| Tue 14 Oct 2003, 10:34 | | ACQUISITION OF A 20% INTEREST IN THE PORGERA GOLD |
|
DRD -
Durban Roodepoort Deep, Limited
(Incorporated in the Republic of South Africa)
(Registration number 1895/000926/06)
(Share code: DUR)
(ISIN: ZAE 000015079)
(ARBN number: 086 277 616)
(NASDAQ Trading Symbol: DROOY)
("DRD" or "the company")
ACQUISITION OF A 20% INTEREST IN THE PORGERA GOLD MINE
1. Introduction
DRD is pleased to announce that it has concluded an agreement with Oil Search
Limited ("Oil Search"), a company registered in the Independent State of Papua
New Guinea ("PNG"), in terms of which DRD"s wholly-owned subsidiary, DRD (Isle
of Man) Limited, shall, subject to the conditions precedent set out below,
acquire all of the shares in and claims against Oil Search"s wholly-owned
subsidiaries Mineral Resources Porgera Limited ("MRP") and Orogen Minerals
(Porgera) Limited ("OMP") ("the acquisition"). The acquisition is to be
implemented by way of an amalgamation under the laws of PNG ("the
amalgamation").
The principal asset of MRP and OMP is an independently registered 20% interest
in fifteen mineral tenements located in PNG. These tenements are mined as part
of the Porgera Gold Mine in collaboration with MRP, OMP, Placer Dome Inc.
("Placer") and Mineral Resources Enga Limited ("MRE") (on behalf of the Enga
Provincial Government and Porgera landowners in PNG) through a joint venture
relationship ("the Porgera Joint Venture"). MRP and OMP share in the production
of the Porgera Gold Mine in proportion to the percentage of the mineral
tenements they own, which translates into 20% of the total gold produced. The
Porgera Gold Mine is managed by Placer.
2. Purchase consideration
The maximum purchase consideration of US$73.81 million ("the consideration")
will be settled through:
- a cash payment; and
- the issue of new DRD ordinary shares to Oil Search at a 10% discount to the
volume weighted average price of DRD American Depositary Receipts as traded on
NASDAQ over either the 30-day trading period ending 1 business day prior to
completion or the 3-day trading period ending 1 business day prior to completion
(whichever is the lower) which will, in aggregate, equate to US$21.14 million in
value ("the consideration shares").
DRD may elect to settle the consideration fully in cash, in which event the
consideration shares will be substituted by US$19.02 million in cash.
The consideration is subject to certain completion adjustments, which will
reflect:
- the net change in the cash position of MRP and OMP between the effective date,
being 30 June 2003, and the completion date, which is expected to be within the
next 6 weeks; and
- the difference between the estimated stamp duty and the actual stamp duty
paid.
3. Funding of the acquisition
The cash portion of the consideration will be funded out of DRD"s cash on hand,
including funds raised from the issue of 27 million DRD shares to the Investec
Group, the terms of which were published in announcements dated 25 August 2003
and 8 September 2003.
4. Rationale for the acquisition
The acquisition is in line with DRD"s stated growth strategy with respect to the
Australasian region. It will lower DRD"s risk profile through the addition of
lower cost production ounces, provide exposure to a predominantly US$ cost base
and provide access to cashflows outside of South Africa. Together with DRD"s
existing gold investments, the acquisition will assist DRD in attaining critical
mass in the region and offers synergies with DRD"s wholly-owned Tolukuma Gold
Mine, also located in PNG.
In addition, DRD has a track record of extending mine lives which it has done
successfully at its South African operations and DRD intends to explore with
Placer the potential to extend the life of the Porgera Gold Mine.
5. Offer to MRE
As part of the acquisition and subject to the amalgamation occurring, DRD has
agreed to offer a 5% direct interest in the Porgera Joint Venture to MRE, on
reasonable commercial terms referable to DRD"s acquisition cost of the 5%
interest, recognising reasonable transaction costs of the acquisition and on-
sale of the 5% interest.
6. Conditions precedent
The acquisition is subject to, inter alia, the fulfilment of the following
conditions precedent:
- approval from the Bank of Papua New Guinea, if required;
- approval in principle from the Investment Promotion Authority of Papua New
Guinea;
all other necessary approvals from the relevant PNG and South African regulatory
authorities;
- certain warranties by Oil Search being true and complete (including warranties
in relation to Oil Search"s interests in the shares in OMP and MRP and certain
due diligence information provided by Oil Search to DRD);
- each of the relevant companies taking all necessary corporate actions required
by the PNG Companies Act in relation to the amalgamation.
7. Pro forma financial effects
The pro forma financial effects set out below have been prepared to assist
shareholders to assess the impact of the acquisition on the earnings, headline
earnings, net asset value and tangible net asset value per DRD ordinary share.
The material assumptions are set out in the notes following the table. These
pro forma financial effects have been disclosed in terms of the Listings
Requirements of the JSE Securities Exchange South Africa and do not constitute a
representation of the future financial position of DRD on completion of the
acquisition.
Before the After the
acquisition acquisition Change
(Rand) (Rand) (%)
Earnings per share 2.02 1.80 (10.9)
Headline earnings per 2.17 1.93 (11.1)
share
Net asset value per share 2.48 4.46 79.8
Tangible net asset value 2.48 4.43 78.6
per share
Notes:
1 The earnings and headline earnings per share in the "Before the acquisition"
column of the table are based on the audited income statement of DRD for the
financial year ended 30 June 2003 and 183 300 665 DRD shares in issue (being the
weighted average number of shares in issue for the year ended 30 June 2003).
2 The earnings and headline earnings per share in the "After the acquisition"
column of the table are based on 210 300 665 DRD shares in issue, the audited
income statements of MRP and OMP for the twelve months ended 31 December 2002
and the assumptions that:
- the acquisition became effective on 1 July 2002;
DRD elected to settle the consideration fully by means of a cash payment of
US$71.69 million;
- the issue of 27 million DRD shares to the Investec Group took place on 1 July
2002; and
- the portion of the cash consideration not funded through the issue of shares
to the Investec Group would have earned interest at a rate of 12% per annum,
which interest would have attracted taxation at a rate of 30%.
3. The net asset value per share and tangible net asset value per share in the
"Before the acquisition" column of the table are based on the audited balance
sheet of DRD at 30 June 2003 and 184 222 073 DRD shares in issue.
4 The net asset value per share and tangible net asset value per share in the
"After the acquisition" column of the table are based on the audited balance
sheets of MRP and OMP at 31 December 2002 and the assumptions that:
- the acquisition was completed on 30 June 2003; and
- the issue of 27 million DRD shares to the Investec Group took place on 30 June
2003.
The pro forma financial effects have been prepared according to SA GAAP and have
not been audited.
8. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are advised that, having regard for the disclosures made in this
announcement, caution is no longer required when dealing in their DRD shares.
Johannesburg
14 October 2003
Financial adviser
Questco (Proprietary) Limited
(Registration number 2002/005616/07)
Sponsor
Standard Corporate and Merchant Bank
(A division of The Standard Bank of South Africa Limited)
(Registration number 1962/000738/06)
Legal adviser
Bowman Gilfillan Inc
(Registration number 1998/021409/21)
Date: 14/10/2003 10:27:05 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
