UPDATE 3-South Africa's DRDGold plans Blyvoor mine sale

Tue Apr 19, 2011 1:23pm BST

Quotes

   

* Looks to sell deep-level Blyvoor mine

* Most likely suitor would be from S.Africa's "Big 3"

* Headline earnings per share rise 44 percent

(Recasts with background, analyst, CEO comment)

By Ed Stoddard

JOHANNESBURG, April 19 (Reuters) - DRDGold (DRDJ.J), South Africa's fourth-largest gold producer, said on Tuesday it planned to sell its Blyvoor mine in a move that could bring it needed cash but may be an asset that only a few would want.

The mid-tier miner also said output fell as expected in the March quarter, while headline earnings per share rose because of a deferred tax credit.

The Blyvoor mine, which was distressed and loss-making in 2009 and on the verge of liquidation, has returned to profitability but the company said the operation no longer fitted its core strategic focus.

Blyvoor is a deep-level mining operation and the company has been trying to move away from this area because of the high risks and costs.

That might mean its only serious suitors could come from miners with deep-level experience, namely South Africa's "Big 3" gold producers: AngloGold Ashanti (ANGJ.J), Gold Fields (GFIJ.J) and Harmony Gold Mining Co. (HARJ.J).

But they have also been trying to diversify their operations outside of the country, in part because of the costs and risks involved in plunging deeper into the earth to extract gold.

But one of the advisers on the transaction is Beijing Axis, which could suggest DRDGold is looking East. The other is Royal Bank of Canada.

"The Chinese won't shy away from things like that but if you talk about experience with deep levels then it is South African miners," said Abri du Plessis, chief investment officer with Gryphon Asset Management.

Some analysts said they were unsure how to value the mine, which was severely damaged by seismic activity in 2009.

"There are so many variables. It should be positive for the company if they can realise a fair value because it will significantly reduce their risk profile, and it will give them cash which they can apply elsewhere," said a Johannesburg-based analyst.

The projected life of the mine is until 2030 and it had attributable reserves in 2010 of 5.3 million ounces.

NOT GIVING IT AWAY

DRDGold's chief executive said the company, while keen for strategic reasons to part with the asset, was not planning on giving it away.

"If we don't find the right buyer there won't be a sale," Niel Pretorius said on a conference call.

Chief Financial Officer Craig Barnes said a higher rand gold price so far this quarter was promising but he declined to give a specific earnings forecast going ahead.

Total group gold production was down 3 percent at 67,387 ounces but the miner had said earlier this month it expected this to be the case.

South African miners often see lower production in the March quarter because of spill-over from the Christmas holidays.

Headline earnings for the three months to end-March totalled 12.5 cents per share, up 44 percent from the previous three months. Headline earnings are the main profit gauge in South Africa and exclude certain one-time items. (Additional reporting by Ruona Agbroko; Editing by David Cowell)

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