Gold producer AngloGold Ashanti (AU) has entered into a binding agreement to sell its entire interest in AngloGold Ashanti Namibia (Proprietary) Limited (AGAN) to a fully-owned subsidiary of QKR Corporation Limited (QKR) for an upfront consideration based on an enterprise value of $110 million.
AGAN, which is a wholly-owned subsidiary of AngloGold, owns the Navachab Gold Mine. The upfront payment is subject to adjustment of AGAN's net debt and working capital position on the closing date of the transaction. QKR will pay the upfront consideration in cash on transaction closure.
Along with the upfront consideration, AngloGold will also receive a deferred consideration in the form of a net smelter return (NSR) to be paid quarterly for a period of seven years following the second anniversary of the closing date.
NSR to be paid will be determined at 2% of gold ounces sold by Navachab during a relevant quarter at an average gold price of $1,350 per ounce being achieved and capped at 18,750 ounces sold per quarter. Operations at Navachab will continue to be conducted by AngloGold till the closing date of the transaction.
The deal’s closure depends on fulfillment of a number of precedents, including Namibian and South African regulatory and third party approvals, which are expected to be obtained over the next several months.
As of Dec 31, 2012, Navachab gold mine had gold mineral resources of 4,410,000 ounces and gold ore reserves of 2,100,000 ounces. The mine produced 74,000 ounces of gold at a cash cost of $929 per ounce in the year ended Dec 31, 2012.
The financial advisor to AngloGold for the transaction is CIBC World Markets plc. ENS, Africa is the legal advisor while UBS South Africa (Pty) Limited is sponsor to AngloGold.
AngloGold carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the mining industry are Franco-Nevada Corp. (FNV), Lake Shore Gold Corp. (LSG) and Alexco Resource Corp. (AXU), all of which carry a Zacks Rank #2 (Buy).
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