DRDGOLD Limited (DRDGOLD; JSE: DRD, NADAQ: DROOY) and Village Main Reef Limited (Village; JSE: VIL) announced today that DRDGOLD has received and accepted an expression of interest (EOI) from Village for the acquisition of DRDGOLD's entire interest in and claims against Blyvooruitzicht Gold Mining Company Limited (Blyvoor) for R150 million.
In terms of the EOI, the purchase consideration for DRDGOLD's interest – comprising all of DRDGOLD's Blyvoor ordinary shares and all amounts owed to DRDGOLD by Blyvoor – will be settled by Village through the issue of new Village shares to DRDGOLD. The EOI is non-binding and does not constitute a firm intention by Village to make an offer to acquire the sale assets.
In a SENS announcement released today, the respective boards of directors of Village and DRDGOLD say they believe the proposed transaction represents:
an opportunity for Village to use its specialist skills to unlock further value in a socially responsible manner from the Blyvoor operations going forward, including for the benefit of DRDGOLD and its shareholders; and an opportunity for DRDGOLD to eliminate any further funding exposure towards Blyvoor whilst retaining, via its shareholding in Village, significant further indirect potential upside from its historic investment in Blyvoor; provide Blyvoor with access to the significant management and operational skills that Village has, thereby creating a platform for the sustainable and socially responsible future development of Blyvoor; and achieve clear separation of DRDGOLD's surface and underground operations, in accordance with its stated strategy.
DRDGOLD and Village have entered into a break-fee agreement, in terms of which DRDGOLD has granted Village an exclusive right, for a period of 60 days from 7 November 2011, to acquire DRDGOLD's interest in Blyvoor.
The EOI envisages the proposed transaction being subject to the fulfillment of various conditions precedent, including the conclusion of a due diligence investigation by Village.
DRDGOLD and Village expect that the proposed transaction will be implemented in two phases:
During Phase 1, Village will simultaneously enter into a) a sale and purchase agreement with DRDGOLD and b) a contract mining agreement with Blyvoor in terms of which all mining activities conducted by Blyvoor will be managed by Village for and on behalf of Blyvoor. The contract mining agreement is expected to become effective on or about 1 February 2012 and continue until all the required statutory and regulatory approvals and consents in respect of the implementation of the proposed transaction have been obtained.
Upon entering into the sale and purchase agreement, Village will a) acquire a R115 million portion of DRDGOLD's loan to Blyvoor for R115 million, which acquisition will be settled through the issue of 65 714 286 Village shares at an issue price of R1.75 per share to DRDGOLD and b) place 20 000 000 Village shares, at the same issue price, in escrow for release to DRDGOLD as payment for the balance of the Blyvoor loan under Phase 2.
Phase 2 will begin once all of the relevant statutory approvals have been granted, at which date Village will release those shares held in escrow to DRDGOLD, acquire the balance of DRDGOLD's loan to Blyvoor and purchase DRDGOLD's entire shareholding in Blyvoor for a purchase consideration of R1.
Niël Pretorius, CEO, DRDGOLD
Office: +27 11 470 2600M
James Duncan, Russell and Associates
Office: +27 11 880 3924
Mobile: +27 82 892 8052
Bernard Swanepoel, CEO, Village
Mobile: +27 83 303 9922