Great Basin Gold Ltd. (fka GBGLF)

[amarksp]

Great Basin's Dippenaar defends 'pioneering' empowerment deal

By: Matthew Hill
Published: 07 Mar 07 - 9:01
South Africa’s Department of Minerals and Energy (DME) should consider JSE- and TSX-listed Great Basin Gold’s (GBG’s) mining rights application in its entirety, rather than making a "preemptive" decision regarding its black economic-empowerment (BEE) transaction, which involves Gold Fields giving GBG’s empowerment partner, Tranter Gold, R80-million, in the hopes of getting BEE credits in return, CEO Ferdi Dippenaar said.

This was after the DME said that companies could not donate cash to a BEE firm expecting to receive empowerment credits in return.

"Usually with a new mining project, the banks are paid off first, which sees the BEE company waiting for a few years to see any underlying benefits."However, it also said that there was no legal framework covering such a transaction.

Lawyers canvassed by Mining Weekly Online were of the view that the proposed deal had uncovered a legal grey area.

In the deal, GBG would pay Gold Fields the R80-million that it owed for a smelter royalty, and Gold Fields would immediately donate this to Tranter Gold to help the junior miner pay for the stake it was acquiring in GBG.


If Gold Fields did not score empowerment credits as a result, it would get the cash back.

However, speaking from Canada in a telephone interview, Dippenaar emphasised his belief that the gold-mining giant should get credits, as the donation would facilitate the establishment of a new BEE junior miner.

"I can't prescribe what the DME allocates credits for, but the cash will increase Tranter Gold's sustainability and provide it with the ability to grow in the resources market, which currently offers a lot of opportunities," he said.

He said that the R80-million would help the junior mining company to pay off debt to its bank, allowing it to see quicker returns from GBG's Burnstone gold project.

"Usually with a new mining project, the banks are paid off first, which sees the BEE company waiting for a few years to see any underlying benefits," Dippenaar highlighted. "Hopefully this is where our deal will be different."

Tranter Gold was holding back R10-million of the donation, which would ensure that the firm had solid cash flows.

"This model is altogether different," he noted. "But, if it works, we hope that it will be followed by others."

Dippenaar concluded by saying that the deal would help create a sustainable junior BEE miner, which the country needed at the moment.

Edited by: Liezel Hill