Johannesburg, South Africa — MININGREVIEW.COM — 10 November 2009 – DRDGold Limited “’ South Africa’s fourth biggest gold producer “’ has announced that, in a bid to save its 74%-owned Blyvoor mine from liquidation, it intends applying to the High Court of South Africa for a judicial management order over the struggling operation.
CEO Niël Pretorius said that the application “’ in terms of the provisions of Section 427 of the South African Companies Act “’ had been prompted by Blyvoor’s inability to continue to sustain losses which had now reached R27 million a month.
“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.
“Judicial management is the only appropriate course of action for us to take in the face of the combined negative impact of circumstances beyond the control of the board of directors and management,” he added.
These circumstances “’ which had seen Blyvoor plummet into sustained losses from ‘a period of handsome profits’ which lasted until April this year “’ included: a 16% drop in the average Rand gold price received between 1 April 2009 and 30 September 2009; extensive damage caused to higher-grade underground production areas at No 5 Shaft during May 2009 by seismic activity, restoration of which is expected to take until March 2010 to complete; power utility Eskom’s higher winter tariffs, compounded by a 32% price increase effective from 1 July 2009, and the likelihood of further increases in coming months; and the wage strike by the National Union of Mineworkers, which resulted in the loss of 8 000 ounces of production worth R60 million.
“In terms of a judicial management order, the court appoints a judicial manager who has a wide range of powers at his/her disposal to take such actions he/she deems necessary to save the business,” Pretorius said.
DRDGold envisages Blyvoor remaining under judicial management until after access to the seismicity-damaged, higher-grade areas at No 5 Shaft has been regained, Pretorius added.
“In addition to the R75 million we have committed to saving Blyvoor over the past three months, we will provide the judicial manager with whatever assistance he/she may require to obtain additional ‘rescue finance’ from appropriate institutions, such as the Industrial Development Corporation,” Pretorius concluded.