[miningmx.com] – SOUTH Africa’s gold mining companies have rushed to the aid of the 94-year old Rand Refinery, the world’s largest single-site precious metals refinery, after it failed to account for 87,000 ounces of gold.
Rand Refinery shareholders, AngloGold Ashanti, Sibanye Gold, Harmony Gold and Gold Fields will provide the refinery with a R1.2bn convertible loan described in an announcement to the Johannesburg Stock Exchange today as “a precautionary measure”.
This was after the refinery failed to successfully implement new enterprise resource (ERP) planning software which resulted in a difference between the actual inventory and the accounting records of approximately 87,000 ounces of gold.
“Uncertainty around the true position has prevented the company from being able to finalise its annual financial statements for the financial year ended 30 September 2013,” it said in its announcement.
The risk is that the refinery goes bust although that is considered unlikely. “Rand Refinery requested financial assistance from shareholders as a precautionary measure, should resolution of the difficulties result in a financial loss for the company,” it said. It was unlikely to be without gold should a client call on a contract owing to the sheer volume of throughput at the refinery.
Rand Refinery processes about 380 tons of gold a year from South African and African mines. Yet it is also a major part, albeit historical, of the country’s beneficiation story in terms of the government’s interest in adding value to newly mined concentrate.
As the largest shareholder, AngloGold Ashanti will provide the lionshare of the loan, up to a maximum of R573.8m followed by Sibanye Gold (R448.5m), Harmony (R140.4m), and Gold Fields (R37.3m).
DRDGold, which is the third largest shareholder in Rand Refinery with an 11.3% stake is not participating in the loan, but did approve it. As the loan is convertible into shares, DRDGold’s stake in the refinery will be diluted.
DRDGold CEO, Niel Pretorius said that the company stands to be diluted if the loan is converted but it has a claw back option issued at a “slight premium”. The importance of remaining a shareholder in the refinery is that it counts as beneficiation points in terms of mining legislation in South Africa.
“Rand Refinery’s operations are unaffected by this matter and the processing of gold continues at full capacity,” the company said in its announcement.
“The Rand Refinery management team, under the leadership of recently appointed Mark Lynam, has appointed external financial and technical specialists, including Accenture, to assist,” it said. Lynam is a former senior vice-president of finance & treasury at AngloGold Ashant
“Actions and controls implemented to date have stabilised the situation and the focus now is on resolving the matter and finalising the accounts,” it said.
