FFG circuit optimisation continues amid power supply challenges
Johannesburg, South Africa. Thursday, 19 February 2015. DRDGOLD Limited (DRDGOLD; JSE, NYSE: DRD) has reported a 6% increase in gold production to 73 015oz for the first half of FY2015 compared with the first half of FY2014.
CEO Niël Pretorius, in the company’s report to shareholders for the quarter and six months ended 31 December 2014, attributes the increase to a 9% improvement in the average yield to 0.196g/t.
This reflected a restoration of metallurgical efficiencies and operating business improvements following the temporary suspension of the Ergo plant’s new flotation/fine-grind (FFG) circuit in April 2014.
Throughput for the six months under review was 3% lower at 11 591 000t due mainly to heavy summer rainfall and load-shedding by power utility Eskom experienced during the second quarter.
Test work on the FFG circuit during the second quarter, which involved running one of the circuit’s three streams, had no adverse impact on gold production. Valuable data was obtained from the test work, which informed ways to optimise the FFG circuit’s performance, and the circuit’s other two streams were re-started during January 2015.
Eskom’s load-shedding over a period of five days in December caused a loss of 67 hours of production. Subsequently, agreement has been reached with the power utility in terms of which electricity consumption is reduced during load-shedding. This makes for uninterrupted tonnage throughput, although recoveries may be lower.
Various other measures in place to deal with power interruptions have been put to the test several times during the last few months, have performed to specification, and in each instance full production was resumed without delay.
Cash operating costs for the six-month period were 5% higher at R370 101/kg, a consequence of additional costs associated with the running of one stream of the FFG circuit and the processing of sand material at the City Deep plant, and of general inflationary increases averaging 8.3% year-on-year.
Higher gold production and gold sold, together with a stronger average Rand gold price received, drove revenue 9% higher to R1 015.5 million and, notwithstanding increased total cash operating costs, operating profit rose by 5% to R164.1 million.
Noting an unrestricted cash balance of R228.4 million, Pretorius says the DRDGOLD board had decided not to declare an interim dividend but rather to seek early redemption of the remaining balance of some R77 million still owing on the company’s Domestic Medium Term Note Programme. This would represent the final payment of the notes, which were used to finance capital expenditure.
Looking ahead at operations, Pretorius says the company’s near-term focus will be to optimise the FFG circuit amidst the new challenge of intermittent power supply.
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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 integrated report for the fiscal year ended 30 June 2014, which we filed with the United States Securities and Exchange Commission on 31 October 2014 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 report have not been reviewed and reported on by DRDGOLD’s auditors.