6% rise in gold production
21 October 2010
Higher winter power surcharge trims otherwise solid operating performance
Johannesburg, South Africa. 21 October 2010. DRDGOLD Limited (JSE: DRD; NASDAQ: DROOY) has reported a 6% increase in gold production to 65 267oz for the quarter ended 30 September 2010, reflecting increasing stability in the underground operations of the company’s Blyvoor operation and a stable performance by both of its surface retreatment-only operations, Crown and Ergo.
At Blyvoor, continued opening up and development in the wake of extensive seismicity-induced damage to high grade working areas underground in the previous financial year yielded a 15% increase in underground gold production to 24 101oz.
Operating profit was R22.1 million lower at R69.4 million due both to a lower Rand gold price received of R288 054/kg and an 11% increase in total cash operating costs to R520.7 million.
Cost drivers during the quarter were power – in particular, power utility Eskom’s higher winter surcharge which it levies for three months on top of its normal tariff – and annual wage increases.
DRDGOLD CEO Niël Pretorius points out that the higher winter power surcharge added R27.8 million to cash costs.
Cash operating profit would have been R97.2 million – 6% higher than in the previous quarter – but for “this peculiar practice on the part of Eskom, for which we receive no value,” Pretorius says.
Looking ahead, Pretorius said that the Group expects to continue to operate in an environment characterised by a strong gold price, which will assist in offsetting power and labour cost pressures.
“That the winter power surcharge is behind us for now, will help greatly towards restoring margin,” Pretorius said
In Zimbabwe, Chizim Gold – DRDGOLD’s joint venture with Zimbabwe-based Chizim Investments – has again increased its number of claims at Leny, on the Zimbabwe Greenstone Belt. These now total 61, covering 602ha.
Five drill holes totalling 1 176m have been completed at Leny, all showing extensive sulphides and mineralisation. When results have been assessed, a second infill drilling programme will be designed to define the orebody, Pretorius said.
Since February this year, Chizim Gold has evaluated six greenfields gold projects in Zimbabwe.
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Many factors could cause the actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, adverse changes or uncertainties in general economic conditions in the markets we serve, a drop in the gold price, a continuing strengthening of the rand against the dollar, regulatory developments adverse to DRDGOLD or difficulties in maintaining necessary licences or other governmental approvals, changes in DRDGOLD's competitive position, changes in business strategy, any major disruption in production at key facilities or adverse changes in foreign exchange rates and various other factors.
These risks include, without limitation, those described in the section entitled "Risk Factors" included in our annual report for the fiscal year ended 30 June 2009, which we filed with the United States Securities and Exchange Commission 27 November 2009 on Form 20-F. You should not place undue reliance on these forward-looking statements, which speak only as of the date thereof. We do not undertake any obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after the date of this report or to the occurrence of unanticipated events.