Nov. 10 (Bloomberg) -- DRDGold Ltd., owner of one of South Africa’s oldest active gold mines, had its biggest two-day slump in a year after it began liquidation proceedings and the rand’s rally erodes profit from record gold prices.

The stock dropped 5.8 percent, extending yesterday’s 11 percent slump to 4.05 rand in Johannesburg trading. The 16.5 percent two-day decline is the steepest since Oct. 27 2008.

The rand’s 27 percent rally against the dollar this year is crimping local companies’ export earnings, prompting businesses to demand that the government intervenes to weaken the currency. Economy Minister Ebrahim Patel said today the country is paying “a huge price” for the rand’s gains and will host public discussions to canvass opinion on exchange-rate management within two weeks. The rand may slide to weaker than 8 per dollar on “stronger intervention resolve from government,” Royal Bank of Scotland Plc currency strategist, Imran Ahmad, said today.

“Rising electricity prices and the strong rand has really put such pressure on the company and this attempt to get judicial management is really just a stay of creditors,” said David Shapiro, who heads Sasfin Holdings Ltd.’s securities unit in Johannesburg.

Eskom Holdings Ltd., which supplies 95 percent of South Africa’s power, raised prices by an average 31 percent this year and proposed increasing average tariffs 45 percent annually for three years from 2010.

Production Costs

The stronger rand raises miners’ local production costs as they are paid for the metals they export in dollars and most of their costs are in rand.

The rand price of gold has dropped 1 percent this year in rand terms even as it rallied 26 percent in dollars.

DRDGold and Harmony Gold Mining Co., which have all of their production in South Africa, will be worst hurt by the rand rally. AngloGold Ashanti Ltd., the world’s third-biggest producer of the metal, is the most protected against gains in the rand because about 60 percent of its production is outside South Africa.

DRDGold owns 74 percent of Blyvoor, one of the company’s two mining operations in South Africa. The mine, which started production in 1942 and was the first on the West Wits line of the Witwatersrand basin, the world’s biggest goldfield, is recording monthly losses of 27 million rand ($3.6 million) after being hurt by strike, electricity price increases, rockfalls and fluctuations in the value of the rand, according to DRDGold.

“DRDGold has very marginal operations at the best of times and they have little else other than the Blyvooruitzicht mine,” Sasfin’s Shapiro said.

A court-appointed judicial manager may give some creditors temporary preference over others and agree to compromises with creditors “without the risk of committing an act of insolvency,” which may expose the mine to liquidation, Chief Executive Officer Niel Pretorius said yesterday.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew1@bloomberg.net.

Last Updated: November 10, 2009 11:24 EST