DRDGold backs Chinese bid for Village
DRDGOLD is supporting a R637m bid by China’s Heaven-Sent for Village Main Reef, a transaction which would inject more than R40m into DRDGold’s coffers.
DRDGold owns about 3.3million unencumbered shares in Village, whose key assets are the Tau Lekoa gold mine and the Lesego platinum prospect. A further 1-million shares are being held in escrow after a failed deal when DRDGold sold Village its Blyvooruitzicht gold mine.
An arbitration hearing is pending between the two companies to settle an argument about the Blyvoor transaction, said DRDGold CEO Niel Pretorius.
“We’re alleging Village didn’t do everything they should and they’re alleging they did,” he said.
He raised the possibility of executives coming to an arrangement outside of the arbitration process.
An agreement would not only free up the shares held in escrow but about R6m held in an escrow account. In all DRDGold could receive R18m if the matter were settled in its favour.
The Heaven-Sent offer of R12.25 is a “little bit shy of what we’d hoped to get for our Village shares”, Mr Pretorius said. “But we are in support of the offer.”
DRDGold withheld payment of an interim dividend, preferring an early termination of the R77m out- standing on its domestic mediumterm notes due in July, he said.
DRDGold had R228m of cash on its books at the end of December and it has unveiled a R23m project to expand treatment capacity at its Ergo processing plant by 300,000 tonnes a month to 2.1-million tonnes a month from September.
Analysts quizzed management during a results presentation about expanding the plant, which was once owned by AngloGold Ashanti, to its full historical capacity of 2.4million tonnes a year.
DRDGold is unlikely to expand the plant beyond the 2.1-million tonnes as it balances its high-grade tailings material with lower-grade material to extend the life of the mine instead of mining it as quickly as possible, Mr Pretorius said.
The thinking is that by extending the life of the mine, DRDGold will reap the peaks in the gold price cycle in a volatile market over a longer period, he said.
DRDGold narrowed its loss in the interim period to the end of December, reporting a net loss of R2.8m for the six months compared to a loss of R26.4m.
Operating profit for the period increased to R164m from R156m as revenue topped R1bn compared to R935m. Gold output rose 6% to 73,015oz because of improved yields on the back of metallurgical efficiencies in its operation and business improvements.
These gains offset a 3% fall in volumes during the period due to heavy summer rainfalls and Eskom’s power constraints.
Village also released results yesterday, which showed a deepening loss in the interim period as its discontinued operations weighed heavily on the group’s financial performance.
Village reported a post-tax loss of R209m for the six months to end-December against a profit of R128m a year earlier.
It recorded a loss from discontinued operations of R305m compared to R32m.
The bulk of the loss came from the Consolidated Murchison gold and antimony mine which has been put into provisional liquidation after a sales process was terminated in December.
Village sold a total of 56,295oz of gold in the interim period, down from 61,761oz.
Village shareholders will meet on April 2 to vote on the deal.
Heaven-Sent’s offer of R12.25 is a little bit shy of what we’d hoped to get for our Village shares. But we are in support of the offer