Unsolicited offer for old gold mine

AngloGold Ashanti has signed a memorandum of understanding with a group interested in buying its Kopanang gold mine, which the company is preparing to close.

The group is also preparing to close its TauTona mine, which would mean a combined loss of 8,500 jobs. It said in June that the mines were old, nearing the end of their lives and a financial drag on its South African division. It received unsolicited offers for Kopanang.

The memorandum of understanding could result in a sale agreement, the company said, adding it would talk to organised labour about the sale.

In the six months to endJune, Kopanang’s gold output fell 6% to 44,000 ounces, while its all-in sustaining costs shot up 26%, to $1,682 an ounce.

Together with TauTona, the two mines were the most expensive in the South African division, pushing the average all-in sustaining cost to a worst level of $1,259 an ounce.

If the talks are successful and the sale goes ahead, AngloGold will still pay severance packages to employees.

A number of potential buyers have been mentioned in media reports including JSE-listed Harmony Gold. However, the buyer is unlikely to be Harmony, which is looking for longer-life assets to add 500,000oz of annual production to its profile of 1-million ounces a year.

AngloGold CEO Srinivasan Venkatakrishnan has made it clear that the new owner must be an experienced operator with financial resources and that the company wanted to avoid the mistakes others had made by selling mines to inexperienced groups that destroyed and sterilised assets.