A South African private company is about to become the first African mining and metal company to list on the Hong Kong Stock Exchange, Business Day newspaper in Johannesburg reported on Thursday.
The newspaper said Hong Kong-listed Wing Hing International is buying an 87 percent stake in a private South African company called Taung Gold for 580 million U.S. dollars in shares. The group aims to have mines in production from 2014.
Taung’s existing shareholders will hold 84 percent of Wing Hing once the deal is completed in about two months. This will be subject to the Chinese company’s shareholders approving the transaction.
An emerging markets investment bank, Renaissance Capital which is advising Taung, said the transaction would result in the first African mining and metal company to list in Hong Kong.
It would also pave the way for more listings in Hong Kong of world- class mining assets from Africa. Currently Taung is 32 percent owned by a New York-based group, Electrum Strategic Resources that invests in precious metals companies.
Business Day said electrum and a company called GoldCom, incorporated in the British Virgin Islands, will be the owners of the 84 percent stake in Wing Hing.
At the conclusion of the deal, Wing Hing will have cash of 95 million U.S. dollars.
Taung Chief Executive Neil Herrick said this is enough to complete the feasibility studies into the company’s Jeanette and Evander gold projects in South Africa’s Free State and Mpumalanga provinces.
He said there is no pressure on Taung to raise capital for the first two years.
Herrick said a Johannesburg listing is not planned but could be an option later on. In 2008 Taung’s plans to list on the Johannesburg Securities Exchange were hamstrung by the financial crisis.
In keeping with South African conditions, Taung has a South African black empowerment group holding 26 percent of its shares.
In addition, a vendor financing agreement is being struck so that Taung can increase its holding of the operating assets so that the new company will have the requisite South African black empowerment levels.
Business Day said both projects have a combined resource of 24 million ounces (oz) of gold, 15 million of which are at Jeanette, in South Africa’s Free State province. At cash operating costs of between 300-400 U.S. dollars an ounce, the mines are forecast to reach steady state production of 380, 000 oz at Jeanette and 267, 000 oz at Evander.
Van Zyl Botha, financial director of South Africa’s Randgold & Exploration, said they have reached an agreement with Taung to buy its Jeanette properties, subject to various conditions. Herrick said one of the problems at the Jeanette properties is the geological difficulty in keeping the hanging wall, or roofs of tunnels, in place. Taung believes it has solved the problem, which will allow it to mine the area.