| Fri 3 Oct 2008, 13:00 | | DRD - DRDGold Limited - Acquisition by DRDGOLD South African Operations (Pty) |
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DRD
DRDD
DRD - DRDGold Limited - Acquisition by DRDGOLD South African Operations (Pty)
Limited ("DRDGOLD SA") of an additional 15% interest in the Elsburg Gold
Mining Joint Venture
DRDGOLD LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1895/000926/06)
JSE share code: DRD
ISIN: ZAE000058723
Issuer code: DUSM
Nasdaq trading symbol: DROO
("DRDGOLD" or "the company")
Acquisition by DRDGOLD South African Operations (Pty) Limited ("DRDGOLD SA")
of an additional 15% interest in the Elsburg Gold Mining Joint Venture
1. Introduction
On 7 June 2007, DRDGOLD and Mintails Limited of Australia ("Mintails")
announced the formation of a joint venture whereby DRDGOLD SA would contribute
the Elsburg Tailings Complex (some 180 million tonnes) and Mintails, through
its subsidiary Mintails SA (Pty) Limited, would contribute one refurbished CIL
gold circuit at its Brakpan plant in order to commence the processing of
tailings on the East Rand for the recovery of gold ("the Elsburg Gold Mining
Joint Venture"). (DRDGOLD SA is controlled as to 74% by DRDGOLD and 26% by a
black economic empowerment partner Khumo Gold SPV (Pty) Limited and an
employee trust.)
On 26 November 2007, DRDGOLD and Mintails announced a significant expansion of
their joint activities through the planned refurbishment of infrastructure at
the Brakpan plant and an increase in available tailings material for
processing to approximately 1.7 billion tonnes, including the Elsburg Tailings
Complex ("the ERGO JV").
Whilst the Elsburg Gold Mining Joint Venture was constituted through the
structure of a 50:50 joint venture agreement, the ERGO JV was consummated
through the creation of a 50:50 joint venture entity namely Ergo Mining (Pty)
Limited. The ERGO JV plans to explore, evaluate and process up to 1.7 billion
tonnes of surface gold, uranium and sulphur bearing tailings from the East and
Central Rand goldfields of South Africa.
In terms of an agreement dated 29 September 2008 ("the agreement"), DRDGOLD SA
has agreed to acquire a further 15% interest in the Elsburg Gold Mining Joint
Venture from Mintails ("the acquisition") resulting in DRDGOLD SA, which holds
its interest through its subsidiary, East Rand Proprietary Mines Limited,
holding a 65% interest and Mintails a 35% interest in the joint venture.
In addition, Mintails has granted DRDGOLD SA a conditional option to acquire a
further 11.4% interest in the Elsburg Gold Mining Joint Venture ("the
option"). The 50:50 interests of DRDGOLD SA and Mintails in the ERGO JV are
not affected by the acquisition and remain unchanged.
2. Purchase consideration and effective date
The purchase consideration in respect of the acquisition is R100 million
(approximately AUD15.3 million), which is to be re-invested by Mintails
towards its outstanding capital requirements in the Elsburg Gold Mining Joint
Venture and the Ergo JV. The effective date of the acquisition will be the
date upon which it becomes unconditional.
The option is exercisable between 1 January 2009 and 15 January 2009 at an
exercise price of R75.9 million.
3. Rationale for and benefits of the acquisition
Although the Elsburg Gold Mining Joint Venture is scheduled to commission the
Brakpan plant in early October 2008, both joint ventures require significant
capital investment as the projects continue. In terms of the agreement,
Mintails has agreed, through its subsidiaries, to apply the purchase
consideration and any proceeds from the exercise of the option towards the
partial fulfilment of such capital requirements as follows:
- approximately R52.4 million for the capital required by the Elsburg Gold
Mining Joint Venture (with an additional R52.1 million should the option
be exercised);
- approximately R17.4 million for the refurbishment of the CIL gold circuit
which is to be used by the Elsburg Gold Mining Joint Venture; and
- approximately R30.2 million for capital required by the ERGO JV (with an
additional R23.8 million should the option be exercised).
The acquisition therefore facilitates the advancement of both the Elsburg Gold
Mining Joint Venture and the ERGO JV as well as being consistent with
DRDGOLD`s stated intention of focusing on its South African gold operations
and, in particular, its surface dump retreatment operations.
4. Pro forma financial effects of the acquisition and the exercise of the
option
The pro forma financial effects of the acquisition and the exercise of the
option are presented below. Such pro forma financial effects are the
responsibility of the board of directors of DRDGOLD and are presented for
illustrative purposes only to provide information on how the acquisition and
the exercise of the option may have impacted on the reported financial
information of the company if they had been implemented in the year ended 30
June 2008. Because of their nature, the pro forma financial effects may not
give a fair indication of the company`s financial position at 30 June 2008 or
its future earnings.
Before the After the Overall %
acquisition acquisition and change
(i) the exercise of
After the the option
acquisition (iii)
(ii)
Attributable
earnings per
ordinary share
for the year
ended 30 June
2008 (cents) (iv) 265 263 261 (2)
Headline earnings
per ordinary
share for the
year ended 30
June 2008 (cents)
(iv) 30 28 27 (10)
Net asset value
per ordinary
share at 30 June
2008 (cents) (v) 347 345 343 (1)
Net tangible
asset value per
ordinary share at
30 June 2008
(cents) (v) 347 345 343 (1)
Weighted average
number of
ordinary shares
in issue for the
period 376 023 344 376 023 344 376 023 344 -
Number of
ordinary shares
in issue at the
end of the period 376 571 588 376 571 588 376 571 588 -
Notes:
i. The figures in this column are extracted from the audited annual
financial results of the company for the year ended 30 June 2008.
ii. The figures in this column are based on the figures set out in the
previous column, having adjusted for the effects of the acquisition.
iii. The figures in this column are based on the figures set out in the
previous column, having further adjusted for the effects of the exercise
of the option.
iv. For purposes of the pro forma attributable and headline earnings per
ordinary share after the acquisition and the exercise of the option it
was assumed that:
- the acquisition and the exercise of the option were implemented with
effect from 1 July 2007; and
- earnings were reduced by the interest which would have been earned
on the purchase consideration at an interest rate of 11% per annum,
adjusted for tax at a tax rate of 28%.
v. For purposes of net asset value and net tangible asset value per ordinary
share after the acquisition and the exercise of the option, it was
assumed that the acquisition and the exercise of the option were
implemented on 30 June 2008.
5. Condition precedent
The acquisition is subject to the approval of the Competition Commission.
6. JSE Limited requirements
In terms of the JSE Limited Listings Requirements, the acquisition is
classified as a Category 2 transaction. This announcement is therefore for
information purposes only and no further action is required by DRDGOLD
shareholders.
Randburg
3 October 2008
Sponsor
QuestCo Sponsors (Pty) Limited
Corporate adviser
QuestCo (Pty) Limited
Attorneys
Feinsteins
(Levy, Feinsteins & Associates Incorporated-Reg No 1995/001716/21)
Date: 03/10/2008 13:00:02 Produced by the JSE SENS Department.
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