Polyus, Harmony speculation surfacing

WHAT does it mean when a CEO or company offers a “no comment”? It depends who’s saying it.

In the mouth of Anglo American, this is standard response to any information about itself it hasn’t rubber-stamped in its corporate communications department. In the mouth of Bernard Swanepoel, Harmony Gold’s CEO, it’s an interesting departure.

Swanepoel is not even remotely media shy. In fact, he’s used the media as much as he feels, lately, abused by it.

Consider the corporate plans he’s aired in the media. These include the potential offshore listing of Harmony Gold’s Papua New Guinea project, Hidden Valley; or the separate listing of some of Harmony’s assets through Village Main, a non-operating company he bought in 2006. Then there’s the body-blows he imparted to Gold Fields (and vice versa) during Harmony’s attempt to buy that company.

More recently, Swanepoel has spoken of plans to build a gold retreatment business, and most recently of a joint venture with Victor Vekselberg’s Renova Group to help treat Harmony’s uranium slimes at the old Randfontein Estates.

So market talk that Swanepoel might be consorting with another Russian company, Polyus Gold, needs some working through.

The speculation is that Harmony is in advanced talks with Polyus on a merger. So far, Miningmx has been unable to have the speculation firmly validated by a second source; it must therefore carry a health warning. A quick phone around of Johannesburg analysts has been met with scepticism.

Why, say analysts, would Polyus Gold, want to own Harmony’s predominantly South African assets, some of them lossmaking? Total cash costs at Polyus Gold were last recorded at $236/oz. Compare this to the $400/oz in cash costs at the Harmony Gold mines.

Bear in mind, too, that at $9.3bn, Polyus Gold has twice the market capitalisation of Harmony Gold. It’s therefore relatively highly rated paper that wouldn’t necessarily improve its rating by merging with Harmony. Polyus Gold also has a healthy pipeline of new projects it estimates will take production to 3.9 million oz by 2015. The reasons for not doing a merger far outweigh those supporting a merger.

For the record, Swanepoel won’t provide any insight, and unusually chooses to issue a “no comment” statement through a third party, which is a first in more than 10 years of communication. He might well be too busy to tackle outlandish speculation, you may argue. Well, he certainly is busy.

Harmony Gold looks like it’s edging towards some significant corporate development the details of which currently remain undisclosed. Perhaps its suits Swanepoel to be cryptic about his potential involvement with Polyus. Or there’s a possibility that while a merger is not on the cards, Harmony is quite involved with Polyus nonetheless.

Other speculation is that Polyus Gold has already bought shares in AngloGold from Anglo American. This would reprise speculation reported in the UK’s ‘The Times’ on February 18 which said Polyus Gold had approached Anglo American to buy its 41% stake in AngloGold.

Is there any connection between Harmony, Polyus and a bid for shares in AngloGold Ashanti? Perhaps Harmony has agreed to buy AngloGold’s South African mines from the Russians, helping Polyus Gold to afford some of its investment. At $4.8bn, a 41% stake in AngloGold Ashanti is considered too big a fish for Polyus.

“No comment,” said Anglo American spokesperson, Anne Dunn, when asked if the mining group had offloaded some of its shares in AngloGold Ashanti. But in a city as leaky as Johannesburg, the persistence of the rumours are worth turning over.

source news : miningmx.com