Nicola Mawson
23 December 2008
Johannesburg — HARMONY Gold Mining has taken the first step to clearing its books of debt after raising almost R1bn through a share issue, paving the way for a possible acquisition in mid-2009.
CEO Graham Briggs said the company was now "en route" to reducing its debt levels.
Yesterday, the company said it had raised R979m before costs by issuing 10,5-million shares. The cost of the placement was about R15m, or 1,5% of the value of shares issued. The company had issued the shares for cash in the open market.
Briggs said net debt was R2,35bn at the end of September. All its debt was classified as short-term as it was due within the current financial year.
The company has two major debts. The first is its facility with Nedbank and the second is a R1,7bn convertible bond that is due in May. Harmony has now repaid R1,25bn of the R2bn Nedbank debt, which was due this month. The R750m remaining is now due by the end of next year.
Briggs said that to have debt on a balance sheet during tumultuous times was not viable.
The company expected the balance of $169m as a result of its Rand Uranium deal to be paid during April. The first tranche was paid a few months ago, said Briggs.
Rand Uranium was a venture in which Harmony took Randfontein Cooke section, which has three shafts and a tailings dam, and transferred these assets into a separate company called Rand Uranium. Harmony then sold 60% in a private equity deal.
Briggs said the company had chosen to benefit from the liquidity of its shares to raise the capital. In the middle of next year, if its debt was paid off, the company would be in a position to acquire another firm.
Harmony continued to do due diligence reports on companies and would be opportunistic but prudent. Briggs said many companies were under stress due to their debt levels.
The company said its future lay with its pipeline of projects. It regularly reviewed its cash flow to ensure it supported the continuation of projects.
"During a recent review, Harmony reaffirmed its commitment to its capital expenditure plans," the company said in a statement to the JSE.
Harmony placed the 10,5-million shares between November 25 and December 19 at an average price of R93,20. Its weighted average price during trade on the JSE over the same period was R92,79.
The number of shares issues is equivalent to 2,6% of Harmony's issued share capital of 403,4-million shares at the end of September.
Last month, Harmony said it was bullish on the outlook for the gold price, despite the volatility seen recently. In the September quarter, Harmony produced 6% more gold at 12342kg compared with the June quarter as both tonnages and grades improved. After a 3% weaker average rand price at R217295/kg, revenue rose only slightly to R2,7bn.
After a 9% increase in cash costs to R151827/kg, together with increases in items including amortisation, corporate costs and impairment of the investment in Pamodzi Gold, headline earnings dropped to 24c per share from 65c.
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