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DRDGOLD may inject gold into Aussie JV

David McKay | Mon, 30 Apr 2007 13:00
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[] -- DRDGOLD's central and east rand gold projects, including part of the massive Argonaut venture, could be sold into the uranium and gold exploration joint venture established with Australia's Mintails Ltd.

"They could be vended in," said Niel Pretorius, MD of DRDGOLD's South African subsidiary, DRDGOLD SA. "It's an option to capture that value although we don't yet have a mandate for this."

DRDGOLD announced on April 26 that it planned to create a joint venture with Mintails, a listed Australian company and Mineral & Mining Reclamation Services (MMRS). In terms of the proposal, the partners agreed to consolidate their uranium and gold-bearing properties on the Rand. The joint venture might begin production after about two years of development.

In addition, the joint venture would be listed in Australia in which it would raise about A$6m to pay for the development.

Argonaut is a gold project that DRDGOLD forerunner, Durban Roodepoort Deep, resuscitated in the Nineties, and again in 2003. DRDGOLD rescoped the project in 2006 saying it had mineable resources of 8.9 million oz at anticipated grades of 8.5g/t.

Its other project that could be sold into the joint venture is Sallies, an extension of the century-old ERPM gold mine on South Africa's east Rand. ERPM has about five years of mining life left.

Prospecting at Sallies has been taking place at about 3km underground covering an area of 1,252 hectares. DRDGOLD said in 2006 that the in-situ gold resource, at 7.5 g/t, would equate to approximately 2.4 million oz of gold. "The Sallies 2 section [part of Argonaut] is a genuine exploration asset," said Pretorius.

"This is a platform from which one could grow a genuine exploration portfolio," said Pretorius of the joint venture proposal with Mintails. However analysts were sceptical.

Commenting on the uranium and gold joint venture, JP Morgan gold analyst, Steve Shepherd, said there was little substance to the joint venture announcement. "It would appear that DRDGOLD is climbing aboard the uranium 'bandwagon'," said Shepherd in a note. "This said there is absolutely no substance that accompanies the announcement."

A number of South African companies have laid down plans to restart uranium production. Uranium One has begun production at its Dominion mine in Klerksdrop while First Uranium, controlled by Simmer & Jack Mines, has projects. Most recently, Harmony Gold said it was considering producing uranium again.

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There's also questions about how Australian investors would view DRDGOLD's involvement in the joint venture given its virtual reversal out of Emperor Mines Ltd, an Australian listed firm in which the South Africans had a 78% stake.

Pretorius said investors would have to draw their own conclusions. "They will have to decide for themselves."

Mintails, which is principally a gold retreatment company, has some following in Australia. Keith Goode, writing for Eagle Research in a note dated April 14, said Mintails could recreate Ergo, the closed AngloGold Ashanti retreatment operation, with projected output of 300,000 oz of gold.

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