[Business Day] - DRDGOLD said yesterday it intended to save its 74%-owned Blyvoor mine in Carletonville from liquidation and apply to the high court for a judicial management order over the operation.
DRDGOLD said yesterday it intended to save its 74%-owned Blyvoor mine in Carletonville from liquidation and apply to the high court for a judicial management order over the operation. CEO Niël Pretorius said the application had been prompted by Blyvoor’s inability to continue to sustain losses, which had now reached R27m a month.
Blyvoor has been losing money since April as a result of a 16% fall in the average rand gold price due to the strengthening of the rand against the dollar, as well as because of Eskom’s higher winter tariffs, compounded by a 32% price increase effective in July, and the likelihood of further increases in coming months.
"Restructuring at Blyvoor flowing from the recent consultation process in terms of section 189A of the Labour Relations Act is not delivering the expected turnaround as rapidly as we had hoped, and the mine is also finding it very hard to shake off the effects of the recent four-week strike; we now need a rescue plan that holds real promise of saving Blyvoor from insolvency," Pretorius said.
At the release of DRDGOLD’s poor September quarterly results last month, Pretorius warned that operations at Blyvoor would not survive Eskom’s proposed hikes if the rand-gold price did not rise.
DRDGOLD reported a R63,3m net loss in the quarter, citing problems at the underground operation related to earth tremors, strikes and a strong rand. The wage strike by the National Union of Mineworkers resulted in the loss of 8000 oz of production worth R60m.
There was extensive damage to higher-grade underground production areas caused by seismic activity in May, and full restoration was expected to be completed only in March next year. "In terms of a judicial management order, the court appoints a judicial manager who has a wide range of powers at his or her disposal to take such actions he or she deems necessary to save the business," Pretorius said. These could include giving certain creditors temporary preference, and agreeing on compromises with creditors without exposing the mine to liquidation.
DRDGOLD envisaged Blyvoor remaining under judicial management until after access to the seismicity-damaged, higher-grade areas at No5 Shaft had been regained, Pretorius said. "In addition to the R75m we have committed to saving Blyvoor over the past three months, we will provide the judicial manager with whatever assistance required to obtain additional rescue finance from appropriate institutions, such as the Industrial Development Corporation."