Blyvoor gives notice of right-sizing consultation process
26 August 2009
Johannesburg, South Africa, 26 August 2009. DRDGOLD Limited (JSE: DRD; NASDAQ: DROOY) announced today that it has advised unions of its intention to right-size the Blyvooruitzicht operations (Blyvoor) of its 74%-held subsidiary, DRDGOLD South African Operations (Pty) Limited (DRDGOLD SA).
Blyvoor will now proceed with a 60-day facilitated consultation process in terms of Section 189A of the Labour Relations Act to determine the future of affected employees.
DRDGOLD announced at its quarterly briefings last Thursday that right-sizing at Blyvoor had become necessary.
This had been brought about by:
- a 5% drop in underground production to 21 349oz due mainly to seismic damage to high-grade panels;
- a 16% drop in the average Rand gold price received to R244 927/kg due to Rand strength; and
- a 17% increase in underground cash operating costs to R289 816/kg.
The damaged panels will take up to six months to rehabilitate, during which time monthly production from the affected areas will be reduced from 2 500m² per month to 200m² per month.
This extended, negative impact on underground production, combined with dim prospects for a substantial Rand gold price recovery in the short-term, a 32% power price increase from power utility Eskom with effect from 1 July and the prospect of paying at least the 6% wage increase currently on the table with unions, makes right-sizing at Blyvoor inevitable.
A combined management/unions task team has been appointed and is currently investigating possible cost-reduction measures at the mine. It is envisaged that the task team will continue its work during the Section 189A consultation process, and beyond.
South Africa & North America
James Duncan, Russell & Associates
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