DRDGOLD to seek judicial management order for Blyvoor
09 November 2009
Johannesburg, South Africa. 9 November 2009. DRDGOLD Limited (JSE: DRD; Nasdaq: DROOY) 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.
DRDGOLD CEO Niël Pretorius said today 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.”
These circumstances, which had seen Blyvoor plummet into sustained losses from ‘a period of handsome profits’ which lasted until April this year, included:
- the 16% drop in the average Rand gold price received between 1 April 2009 and 30 September 2009 due to the strengthening of the Rand against the US Dollar;
- extensive damage caused during May 2009 to higher-grade underground production areas at No 5 Shaft 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.
These could, for example, include giving certain creditors temporary preference over others and agreeing compromises with creditors without the risk of committing an act of insolvency and thereby exposing the mine to liquidation.
DRDGOLD envisaged Blyvoor remaining under judicial management until after access to the seismicity-damaged, higher-grade areas at No 5 Shaft had been regained, Pretorius said.
“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.”
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Many factors could cause the actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, adverse changes or uncertainties in general economic conditions in the markets we serve, a drop in the gold price, a continuing strengthening of the rand against the dollar, regulatory developments adverse to DRDGOLD or difficulties in maintaining necessary licences or other governmental approvals, changes in DRDGOLD's competitive position, changes in business strategy, any major disruption in production at key facilities or adverse changes in foreign exchange rates and various other factors.
These risks include, without limitation, those described in the section entitled "Risk Factors" included in our annual report for the fiscal year ended 30 June 2008, which we filed with the United States Securities and Exchange Commission on 12 December 2008 on Form 20-F. You should not place undue reliance on these forward-looking statements, which speak only as of the date thereof. We do not undertake any obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after the date of this report or to the occurrence of unanticipated events.