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DRD, Khumo Bathong JV secure ERPM in curtain-raiser charter transaction

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Published: Thursday, 10 October 2002 02:00

In a "curtain-raiser" to the South African Mining Charter released yesterday, Crown Gold Recoveries (Crown) – a black economic empowerment (BEE) joint venture between Durban Roodepoort Deep, Limited (DRD) and Khumo Bathong Holdings (Pty) Limited (KBH), announced today (Thursday, 10 October, 2002) that it has secured an agreement to purchase East Rand Proprietary Mines Limited (ERPM) for R90 million. 145/02-cdr

In a "curtain-raiser" to the South African Mining Charter released yesterday, Crown Gold Recoveries (Crown) – a black economic empowerment (BEE) joint venture between Durban Roodepoort Deep, Limited (DRD) and Khumo Bathong Holdings (Pty) Limited (KBH), announced today (Thursday, 10 October, 2002) that it has secured an agreement to purchase East Rand Proprietary Mines Limited (ERPM) for R90 million.

The purchase price is R30 million lower than the R120 million on the table when negotiations were announced last month. The Crown JV (60% Khumo Bathong/40% DRD) is in negotiation with the Industrial Development Corporation on loan finance for the purchase, which is subject to only one condition precedent, being the approval of the transaction by the Competitions Commission.

The "rescue" acquisition of the struggling ERPM will add 135 000 ounces a year from underground mining to Crown’s current gold production from surface dump retreatment on the central and eastern Witwatersrand, taking its total to 275 000 ounces.

Crown director and KBH chairman Dr Paseka Ncholo said the ERPM acquisition put both of his companies squarely in the ranks of "true BEE gold producers".

"With its 165 000 ounces of attributable Crown production after the incorporation of ERPM, together with the 40 000 ounces from its 4% stake in DRD, KBH’s immediate annual production will rise to 205 000 ounces," Ncholo said.

"This means it will command 21% of DRD’s production base."

Re-treatment of the Cason (Boksburg) surface dump material from July next year will add another 40 000 ounces to KBH’s annual production, taking its share of DRD’s production base to 24%, with an approximate value of R2.0 billion.

"ERPM has reserves of 1.5 million ounces and resources of 5.5 million ounces; at US$7 per reserve ounce and US$2 per resource ounce, this is one of the cheapest sources of new gold," Ncholo said.

DRD chairman and chief executive officer Mark Wellesley-Wood said DRD, currently the manager of ERPM, had lent ERPM R10 million for working capital and would continue to manage the 100-year old mine, post-acquisition.

"DRD has a proven track record of turning around purported ‘failures’ and we are confident we can work our winning formula to the same effect at ERPM.

"We will look immediately to increasing production, lowering costs and extending the mine’s life through securing a capital injection of around R100 million; a focus on mining profitable areas; tighter controls; labour efficiencies and DRD’s pillar mining expertise."

Ncholo and Wellesley-Wood believe Crown will be a model for what is anticipated in both the newly promulgated Minerals Act and associated empowerment Charter.

"We’re about turning around old operations that everyone else has turned their backs on, saving jobs and continuing to create wealth in the process," said Ncholo.

"Of course, we intend also to give substance to the other provisions of the new legislation, such as meaningful community involvement in our business."

Queries:

James Duncan

Russell & Associates
27 11 880-3924 (office)
27 82 892-8052 (mobile)

Charmane Russell

Russell & Associates
27 11 880-3924 (office)
27 82 372 5816 (mobile)