Lower gold production due to power outages; but new project off to “flying start”
13 February 2019
Johannesburg, South Africa. 13 February 2019. DRDGOLD Limited (DRDGOLD; JSE, NYSE: DRD) says it lost around 49kg of gold production in the first half of FY2019 as a direct consequence of power supply disruptions.
Reporting on the operating and financial results for the six months ended 31 December 2018, CEO Niël Pretorius says that while the company avoided the labour- and safety-related issues impacting other producers, it was not spared the challenges of distressed power utility Eskom.
Although the first phase of the new Far West Gold Recoveries (FWGR) project got off to a “flying start” during the six months, overall gold production was down 3% at 2 280kg, reflecting a 2% decline in overall throughput to 12 004 000t and a 0.001g/t decline in the overall average yield to 0.190g/t.
At FWGR, where commissioning began early in December 2018 – just four months from the start of construction – throughput was 140 000t at 0.314g/t but at Ergo throughput was down 3% to 11 864 000t due to power outages experienced over 11 days during the second quarter of FY2019.
Internal back-up generation capacity assisted in getting production going immediately after power was restored, containing losses to an extent, Pretorius says.
While a higher Rand gold price received helped to offset the impact of lower gold production and sales, resulting in total revenue being virtually unchanged at R1 252.5 million, total cash operating costs were 9% higher at R1 168.8 million, leaving operating profit 54% down at R102.2 million.
Pretorius says Ergo’s three new projects have all been implemented successfully.
Reclamation of the 4L50 dump is fully operational; conversion of the Brakpan plant from elution to zinc precipitation is resulting in the expected improvement in efficiencies; and the two ball mills relocated to Brakpan from the Crown plant have been commissioned, allowing for the retreatment of higher-grade sand reserves.
At FWGR Phase 1, the Driefontein 5 reclamation site has been fully commissioned; refurbishment of the Driefontein 2 plant was completed at the end of January 2019; and the upgrading of the Driefontein 4 tailings dam is on track for completion by the end of March 2019.
Looking ahead, Pretorius says all indications are that FWGR Phase 1 will be fully commissioned during the first half of calendar 2019 with the benefit of its contribution showing in the second half of the financial year. The group’s guidance for FY2019 has been revised, to between 157 000 and 165 000 ounces, at a cash operating cost of approximately R500 000/kg.
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Forward looking Statements
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 2018, which we filed with the United States Securities and Exchange Commission on 31 October 2018 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 statements included in this release have not been reviewed and reported on by DRDGOLD’s auditors.