The consolidation of all of Gold Pacific operations into a single package was announced on Thursday, and as expected Australian listed, Emperor, a Fijian gold miner, will be the vehicle. While the announcement was expected, there is further speculation, now that it has separated its assets into a South African and Australian assets, that it would further split them into separate listed vehicles. Mark Wellesley-Wood, DRDGold’s chief executive, downplayed the idea. “I think we have been clear in creating focused regional entities,” he said, “DRDGold has no fixed metric that it must do anything or leave anywhere.”
“We are consolidating all DRD’s Pacific island interests into a single vehicle for transparency and valuation,” said Mark Wellesley Wood, DRD’s chief executive in a conference call. You can see the live stock price here.
DRDGold taking over Emperor – Gold prices can surge
Once the $230 million transaction is complete, they will own 90.5% of Emperor, as $200 million of the purchase price will be paid to DRDGold in Emperor shares. The other $30 million will be paid in cash.
Last year, DRDGold failed in a takeover offer for Emperor, only managing to acquire its current 45.33% stake.
For the purposes of liquidity, according to Wellesley-Wood, a $15 million capital raising will take place after the merger in February or March next year, where they will not participate and allow its stake to decrease to 85%.
Just this year, they announced the consolidation of its South African assets into one entity. They took an 85% stake and its BEE partners 15% of the new vehicle.
Wellesley-Wood says now that the Australasian and South African operations have been separated value will be unlocked.
Not only does this deal allow critical mass, it also means we will no longer be sending Australian assets through a South African rating,” he said, “The value can now be captured in the Emperor share price.”
The company is also positioned better for possible acquisitions said Wellesley-Wood. Last Friday, they announced the acquisition of a 5% stake in Allied Gold, an Australian listed explorer with interests in Papa New Guinea, for A$3.03 million (A$0.40 per share). DRD has also decided to underwrite a share issue, representing 17.5% of Allied’s share capital.
The Transaction from
Put simply DRDGold has sold its 20% stake in the Porgera Mine and its wholly owned Tolukuma both in Papa New Guinea for $230 million. One analyst questioned the value. As we mentioned many times before, this can have implications on the market of Gold IRA rollover markets – while it is a safe retirement plan, it still has to be a carefully considered decision before taking your 401k to gold.
The market capitalisation in the US on Wednesday night was about $459 million, and if the $17 million stake in Emperor is removed it would in theory be worth $442 million, which means the deal values the two PNG assets at just over 50% of the deal.
Some might dispute this, considering the handy cash flows they has been receiving from these operations over the past few years while the South African operations have been losing money.
Ian Murray, former chief executive and now a consultant, says the Emperor share price move on Thursday after the announcement actually increases the value of the deal above $260 million, and therefore gives those assets a higher value. He also added that the South African assets had a longer life than those in Australasia.
Once the deal is complete, by early next year, Emperor will become the third largest producing gold company listed on the Australian Stock Exchange, with annual production of over 375,000 ounces and reserves and resources of 2.2 and 7.6 million ounces of gold respectively, according to DRD Gold.
Emperor shares went up 21.54% on Thursday in Australia, closing at A$0.395 each. Their shares were up 2% to R10.30, by lunchtime in Johannesburg.