In the media

DRDGOLD outlines its Zimbabwe gold bet

11 February 2010

Source: www.miningmx.com

Author: Allan Seccombe

DRDGOLD is in an equally held partnership in Zimbabwe to explore a greenstone gold deposit not far from the capital Harare, but it is going in very carefully and with limited expenditure, said CEO Niel Pretorius.

DRDGOLD was brought in as joint partner by a company called Chizim Investments to explore 32 contiguous claims spread over 550 hectares. Chizim Investments is a tourism and fishing business owned by Lovemore Chihota, a long-serving member of the Reserve Bank of Zimbabwe.

Pretorius sounded a sanguine note over the new indigenisation laws that were gazetted this week requiring businesses to be 51% owned by black Zimbabweans.

“We’ll just dilute by one percent and have 49%,” Pretorius said.

Having Chihota involved in the project was a form of insurance, Pretorius said. “We are adequately connected to ensure the administrative process does not run into hiccups.”

DRDGOLD’s exposure to Zimbabwe will be limited, with spending there will be limited to R7.5m at first, with drilling to firm up a SAMREC/JORC compliant resource by September this year and to start small-scale mining with a mobile scrubber plant and earthmoving equipment.

This low-level entry into Zimbabwe will give DRDGOLD a foothold in the country for if and when the political situation stabilises and becomes investor friendly. Investors with few scruples about the unfavourable political environment and a strong tolerance for risk are entering Zimbabwe.

“This orebody was just too good to ignore. It’s close to surface and we’ve found samples of eight to 25 grams a tonne at barely shovel depth,” Pretorius said.

Back in South Africa, DRDGOLD plans to remove its remaining underground operation Blyvoor out of judicial management. The mine was put into judicial management as a “timeout period” to protect it from hostile creditors as it grappled with low grade ore after high grade panels were damaged by a seismic event. The rand gold price also dropped and costs increased.

“We are seeing recoveries of better than four grams a tonne and we’re back on track,” Pretorius said. "It was met with some consternation but it has met with success."

DRDGOLD is involved in a process to sell a 60% stake in its Blyvoor mine to newcomers Aurora Empowerment Systems for R296m. The deal should be concluded by July this year.

DRDGOLD's focus is firmly on increasing its surface treatment operations, which are low-cost and low-risk methods to produce gold. "We are mining South Africa's mineral wealth for a second time," Pretorius said.

DRDGOLD sees itself building a dominant position in surface treatment operations, allowing it to snap up more tailings. The barriers to entry are high, with deposition sites at a premium and difficult to secure. The cost of setting up plants and pipelines will also deter newcomers, he said.

DRDGOLD has access to some 1.8 billion tonnes of tailings in the Central and East Rand.