Bid to buy Mintails

Brendan Ryan | Thu, 25 Jun 2009 11:53
[miningmx.com] -- A TAKEOVER bid is being launched for Australian-listed junior gold company Mintails, which produces gold from two dump retreatment schemes on the East and West Rand in South Africa.

Mintails also owns more than 1.5 billion tonnes of tailings dump material in these regions which can be treated to produce gold, uranium and sulphuric acid.

Mintails requested a halt in trading in its shares on the ASX on Wednesday “as a result of the company being approached by a gold producer with South African operations with a view to acquire the South African assets of the company”.

The statement added Mintails expected to receive a written proposal within 24 hours, and that trading should resume on Friday morning.

Mintails chairperson Pat Smyth commented on Thursday that the Mintails board was in the process of considering the proposal, and that the company had requested an extension to the trading halt.

“There’s nothing further I can say at this stage,” he added.

There are a number of possible candidates who might want to take over Mintails, judging by their stated strategies of uranium expansion and desire to grow through acquisition.

They include DRDGOLD, Simmer & Jack, First Uranium, Gold One International, and Gold Fields.

The most likely suspect would appear to be DRDGOLD, which is already involved in a number of joint ventures with Mintails.

DRDGOLD’s stated strategy is to increase its gold production sourced from surface material, because this is cheaper and carries lower risk than underground mining.

DRDGOLD CEO Niel Pretorius declined to comment when approached by Miningmx.

DRDGOLD started off as a minority partner in Mintails’ Ergo project near Springs on the East Rand. It was able to increase its stake because of the financial difficulties Mintails experienced in 2008.

Mintails ran out of cash to fund its share of capital and start-up costs at Ergo, despite re-assurances by former chairman Bryan Frost that it did have the money available.

Frost quit in March, apparently to avoid being forced off the board after Smyth had gathered sufficient support to call a special meeting at which it would be proposed that Frost be voted out.

DRDGOLD and Mintails are 50-50 partners in Ergo. However, DRDGOLD will receive all the profits from between the first seven and 12 years of operations from the gold plant following the cash injections made into the project in late 2008.

In February, DRDGOLD bought a 50% stake in Mintails’ proposed Witfontein slimes deposition site on the West Rand.

Witfontein could be a key strategic asset in any future consolidation between the various uranium producers on the West Rand, because it is large enough to accommodate waste tailings from several producers.

Simmers’ Ezulwini mine is close to Randfontein, as is Rand Uranium’s project to treat the Cooke 3 dump.

First Uranium CEO Gordon Miller commented last week that First Uranium was actively looking for strategic partnerships or acquisitions and this had become a priority for the group.

He said: “Several South African projects in close proximity to the company’s operations are becoming more attractive, thus shifting the emphasis of First Uranium’s growth agenda.”

Miller said: “There are lots of opportunities and we are building relationships with operators in the region.”

However, a First Uranium spokesperson today denied that the company was bidding for Mintails.

Gold Fields is also pushing ahead with plans to develop what it has termed its “fifth mine” in South Africa. This is a project to recover uranium from tailings dams created by the operations of its huge Driefontein and Kloof Mines on the West Rand near Carletonville.

Gold Fields CEO Nick Holland left the possibility of joint ventures in the region wide open when he said in May: “If there were synergies to be gained from cooperating with another player in that area, I’d be happy to do that.

“We decided we couldn't afford to sit around waiting for proposals but that we needed to crack ahead as if it would be our stand-alone project. If other people want to come to the party down the road, I'm open to those possibilities.”

A Gold Fields spokesperson has denied that Gold Fields is bidding for Mintails.

*The writer owns shares in Mintails.