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SA gold mining industry criticised

John Sayers,
Johannesburg, South Africa — MININGREVIEW.COM — 11 June 2008 – The gold-mining industry has “fallen flat on its face” as far as return of capital to shareholders is concerned, says DRDGold CEO John Sayers.

“It is a failure driven in major part by an urge to grow both reserves and resources, rather than to support existing operations, he told the Africa Mining Congress 2008 here. “We don’t believe that the valuation parameter works particularly well,”

Sayers added that DRDGold’s debate with investors currently revolved fundamentally around the sustainability of the business and the ability to support and maintain existing operations and existing reserves and resources. The higher gold price had reinforced this standpoint, which made the sheer purchase of reserves and resources expensive, he said.

“The lack of focus on existing operations had resulted in failure to deliver and reduced output across the board,” Sayers added.

He expressed the view that previous management’s attempt to convert the medium-to-small DRDGold into a global mining company had damaged the business and stripped out shareholder wealth.

The gold-mining sector’s lack of delivery had resulted in investor disenchantment, as companies either merged expensively or took on significant debt in order to increase their reserves and resource bases.

“The entire sector has been a disappointment,” Sayers reiterated, “resulting in investors moving from gold-mining companies to diversified majors such as BHP Billiton.

DRDGold’s attempt to go global in 2003 had sucked cash of its balance sheet and had resulted in its South African operations being starved of capital expenditure, according to Sayers.