South Africa’s third-largest gold producer Harmony Gold Mining (HGMCY-Q) has agreed to acquire more than 17 million shares of High River Gold Mines (HRG-T) from Japanese gold-investing company Jipangu.
Harmony will pick up the shares, representing about 21% of High River’s issued share capital, for US$14.5 million, a 16% discount on the weighted average share price for the 30 days prior to the agreement.
High River’s key asset is a 53% fully diluted interest in Russian gold-mining company OJSC Buryatzoloto.
Buryatzoloto owns and operates the Irokinda and Zun-Holba gold mines in southern Siberia’s Buryatia autonomous region, east of Lake Baikal. Combined, the two mines produced 147,176 oz. gold last year at a direct cash cost of US$143 per oz.
During the first half of 2002, the mines produced 76,036 oz. gold (High River’s share: 42,474 oz.) at a total cash cost of US$191 per oz., compared with 72,891 oz. gold (High River: 19,302 oz.) produced at US$167 per oz. the previous year. Cash costs rose as a Russian government rebate on exploration expenses was eliminated.
Buryatzoloto production is “essentially unhedged” and realized an average of US$299 per oz. during the recent 6-month period, up from US$262 per oz. a year earlier.
Buryatzoloto expects to produce 150,000 oz. of gold in 2002.
In July, High River inked a deal to acquire the Berezitovoye gold project in southern Siberia’s Amur region. Under the deal, High River will issue the Russian company Khaikta up to 6.8 million treasury shares and pay a total of US$2.75 million in cash. The final number of shares issued depends on the size of the proven and probable gold reserves outlined in a feasibility study.
The Berezitovoye deposit contains a near-surface resource of 14.1 million tonnes grading 3.05 grams gold and 14.3 grams silver per tonne, plus 0.93% zinc and 0.57% lead, based on a 1 gram gold cutoff, and Russian classification guidelines, which roughly correspond to Western measured and indicated categories.
Earlier this year, Harmony grabbed a 32% stake in privately held Highland Gold, which owns a package of prospective exploration assets and a gold producing mine in Russia.
Harmony’s chief executive officer, Bernard Swanepoel, said, “We continue to be impressed by the highly prospective orebodies and good mining infrastructure in Russia. Through our participation in both Highlands Gold and High River Gold we will be in a position to identify further growth opportunities available to the company in that country.”
High River also has a half-interest in the New Britannia gold mine in Manitoba. The mine, operated with equal partner TVX Gold (TVX-T), produced 57,847 oz. of gold at US$196 per oz. during the first half of 2002, up from the year-ago 54,278 oz. at US$190 per oz. The mine is well ahead of its 2002 target of 110,000 oz.
The company also has an 80% stake in Burkina Faso, West Africa, where it recently agreed to look at combining operations with Axmin‘s (AXM-T) nearby Bouroum deposit.
The deal is slated to close on Nov. 22.
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