DRDGOLD sells Blyvoor to Aurora

David McKay | Wed, 02 Dec 2009 15:18
[miningmx.com] -- DRDGOLD is to sell 60% of its struggling Blyvoor mine to emerging marginal gold asset operator, Aurora Empowerment System, for R376m, the companies announced on Wednesday.

In terms of the transaction with Aurora, DRDGOLD will be paid R296m in cash which CEO of DRDGOLD , Niel Pretorius, said would be used to bolster DRDGOLD's balance sheet ahead of planned acquisitions of “lower risk, lower cost, higher margin” assets.

“We’ve got a couple of plans including the possibility of mining in Zimbabwe. They have been mining there for over 100 years so I’m sure there’s some surface dumps we could treat,” he said.

However, R250m of the cash may be pumped into increasing DRDGOLD’s Crown surface treatment facilities, particularly improving the Ergo circuit which could be doubled from its current 1.2 million tonnes per month capacity, Pretorius said.

All in all, DRDGOLD could mill 2.4 million tonnes/month of gold tailings if it were able to unlock Crown’s full potential.

In terms of the deal on Blyvoor – which Pretorius said included the “whole shabang” of surface operations and underground - a further R80m would be provided in a draw-down facility by Aurora. This would satisfy Blyvoor’s immediate working capital requirements, including a much-needed R10m by end-December. Up to R14m would be provided at each month-end until the end of May, DRDGOLD said.

It also allowed for the payment of a monthly profit share of R2.5m or 25% of net operating cash profit, whichever was the highest. This would be paid until June 29, which is the scheduled closure of the transaction, and regardless of whether Blyvoor was profitable. “We will be providing management services so it’s in payment of that,” Pretorius said.

We’ve got a couple of plans including the possibility of mining in Zimbabwe

The deal removes the need for any retrenchments in terms of an order by DRDGOLD in November 9 to place Blyvoor underground mine under judicial management.

DRDGOLD said at the time that it had spent R75m over the previous three months attempting to save the mine.

However, the move also signals DRDGOLD’s virtual parting with underground mining. Blyvoor was the group’s last underground mine after more than 75 years of opeation. It will now produce about 40,000 oz from surface operations per quarter.

Aurora Empowerment System is operated by Zondwa Mandela who recently bought the Orkney mines from failed gold junior, Pamodzi Gold. Aurora had originally bid for 100% of both Blyvoor’s surface and underground mining operations, said Pretorius. “Given the offer was for the whole mining, we didn’t want to lose complete exposure to it,” he said.