South African-based Durban Roodepoort Deep (DROOY-Q) has agreed to acquire Australian-listed Oil Search Ltd.’s 20% interest in the 760,000-oz.-per-year Porgera gold mine in Papua New Guinea, for US$73.8 million.
The purchase price includes US$52.7 million in cash and US$21.1 million worth of DRD shares, though the equity portion may be covered with cash at a 10% discount to the value of the scrip. DRD plans to fund the cash portion of the deal with money on hand, including proceeds from the recent issuance of 27 million shares to the Investec Group.
Under the deal, Oil Search’s subsidiaries in the Porgera project, Orogon Minerals (Porgera) (OMP) and Mineral Resources Porgera will be merged with DRD’s subsidiary Dome Resources; OMP will be the surviving entity.
Porgera, managed and 75% owned by Placer Dome (PDG-T), has churned out more than 10 million ounces of gold since beginning operation in 1990. Mineral Resources Enga (MRE) holds the remaining 5% on behalf of the Enga Provincial Government and landowners in PNG.
As part of the deal, and subject to the amalgamation, DRD has agreed to offer a 5% direct interest in the Porgera joint venture to MRE. When the dust settles DRD would have representation on the Porgera joint venture committee.
Placer expects Porgera to pour 760,000 oz. of gold during 2003, as the mine goes underground. That ‘s an 18% increase over 2002 production. The company figures its share of cash costs at US$239 per oz., and total costs to rise to US$296 per oz. Capital expenditure to develop the open pit are pegged at US$34 million. At the end of 2002, Placer reported Porgera’s proven and probable mineral reserves at 6.2 million oz.
Production from Porgera is subject to a 2% net smelter return royalty payable to PNG’s Department of Mines.
The deal is expected to wrap up in November.
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