Harmony Gold to issue up to $200m in shares for Mponeng purchase

Harmony Gold made the announcement on Wednesday 6 May that it is planning to issue new shares to fund its purchase of Mponeng in a quarterly operational update. The company needs to make a down payment of $200-million in coming months – with deferred payments over the course of several years that could reach $470-million – and it is reaching out to shareholders to do so. 

“Harmony is taking proactive steps by seeking authority from its shareholders to issue ordinary shares for cash (pursuant to a general authority to issue ordinary shares for cash and/or by way of a vendor consideration placing), for a maximum aggregate subscription consideration of up to $200-million. The subscription proceeds will be used by the company to fund part of the consideration payable for the acquisition,” it said in a statement.

What is being proposed is an equity raise via an accelerated bookbuild, with an offer to a small number of targeted investors.

The Covid-19 pandemic has wrought havoc on the global economy and financial markets and while many companies – especially those in distress – would like to raise cash this way, their ability to do so is severely constrained. But, building on 2019 gains, the precious metal’s price has gained around 12% in the year to date to just below $1,700 an ounce and it has been even higher, with some analysts predicting it could reach the $2,000 level in 2020.

The economic and regulatory uncertainties around the pandemic have bolstered gold’s “safe haven” status. And in rand terms, gold is near record highs above a million rand a kilogram. 

Investors have taken note even as production has been slashed and costs raised by the pandemic. Harmony’s share price has doubled since early March. Its outlook is long-term, and Mponeng is part of that strategy. It extracts gold from up to 4km below the surface and an injection of capital could allow for profitable expansion for years to come. Even amid the pandemic, the world of corporate finance is still humming. BM