15 | Investment in joint venture | | |
| | Doornkop JV agreement | | |
| | During the 2010 financial year, Harmony and Randfontein Estates Limited, a subsidiary of Harmony, entered into a joint venture agreement for the operation of the Doornkop mine following Harmony’s purchase of a 26% interest in the Doornkop mining right from AVRD. | | |
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The agreement to purchase AVRD’s 26% interest during the 2010 financial year is considered to be a repurchase of a call option (equity interest). The transaction became effective on 19 March 2010. As consideration for the 26% interest in Doornkop, the company repaid the outstanding balance of R244 million of the AVRD Nedbank loan (refer to note 29 of group financial statements) on 31 March 2010, as well as issued 2 162 359 shares to AVRD on 28 April 2010. The value of the consideration shares on the effective date was R151 million. The total purchase consideration was R398.0 million. In terms of the sales agreement, 975 419 consideration shares are to be held in escrow until 1 May 2014. The difference between the value of the shares issued of R151 million, the settlement of the AVRD Nedbank loan and transaction costs, have been taken directly to equity. Harmony recognised the cost of the mineral rights as part of property, plant and equipment (refer to note 8). Depreciation of R1.4 million was recorded during the 2010 financial year for this asset. The joint venture agreement entitles the company to a 16% share of the operating profit or loss of the Doornkop mine. During 2010, this amounted to a profit of R5 million for 3 months from the effective date. | | |
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| | The following are the company's effective share of income, expenses, assets and liabilities, which are included in the 2010 financial statements: | 16% | – |
| | Revenue | 23 | – |
| | Operating costs | (18) | – |
| | Operating profit | 5 | – |
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| | | 26% | – |
| | Non-current assets | 398 | – |
| | Total assets | 398 | – |