PAN African would keep the dilution of its shareholders to the absolute minimum in its R1,5bn purchase of the Evander mine from Harmony Gold after a consortium that it was in to acquire the assets fell apart, it was announced yesterday.

Wits Gold and Pan African disagreed over the funding of its offer to Harmony of R1,7bn, Wits CEO Philip Kotze said. Wits prepared its own bid for the mine, but was not chosen by Harmony because it is believed its terms were similar to those of the consortium's.

"The acquisition of Evander would have fast-tracked Wits into a gold producer. The termination . is negative and removes a key short-term catalyst for the stock," Macquarie First South said. Harmony opted for the Pan African bid, which is a lot simpler and would give it R1bn in cash once it gained approval from Pan African shareholders and the Competition Commission.

Pan African CEO Jan Nelson said yesterday the company had secured irrevocable support for the deal from more than 50% of its shareholders. Pan African would fund R500m from debt and it had "firm term sheets" from two local banks, Mr Nelson said. As part of the debt arrangement, Pan African would hedge up to 25% of the gold from Evander, he said.

The mine can produce about 100000oz of gold a year at a cost of about $850/oz. Pan African would receive all profit from Evander from April 1 and will use it towards the remaining R1bn. It had conservatively factored in R200m from Evander, which it would add to the R300m on its balance sheet. It could also raise cash from the sale of noncore assets that come with the purchase, Mr Nelson said.

Up to R500m will be raised through an equity placement to all shareholders. "It will not represent more than 10% of the current market capitalisation, which is not significant dilution for a transaction of this size," he said.

Evander plans to grow Pan African's gold resources to 38-million ounces from 6-million ounces and its reserves to 8,6-million oz from 1-million ounces.