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Harmony cuts cash portion for Oz sale after Monarch battles to raise funds

Publication: Mining Weekly
Journalist: Liezel Hill

South African miner Harmony Gold has renegotiated the terms of sale for its Mount Magnet assets in Australia, after junior Monarch Gold struggled to raise cash for the deal.

Monarch will now pay Harmony an initial A$15-million in cash (A$5-million of which has already been paid), compared with the previous terms of A$30-million.

The total acquisition price remains unchanged, however, at A$65-million.

A further A$10-million in cash has been deferred and the equity segment has been increased from A$20-million worth of shares to A$25-million.

Monarch will also provide Harmony with a convertible note worth A$15-million.

The two companies first announced the transaction in February, after Harmony identified the Mt Magnet assets as noncore, as part of an asset rationalisation process.

The original agreement required Monarch to raise A$35-million by the end of June, to finance the cash element of the deal, but the company had asked for a four-month extension to satisfy the conditions.

“The prevailing unfavourable financial market conditions worldwide have made it difficult for Monarch to raise the required funds,” Harmony said in a statement.

The Mt Magnet assets includes Hill 50, Great Fingall, St George, Star and Big Bell mines, which contain 2,7-million ounces of gold resources, tenements covering about 62 000 ha and 166 exploration licence blocks, along with a 2,7-million ton a year capacity plant.

The new terms require the approval of Monarch's shareholders, who are expected to vote on the proposal at the end of August.

“We believe the restructured consideration will allow Monarch to complete the transaction and allow them to focus on the redevelopment of the Mt Magnet asset,” said Harmony CEO Graham Briggs.

Harmony said last year that it would offload what it viewed as noncore assets, in order to focus on its larger, long-life mines.

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