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DRDGOLD fends off critics, rejects offer Posted: Tue, 29 Mar 2005 [miningmx.com] -- DRDGOLD said an insurance claim, and asset sales of up to R100m, would take care of estimated liabilities of R250m following the voluntary liquidation of the South African company’s North West province gold shafts. The insurance claim, which is believed to total R200m to R300m, related to damage sustained when an earthquake, that recorded 5.3 on the Richter Scale, knocked out operations at the North West shafts. The shafts produced 34% of DRDGOLD’s gold in the six months to December, or some 151,000 oz. DRDGOLD’s chief financial officer, Ian Murray, said a rehabilitation fund to pay for closure of the North West province shafts was also “fully financed”. “DRDGOLD estimates that liabilities of the North West shafts are R130m relating to retrenchments and a further R120m owed to creditors,” Murray said. The shafts employ about 5,600 miners. DRDGOLD also confirmed it had rejected an offer from Simmer & Jack Mines, a company in which Randgold & Exploration has a stake, to buy its extant South African mines. These included the Blyvooruitzicht Gold Mining Company and DRDGOLD’s stake in Crown Gold Recoveries, operations that produced 28% of the company’s total gold production in the six months to December. “The board rejected this supposed offer for the mines. It consisted of a single page letter with no amount mentioned, but asked for exclusivity to conduct a due diligence,” Murray said. Simmer & Jack Mines said, however, that it would continue to seek ownership of the shafts nominated for liquidation. "I firmly believe that this decision [not to sell the group's remaining South African mines] is not in the best interests of DRDGold's South African assets," said Roger Kebble, chairman of Simmer & Jack. At the weekend, Simmer & Jack Mines, said it had dispatched letters of intent to Mark Wellesley-Wood, CEO of DRDGOLD, and a liquidator that was last week appointed to preside over the sale or closure of Buffelsfontein and Hartebeesfontein, the wholly-owned subsidiaries through which DRDGOLD owned the North West shafts. “I believe we have a proposal that will prevent permanent closure and save a substantial number of jobs on which the local communities depend for their existence," said Kebble. Murray said, however, there was “no chance of control of the South African mines changing from DRDGOLD”. “Our shareholders want South African gearing,” he said. DRDGOLD has already lost about half of its South African gold reserves, about five million ounces, by putting the North West mines into liquidation. “At a rand gold price of between R85,000/kg to R86,000/kg, Blyvooruitzicht and Crown Gold Recoveries are at breakeven,” Murray said. “This is when we would be in a position to put capital back into the operations,” he said. The rand gold price is currently at R86,285/kg assuming a rand/dollar exchange rate of R6.32 and a gold price of $426.65/oz. Kebble believed that DRDGOLD's strategy was to close down its South African mines: "I have always maintained that Mark Wellesley-Wood has an agenda to close the South African operations because he can't make them viable," he said. Ilja Graulich, DRDGOLD’s investor relations manager, said at the weekend that the company had “poured R280m down the North West shafts. Make sure you're the first to hear it. Subscribe now for miningmx's free news alerts. It'll take you less than a minute - we promise.
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