"JOHANNESBURG – Durban Roodepoort Deep could afford to spend as...

"JOHANNESBURG – Durban Roodepoort Deep could afford to spend as much as $100 million on an acquisition in Australasia, but would not make an offer to buy out minorities of Emperor Gold Mines, the Australian-listed company in which it owns a 19% stake.
Ilja Graulich, a DRD spokesman, said the company had no plans to buy Emperor. “Emperor is definitely not the acquisition, it’s not even on the agenda for our next board meeting,” said Graulich. He said DRD was satisfied with its stake in the company, which it was allowed to increase by no more than three percent every six months.

There had been speculation that DRD would have to make an offer to Emperor’s minority shareholders to avoid running foul of South Africa’s exchange control regulations. The speculation was fuelled by Harmony Gold, another South African gold producer, which said Tuesday it was compelled by Reserve Bank regulations to make a bid for the foreign companies in which it had minority shareholdings, or sell the shares altogether.

Graulich said the DRD had not come under any pressure to realize its Emperor investment or make a bid to acquire the A$70 million company. He said DRD was eying alternative acquisitions in the region which were “far more attractive at this stage”. The acquisition, which was first mooted two months ago when the company announced it would raise $65 million through a placement of new shares with South African bank Investec, was likely to be completed before the end of the month. “It’s really close now,” said Graulich.

He said DRD could manage spending between $60 million and $100 million to buy a new operation. He would not say whether the deal would be funded from through debt, DRD’s cash reserves of $90 million, or even from the issue of still more shares. “There are many ways to skin a cat and we would look at all of them,” said Graulich.

The company has not been coy about tapping the bond and equity markets in equal measure, to bankroll both its fight for survival and its growth ambitions. DRD raised $66 million in November last year through the issue of a four-year, 6% convertible bond. The cash was to be used, among other things, for an unnamed Australasian acquisition, but much of its was diverted to funding the group’s normal business activities as the rand price of gold drove its South African operations into the red. In February last year, the group raised $40 million to close out its hedge book, by issuing 10 million new shares.

The $65 million raised last month would be used to acquire an operation generating positive cash flow outside South Africa and to top up the group’s cash reserves, given that the retrenchments of almost 3,000 workers at its North West operations are expected to cost about R50 million.

The new acquisition, he said would produce about 100,000 ounces of gold each year for between five and ten years. The company aims to produce 400,000 ounces of gold from Australasia, although chief executive Mark Wellesley Wood has said DRD would not pay “mainland prices”.

The group is likely to buy a mine in New Zealand or one of the Pacific Island states. Wellesley Wood told Mineweb in Denver last week DRD would run the rule over Newmont’s Martha operation in New Zealand, which had recently been put on sale. DRD had previously considered buying the mine, but had backed off until the mine plan had been revamped".