Chinese investors look for more South African gold deals

A consortium of Chinese investors currently making a R4.5 billion ($642 million) bid for Gold One International, currently the lowest cost gold producer in South Africa, will be using the deal as a beachhead for further expansion in Africa.

The consortium — comprising Baiyin Non-Ferrous Group Co Ltd (60 per cent), the China-Africa Development Fund (30 per cent) and Long March Capital Group (10 per cent) — has already acquired around 19 per cent of Gold One. The consortium is making an offer at 408c/share for Gold One, with the aim of ultimately securing a 60-75 per cent stake.

Part of the deal will also see Gold One shareholders voting on a proposed minimum capital injection of R1.05 bn ($150 mn).

GoldOne president and CEO Neal Froneman said this week that the Chinese consortium took the decision to provide new capital as it supported the company’s growth strategy. He said the new Chinese partners saw South Africa as a springboard into Africa.

He said the Baiyen-led consortium has already indicated a willingness to inject further significant funds into GoldOne to pursue this strategy.“Our partners have an affinity for Africa and with the existing GoldOne management team being incentivised to stay on-board and pursue this strategy, we are well set to act upon the opportunities that we have identified,” he said.

Market pundits reckon parts or all of DRD Gold, SA’s fourth largest gold producer, could be in the sights of GoldOne.

Gold One itself is on the acquisition trail, having made an offer this May to acquire gold producer Rand Uranium for R1.75 bn ($250 mn) in cash. The acquisition would not only double GoldOne’s production profile, but also diversify the company’s resource base with some 40 million pounds of uranium reserve.

The GoldOne transaction is part of a recent thrust by Chinese investors into SA’s vibrant gold mining sector. Earlier this month, China African Precious Metals (CAPM) pitched a R150 mn ($20 mn) buyout offer for Pamodzi Gold Orkney (which was under provisional liquidation). This was on the heels of Wing Hing International proposing to invest up to R4 bn in a transaction involving the acquisition of unlisted Taung Gold, which owns two marginal (and currently dormant) SA gold operations.