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SURFACE OPERATIONS DELIVER 37% MARGIN; 42% INCREASE IN NET PROFIT; 44% INCREASE IN HEPS

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Published: Tuesday, 19 April 2011 02:00

Johannesburg, South Africa. 19 April, 2011. DRDGOLD Limited (JSE: DRD; NASDAQ: DROOY) today reported a 42% increase in net profit to R59.1 million and a 44% increase in headline earnings per share to 12.5 South African cents for the quarter ended 31 March 2011.

Lower deferred taxation R5,5 million compared with the previous quarters R34.3 million offset the impact on the Groups bottom line of a 3% decline in gold production to 67 387oz and a 5% increase in cash operating costs to R241 563/kg.

Lower production and higher costs reduced operating profit by 4% to R145.1 million, notwithstanding a 3% increase in the average Rand gold price received to R312 913/kg.

The Group's top performer for the quarter was the Ergo surface retreatment operation which increased gold production by 8% to 12 506oz and reduced cash operating costs by 6% to deliver a 40% increase in cash operating profit to R48.5 million.

At the Group's other surface retreatment-only operation, Crown, gold production was lower as recovery of the Top Star dump in Johannesburgs CBD starts to wind down, costs were higher and cash operating profit lower.

However, Ergo, Crown and the Blyvoor surface operation collectively delivered a 37% margin for the quarter.

Blyvoor as a whole reported lower production, higher costs and a reduction in cash operating profit, primarily reflecting lower production from the underground operation. This was due to time taken to re-establish safety and environment standards following the Christmas break; safety precautions taken to manage around increased seismicity during March; and a one-day shut-down in memory of eight workers who died in a bus accident on 18 March.

DRDGOLD CEO Niël Pretorius said that, further to its announcement at the end of the December quarter regarding the separation of assets, the Board of Directors have concluded that Blyvoor no longer fits DRDGOLDs core strategic focus and that its majority shareholding in Blyvoor should be offered for sale. Royal Bank of Canada and Beijing Axis have been appointed to advise on the disposal of the Blyvoor interest.

Pretorius said that the Board has approved a R37 million, three-year exploration project relating to the ERPM Extension 1 and 2 exploration tenements in order to further define the estimated resource of 18 million ounces.

Operationally, DRDGOLDs focus will remain the construction of the Crown/Ergo pipeline and the Ergo plant upgrade, Pretorius said.

Also, in the coming months, decommissioning of the Top Star site will begin, with reclamation starting from two other sites. Work on the integration of the Crown Central and City deep plants into Ergo will also get under way.