AngloGold Ashanti Ltd. will halve its production from South Africa after agreeing to sell mines to Harmony Gold Mining Co. and a Chinese investment firm in an effort to stem losses in its home country.
The world’s third-largest gold miner will sell Moab Khotsong, which includes the Great Noligwa mine, to Harmony for about $300 million and Kopanang to Heaven-Sent SA Sunshine Investment Co. for 100 million rand ($7.4 million), the Johannesburg-based company said in a statement on Thursday.
AngloGold’s South African mines have dragged down the company’s performance in recent quarters as aging infrastructure, reserve depletion and accidents have raised costs and reduced production. After the sales, the company will still own the West Wits operations near Johannesburg and some waste-dump operations, reducing gold production from South Africa to about 13 percent of its total, from about a quarter previously.
“This transaction is in line with our capital-allocation strategy and our aim to effect the improvement of our global portfolio,” Chief Executive Officer Srinivasan Venkatakrishnan said in a statement.
The sales come after AngloGold put its South African assets under review “given their under-performance leading to heavy, and ultimately unsustainable, losses being incurred,” the company said.
Read more: AngloGold Weighs Options for Asset Mix as South Africa Lags
For Harmony, the acquisition will add 250,000 ounces a year at an average all-in sustaining cost of less than $950 an ounce and increase cash flows by 60 percent, the company said in a separate statement. Harmony CEO Peter Steenkamp has spoken of the need for a major acquisition to offset aging mines scheduled to close elsewhere in its South African portfolio.
Harmony will use its revolving credit facility to fund $100 million of the purchase price with the remainder coming from a bridge loan facility that may be repaid through a rights issue, the company said.
AngloGold gained as much as 4 percent to 129.49 rand a share and traded up 2.6 percent at 9:56 a.m. in Johannesburg, the biggest riser in the Bloomberg Intelligence Senior Gold Mining gauge. Harmony dropped 1.8 percent to 22.99 rand a share.
Heaven-Sent, which is buying the unprofitable Kopanang operation, is a Hong Kong-based company that owns 74 percent of South Africa’s Village Main Reef Ltd. and operates the Tau Lekoa mine in the Vaal River region, AngloGold said.