Race for AngloGold assets may pit Sibanye against rival Harmony

Sibanye Gold [JSE:SGL] faces competition from two rivals if it wants to buy South African gold mining assets that AngloGold Ashanti plans to sell.

Sibanye, headed by South Africa’s prolific mining deal-maker, Neal Froneman, would be interested in purchasing AngloGold’s remaining mine in the country. But he’d likely face a challenge from other producers, notably Harmony Gold Mining Co. and Chinese-backed Heaven-Sent SA Sunshine Investment Co., according to Bernard Swanepoel, a former chief of Harmony.

“There should be three interested parties: Harmony, Sibanye and Heaven-Sent,” Swanepoel said. “I really can’t see any outsiders participating.”

Sibanye would “certainly engage” AngloGold on the sale of its South African assets, but any deal depends on timing, Froneman said in an interview. AngloGold’s Mponeng - the world’s deepest mine - is adjacent to Sibanye’s Driefontein operation, and synergies make a lot of sense, Froneman said.

“There isn’t a lot of clarity on exactly how they are going to go about this, but we will engage with them when they approach us,” Froneman said.

While Sibanye may be the most likely buyer, it’s still weighed down by debt and its takeover of platinum miner Lonmin Plc has been prolonged by a legal challenge from a labour union. The company is also battling to contain costs at its gold mines, and a five-month strike by workers over wages has curbed output.

AngloGold will be open-minded when considering offers for Mponeng, but would likely favor a buyer with good finances and experience with deep-level mines, Chief Executive Officer Kelvin Dushnisky said in an interview.

Harmony, which completed the purchase of AngloGold’s Moab Khotsong mine last year, looks at opportunities that add value and is seeking clarity on how AngloGold intends to handle the sale process, spokesperson Lauren Fourie said.

A spokesperson for Heaven-Sent, which also owns a former AngloGold mine and other mining assets in South Africa, didn’t immediately respond to a request for comment.

AngloGold says Mponeng is a world class asset that won’t require capital for eight years, but digging at depths of about 2.5 miles could be daunting to investors who see South Africa’s industry limping toward its final years.

Beyond the eight years, Mponeng may need a $1bn investment to reach more ore, JPMorgan Chase & Co said in April. All-in sustaining costs at the mine in the three months to March rose 19% to $1 304 an ounce from the previous quarter. Gold is trading at about $1 281 in London.

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