Harmony trims its Gold Fields stake

Harmony Gold Mining (HMY-N) has had sold off 30 million Gold Fields (GFI-N) shares at US$10.50 per share, for gross proceeds of US$315 million.

The sale leaves Harmony with around 26.6 million Gold Fields shares, which the company says it plans to hang on to.

“Gold Fields’ invitation to appoint Norilsk Nickel to its board seems to circumvent some of our potential to deploy this entire stake strategically,” said Harmony CEO Bernard Swanepoel in a prepared statement. “We retain a 5.4% stake in Gold Fields in the interim to allow us to participate in any appropriate restructuring of Gold Fields that should eventuate.”

Gold Fields recently said that Russian-based Norilsk has accepted its invitation to nominate two non-executive directors to Gold Field’s board. Norilsk owns a 20.3% stake in Gold Fields.

Harmony acquired an 11.5% stake in Gold Fields via the early settlement portion of its terminated takeover bid. A recent High Court ruling in South Africa concluded that Harmony’s hostile bid had actually lapsed on Dec. 18, 2004., instead of May 20, the same day as the Court’s ruling.

In the end, the 7-month battle (five months of which were fought in vain) ended up costing Harmony an estimated 159.1 million rand (US$24.5 million), and Gold Fields, 170.4 million rand (US$26.2 million). Those figures exclude the millions carved from each company’s share value.

Harmony plans to use proceeds from the sale to retire short-term debt, and fund its Hidden Valley project in Papua New Guinea, where construction is expected to crank up in July. The plan allows the project to remain hedge-free.

Hidden Valley is reportedly home to proven reserve totalling 1.9 million oz. of gold and 25.5 million oz. of silver. The company was granted a development licence earlier this year, after comprehensive review of its environmental plans.

The proposed open-pit operation is expected to chip in 300,000 oz. of gold and 4 million oz. of silver per year to Harmony’s coffers; cash cost are pegged at US$224 per oz. The project carries a US$124-million price tag, and a rate of return of 28%. The first gold pour is slated for early 2007.

Meanwhile, Harmony is considering a buy-back of its own shares.