DROOY Closing Hedge
"Durban Roodepoort Deep (DRD) announced that it will next week close out its only remaining hedge contract, valued at R60 million, in line with its policy of not hedging gold production.
The hedge is a "gold for electricity" contract with power utility Eskom and was largely closed out in early 2004.
The remaining 135,000 ounces of gold hedged under the contract covers the period January 2005 to September 2005 and DRD expects that it will be closed out by next week.
DRD CEO Ian Murray said: "We have been keen to close out this remaining hedge contract and the current low rand gold price has presented an ideal opportunity to achieve this.
"DRD will now provide shareholders with even more direct exposure to the gold price."
To fund the closing out of the Eskom hedge, DRD has agreed a R100 million short-term loan facility with Investec Bank Limited.
The loan is based on commercial terms and conditions and is repayable at DRD's election, either in cash, in DRD shares or a combination of both.
The number of shares that could be issued to Investec under this loan is dependent on the average price of DRD shares as traded on the JSE Securities Exchange South Africa for the ten trading days prior to the dates of repayment.
At the closing share price on the JSE on 24 June 2004 of R16, approximately 6.25 million shares may be issued or 2.6% of the enlarged capital, assuming the full facility is drawn down.
DRD estimates the cost of closing out the hedge will be around R60 million.
The balance of R40 million will be available for any required injection of funds into Emperor Mines Limited if and when that company comes under DRD's full ownership. The funds will not be used for the acquisition of Emperor shares.
DRD has launched a bid for the Australian based gold firm which owns the Emperor gold mine located at Vatukoula in Fiji.
The gold mine produces some 130,000 troy ounces of gold annually.
DRD has previously indicated that, in its view, Emperor will require additional funding to complete its Phase II capital expansion plan and possibly for other plant upgrades, including those required to release the significant build up of gold in circuit.
Any injection of funds into Emperor will depend in part on the level of acceptances under the current takeover offer. DRD has received a recommendation by a majority of the independent directors of the Emperor Mines Limited board that shareholders accept DRD's final, revised offer of five DRD shares for every 22 Emperor shares it does not already own. DRD currently has an interest in 26% of Emperor.
If the offer is unsuccessful, DRD may choose not to further draw down the loan facility or, alternatively, will use the funds for general corporate purposes.
DRD is offering to acquire all of the shares in Emperor by way of a takeover offer. The outcome of the takeover is not yet known, as the remaining 50.1% minimum acceptance requirement has not yet been satisfied.
The offer is scheduled to close on 14 July 2004 unless extended.
I-Net Bridge"