Commissioning, integration of new Ergo circuit affects operating, financial performance in Q1 FY2014
22 October 2013
Johannesburg, South Africa. 22 October 2013. DRDGOLD Limited (DRDGOLD, JSE, NYSE: DRD) reported today that reduced operating efficiencies due largely to on-going commissioning and integration of the new flotation/fine-grind circuit at the Brakpan plant of its Ergo operation affected the company’s financial performance for the first quarter of FY2014, ended 30 September 2013.
While throughput was “solid”, says DRDGOLD CEO Niël Pretorius – 9% higher at 6 098 000t compared with Q1 FY2013 – and the flotation section of the new circuit performed well, the mills in the fine-grind section were slow to get going.
This created a bottleneck of rich concentrate, resulting in weak gold production – 33 597oz compared with 37 905oz – and high unit costs. All-in sustaining costs were R436 954/kg and the all-in sustaining costs margin was negative at -2% for the first time, since the September 2010 quarter, Pretorius says.
On the financial front, operating profit was down to R72 million due to lower gold production, higher costs and a lower average rand gold price received – R427 604/kg compared with R446 783/kg.
Consequently, earnings before interest, taxes, depreciation and amortisation (EBITDA) declined, and a headline loss of R12.5 million was recorded.
Commenting on the company’s recent wage settlement with the National Union of Mineworkers, Pretorius says that – notwithstanding a two-day strike – the negotiating process was “expeditious and largely constructive”, resulting ultimately in a settlement within budgeted parameters. The industrial action, which was peaceful, is not expected to impact materially on performance in the second quarter.
Looking ahead, Niël Pretorius says that commissioning of the new flotation/fine-grind circuit, as previously reported, will continue in the second quarter, with completion expected by December.
While some impact on production in the second quarter is expected, this should be less substantial than in the first quarter, in part because the performance of the mills has stabilised. In addition, close attention is being paid to other operating parameters – including costs – in order to offset the impact.
- Report to shareholders for the quarter ended 30 September 2013 (PDF - 500KB)
- Presentation: Results for the quarter ended 30 September 2013 (PDF - 1.49MB)
- Webcast: Results presentation
South Africa & North America
James Duncan, Russell and Associates
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Investor and Media Relations
Phil Dexter, St James’s Corporate Services
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For more information, please visit www.drdgold.com
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 2012, which we filed with the United States Securities and Exchange Commission on 26 October 2012 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.