JOHANNESBURG (miningweekly.com) − South Africa’s fourth-largest gold miner DRDGold would only sell its 74%-owned Blyvooruitzicht (Blyvoor) mine if it could attract the “right” investors, CEO Niël Pretorius said on Monday.

He said that large corporations have started to sell down to smaller and smaller companies, which sometimes ended up in these mines having to be liquidated.

“This will not happen with our Blyvoor asset under my watch,” said Pretorius, adding that the mine would be dealt with in a responsible manner. “We would rather close the mine, than see it end up to the likes of Aurora’s mines.”

Pretorius said that DRDGold was prepared to “dilute out of the asset” to investors with a strong enough balance sheet and the capital to develop the business going forward. DRDGold might even play a role in setting up the right structures to achieve that, he added.

DRDGold believed that Blyvoor was a strategic asset that could be a valuable commodity to an investor, which did not have to deal with public compliance issues.

The total development of Blyvoor over a seven-year period is estimated at R240-million, while the current working capital deficit stands at around R18-million.

DRDGold provided funding to the mine for the past 15 years, but suspended financial assistance earlier this year.

A business rescue plan is now being developed for the deep-level mining operation, under the guidance of rescue practitioner Peter van den Steen.

Pretorius said that the company was engaging with the relevant unions to rally their support for the business rescue plan, which had to be filed by November 1.

A business rescue plan supported by the rescue practitioner, the mine’s suppliers and interested parties or stakeholders would make it a lot easier to get the necessary investor support.

He added that the Blyvoor mine had the potential to generate profits at the current high gold price.

DRDGold’s operations generated net cash inflow of R330-million during its 2011 financial year, ended June 30, but took a one-off 100% impairment for its Blyvoor asset, which had a negative impact of just over R500-million.

CFO Craig Barnes said that if the impairment and certain extraordinary items were added back to the balance sheet, the company made a R132-million profit for the year.

“There might be a subsequent adjustment in value, but we decided to take the full hit. We are hoping for better support from the unions to get Blyvoor back on the right track,” said Pretorius.

DRDGold saw headline earnings a share, which is not affected by the Blyvoor accounting adjustment, rising 115% to 28c, compared with 2010.

The group increased its dividends by 50% in 2011 to 7.5c, which was the second-highest dividend yield declared by a South African mining company for the year.
 

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