| Thu 23 Jun 2011, 16:00 | | DRD - DRDGOLD Limited - DRDGOLD suspends financial assistance to Blyvoor |
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DRD
DRDD
DRD - DRDGOLD Limited - DRDGOLD suspends financial assistance to Blyvoor
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: DROOY
("DRDGOLD")
DRDGOLD SUSPENDS FINANCIAL ASSISTANCE TO BLYVOOR
DRDGOLD shareholders are advised that the board of directors of DRDGOLD
("DRDGOLD Board") has decided to suspend financial assistance to DRDGOLD`s
74%-owned subsidiary, Blyvooruitzicht Gold Mining Company Limited ("Blyvoor").
The decision follows the promulgation of the new Companies Act, No. 71 of 2008,
as amended ("the Act") that requires directors of parent companies to seek the
consent of the parent company shareholders and then to consider the effects on
the solvency and liquidity of the parent company as conditions precedent to the
provision of financial assistance to subsidiaries.
Blyvoor`s production has been trending down as a result of a drop in grade,
public holiday interruptions and seismicity-related work stoppages, while costs
have increased due mainly to higher electricity charges, and particularly power
utility Eskom`s winter tariff which adds R11 million a month to overhead costs.
Blyvoor requires an estimated R80 million in financial assistance through to
December 2011. DRDGOLD has maintained an internal revolving credit facility for
Blyvoor since it came out of judicial management in April 2010, but this
facility is now fully drawn down.
The board of directors of Blyvoor ("Blyvoor Board") has, in response to the
DRDGOLD Board`s decision, resolved to begin business rescue proceedings for
Blyvoor in terms of Chapter 6 of the Act. The business rescue process provided
for in Chapter 6 of the Act replaces the judicial management process in the
previous Companies Act, No. 61 of 1973, as amended.
The DRDGOLD Board supports the decision of the Blyvoor Board, and expressed the
view that the business rescue proceedings are an improvement on judicial
management in a number of key respects. Most notable is the fact that the
business rescue practitioner is a professional appointed by the distressed
company from a pool of certified rescue practitioners, whose function it is to
rescue the business. Judicial managers, by contrast, were appointed by the
Master of the High Court from a pool of people whose main business involved the
liquidation of companies.
The Act also provides clear guidelines on the business rescue process, which is
designed to run for a pre-determined three-month period, unless extended by a
court application. During this time, the rescue practitioner must formulate and
implement a rescue plan with the co-operation of the distressed company`s board
of directors. Blyvoor would enjoy a moratorium against civil claims while under
rescue proceedings.
Blyvoor`s Board will appoint the rescue practitioner as soon as it receives a
list from the Commissioner of Companies of accredited practitioners.
Commenting on DRDGOLD`s previously-announced intention to dispose in whole or in
part of its 74% interest in Blyvoor, Chief Executive Officer Niel Pretorius said
that discussions are ongoing with three parties, and that business rescue
proceedings will not interfere with these.
"In fact the business rescue process will preserve the asset while it seeks a
solution for its cash flow issues. It will also provide Blyvoor with an
opportunity to make submissions to The Industrial Development Corporation for
development capital, canvass Eskom to reconsider cancellation or deferral of
winter tariffs, and continue negotiations with neighbouring mines on the
development of shared opportunities," Pretorius said.
Roodepoort
23 June 2011
Sponsor
One Capital
Date: 23/06/2011 16:00:03 Produced by the JSE SENS Department.
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