FRIDAY, 11.00AM
RANDGOLD-managed East Rand Proprietary Mine is is on the brink of closure as the falling gold price and lower than expected gold yields push the embattled producer to its knees.
The mine, once one of the largest and most profitable in the world, currently employs 4 500 people. Although ERPM is managed by Randgold, government is a mojor stakeholder through loans paid to the mine to keep it from closure a few years ago. Mineral and energy affairs director-general Dick Bakker said on Thursday that government and the mine are involved in “delicate talks” about extending the mine’s lifeline. He added that ERPM has a survival window of two or three years.
In a cautionary statement issued on Thursday, ERPM said: “While management has made certain proposals to government and discussions are taking polace, there remains a strong possibility of ceasing operations in the near future … Shareholders are advised that, as a result of the low gold price and lower than expected undergorund yields, the company is operating at a loss with no reasonable possibility of generating profits in the foreseeable future.”
ERPM chairman Lionel Hewitt said Randgold is re-evaluating its involvement with ERPM. Randgold has already indicated it will not renew its management contract with the mine when it comes up for renewal in September. Earlier this month, ERPM subsidiary Benoni Gold Mining Company was the first SA mining house to hit the wall as a result of the slump in the bullion price, announcing its immediate closure.
At this stage, the mine’s only possibility of survival lies in continued government financial support or a substantial drop in the value of the rand, both unlikely. Another possibility is a radical downscaling, with mining operations being concentrated in higher-yielding parts of the mine.