[miningmx.com] — WITS Gold may tap shareholders for up to R450m and
introduce new ones in an effort to boost the share’s liquidity, CEO Philip Kotze said
on Tuesday.
He was commenting a day after unveiling – in joint venture with Pan African
Resources – a proposal to buy Evander Gold Mines from Harmony Gold. Depending on
the rand gold price over time, the deal could cost up to R1.7bn.
“I think the maximum we may ask for is R450m. If all shareholders follow their
rights,
there’s obviously no dilution,’ said Kotze. “However, I may take the opportunity to
introduce new shareholders [in a share placement],’ he added. No decision had been
taken in this regard, however.
Some R800m of the deal is debt financed, which means Wits Gold and Pan African
Gold are only required to pump in R300m in cash each.
However, Wits Gold – which had cash of roughly R131m – has to pay R50m to
Harmony for property south of De Bron-Merriespruit (DBM), while Kotze said the
company was also hoping to “clean up some mineral rights’. Working capital
requirements could top R150m.
So far, Wits Gold’s empowerment shareholders agreed to follow their rights, including
Continental Africa Gold Resources through which the ANC’s Chancellor House has a
stake, and roughly 7% in Wits Gold owned by Sipho Nkosi’s Tranter Kismet
Investments.
Harmony has a 12.68% stake in Wits Gold after it converted an option valued at
R268m, structured originally to allow it to participate in 40% of Wits Gold’s southern
Free State assets.
Harmony’s interest in Wits Gold assisted in deal completion. “We became seriously
involved in this in about November, but Jan [Nelson, CEO of Pan African Resources]
has been following this for three years,’ he said.
Kotze said the rights issue would be complete in about three months. A share re-
rating might take longer, however. Shares in Wits Gold were up R1 following the
announcement yesterday, and didn’t trade today.
JUNIOR MINERS
The pre-feasibility study on DBM is likely to be published in the middle of this year; a
development Kotze said would show a 27% improvement in the resources of
the project, to just over 7.5 million ounces.
Included with Evander, which Kotze believes has a payback at the current rand gold
price of about three years, Wits Gold will eventually produce about 250,000 oz
annually including the attributable contribution from Evander. For its part, Pan African
Resources will produce about 145,000 oz, which
includes output from its Barberton mines.
Although styled as a shot-in-the-arm of South Africa’s gold junior industry, the scale
of these two companies is still fairly modest, and raises the question as to whether
they might just as well be combined at some future point.
Said Kotze: “I think the market will be saying exactly that and we initially looked at
that.’ Kotze added that he and Nelson were “relatively simple people’ with no
chance of egos “getting in the way’.
“Jan and I, having already worked together at Harmony Gold, have a like-minded
approach. In three to five years, there could be lots of reasons to combine the
companies, but it’s not on the agenda now especially as Wits Gold is looking for a re-
rating,’ Kotze said.
