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DRDGOLD LIMITED - Disposal of mineral interests and option granted to dispose of the related mining infrastructure of ERPM

Release Date: 26/02/2019 08:00
Code(s): DRD     PDF:  
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Disposal of mineral interests and option granted to dispose of the related mining infrastructure of ERPM

(Incorporated in the Republic of South Africa)
(Registration number 1895/000926/06)
ISIN: ZAE000058723
JSE share code: DRD
NYSE trading symbol: DRD
(“DRDGOLD” or the “Company”)


DRDGOLD shareholders (“Shareholders”) are referred to the announcements published on SENS on
25 July 2014, 29 October 2014 and 5 December 2014 in respect of the proposed disposal of the
mining rights of East Rand Proprietary Mines Limited (“ERPM”) and the related mining infrastructure
and associated movable machinery, plant and equipment by the Company and Ergo Mining
Operations Proprietary Limited to Walcot Capital (“Walcot”), an Australian based entity, (the
“Disposal”). In the annual financial statements for the year ended 30 June 2018, DRDGOLD advised
Shareholders that the Disposal agreement had lapsed.

On 17 December 2018 (“Signature Date”) and following an approach from a Malaysian-registered
exploration start-up, OroTree Limited (“OroTree”), DRDGOLD disposed of ERPM’s underground
Mineral Interests (as defined below) to OroTree through the structure and in the manner described
more fully below, and granted an option to OroTree to acquire the Mining Infrastructure Assets (as
defined below) required to access the deep level underground ounces of ERPM (the “Option”).
DRDGOLD was introduced to OroTree through the agency of the same entity that introduced Walcot.

The underground Mineral Interests, which were disposed of for an aggregate consideration of R4.00,
     - the mining rights with the Department of Mineral Resources (“DMR”) entitled DMR Ref GP
       30/5/1/2/2 150MR and DMR Ref GP 30/5/1/2/2 151MR;
     - the prospecting right, as renewed and amended, entitled DMR Ref GP 30/5/1/1/2 243PR; and
     - all transferable permits and licences relating thereto.

In terms of the Option granted, OroTree has an option to acquire, entirely at its discretion, on or
before 30 June 2019, the following assets and infrastructure:
    - ERPM’s Far East Vertical main shaft and ventilation shaft (including the vent shaft winding
      motor and head-gear singular);
    - all associated on-surface and underground mining infrastructure located within the boundaries
      of the portion of the mining area pertaining to the prospecting right entitled DMR Ref GP
      30/5/1/2/2 151MR (registered in the Mineral and Petroleum Titles Registration Office under
      Ref No 65/2014) (as renewed and amended); and
    - all transferrable permits and licences relating thereto,

collectively, the “Mining Infrastructure Assets”.

The cession of the Mining Interests was registered in the name of OroTree’s subsidiary, ERPM
Extension Area 1 Proprietary Limited, at the DMR on 22 February 2019.

The purchase consideration in respect of the Mining Infrastructure Assets, if OroTree elects to
exercise the Option, is US$10.3 million, less an upfront non-refundable fee of US$500 000.00 (“Non-
refundable Amount”), (collectively, “Option Consideration”). The Non-refundable Amount was paid
after the Signature Date and is akin to a break fee in the event that the Option is not exercised.

DRDGOLD is of the view that the likelihood of OroTree exercising the Option may be influenced by
the availability of funding, and, it being satisfied with the results of its due diligence investigation. In
this regard, Shareholders are advised to consider the following:

    -   the ERPM mine is an ultra-deep gold mine with the vast bulk of the inferred gold resource
        ounces previously recognised by DRDGOLD in its mining reserve and resource statement,
        located at between 2 200 and 4 000 metres underground;
    -   the mine was closed in 2008 after the pumping of underground water was stopped following
        an incident that rendered continued pumping unsafe, and following which there has been
        limited maintenance of on-surface infrastructure, and no maintenance of the underground
    -   the orebody in which the bulk of the inferred resource ounces is recognised by DRDGOLD in
        its mining reserve and resource statement are located downstream and below the central
        basin, where the water level is being maintained at approximately 200 metres from the
        surface, separated by a 50 metre wide water barrier pillar; and
    -   the infrastructure to re-open the mine and access the deep-level orebody that forms part of
        the inferred resources recognised by DRDGOLD could require significant capital investment,
        using the South Deep model as a reference.

The net asset value of the Mining Infrastructure Assets was negative R9.5 million as at
31 December 2018.

The unaudited loss after tax attributable to the Mining Infrastructure Assets was R885 750, as
reported in the unaudited interim results for the six months ended 31 December 2018 which were
prepared in terms of International Financial Reporting Standards.

In the event that the Option is exercised, the Option Consideration receivable in respect of the Mining
Infrastructure Assets will be utilised to bolster the Company’s cash buffer, to the extent required.

In terms of the Listings Requirements of the JSE Limited, the Option is categorised as a category 2

26 February 2019

One Capital

Date: 26/02/2019 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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