South Africans bid for South Pacific exposure (March 15, 2004)

South African gold producers Harmony Gold (HMY-N) and Durban Roodepoort Deep (DROOY-Q) have both issued bids for Pacific Rim mining companies, continuing a move for geographical diversification.

Durban Deeps issued a friendly bid for Australian-listed gold producer Emperor Mines, in which it already owns a 19.8% stake. The bid, settled between Durban Deeps and Emperor management earlier this month, valued Emperor at A$105 million based on closing market prices March 5.

Durban Deeps is offering one share for five Emperor shares, a scrip bid equating to A88 per share. Emperor shares jumped to A85 from A67 on March 8 when the bid was announced.

Emperor’s chief asset is the Vatukoula gold mine on Viti Levu island in Fiji. Vatukoula produces about 130,000 oz. annually and at its most recent half-year report it had produced 56,000 oz. in the six months ended December 2003, at a cash cost of A$493 per oz.

Harmony has offered to take over full ownership of ASX-listed Abelle, for A$2 per share, plus A$1.70 for listed options and a cash bid for unlisted options at their imputed value. Abelle, in which Harmony already holds a 63% interest, has three development-stage projects in Papua New Guinea, each with a gold resource outlined on it, all acquired in a merger with Aurora Gold in 2003.

The most advanced of Abelle’s projects is the Hidden Valley gold-silver project, where a 2002 feasibility study indicated marginal economics; Abelle is revising the feasibility work and has started the permitting process. Proven and probable reserves at Hidden Valley and the adjacent Hamata deposits were estimated at 21.5 million tonnes grading 3 grams gold and 43 grams silver per tonne at year-end.

At the Wafi property an inferred resource of 53 million tonnes grading 2.5 grams gold has been estimated, and at the nearby Golpu copper-gold project Abelle has calculated an indicated resource of 75 million tonnes at 1.2% copper and 0.5 gram gold per tonne.