Anglogold to sell Tau Lekoa mine

johannesburg - gold miner anglogold ashanti is to sell the tau lekoa mine together with the adjacent weltevreden and goedgenoeg project areas to simmer and jack mines (simmers), it announced late on tuesday.

the consideration for the transaction is r600m less an offset up to a maximum of r150m for unhedged free cash flow generated by the tau lekoa mine in the period between january 1 2009 and december 31 2009, as well as an offset for unhedged free cashflow generated by the tau lekoa mine in the period between january 1 2010 and the effective date of the transaction.

simmers will endeavour to settle the completion consideration entirely in cash, however it may issue to anglogold ashanti ordinary shares in simmers up to a maximum value of r150m, with the remainder payable in cash.

it will also pay a royalty, determined at 3% of the net revenue (being gross revenue less state royalties), generated by the tau lekoa mine and any operations as developed at weltevreden and goedgenoeg.

the royalty will be payable quarterly commencing from january 1 2010 until the total production from the sale assets upon which the royalty is paid is equal to 1.5 million ounces and provided that the average quarterly rand price of gold is equal to or exceeds r180 000/kg (in january 1 2010 terms).

the effective date will occur on january 1 2010 or the first day in the calendar month following the fulfillment of allconditions precedent to the transaction, anglogold ashanti said in a statement.

anglogold ashanti will continue to operate tau lekoa until the effective date with appropriate joint management arrangements with simmers and will retain all operating cash flow generated from the tau lekoa mine for the year ending december 31 2009 greater than r150m as determined on an unhedged basis.

subject to approval

in addition, following the effective date, simmers will treat all ores produced from the sales assets at its own processing facilities. as a result anglogold ashanti will have increased processing capacity available, allowing for the processing of additional material sooner from its other vaal river mines and surface sources, thereby further accelerating cash flow.

anglogold ashanti said the transaction is consistent with its strategy of active portfolio management to focus human and financial resources on core operations.

tau lekoa is one of the smallest of anglogold ashanti's south african operations and is both geographically and geologically separated from the its other vaal river mines. the ventersdorp contact reef as mined at tau lekoa is generally of a lower gold grade and also does not contain uranium in meaningful quantities as compared to the vaal reef as mined at the company's other vaal river mines.

anglogold ashanti therefore took a strategic decision, following its asset review process, to initiate a sale process for the sale assets subject to satisfaction of the company's value parameters.

the deal is conditional on simmers raising sufficient cash to settle the completion consideration subject to the share value, the receipt of all ministerial consents, approval by simmers shareholders and regulatory and other third party approvals, including the south african reserve bank, the jse and the south african competition commission.

commenting on the transaction, mark cutifani, ceo of anglogold ashanti, said "i am delighted that we have been able to execute another important step to focus our asset portfolio. the transaction will act to strengthen our balance sheet further and after an orderly transition process will enable us to focus our key human resources and financial resources across our strategic asset base and growth initiatives."