On May 4, the day Harmony and ARMgold announced their merger, two businessmen were in a boarding queue at Cape Town International. They looked at a headline in Business Day and one remarked: "Look at that guy. Can you believe it, just two years and he is doing a R20bn merger." There were some comments about empowerment that I missed. The other responded: "But you've got to give it to him - he's played his cards right. He's played his cards bloody well."
The man they were referring to was Patrice Motsepe, chairman of ARMgold and its holding company African Rainbow Minerals, and now nonexecutive chairman of Harmony.
It began with the deal he put together to acquire his first assets. It was essentially a kind of clawback deal, based on tangible and sustainable operational upside, instead of on debt-funded share purchases through a special-purpose vehicle.
"His model was based on creating a revenue stream, and not raising debt for an overvalued asset," says an analyst.
From those humble beginnings with marginal mines which AngloGold could no longer operate profitably, he has built a multibillion-rand black-owned mining company in four years.
Contrary to popular opinion, Anglo has not come out of the deal too badly. The conditions on the original deal mean it has made R270m more than the much-quoted sale price of R30m. And billionaire Motsepe and Anglo aren't the only ones who have made money.
In June 2002, ARMgold listed on the JSE at an initial price of R44, which climbed to R48 on the first day. The price went up to a high of R93 before falling to about R59 now. Speculative investors could have made a sweet bundle of cash by getting out at the top, nearly doubling their investment in under six months.
Six months after listing, Motsepe delivered a 426% increase in operating income to R1,6bn for the year 2002. The company is debt-free.
There is no doubt that ARM is the empowerment story of the year. Four years ago, at the end of its first year of operations, ARMgold had about R10m on its balance sheet. The company now boasts just over R2bn in cash.
The second half of last year was rough, as it was for most gold companies. Revenue declined sharply, as did profits, but that is less an indication of the company's performance than a story of the rampant rand.
Towards the end of last year there was already talk that Motsepe needed to expand or consolidate with another group. His original mines were approaching the end of their lives. The assumption was that he might use the R2bn war chest he had amassed. He went the route of consolidation, a logical and strategic move. He married his sweetheart of a year and half, Harmony Gold. The two have been partners since a successful joint bid for Free Gold.
The Harmony merger has created the world's fifth-biggest gold company, and though you can ask questions about its broad-based empowerment, the company is 26% black-controlled. African Rainbow Minerals, the unlisted company, has a 14% direct interest. That probably means ARM's NAV is the biggest of any single black company.
Though ARMgold was the highlight of the year, it probably should share the spot with MTN. The cellular company had two high spots . The first was a return to growing EPS in the group, as the Nigerian operation became cash positive earlier than expected. The second was a fairly neat solution to its empowerment credentials, through a management buy-in.
The group is in a better position than its bigger rival, Vodacom, to handle slowing growth in SA.