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Harmony to pay Rio Tinto $22,5m for PNG rights

Publication: Mining Weekly
Journalist: Matthew Hill

Major gold producer Harmony Gold announced on Wednesday that it had concluded negotiations to buy Rio Tinto’s rights under a royalty agreement, which was entered into before Harmony’s acquisition of the Hidden Valley and Kerimenge deposits, in Papua New Guinea.

“The rationale for the transaction is based on the fact that the cash costs an ounce of gold produced at Hidden Valley should reduce by $13/oz,” Harmony stated.

In terms of the royalty agreement, Rio Tinto had the right to receive a portion of between 2% and 3,5% of Hidden Valley’s future production. Harmony would pay Rio Tinto a $22,5-million consideration.

This would be settled by issuing 1,3-million new ordinary shares of 50c each, and the balance of $2,5-million would be payable in cash on the effective date, Harmony said in an emailed statement.

The listing of the consideration shares would begin on March 29 and the agreement was effective from the day on which the consideration was settled, which would be the date of the allotment and issue of the consideration shares.

The effect of the acquisition on the earnings a share and net asset value a share of Harmony for the half-year year ended December 31, assuming the acquisition had taken effect from 1 July 2006, would be insignificant.

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