[Mining Weekly] - JSE- and Nasdaq-listed gold-mining midtier DRDGOLD said on Tuesday that it had raised funding for its pipeline project currently under construction.
JSE- and Nasdaq-listed gold-mining midtier DRDGOLD said on Tuesday that it had raised funding for its pipeline project currently under construction.
DRDGOLD CFO Craig Barnes told Mining Weekly Online that the company had managed to raise R108-million with the first issuance of its R500-million domestic medium-term not programme.
Barnes said that the purpose of the fund raising through the notes - which are listed on the JSE-bond market - was to fund its R300-million 50-km Crown/Ergo pipeline.
"The great thing about this kind of funding instrument is that it allows us a lot of flexibility," Barnes told Mining Weekly Online.
"As and when required, from time to time, we’ll issue more notes, if we require more funding," Barnes said.
First prize will be to self-fund as much as possible of the R300-million from group cash flows.
"But it’s all dependent on the rand gold price, and if there is a shortfall, we will go out to the market and raise further funding under this note," Barnes added.
DRDGOLD has opted for a debt funding mechanism rather than the issuing of equity, in the belief that its share price is undervalued. DRDGOLD’s share price rose 0,27% on the JSE on Tuesday, to R3,73 a share.
The new pipeline project to the company’s Ergo operation on the East Rand will facilitate gold production from surface material at a profit margin of $400/oz and also extend the life of its Crown surface operations in Johannesburg.
The full project feasibility study includes not only the construction of the pipeline, but also the provision of pump stations, the improvement of tailings dams and the upgrading of the second carbon-in-leach (CIL) stream at Ergo, near Brakpan.
Ergo plant’s second CIL circuit will be refurbished to increase capacity from 1,2-million tons a month to 1,8-million tons a month.
The notes mature in from 12 months to 24 months and bear interest at the three-month Johannesburg interbank acceptance rate, plus a margin ranging from 4% to 5% a year.
The new Crown/Ergo pipeline project, which is scheduled for completion by August 2011, will kick in as Crown’s deposition capacity is fully taken up.
In recent times, lack of deposition capacity has presented a constraint on the potential to extend Crown’s life by turning to account further surface tailings resources on the western and central Rand.
Ergo’s recently refurbished plant is achieving its first-phase targeted throughput of 1,2-million tons of gold-bearing tailings at a cost of R198 000/kg and yielding the $400/oz margin.
There is confidence that current research and development into improving recovered grade can deliver even better results from the first phase.
Pilot plant work, focused on the releaching of residue, is yielding up to 0,02 g/t more gold.
Extrapolated to the main plant, this suggests a potential for 25 kg/m of more gold.
The new pipeline will link two of the Crown operation’s plants - Crown and City Deep - in the west, with Ergo in the east.
The pipeline will give Crown access to Ergo’s 200-million-ton capacity tailings deposition site, enabling Crown to restore its maximum deposition capacity to 600 000 t/m from the current 400 000 t/m, a restriction imposed in 2008 owing to the diminished capacity of its deposition site at Nasrec.
Restored deposition capacity means that Crown can look seriously at turning to account several tailings dams along the western and central Rand.
The pipeline will increase Ergo’s potential to recover additional tailings along the central and eastern Rand, providing feed for the second CIL circuit, which forms part of Ergo’s second-phase expansion.
Higher Ergo volumes are likely, in turn, to result in further cost reductions and improved efficiencies.
The Ergo of old also extracted uranium, but to do so again will require a uranium price of $113/lb, rather than the current $50/lb position.
But it is in a strong position to recover uranium in the future, as AngloGold Ashanti did in the past, as uranium is already in the material that is being brought to Ergo, which means some costs are already being recovered, and the $113/lb requirement also takes into account the capital cost of refurbishing Ergo’s old uranium plant.
To watch a video in which DRDGOLD operations officer Charles Symons discusses the project, go to www.miningweekly.com and click on ’Multimedia’ and then on ’Video Clips’, or watch it on the Mining Weekly App on your iPhone, or to m.miningweekly.com on your cellphone.