Ergo production improvement continues; next chapter of growth gets under way
26 April 2012
Johannesburg, South Africa. 26 April 2012. DRDGOLD Limited (DRDGOLD; JSE, NYSE: DRD) today reported a 3% increase in gold production to 34 947oz from its newly consolidated Ergo and Crown surface retreatment operations for the quarter ended 31 March 2012, resulting in an operating profit of R162.2 million.
Ergo's cash operating costs were contained to a 1% increase at R267 044/kg.
CEO Niël Pretorius says Ergo's improved production performance is particularly pleasing as it was achieved notwithstanding various ongoing, potentially disruptive events completion of the 50–kilometre Crown/Ergo pipeline; upgrading of Ergo's Brakpan plant; de–commissioning of two reclamation sites and commissioning of two new sites; and the phasing out of production at both the Crown and City Deep plants.
Pretorius points out that the R300–million capital investment in the Crown/Ergo pipeline to consolidate the Ergo and Crown operations was achieved without any dilution to shareholders.
“In fact, we repurchased 5.4 million shares on the open market during February and March 2012, which we hold in treasury to offset the potential dilution of employees exercising share options,” Pretorius says.
Looking ahead to the “next chapter” of Ergo's growth and development, Pretorius says construction has begun on a R250 million flotation/fine–grind circuit at the Brakpan plant, which is expected to increase gold production by 16 to 20%.
“We ended the quarter with cash and cash equivalents of R379.8 million and therefore believe we can also implement this project without any dilution to shareholders,” he says.
The flotation/fine–grind circuit may also bring uranium recovery within Ergo's reach and effect a by–product credit reduction in gold production costs of between 5 and 8%, Pretorius says, assuming production of 11tpm and a uranium spot price of US$50/lb.
A feasibility study is under way to verify these assumptions and, amongst other things, the estimated capital cost of R150 million.
“While all of this is happening, we will continue to work on optimizing our gold circuit in pursuit of our objective to produce between 140 00 and 150 000oz a year at a cash cost of R260000–270 000/kg or US$1 000–1 100/oz, and with maintenance capital of about R11 000/kg or US$42/oz,” Pretorius says.
The disposal of DRDGOLD's 74% interest in Blyvooruitzicht Gold Mining company Limited (Blyvoor) to Village Main Reef Limited continued during the quarter.
South Africa & North America
James Duncan, Russell & Associates
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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 sustained strengthening of the Rand against the Dollar, regulatory developments adverse to DRDGOLD or difficulties in maintaining necessary licenses 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 2011, which we filed with the United States Securities and Exchange Commission on 28 October 2011 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. Any forward-looking statement included in this report have not been reviewed and reported on by DRDGOLD's auditors.