In the media

DRDGOLD results shine on strong gold price, overhaul

29 August 2012

A strong gold price coupled with an overhaul of operations boosted profit by more than half at DRDGOLD for the full year to June, the company reported yesterday.

The mid-tier producer of gold, whose focus is on mining dumps mainly in Gauteng, said it planned to maintain the volume delivery of tons to plant and getting its flotation circuit operational before the end of the year.

Niël Pretorius, the chief executive who described the firm as “refuse people”, said it aimed to explore the expansion of its reclamation recovery areas.

“Going forward, we can leverage the expertise developed over the years that enable us to recycle tailings profitably, to consider expanding into other areas of reclamation and recovery,” Pretorius said.

An analyst who declined to be named said yesterday: “For them selling Blyvoor, and detaching themselves from the liability, is the biggest thing they have achieved so far.”

He added that surface mining made economic sense, especially with a strong gold price.

The JSE-listed firm reported a 53 percent increase in operating profit from continuing operations to R622.2 million because of a 36 percent rise in the rand gold price received, to an average R418 538 a kilogram.

DRDGOLD completed the first part of the sale of the 74 percent stake in its Blyvooruitzicht Gold Mining Company (Blyvoor) to Village Main Reef in June, and acquired an interest of under 9 percent in Village.

The company operates the Ergo Brakpan plant, while its Crown operation has been decommissioned.

Total attributable mineral reserves and resources slid to 1.8 million ounces and 37.6 million ounces, respectively, due to Blyvoor’s disposal in the year.

“Village shares are a volatile currency, and we will hold on to them because they are better than the rand. We believe the gold price will go up and we will make money,” Pretorius said.

The company declared a dividend of 10c a share, which is 33 percent higher than the previous year. Headline earnings a share from continuing operations improved by 259 percent to 61c.

DRDGOLD also reported net cash flow from operations was up 91 percent to R619.5m.

Volumes processed rose to 21.6 million tons, but grades fell 9 percent to 0.02g per ton in the financial year, resulting in gold production dropping 6 percent year on year to 135 708 ounces.

The stock slumped 4.72 percent to close at R5.05 yesterday.

DRDGOLD said that the completion and commissioning of the R350m Ergo plant upgrade to a volume capacity of 1.8 million tons a month and the Crown-Ergo pipeline had helped to strengthen its surface treatment operations.

“A lot of that has to do with the high gold price, I don’t know if the gold price will continue to be high, but to maintain the results, we will have a moderate capital expenditure in the coming year,” Pretorius said.

He added that it was time to put money in the pockets of the shareholders from the assets the company already owned.

Environmental rehabilitation costs this year increased to R47.3m from R37.2m in the last financial year following the decommissioning of the Crown Mines tailings plant. The company was trying to ensure that taps in Johannesburg did not run dry because of irresponsible water use at Ergo.

Source: Business Report