Ura­nium One to bid SA gold farewell

Ei­ther off­shore ac­qui­si­tions or a re­verse takeover

Finweek English Edition - - Companies & markets - DAVID MCKAY

NEAL FRONE­MAN, CEO of Aflease Gold, plans to sell the South African gold ex­plo­ration firm and hopes a merger be­tween it and Rand­gold & Ex­plo­ration (R&E) will min­imise dis­rup­tion to its share.

A num­ber of for­eign-listed firms have shown in­ter­est in Aflease Gold, says Frone­man, who’s also CEO of sxr Ura­nium One (Ura­nium One), a 68% share­holder in Aflease Gold. That’s be­cause the com­pany has North Amer­i­can type gold de­posits, he says.

How­ever, the plan first is to have the merger of JCI and R&E ap­proved, which is cur­rently be­ing ne­go­ti­ated.

Were that to hap­pen, Aflease will bid for R&E prin­ci­pally for its R2bn worth of Gold Fields shares. The out­come would be R4bn in mar­ket cap­i­tal­i­sa­tion, of which R2bn would be cash.

Though there’s still a lot of wa­ter to flow un­der the bridge, buy­ing R&E would di­lute Ura­nium One’s stake down to around 25%. “It’ll then be much eas­ier to exit the firm,” says Frone­man. “A lot less dis­rup­tion.”

Aflease Gold’s prin­ci­pal as­set is East Mod­der, east of Jo­han­nes­burg. It’s slated to be the East Rand’s first new gold mine in 28 years, with pro­jected out­put of 100 000oz/year. Its rel­a­tively shal­low and cheap-to-mine gold ounces are not at all like other as­sets owned by SA’s gold ju­nior min­ing com­pa­nies, says Frone­man.

It’s also for that rea­son that Aflease Gold has no in­ter­est in the as­sets of DRDGOLD, which is sell­ing its in­ter­na­tional arm in favour of a home strat­egy. Some say that the plan may ex­pose DRDGOLD to an as­set strip or a hos­tile takeover.

But what’s Plan B for Aflease Gold should Ura­nium One fail to im­ple­ment its takeover strat­egy? Ura­nium One CFO Jean Nortier says: “We’ve got quite a num­ber of al­ter­na­tives to the R&E deal.” One is to “en­gi­neer” the takeover of Aflease Gold by a for­eign-listed min­ing com­pany; the other is to add slightly more “crit­i­cal mass” to Aflease Gold by way of ac­qui­si­tions. Those would be deals done via pa­per, en­abling the di­lu­tion of Ura­nium One in the same way as the R&E trans­ac­tion would.

“There are a num­ber of as­sets in other ju­ris­dic­tions that are ap­pro­pri­ately priced for Aflease Gold,” says Nortier. The prom­ise of cor­po­rate ac­tiv­ity is more good news for share­hold­ers in the gold com­pany, which have so far ben­e­fited from the strong run in the gold price. Aflease Gold’s share price has gained 63% over the past 12 months.

Avoid­ing dis­rup­tion. Neal Frone­man

Has a num­ber of

op­tions. Jean Nortier

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