| Thu 27 Oct 2005, 7:55 | | DRDGOLD Limited - Restructuring of local operation |
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DRDGOLD Limited - Restructuring of local operations, BEE Transaction and Further
Cautionary Announcement
DRDGOLD Limited
(Formerly Durban Roodepoort Deep, Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1895/000926/06)
Share code: DRD
ISIN: ZAE000058723
ARB number: 086 277 616
("DRDGOLD" or "the company")
RESTRUCTURING OF LOCAL OPERATIONS, BLACK ECONOMIC EMPOWERMENT TRANSACTION AND
FURTHER CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the cautionary announcements dated 28 July
2005 and 29 September 2005.
DRDGOLD is pleased to announce that its Board of Directors ("the DRDGOLD
Board") has approved:
- the restructuring of DRDGOLD"s South African operations, comprising:
- Blyvooruitzicht Gold Mining Company Limited ("Blyvoor");
- Crown Gold Recoveries (Proprietary) Limited ("CGR"); and
- CGR"s wholly-owned subsidiary, East Rand Proprietary Mines
Limited ("ERPM"), in order to create DRDGOLD South African
Operations (Proprietary) Limited ("DRDGOLD SA") ("the
restructuring"); and
- the associated Black Economic Empowerment transactions with DRDGOLD"s
empowerment partner Khumo Bathong Holdings (Proprietary) Limited
("KBH") and KBH"s associate company KhumoGold (Proprietary) Limited
("KhumoGold") ("the KBH transactions").
2. RATIONALE
The restructuring and the KBH transactions are to be undertaken in order to
provide for broader equity participation that is consistent with the
underlying values captured in the Broad-Based Socio-Economic Empowerment
Charter for the South African Mining Industry ("the Mining Charter") and to
establish a sound African growth platform for DRDGOLD SA.
The effect of the restructuring and the KBH transactions is that KBH"s
former 60% stake in CGR and its ERPM position, which was wholly encumbered
in terms of certain instruments securing payment of loans advanced by the
Industrial Development Corporation of South Africa ("the IDC"), the release
of which was procured through DRDGOLD"s acquisition of the IDC"s claims as
detailed in paragraph 3 below, would be substituted by an unencumbered 15%
stake held by its associate company, KhumoGold, in DRDGOLD SA.
3. THE IDC TRANSACTIONS
As part of the restructuring, DRDGOLD entered into agreements with the IDC
whereby:
- DRDGOLD has acquired the IDC"s claims against CGR and ERPM in exchange
for 4,451,219 new DRDGOLD shares; and
- DRDGOLD has acquired from the IDC the remaining equity interest, which
DRDGOLD does not already own, in certain security special purpose
vehicles for a purchase consideration of R120.00 in cash ("the equity
interest"), (collectively, "the IDC transactions").
Upon acquisition of the equity interest, DRDGOLD established control over
CGR and ERPM and, as such, DRDGOLD was required to submit an application to
the Competition Commission for its approval of the IDC transactions, which
approval was received on 3 October 2005.
4. DRDGOLD SA
DRDGOLD SA has been incorporated as a wholly-owned subsidiary of DRDGOLD.
DRDGOLD will consolidate its operational holdings in South Africa by
transferring ownership of DRDGOLD"s direct and indirect interests in
Blyvoor, CGR and ERPM to DRDGOLD SA in exchange for 850,000 new DRDGOLD SA
shares.
The announcement to be published in the press on 28 October 2005 will
contain an organogram showing the resultant Group structure after the
restructuring and the KBH transactions.
5. THE KBH TRANSACTIONS
In order for DRDGOLD to maintain its compliance with the Mining Charter,
the DRDGOLD Board and the boards of Blyvoor, CGR and ERPM have approved the
KBH transactions, which will result in:
- ERPM acquiring KBH"s CGR shareholder loans for a total cash
consideration of R9.3 million;
- KhumoGold subscribing for 150,000 new shares in DRDGOLD SA (15%) for a
total cash consideration of R13,22 million;
- KhumoGold subscribing for preference shares in each of Blyvoor, CGR
and ERPM for a total subscription price of R10,65 million, which would
entitle it to a loan-performance linked special dividend of 15% of all
payments made in respect of certain debt instruments between DRDGOLD
and Blyvoor, CGR and ERPM; and
- DRDGOLD subscribing for R31,811,000 in compulsorily redeemable
preference shares in KhumoGold in order to facilitate vendor finance
for the KBH transactions.
