In the media

DRDGOLD ready to grow again

[] - DRDGOLD would not need to raise capital until between 2010 and 2012 and only then if it decided to go ahead with the proposed ERPM 2 extension project.

DRDGOLD would not need to raise capital until between 2010 and 2012 and only then if it decided to go ahead with the proposed ERPM 2 extension project.

Addressing the Africa Mining Congress being held in Sandton, DRDGOLD CEO John Sayers said the company’s short-term growth projects were fully funded.

He added that, “I would hate to try to raise money in today’s market.”

Sayers told delegates that DRDGOLD’s management had “kept their heads down” during the past two years while the company restructured after its disastrous foray into Australasia when it invested in mines in Papua New Guinea (PNG) and Fiji.

He said that DRDGOLD had been shifted from an operation that was essentially bankrupt to one that now had sustainable, cash generating operations. The next challenge was to convince investors about DRDGOLD’s growth prospects.

“Investors struggle to see the growth in our business but we have the extra resources available in South Africa at no cost which can be accessed from existing infrastructure.

“ That infrastructure is in a much better condition than it is perceived to be. We are also now a stable business. There have been no senior management changes during the past two years.

“Our third quarter results took a lot of people by surprise. We reported a 28,5% profit margin which is not a bad business at all. I am pretty relaxed about the fourth quarter results,” Sayers said.

Sayers said DRDGOLD’s previous management team had joined the “stampede” into PNG from 2003 but had underestimated the difficulties, the costs and the environmental problems of operating in that region.

“At the same time they put the South African gold mines onto capital expenditure free maintenance. No gold mine can operate like that. We ended up as a bankrupt company that could not support its cash-generating assets in South Africa,” Sayers commented.

DRDGOLD’s short-term expansion projects involve the retreatment of the Top Star dump; the ERPM 1 extension on which a prefeasibility study had been completed and the Phase One stage of the Ergo dump retreatment scheme which is a 50/50 JV with Mintails.

Longer term expansion projects included the Phase Two developments at Ergo which could take the company into uranium and sulphuric acid production and the ERPM 2 extension project on which a feasibility study should be completed by the end of 2010.

“ERPM extension 2 is effectively a new mine and it will cost between R6bn and R8bn to build but, by that time, we will be generating income from our other new projects. ERPM extension 1, by comparison, involves a decline shaft which will cost only around R100m,” Sayers said.

He added that communication of DRDGOLD’s new situation and its growth opportunities was important. Management intended undertaking road shows in Europe and the United States over the next six months to brief investors on what had been done to the business.

The writer owns shares in DRDGOLD.

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