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Harmony Gold Rises the Most in Two Years on Takeover Speculation

Harmony Gold Mining Ltd., Africa’s third-largest producer of the metal, rose the most in more than two years in Johannesburg trading after RBC Capital Markets said the mining company may become a takeover candidate.

The stock jumped 12 percent to 98.40 rand at the 5 p.m. close, the biggest one-day gain since November 2008, valuing the Johannesburg-based company at 42.3 billion rand ($6.2 billion). RBC’s Leon Esterhuizen yesterday raised Harmony to “outperform” from “sector perform,” citing it as a possible takeover target.

“Another gold major could be looking at a strategy of making a bid for Harmony” to strip out its Papua New Guinea assets and re-list the rest separately, Esterhuizen wrote. It may “make sense” for larger competitor Gold Fields Ltd. to make a bid, he said, adding that a tie-up with AngloGold Ashanti Ltd., Africa’s largest gold producer, is “a bit less obvious.”

Harmony’s Chief Executive Officer Graham Briggs dismissed the suggestion it may be a target for Gold Fields, speaking in an interview with Johannesburg-based SAFM radio today. Any move to separate Harmony’s assets would see its non-South African operations “gobbled up” by “majors,” he said. He wasn’t asked about AngloGold or any other potential suitor.

Briggs, who became Harmony’s CEO in 2008, has been closing unprofitable operations to focus on longer-life, lower-cost mines. The company is also expanding abroad to reduce exposure to South Africa, where gold mines are aging and labor and electricity costs increasing.

AngloGold, Gold Fields

Alan Fine, a spokesman for AngloGold, and Sven Lunsche, a spokesman for Gold Fields, said the companies don’t comment on speculation.

Harmony and partner Newcrest Mining Ltd. started output at their Hidden Valley mine in Papua New Guinea last year and said earlier this month their Wafi-Golpu deposit in the country is showing “spectacular results.” They’re targeting 30 million ounces of gold and 8 million metric tons of copper at the site.

“Even on the most conservative basis, Wafi could add in the order of $1.5 billion to $2 billion to the value of Harmony,” Esterhuizen said, adding that’s about 40 percent of the company’s market value.

Harmony shares have risen 23 percent in the past six months, beating AngloGold’s 0.8 percent gain and Gold Fields’ 12 percent increase. AngloGold rose 2.2 percent to 326 rand today, while Gold Fields climbed 3.4 percent to 119.70 rand.

Briggs plans to raise output to 2 million ounces of gold a year by 2013 from about 1.5 million ounces as gold prices climb.

The metal reached a record $1,447.82 an ounce in London today as fighting in Libya and concern that Europe’s debt crisis is worsening spurred demand for alternative investments.

“Harmony is poised to start delivering on a significant promise,” Esterhuizen said. “We believe this is its most vulnerable moment and potential bidders know this.”

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