African Rainbow Minerals hedged 18 million Harmony Gold shares to raise cash while maintaining exposure to future stock gains.
The collar hedge locks in gains while preserving upside, allowing ARM to raise funds without selling shares in Harmony Gold.
As platinum prices fall, ARM benefits from Harmonys 66 stock rally, driven by golds rise and strong asset growth under new CEO Beyers Nel.
African Rainbow Minerals ARM, the diversified mining company chaired by South African billionaire Patrice Motsepe, has hedged nearly a quarter of its 1.1 billion stake approximately 24 percent in Harmony Gold to free up cash and keep options open for possible acquisitions.
Although ARM remains a committed long-term investor in Harmony Gold, now under the leadership of new CEO Beyers Nel , the company has taken steps to improve liquidity. It has hedged 18 million Harmony shares, which account for 2.84 percent of the gold miners issued capital and about 24 percent of ARMs total interest in the firm.
ARM hedges Harmony stake for liquidityThe hedge, structured as a collar, involves buying European put options with a strike price of R234.85 per share valued at R4.2 billion or 235.2 million and selling call options at R562.40 per share worth R10 billion or 560 million. This strategy gives ARM access to funding while still benefiting from future gains in Harmonys share price, up to the call option level.
ARMs decision comes at a time when its facing growing pressure from lower platinum group metal PGM prices. Harmony Gold, the countrys largest gold producer, has seen its stock climb more than 66 percent since January, driven by a surge in gold prices. The World Bank expects gold to stay above 3,000 an ounce through at least 2026.
Harmony, which operates across South Africa, Papua New Guinea, and Australia, reported a 15.2 percent jump in total assets to R68.9 billion 3.76 billion at the end of 2024. Its market cap stands at R169.3 billion 9.48 billion, with ARMs stake now valued at nearly R20 billion 1.12 billion.