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DRDGOLD to sell 26% of SA mines Posted: Thu, 28 Jul 2005 [miningmx.com] -- DRDGOLD, which produces about 250,000 oz/year of gold from South Africa, is to sell 26% of its South African mines to a consortium led by Khumo Bathong Holdings. If completed, the transaction will see the group comply with the South African government’s 10-year regulations on empowerment. The gold mining company also said it was considering projects worth R83m which included re-establishing mining at Blyvooruitzicht’s No 2 sub-shaft, an operation that had been closed since 1993. Funding of the shaft reopening would probably be from proceeds of an earlier share placement with hedge fund Baker Steel. "We still have cash from Baker Steel. We may take some debt on but it's not a precondition of the project," said Mark Wellesley-Wood, DRDGOLD's CEO. If approved at a group board meeting, scheduled for August 24, the project would see DRDGOLD produce a total of 770,000 oz of gold from the sub-shaft. DRDGOLD is also to consider a slimes day project which will see a 15% increase in output from the asset. In terms of a deal signed in 2002, DRDGOLD shares ownership of surface retreatment operations, Crown Gold Recoveries (40%), with Khumo Bathong (60%) as well as ERPM, a century-old gold mine situated on South Africa’s East Rand. Wellesley-Wood said the new deal with Khumo Bathong was, “a logical step forward”. The memorandum of understanding, signed with Khumo Bathong today, sees the empowerment firm effectively extending broader ownership over DRDGOLD’s assets by swapping nearly half of its 60% stake in Crown Gold Recoveries and ERPM for 15% of DRDGOLD’s wholly owned Blyvooruitzicht Gold Mining Company. “The effect would be the ownership by Khumo Bathong of 15% of all of DRDGOLD’s South African operations,” the company said in a statement today. DRDGOLD intends to facilitate the BEE transaction through vendor financing,” it said. The memorandum also allowed for the purchase of a further 11% of DRDGOLD’s South African mines. “DRDGOLD in South Africa, with its substantial reserve and resource position, will pursue further brownfield gold mining opportunities in the country, applying a new, pared-back mining model well suited to the mature profile of the industry,” said Paseka Ncholo, CEO of Khumo Bathong. Ncholo is also the non-executive director of DRDGOLD. In a separate transation, DRDGOLD is to issue 4.5 million shares in order to cancel the debt of Crown Gold Recoveries and ERPM. Commenting on the likelihood of approving the reopening of Blyvooruitzicht’s sub-shaft, Wellesley-Wood said it could be imperilled by excessive wage increases. DRDGOLD, which does not release its financial figures until August, saw gold production fall 27% to 137,000 oz quarter-on-quarter owing to the closure of some of its South African mines. However, cash operating costs improved to $327/oz in the June quarter compared to $412/oz in the March quarter. Commenting on the results in a conference call, Wellesley-Wood said the South African rand had helped the company for the first time in 18 months. This followed a 10% weakening in the rand during the quarter. Commenting on wage negotiations with workers at its South African assets, Wellesley-Wood said DRDGOLD was working independently of the Chamber of Mines of SA's central bargaining system. As a result, wage talks were working to a different timetable with discussions about pay increases at ERPM not starting until October. Higher grade mining news. Straight to the point. Straight to your mailbox. Subscribe now for miningmx's free news alerts.
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