In the media

DRDGOLD profits up

[iol.co.za] -- DRDGOLD on Monday reported a 115% increase in its full year headline earnings per share as the company delivered on its strategic objectives to reduce risk, manage costs and to increase its margin.

DRDGOLD (DRD) on Monday reported a 115% increase in its full year headline earnings per share as the company delivered on its strategic objectives to reduce risk, manage costs and to increase its margin.

Headline earnings per share for the 12 months to end June 2011 were 28 cents, compared to 13 cents the year before, and gold production grew 10% to 265,179 ounces from 241,194 ounces in the year to end June 2010.

The increase in production reflected continued recovery of the underground circuit of the Blyvooruitzicht Gold Mining Company (Blyvoor) from the negative impact of seismicity-induced damage to high-grade production areas at No 5 Shaft and continued bedding down of the Ergo surface retreatment circuit.

Revenue for the year increased by 29% to 2.57 billion rand from 1.99 billion rand the previous year, reflecting higher gold production and a 15% increase in the average Rand gold price received to 308,221 rand/kg from 267,292 rand/kg.

Cash operating unit costs for the year were 8% higher at 251,296 rand/kg, compared to 233,122 rand/kg due primarily to electricity price increases and higher winter tariffs imposed by power utility Eskom.

Operating profit was 76% higher at 477.0 million rand, against 271.6 million rand last year but an impairment on the Blyvoor assets resulted in the company reporting a full year loss of 415.4 million rand. This compares to a full year profit of 203.3 million rand last year.

The company declared a dividend of 7.5 cents a share - its fourth dividend in a row - which is up 50% from the previous year.

“I have always believed that the true measure of the health of a business is its net cash flow. This year our company generated net cash of 323.9 million rand from operations, up 504% from last year,” said DRDGOLD CEO Niël Pretorius.

Gold production from mechanised 24/7 recycling circuits comprised 66% of production and Pretorius said the company also gave credence to earlier statements that its underground operation is a ring-fenced risk, when it suspended financial assistance to Blyvoor in June.

Blyvoor, the last deep-level mining operation within DRDgold’s portfolio, has been fully impaired to the tune of 547.7 million rand in the year under review.

Total gold production for the quarter to the end of June 2011 was 2% higher at 63,079 ounces as a result of strong performances by the Blyvoor surface retreatment circuit and the Ergo circuit offsetting the impact of lower production from the Blyvoor underground and Crown circuits.

Revenue for the quarter was 21% higher at 630.2 million rand with cash operating unit costs 15% higher at 280,240 rand/kg than the same quarter a year ago.

Operating profit was 21% higher at 111.0 million rand and headline earnings per share were 67% lower at 8 cents. This drop in headline earnings was mainly due to the Blyvoor impairment.

Looking ahead, Pretorius said the company intended to further grow surface recovery exposure while phasing out its deep level underground mining operation.

“Responsible growth means that our internal growth will be focused on organic business enhancement with near term payback. External growth will remain focused on exploration opportunities in Zimbabwe, and possibly Mozambique,” he said.

At Blyvoor the business rescue practitioner is preparing a business plan that will facilitate divestiture on appropriate terms. Pretorius said it is the company’s objective to have certainty on a new Blyvoor structure by the end of this calendar year.