South African Company Agrees to Buy Gold Mine: Deal Involving Springs Firm Expected to Be Done in April

By Wayne Heilman, The Gazette, Colorado Springs, Colo.

Jan. 15–South African mining giant Anglo-Gold Ashanti Ltd. announced Monday that it has agreed to buy out Colorado Springs-based Golden Cycle Gold Corp. for $149 million to gain full ownership of Colorado’s largest gold mine.

The deal, expected to be completed in April, will end more than a century of involvement in the mining district by Golden Cycle and its predecessor companies. Golden Cycle Co. was incorporated in November 1895, and related companies later owned a gold mill along west U.S. Highway 24 and developed the Rockrimmon neighborhood.

AngloGold owns two-thirds of Cripple Creek & Victor Gold Mining Co., which employs 320 in the mining district between Cripple Creek and Victor, while Golden Cycle owns the remaining third.

AngloGold manages the venture, which was formed in 1991 and acquired its share in 1999.

“Successful completion of this transaction will enable us to consolidate the full mineral endowment of (the venture) over the remainder of the mine’s life, whilst also simplifying the ownership structure,” said Richard Duffy, AngloGold’s executive vice president in a statement.

The acquisition is not expected to affect daily operations at the mine, which last year produced 281,820 ounces of gold and 89,020 ounces of silver. It is expected to produce 300,000 ounces of gold this year, said Don Ewigleben, president of Anglo-Gold’s North American operations. The deal also won’t affect a feasibility study on expanding the mine to extend its operations from 2012 to 2030.

Golden Cycle and AngloGold have been discussing consolidation of the mine under a single owner for more than three years, said Golden Cycle President Herbert Hampton. AngloGold made a formal acquisition proposal to Golden Cycle on Dec. 5, he said.

Several other potential buyers discussed acquiring Golden Cycle, but none made an offer, Hampton said.

“We are pleased to present this transaction to our shareholders, which represents an attractive premium to market,” Hampton said. “A lot of our shareholders are older and wanted to get some liquidity.

“A transaction of this nature was the best way to do that.”

Golden Cycle owned most of the land in the Cripple Creek-Victor mining district and contributed it to the joint venture; its partners provide financing and management for exploration, mining and processing the ore.

Golden Cycle also owns potential gold mining sites in Nevada and the Philippines and 7,300 acres of oil and gas rights in Fremont County. The company has two employees; Hampton, 61, said he plans to retire “for some period and an assistant will be laid off.”

AngloGold is paying $14.38 in stock for Golden Cycle’s shares, a 37 percent premium over the company’s closing stock price of $10.50 Friday. That price also is 29 percent higher than the average price, weighted for volume, of the stock during the past 30 days.

Golden Cycle’s shares surged immediately to $14.97 after the deal was announced but fell back in heavy trading Monday to $14.20, up $3.70 or 35.2 percent, making it the biggest percentage gaining stock on the New York Stock Exchange for the day.

The transaction must be approved by state, federal and South African regulators and two-thirds of Golden Cycle’s shareholders at a yet-tobe-scheduled meeting. Owners of 44 percent of the company’s 10.35 million shares have agreed to vote for the deal, which includes the three largest shareholders and all directors.

Thomas Winmill, president of the New York-based Midas Fund, Golden Cycle’s largest shareholder, said the fund has agreed to vote its 20.2 percent stake in Golden Cycle for the acquisition. He said it is “the best way to bring liquidity for all shareholders.”

Consolidating ownership under AngloGold is best for the mine and its employees because it allows “the owner to develop and expand the mine for the long term,” Winmill said. “Analysts believe that the mine could produce (if expanded) 500,000 ounces of gold annually,” or 200,000 ounces more than it now produces.

The deal comes the same day gold prices rose to a record $900 an ounce in trading on the New York Mercantile Exchange, up more than 40 percent in the past year.

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