered, sold, resold, transferred or delivered,
directly or indirectly, in the United States except pursuant to
registration under, or an exemption from the registration
requirements of, the Securities Act. There will be no public
offering of securities in the United States or any other
jurisdiction.
The financial
information disclosed in paragraph 3 has been extracted from the
draft financial statements for the Target Assets prepared by
AngloGold Ashanti. Harmony is satisfied as to the quality of those
financial statements.
The reserves and
resources information disclosed in relation to the Target Assets
have been extracted from the Mineral Resources and Ore Reserve
Report for 2016 of AngloGold Ashanti. The report states that VA
Chamberlain, MSc (Mining Engineering), BSc (Hons) (Geology), MGSSA,
FAusIMM, an employee of AngloGold Ashanti, assumes responsibility
for the Mineral Resource and Ore Reserve processes for AngloGold
Ashanti and is satisfied that the Competent Person have fulfilled
his responsibilities and has consented to the information to be
included in the announcement and for his name to be disclosed in
this announcement.
Forward looking
statements
Certain
statements included in this announcement, as well as oral
statements that may be made by Harmony, or by officers, directors
or employees acting on its behalf related to the subject matter
hereof, constitute or are based on forward-looking statements.
Forward-looking statements are preceded by, followed by or include
the words “may”, “will”,
“should”, “expect”, “envisage”,
“intend”, “plan”, “project”,
“estimate”, “anticipate”,
“believe”, “hope”, “can”,
“is designed to” or similar phrases.
These
forward-looking statements involve a number of known and unknown
risks, uncertainties and other factors, many of which are difficult
to predict and generally beyond the control of Harmony, that could
cause Harmony’s actual results and outcomes to be materially
different from historical results or from any future results
expressed or implied by such forward-looking statements. Such
risks, uncertainties and other factors include, among others,
Harmony’s ability to complete the Transaction,
Harmony’s ability to successfully integrate the acquired
assets with its existing operations, Harmony’s ability to
achieve anticipated efficiencies and other cost savings in
connection with the Transaction, Harmony’s ability to
increase production, the success of exploration and development
activities and other risks. Harmony undertakes no obligation to
update publicly or release any revisions to these forward-looking
statements to reflect events or circumstances after the date of
this announcement or to reflect any change in Harmony’s
expectations with regard thereto.
This release
includes mineral reserves and resources information prepared in
accordance with the South African Code for the Reporting of
Exploration Results, Mineral Resources and Mineral
Reserves.
Although Harmony
believes that the expectations reflected in any such
forward-looking statements (or this announcement) relating to the
Transaction are reasonable, the information has not been reviewed
or reported on by the reporting accountants and auditors and no
assurance can be given by Harmony that such expectations will prove
to be correct. Harmony does not undertake any obligation to
publicly update or revise any of the information given in this
announcement that may be deemed to be forward-looking.
Ends.
For more details
contact:
Lauren
Fourie
Investor
Relations Manager
+27 (0)
71 607 1498 (mobile)
or
Marian van der
Walt
Executive:
Corporate and Investor Relations
+27 (0) 82 888
1242 (mobile)
19 October
2017
Sponsor:
J.P. Morgan
Equities South Africa Proprietary Limited.
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
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Harmony Gold Mining Company
Limited
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Date: October 19, 2017
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By:
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/s/ Frank Abbott
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Name
Frank
Abbott
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Title
Financial
Director
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