In addition, DRDGOLD will grant a three-year option, for no consideration,
to:
- KhumoGold to acquire from DRDGOLD a further 5% in DRDGOLD SA at an
exercise price of R4,2 million; and
- a trust, to be formed for the benefit of DRDGOLD"s employees, to
acquire from DRDGOLD 6% in DRDGOLD SA at an exercise price of R5,1
million.
6. UNAUDITED PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects of the restructuring, the IDC
transactions and the KBH transactions ("the transactions") on the earnings
per share ("EPS") and headline EPS ("HEPS") of DRDGOLD for the financial
year ended 30 June 2005 and the net asset value ("NAV") and tangible NAV
("TNAV") per share at that date are set out in the table below. These pro
forma financial effects have been prepared for illustrative purposes only
in order to provide information on how the transactions might have affected
the results, changes in equity and financial position of DRDGOLD and,
because of their nature, may not give a true reflection of the actual
financial effects of the transactions. The directors are responsible for
the unaudited pro forma financial effects.
Before the After the Change
transactions transactions
EPS(cents) (200) (233) -17%
HEPS(cents) (114) (127) -11%
NAV and TNAV
per share
(cents) 208 182 -13%
Notes:
1. The EPS and HEPS, as set out in the "Before the transactions" column of the
table, are based upon the audited income statement of DRDGOLD for the
financial year ended 30 June 2005 and a weighted average of 257 695 796
DRDGOLD shares in issue.
2. The NAV and TNAV per share, as set out in the "Before the transactions"
column of the table, are based upon the audited balance sheet of DRDGOLD as
at 30 June 2005 and 296 206 048 DRDGOLD shares in issue.
3. The EPS and HEPS, as set out in the "After the transactions" column of the
table, are based upon a weighted average of 262 147 015 DRDGOLD shares in
issue and the assumptions that:
- the DRDGOLD shares in respect of the IDC transactions were issued on 1
July 2004; and
- the restructuring and the KBH transactions occurred on 1 July 2004.
4. The NAV and TNAV per share, as set out in the "After the transactions"
column of the table, are based upon 300 657 267 DRDGOLD shares in issue and
the assumptions that:
- the DRDGOLD shares in respect of the IDC transactions were issued on
30 June 2005; and
- the restructuring and the KBH transactions occurred on 30 June 2005.
7. OPINIONS
Dr MP Ncholo, who resigned as Non-Executive Chairman of DRDGOLD on 25
October 2005 and who will resign as Non-Executive Director of DRDGOLD with
effect from 1 November 2005, has an interest in KBH and KhumoGold greater
than 35%. As a result thereof, in terms of section 10.7 (b) of the Listings
Requirements of the JSE Limited, the KBH transactions are classified as
small related party transactions and confirmation is therefore required
from an independent professional expert that the terms of the KBH
transactions are fair and reasonable. The independent directors of DRDGOLD
have appointed EY Corporate Finance (Proprietary) Limited ("E&Y") to act as
the independent professional expert.
The independent directors of DRDGOLD have considered the terms and
conditions of the KBH transactions and are of the opinion that they are
fair and reasonable to the shareholders of DRDGOLD.
E&Y has considered the terms of the KBH transactions and is of the opinion
that they are fair and reasonable to DRDGOLD shareholders. Its letter to
the JSE Limited in this regard may be inspected at DRDGOLD"s registered
office from 27 October 2005 to 23 November 2005, both days inclusive,
during normal business hours.
8. FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue to exercise caution when dealing in
the company"s securities until a detailed announcement regarding DRDGOLD"s
Australasian assets is made.
Johannesburg
27 October 2005
Corporate Adviser
QuestCo
Sponsor
Standard Bank
Independent Professional Expert
E & Y Corporate Finance
Date: 27/10/2005 07:55:06 AM Produced by the JSE SENS Department
