DRDGold gets more from Mintails

Johannesburg - DRDGold continues to buy assets from its cash-strapped partner ASX-listed Mintails and has now extended its involvement from Mintails' East Rand operations to the West Rand.

Mintails announced in its December quarterly report released last week that DRDGold had bought a 50% stake in the Witfontein deposition site on the West Rand for R20m (A$3m).

DRDGold has scored heavily at the expense of Mintails in their Ergo joint venture on the East Rand as Mintails battled to fund its share of the capital costs of completing the Ergo plant, which started production in December.

DRDGold CEO Neil Pretorius was cagey when asked in December over future deals between the two.

He said at the time: "It would depend on what Mintails does on the West Rand, but there are no immediate plans for a greater consolidation of the businesses.

"We have enough on our plate at this point in time and I don't want to stretch our management by taking on more than we can handle."

That seems to have changed, with DRDGold buying into Mintails' vision of a consolidation of retreatment operations on the West Rand.

Environmental assets

Pretorius added DRDGold was keen to secure a site for the deposition of tailings material that could be retreated from its Blyvooruitzicht mine near Carletonville.

A number of groups are either setting up or evaluating projects to retreat slimes dams in the region to recover gold and uranium.

In addition to Mintails and DRDGold, they include Rand Uranium/Harmony, First Uranium/Simmer and Jack, Gold Fields and AngloGold Ashanti.

Fundamental to any of these projects is the acquisition of a site where the hundreds of millions of tons of material to be retreated from the various slimes dams can be deposited again in an environmentally acceptable manner.

Given stricter environmental requirements, such a site must be underlain by impervious rocks such as granite. This will prevent pollution of the groundwater by contaminants like cyanide and sulphur leaking out from the new site.

Much of the West Rand is underlain by dolomite, a porous and therefore unsuitable geological formation.

Many of the slimes dams in the region were constructed on dolomite and moving all that material to a new, secure site would result in major environmental benefits.

Mintails reckons Witfontein is the best site in the region. Because it is large enough to take material from several retreatment projects, it can be used as a bargaining tool for consolidation of operations.

Arduous permit process

Both Rand Uranium and Gold Fields disagree. Gold Fields CEO Nick Holland announced last week his group would "go it alone" and had identified its own new deposition site.

Pretorius said: "Witfontein is a good site and it makes strategic sense to us to acquire the deposition site and then work backwards to the plant and the resource."

Asked about statements from Rand Uranium and Gold Fields that they had their own suitable deposition sites, Pretorius replied: "It's early days for most of these projects.

"Once we have secured the environmental permit for Witfontein and the right to establish the tailings facility, their attitudes might change."

The reason for this belief is the time and effort required for the regulatory process to obtain such a permit.

Mintails has been working on it for nearly three years so far. It recently received a setback because of changed requirements from the Department of Minerals and Energy.

Pretorius said: "I believe there is a good likelihood that the permit for Witfontein will be granted. If it is not, I would point out that the property has considerable salvage value which reduces the risk to our shareholders on the investment.

"We are not buying into a dot.com. The JV owns the land for the Witfontein site."

According to the Mintails quarterly report, the sale of the 50% stake in Witfontein "is a strong step forward in the consolidation plans the company has for the West Rand and it is expected that other parties may participate directly in Witfontein over time".

- Miningmx.com

For more mining sector coverage, visit miningmx.com.