Niel Pretorius, CEO, DRDGOLD
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» Mintails under continued pressure
» Bust up at Mintails sinks the share price
» DRDGOLD's Crown saved in Mintails JV
» DRDGOLD may inject gold into Aussie JV

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Mintails hunts for cash
Brendan Ryan
Posted: Mon, 29 Sep 2008

[miningmx.com] -- SIMMERING tensions between Mintails chairman Bryan Frost and some of his major shareholders could come to a head this week as the company urgently seeks about US$10m in extra funding.

Mintails shares were suspended from trading on the Australian Stock Exchange (ASX) at the request of the company on September 18, “pending an announcement in relation to a review of the two projects and allocation of available capital in the light of the volatile global capital markets.”

That suspension should not have been necessary judging by comments made by Frost when he came to South Africa in July for a meeting with various SA shareholders unhappy with the way he and partner Richard Revelins were running the company.

At the time, Frost dismissed rumours that Mintails did not have enough money to bring its Ergo (East Rand Gold and Uranium) dump retreatment operation into production as “rubbish.”

He told Miningmx , “We’ve got A$22m in the bank. It’s easy to cast a shadow over a company in a bear market. The question you have to ask is – why would they do that? The conclusion we have reached is somebody wants us out and they are using every trick they can.”

Ergo is a 50/50 JV between Mintails and DRDGold while Mintails’ second project is the wholly-owned Wergo (West Rand Gold and Uranium) which will be a similar operation based on the West Rand.

Ergo is due to start production during October and build up rapidly to annual production of 75,000oz of gold during its Phase One operations.

According to Frost and Mintails director Lloyd Birrell – who has board responsibility for the Ergo JV – the Ergo project is unaffected by the developments in the company and will come into production next month as planned.

The success of Ergo is important for DRDGold which views this JV as providing a long-term future for its existing, profitable Crown Mines dump retreatment business.

DRDGold acquired its stake by merging various dump resources on the East Rand with Mintails and the Crown Mines management and technical team has played a key role in developing the project.

DRDGold, potentially, could have an important role to play in whatever may be under negotiation given its operating involvement and the fact that it has what Mintails desperately needs - cash.

At end-June, DRDGold had R846m (about US$100m) cash on hand. DRDGold CEO designate Niel Pretorius did not return calls made to him by Miningmx.

Birrell said, “Ergo is running on schedule and within the budget.”

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Frost commented, “Ergo is funded. The money required is for Wergo. This is not a crisis. It is not unusual to take a step like this where there is widespread speculation taking place.

“We need to finalise our plan and then announce it so that all shareholders are in the same position. I would hope to have the trading suspension on Mintails lifted within about six business days.”

Frost declined to say how much money Mintails was looking to raise and he also refused to explain why Mintails had apparently run out of cash despite the comments he made in July.

He commented, “it’s not easy operating when the world’s capital markets are collapsing around everybody’s ears.”

Sources close to the situation say Mintails needs around US$10m and plans are to raise it through a private equity placement at 10c a share.

“The amount of money needed is not that great and the asset base is sound,” commented one.

Mintails shares stood at 15c when trading was suspended. The share traded as high as 70c last year before sliding to current levels.

The sources added meetings were taking place with potential backers in London this week but that one of the conditions attached to any funding plan might be a restructuring of the board and the removal of Frost and partner Revelins.

That’s denied by Frost who said he had reached an understanding with key shareholders during the meetings in South Africa.

He commented, “we know we are under notice from certain shareholders but they are not trying to force me off the board.

“ They wanted changes made to the board and that’s happening. They will see a continued strengthening of the board bringing on people with the right operational skills.”

The writer owns shares in Mintails.