South Africans bid for South Pacific exposure (April 05, 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 efforts to diversify geographically.

Durban Deeps issued a friendly bid for Australian-listed gold producer Emperor Mines, in which it already owns a 19.8% stake. The bid, recently settled between Durban Deeps and Emperor management, valued Emperor at A$105 million based on closing market prices on 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. During the second half of 2003, the mine produced 56,000 oz. at a cash cost of A$493 per oz. Vatukoula’s annual production target is 130,000 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 of which has a gold resource. The projects were acquired in a merger with Aurora Gold in 2003.

The most advanced of Abelle’s projects is Hidden Valley, a gold-silver deposit with marginal economics; Abelle is revising the feasibility work and has started the permitting process. At year-end, proven and probable reserves at Hidden Valley and the adjacent Hamata deposit totalled about 21.5 million tonnes grading 3 grams gold and 43 grams silver per tonne.

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.