Alan Seccombe | Business Day | 10 September 2018
African Rainbow Minerals (ARM) is assessing the undeveloped Wafi-Golpu copper and gold deposit half-owned by Harmony Gold, but the diversified miner’s executives declined to be drawn on any further details on its copper strategy.
Since selling the jointly held Lubambe operation in Zambia, ARM is still scouting for copper opportunities, with much speculation in the market that the company could join Harmony, in which it holds a 14% stake, in the multibillion-rand investment in Papua New Guinea in the large Wafi-Golpu project.
However, analysts remain cautious about any investment ARM could make in growth through mergers & acquisitions, particularly now that the company has swung to a net cash position of R995m in the year ended June from net debt of R1.3bn a year earlier.
Johann Pretorius, an analyst with Renaissance Capital, asked ARM executive chair Patrice Motsepe and CEO Mike Schmidt at an annual results presentation on Friday for assurance that the company would not make a bad investment decision now that it is generating strong cash flow.
“The bigger concern is that ARM might decide to invest this money in what could be a value-destructive project or acquisition,” Pretorius said, pointing out investors said they want clarity on a dividend policy.
Motsepe said greenfield developments, or building brand new mines, are not on the cards for ARM.
He said: “We are looking at some very exciting growth opportunities. Our balance sheet is in a very good position … greenfield, brownfield is not for us. Whether a transaction is value accretive or destructive, the shareholders will decide. They will punish you if you do a transaction that destroys value.”
Schmidt said that ARM is actively looking at potential copper investments and the Wafi-Golpu deposit shared by Harmony and its Australian partner Newcrest Mining, is one that is being assessed.
“Wafi has a strong credit in terms of copper and gold and it’s one that we do assess. We are a shareholder in Harmony and they speak to us on where they stand and intend doing on a continual basis,” he said.
Harmony needs about R21.5bn for its half of the $2.825bn tag to develop Wafi-Golpu and its CEO, Peter Steenkamp, has spoken of investigating various funding options.