Medium-sized, unhedged gold-miner DRDGold, which was beginning to enjoy a brief spell of solid profit, plunged back into a R63,3-million loss in the latest reporting quarter – but analysts expect it to come off the canvas as its surface operations emerge from teething problems and its troubled underground operation sees cost reduction.
RBC Capital Markets analysts Yuen Low, Leon Esterhuizen and Arnold van Graan expect the JSE- and Nasdaq-listed DRDGold’s long-standing expertise in surface dump retreatment to pull it through at ErgoGold.
“We also expect Blyvoor to emerge with a much lower cost base after the restructuring process,” the analysts add.
DRDGold made a R42-million profit in the previous quarter and has climestone mill suppliers chinaash on hand, but that cash is fast falling to lower levels.
“There was almost a conspiracy of challenges in the last few months,” DRDGold CEO Niel Pretorius says of the performance of the company’s underground Blyvooruit- zicht gold mine in the first quarter.
While Pretorius also believes that Blyvoor will emerge from its litany of seismic and labour problems, he hints that, if it does not, it could go the way of the East Rand Proprietary Mines’ (ERPM’s) underquarry mine crusher equipment in chinaground operation, should it become a risk to the entire group, and also be closed.
“If change is necessary, our management team are bold enough to make those challenges,” Pretorius assures.
Even in the most challenging of quarters, Pretorius points out that DRDGold managed to increase its revenues, contain costs and keep production steady.
He, too, sees the prospects for ErgoGold remaining encouraging.
“Hopefully, we will start returning to some ofspare parts zenith cone crusher singapore the results that we started getting used to and enjoying earlier this year and during the course of last year,” he says.
“The spirit of our company is still very much alive and, with the same resolve that we resolved crises in the past, we will continue in the future, like managing our costs, orebody and people and taking the right decisions when they are needed,” Pretorius says.
He hopes to be able to report improvement at ErgoGold, better recoveries at Blyoor, increased production and improvement in revenues in the next quarter.
“We don’t hedge; we have full exposure to the gold price. That’s a conscious decision that we took and, as a consequence, sometimes we make lots of money and other times we don’t, not- withstanding our best efforts,” he adds.
DRDGold experienced a 1% September quarter decrease in gold production to 57 292 oz, but an increase in gold from surface sources, which offset the impact of lower underground production.
Gold production from surface sources was 10% higher at 38 870 oz and comprised 68% of the quarter’s total production, and reflected a 181% increase in ounces from ErgoGold; a 6% increase in ounces from Crown; and a 35% increase in ounces from ERPM.
ERPM is currently functioning solely as a surface retreament operation. Underground gold production – for which the underground operations of Blyvoor are now the only source – was 14% lower, a consequence of 11 production shifts being lost due to strike action; the continuing negative impact of high-grade panels damaged by seismicity in June; and a shift in Main reef mining from the eastern side of No 5 Shaft to the western side.
Total revenue for the quarter was 6% higher at R445,2-million, with an 8% increase in gold sold off-setting the impact of a 2% drop to R239 098/kg in the average rand gold price received.
Cash operating costs were 3% higher at R434,2-million, owing mainly to power utility Eskom’s 32% general tariff increase.
To watch a video in which DRDGold CEO Niel Pretorius tells Mining Weekly Online of the challenges that plunged the company into a R63-million loss in the September quarter, click here.