This is from a post Ray made on Kitco....
There is a large estate seller in the market on Durban I am tryin to find
out WHEN this thing will be over and will let ya know.
I have been in New Orleans with the Durban folks all last week, the New Orleans presentation is now posted at the durbans.com web site. Go read it is is GOOOD! Mostly a graph presentation but it clearly shows the message.
The following comments from Durban officials-
This note should correct some of the anti DRD expressions and perceptions.
from Ian Murray at DRD
October 20, 2000
1. DRD is not close to bankruptcy. The statutory audit for the year ended 30 June 2000 has been completed and signed off by Deloitte & Touche ( the international audit firm ) . They gave an un-qualified audit report, which they would not have given if there was any "going concern" risk associated with DRD.
2. Steffen, Robertson & Kirsten ( the international firm of mining consultants ) ( SRK ) have prepared a Competent Persons Report on DRD. This report was prepared for a transaction that we were negotiating, but as the transaction fell through we are using the Report as an independent evaluation of DRD’s operations. In this report SRK verify a minimum life of mine of 8 years. I must stress however that SRK are extremely conservative and their report only plans for 8 million ounces of mined gold ( 8 years ) versus our 15.7million ounces of reserves and 90 ounces of resources. In reality it is our opinion that the life of DRD will be anything in excess of 15 years.
3. The audited balance sheet at 30 June 2000 reflects Shareholders Equity of R445 million. This definitely does not reflect a "bankruptcy" risk. This Shareholders Equity number is after the right-off of the closed operations (the loss-makers) of R590 million. The accounting statements insist on the write-down of closed operations, but prevent the write-up of the continuing operations where DRD has increased the value. This write off was essential since the company has grown from 60 000 oz to 1,2million ounces to date. We have renewed DRD and in an effort to improve cash flows we have written off the loss makers.
4. The Harties mine was purchased for R45 million. Our independent Net Present Value ( NPV ) based on the conservative SRK life and a 10% real discount rate is R260 million ( net of hedging ) . This does not include the recent 5% increase in the Rand gold price. We are prevented from writing up the additional R215 million to Shareholders Equity.
5. The Blyvoor 2000 Project has a NPV ( based on conservative SRK Report ) of R580 million versus a historic, depreciated cost of R275 million ( net of hedging ) . We are prevented from writing up the additional R315 million to Shareholders Equity.
6. In total the DRD NPV ( at 10% real discount rate ) is R1.2 billion. The current market capitalisation is R840 million, which is a 30% discount to NPV. This NPV is conservative as it is calculated at a 5% discount to the Rand gold price.
7. Regarding the hedges, the above NPV numbers are calculated after taking into account fully the hedging profits and losses over life. The impact on NPV of the hedge book is R250 million. In other words the NPV quoted above in point 6. Has been reduced by R250 million from an "unhedged" DRD, i.e. an unhedge DRD would have an NPV of R1.45 billion.
8. The hedges need to be understood in context. The bulk of the hedges ( 65% ) were put on to facilitate the Harties acquisition. We agree that the hedged prices are lower versus the current spot price, but equally Harties was purchased at a ridiculously low price of R45 million but is worth R260 million to us today, even with the hedges. We had to protect the restructuring process at Harties bearing in mind this process took place as the gold price fell to US$252/oz.
9. The Return on Investment of the Harties Project acquisition, after accounting for the hedges, is 98%. Without the hedging, the Harties acquisition would not have occurred. This transaction has provided excellent returns for DRD shareholders and has strengthened the company.
10. When we bought Harties their reserves were quoted as 1.6 million ounces. We hedged 33% thereof or 480,000 ounces. Today the reserves, under our management, are 2.8 million ounces. This is an increase of 1.2 million ounces, or 2 x the hedged ounces. This has halved the impact of the hedge over the life of Harties.
11. In summary the hedging assisted in the Harties acquisition, which has returned 95% ROI, and we have increased the reserves by 75%.
12. We conducted further hedging to protect our capital renewal programmes and this includes the big Blyvoor project. These projects are beginning to contribute to the bottomline and will allow stable gold production of more than a million ounces for the next few years.
13. We have closed out and delivered into more than 2 million ounces since September `1999. Currently the hedge represents one years production but it is spread out over five years. The net effect is that 80% of the production is exposed to the upside, be that higher rand gold prices or dollar gold prices. Furthermore DRD has the ability to rapidly gear up production in the event of higher dollar prices, allowing the hedge to be cleared out faster giving more exposure to rising gold prices. The hedge is actively managed and DRD is committed to keeping the company alive. Note the gold price is still US$270/oz and for now does not appear to be headed anywhere. We must do what is good for the company and shareholders.
14. Mr Kebbles son, Brett, is not an officer nor director of DRD, and neither has he, as asserted, stolen money from the company. |
