[miningmx.com] – EMBATTLED US and South African gold producer, Great
Basin Gold (Great Basin), is locked in arbitration proceedings with compatriot, Gold
Fields, over an empowerment deal that turned sour.
Ferdi Dippenaar, CEO of Great Basin, told investors and analysts at the group’s year-
end results presentation on Tuesday that Gold Fields had unwound an R80m ($11m)
arrangement with Tranter Gold, Great Basin’s empowerment partner.
This was after the Department of Mineral Resources (DMR) declined to award Gold
Fields credits for a deal in which it donated R80m to Tranter Gold. The R80m was
capital that Gold Fields had received from Great Basin for cancellation of a 2% royalty
agreement in 2007 over a portion of Great Basin’s Balfour-based Burnstone mine.
“The DMR requested that the matter be settled amicably, in a manner that will not
jeopardise the transformation agenda of the Government,’ said Dippenaar. “However,
settlement negotiations failed and Gold Fields intends concluding the matter through
arbitration. Tranter has joined the company [Great Basin] in arbitration.’
Dippenaar emphasised that the arbitration would not threaten the company’s short-
term targets. “Aribration can take anywhere between 12 to 24 months,’ said
Dippenaar. “Don’t hold your breath.’ The arbitration certainly throws another
unwanted spanner into the Great Basin works, which is also negotiating a new
financing package for Tranter Gold following the decline in Great Basin’s share price,
which Tranter used in loan collateral to invest in Great Basin. (Incidentally, the
arbitration pitches Dippenaar against Gold Fields CEO, Nick Holland. The two were
protagonists when Holland, as CFO of Gold Fields, was instrumental in rebuffing
Harmony Gold’s hostile takeover. Dippenaar was then Commercial Director of
Harmony Gold).
Commenting on the refinancing of Tranter Gold’s loan, which is held with Investec,
Dippenaar said an update was likely before the end of April. “Great Basin is required
to assist in such a way that it doesn’t affect our short-term cash requirements,’
Dippenaar said. Worries about Great Basin’s cash position has partly been the reason
why shares in the company have declined.
Great Basin’s latest bought deal, in which it issued shares for C$50m in cash, stems
from a year-long delay in the commissioning of the Burnstone mine. Investors voiced
their concern in a conference call, asking Dippenaar whether the Burnstone mine’s
latest readjusted production targets could be trusted. “2012 can never be worse than
2011,’ said Dippenaar, who added that he had participated in every refinancing Great
Basin has launched for the company, and had asked senior management and some
mine management to do the same in the latest shares for cash deal. All in all, Great
Basin’s share capital has increased five-fold since October, 2006.
Great Basin has guided for 90,000 to 100,000 oz from Burnstone for the 2012 financial
year, down from a forecast in November that production would be about 125,000 oz.
“What we need for Burnstone is for it to be successful and to over deliver into its
targets,’ said Dippenaar.
Notwithstanding some scepticism regarding Burnstone, Great Basin showed in its
2011 financial results that it was gaining some momentum. The company reported a
profit of $1.5m from operating activities which compares to a $17.9m loss in the 2010
financial year. The flaw currently in Great Basin’s makeup is Burnstone: it recorded a
net operating loss of $15m in 2011, the first year of production build-up.
