In the media

DRDGOLD studies long-term ERPM expansion, but for now retrenchments loom

[Miningweekly] - Interview with Niel Pretorius
Despite the woes experienced by JSE-listed DRDGOLD at its East Rand Proprietary Mines (ERPM) operation, the company remained convinced of the attractiveness of the resource, and had initiated a pre-feasibility study investigating the re-engineering of underground infrastructure at the mine, which would allow for underground expansion.

Mining Weekly interview with Niel Pretorius

Despite the woes experienced by JSE-listed DRDGOLD at its East Rand Proprietary Mines (ERPM) operation, the company remained convinced of the attractiveness of the resource, and had initiated a pre-feasibility study investigating the re-engineering of underground infrastructure at the mine, which would allow for underground expansion.

Production at ERPM declined 21% in the March quarter to 17 362 oz, compared with 22 089 oz in the preceding December quarter. The grade of ore mined decreased by 34%.

Underground seismicity became a worry for the mine, and a rock engineer advised the company to stop mining lower grade ores because of the high strain on infrastructure.

“There is nothing wrong with the ore body [at ERPM], it’s just that the ore body and the layout at this point in time are not a happy combination. So a re-engineered layout, which could enhance the value capacity of ERPM, would turn it into something very similar to Blyvoor - but that is a long-term process,” DRDGOLD SA MD Niel Pretorius told Mining Weekly Online.

DRDGOLD was likely to take a firm decision on the future of the ERPM underground operation by December 2008, once the relevant studies had been completed. Management would need to be convinced that it could retrieve ore with a grade of 6,5 g/t through redesign of the infrastructure, before it would embark on the underground expansion.

“Ultimately the ore body dictates, and we need to make sure that the ore body does in fact have the capacity to deliver into the capex requirement - that whether the new re-engineered layout would give us the result that we are looking at,” Pretorius added.

Re-engineering of the underground operations was a long-term strategy potential, but in the immediate situation, the mine would seek to drop costs by R4-million a month, which could possibly lead to the retrenchment of some 400 mineworkers.

“We are also looking at ways and means we can avoid retrenchments, by redeploying them [mineworkers] into what we refer to as old gold, which is basically vamping and sweeping old mined out areas. There is a lot of free gold in the old ERPM, and that could give jobs to about 50 to 75 people. We are also cutting back on contractor mining,” Pretorius said in an interview.

Those that could not be accommodated by way of alternative employment, would be paid a reasonable retrenchment package, he added.

“We will try and equip them for life after mining by way of skills training. Our arrangement with the union, its an arrangement that we have had in the past and I’m pretty certain that we would have a similar arrangement, is that if positions do open up for ERPM going forward, then our old employees would have the first call,” he said.

DRDGOLD indicated a target period of 18 months to ensure stability at its underground mines, which meant that it invested in infrastructure to drive efficiencies and reduce volatilities in production.

"ERPM is valuable not only from the perspective of gold production - ERPM owns the dumps that are going to be treated at the Ergo project. The first 12 years of gold production really is an ERPM resource.

“All of the surface rights, and all of the servitudes to link up the central rand with the far east rand where the Ergo footprint is, most of those, and the most important ones run through ERPM land, so obviously we want to keep the land and maintain those surface right permits, and also ERPM has access to water,” said Pretorius.

“So by replicating the structure that we have in the west rand, with the extraction of mine water, we could supply water into our future surface operations’ needs, so it has significant strategic value to us,” he said.

While the water was viewed as an asset for the future, the company was spending about R2,5-million a month on pumping costs, which were vital to maintain the level of the Wits basin, and prevent acid mine drainage in the entire region. DRDGOLD was receiving a subsidy from the government for pumping, as it was a regional imperative, and this amounted to about R1,5-million a month.