| Tue 9 Dec 2008, 9:01 | | DRD - DRDGOLD Limited - Acquisition by DRDGOLD of the remaining 35% interest in |
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DRD
DRDD
DRD - DRDGOLD Limited - Acquisition by DRDGOLD of the remaining 35% interest in
the Elsburg Gold Mining joint venture ("The Elsburg Joint Venture") held by
Mintails Limited ("MINTAILS") and cautionary announcement
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 of the remaining 35% interest in the Elsburg Gold Mining
Joint Venture ("the Elsburg Joint Venture") held by Mintails Limited
("Mintails") and cautionary announcement
1 Introduction
The Elsburg Joint Venture was originally established in June 2007 as a 50:50
joint venture by the DRDGOLD and Mintails groups for purposes of processing
tailings on the East Rand for the recovery of gold.
In November 2007, Ergo Mining (Pty) Limited was created as a second 50:50 joint
venture between the DRDGOLD and Mintails groups ("the ERGO Joint Venture") for
purposes of exploring, evaluating and processing up to 1.7 billion tonnes of
surface gold, uranium and sulphur bearing tailings from the East and Central
Rand goldfields of South Africa.
As announced on 3 October 2008, DRDGOLD South African Operations (Pty) Limited
("DRDGOLD SA"), which is 74% held by DRDGOLD and 26% by black economic
empowerment shareholders, Khumo Gold SPV (Pty) Limited and the DRDSA Empowerment
Trust, agreed to acquire a further 15% interest in the Elsburg Joint Venture
from Mintails for a cash consideration of R100 million. The implementation of
this transaction (which is conditional only on Competition Commission approval)
will result in DRDGOLD SA holding a 65% interest (through its subsidiary, East
Rand Proprietary Mines Limited) and Mintails a 35% interest in the joint
venture. In addition, Mintails granted DRDGOLD SA a conditional option to
acquire a further 11.4% interest in the Elsburg Joint Venture ("the Elsburg
option").
In terms of a binding heads of agreement dated 8 December 2008, DRDGOLD has now
agreed to acquire:
- the remaining 35% interest (or 23.6% if the Elsburg option is exercised prior
to implementation of the acquisition) held by Mintails, through its subsidiary
Mogale Gold (Pty) Limited, in the Elsburg Joint Venture; and
- all of the shareholder`s loans from the Mintails group to the Elsburg Joint
Venture
(collectively "the acquisition").
The implementation of the acquisition will result in the DRDGOLD group holding
100% of the Elsburg Joint Venture.
The 50:50 interests of DRDGOLD SA and Mintails in the Ergo Joint Venture are not
affected by the acquisition.
2 Purchase consideration and effective date
The purchase consideration in respect of the acquisition is R177 million, which
is to be settled in cash. In the event that the Elsburg option is exercised
prior to the implementation of the acquisition, the parties have agreed that the
purchase price will be reduced by approximately R23.8 million in recognition of
amounts that will have been paid by the DRDGOLD group on exercise of the Elsburg
option.
The effective date of the acquisition is 8 December 2008 although the risk and
title in respect of the acquisition only passes to the DRDGOLD group on
completion of the acquisition.
3 Rationale for and benefits of the acquisition
During these times of steeply rising underground production costs, coupled with
the safety concerns associated with deep level mining, the acquisition of low
cost surface dump retreatment assets and operations in South Africa is seen as
having significant strategic advantages to the DRDGOLD group.
The implementation of the acquisition will:
- result in DRDGOLD having outright management control over the Elsburg Joint
Venture, which will expedite the advancement of the project and will allow for
greater flexibility and optimisation of all dump retreatment operations
conducted by the DRDGOLD group;
- result in the DRDGOLD group being entitled to 100% of the gold produced and
cash flows from the retreatment of tailings by the Elsburg Joint Venture, which
has a twelve year life of mine; and
- assist in positioning the DRDGOLD group to take advantage of further growth
opportunities.
4 Conditions precedent
The acquisition is subject to, inter alia, the following conditions precedent:
- the completion by DRDGOLD of a due diligence investigation into the assets
being acquired in terms of the acquisition;
- no significant adverse changes in respect of the Elsburg Joint Venture, the
gold price or DRDGOLD`s market capitalisation prior to completion of the
acquisition;
- the approval of the relevant regulatory bodies in South Africa including, to
the extent necessary, the JSE Limited ("JSE"), the South African Reserve Bank
and the Competition Commission; and
- to the extent required, the shareholders of DRDGOLD approving the acquisition
under the JSE Listings Requirements.
5 Cautionary announcement
As the pro forma financial effects of the acquisition are not as yet available,
shareholders should exercise caution when trading in their DRDGOLD securities
until a full announcement containing such financial effects is released.
Randburg
9 December 2008
Sponsor
QuestCo Sponsors (Pty) Limited
Corporate adviser
QuestCo (Pty) Limited
Attorneys in Australia
Middletons
Attorneys in South Africa
Edward Nathan Sonnenberg Inc
Date: 09/12/2008 09:01:05 Produced by the JSE SENS Department.
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