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DRD's second quarter production unchanged

14 February 2012

Gold miner DRDGOLD on Tuesday reported total gold production of 63,659oz for the quarter ended December 2011, virtually unchanged from 63,562oz in the previous quarter.

Headline earnings rose by 66% to R125.3 million and headline earnings per share were 65% higher at 33 cents compared with Q1.

The group reported a 107% increase in cash inflow from operations and substantially higher net profit and headline earnings for the quarter. Gold production was steady and costs marginally lower.

After accounting for cash operating unit costs, 2% lower at R292 988/kg, cash inflow from operations was R243.9 million. Net profit, buoyed by an 11% increase in the average Rand gold price received to R437 316/kg, was 99% higher at R165.1 million.

DRDGOLD CEO Niƫl Pretorius says a process of "settling in" at Ergo - a consequence both of the integration of the Crown circuit with the Ergo circuit via the new, 52-kilometre Crown/Ergo pipeline and of the commissioning of new reclamation sites - has been smoother than anticipated.

"Over the next few months, we intend to fully bed down the Crown/Ergo integration, and expect to leverage the virtually unassailable competitive advantage this gives us to grow our 11Moz surface resource," Pretorius says.

After accounting for cash operating unit costs, 2% lower at R292 988/kg, cash inflow from operations was R243.9 million. Net profit, buoyed by an 11% increase in the average Rand gold price received to R437 316/kg, was 99% higher at R165.1 million.

For the six months ended December gold production from continuing operations was down 5% to 68,545oz.

DRDGOLD CEO Niel Pretorius said a process of "settling in" at Ergo - a consequence both of the integration of the Crown circuit with the Ergo circuit via the new, 52-kilometre Crown/Ergo pipeline and of the commissioning of new reclamation sites - had been smoother than anticipated.

On Monday the company announced that it had entered into a sale of shares and claims agreement with Village Main Reef in respect of its 74% interest in Blyvoor.

In terms of the agreement, DRDGOLD has agreed to sell to Village its entire shareholding in Blyvoor and its working capital and shareholder loan claims against Blyvoor.

The purchase consideration will be settled by Village through the issue of 85.7 million new shares in Village.

Looking ahead, Pretorius said over the next few months, the group intends to fully bed down the Crown/Ergo integration, and expects to leverage "the virtually unassailable competitive advantage this gives us to grow our 11Moz surface resource."

The Board has also given the go-ahead for the incorporation of a flotation and fine-grind circuit into Ergo's Brakpan plant.

Flotation will separate from the total feed to the Brakpan plant the higher fraction pyrite particles in which more than 40% of the gold which does not respond to our metallurgical process is embedded. This material, a concentrate of roughly 4% of total run of mine, is then fine-ground to liberate between 16-20% more gold, the company said.

"The total cost of refurbishing the existing Ergo flotation plant and constructing the fine- grind section is an estimated R250 million. The business case for this improvement is compelling," the company noted.

The company also expects a Competent Person's Report on the ERPM extension 1 and 2 prospect to be completed by the end of this month. The board has now also resolved to develop this resource further through additional drilling to take it to the South African Code for Reporting of Exploration Results, Mineral Resources and Mineral Reserves (Samrec) and Joint Ore Reserves Committee (Jorc) compliant level of confidence.

"In order to create more market awareness of the potential of the resource, we will decide the appropriate commercial model for it, with the possibility to create a separate investment opportunity for investors," it said.

Source: www.businesslive.co.za