JOHANNESBURG (miningweekly.com) – South African gold miner DRDGold said the consolidation of its Crown and Ergo circuits improved operating efficiencies and enhanced its competitive advantage in accessing and treating tailings material in the Johannesburg area.
The company completed the R300-million construction project of the 50 km pipeline that linked the Crown Central footprint, in Roodepoort, to Ergo’s Brakpan plant earlier this month.
“The consolidation allows for lowered safety risk and therefore, decreases chances of production disruptions and increases efficiency,” CEO Niël Pretorius said at DRDGold’s third-quarter results presentation.
For the March quarter, the company reported a 3% increase in gold production from its newly consolidated surface retreatment operations, now known as Ergo.
Output at Ergo grew from 33 984 oz in the December quarter to 34 947 oz in the March quarter, while DRDGold’s total gold production for the March quarter was 60 893 oz.
Operating profit for the period was R220.9-million, which consisted of R162.2-million generated by the consolidated Ergo and R58.7-million from DRDGold’s Blyvooruitzicht Mining Company (Blyvoor), which it is selling. This compared with the total operating profit of R145.1-million recorded in the previous corresponding period.
Total net cash inflow grew by 18% to R141.5-million, up from R120.4-million in the corresponding 2011 quarter.
Revenue was up by 22% from R655-million in the 2011 March quarter to R798.2-million owing to higher gold prices.
Ergo’s operating costs were contained to a 1% increase at R267 044/kg.
Pretorius said Ergo’s improved production performance was particularly pleasing, as it was achieved amid various ongoing and potentially disruptive events over the 12 months preceding the end of the quarter.
This included the completion of the Crown/Ergo pipeline, the upgrading of the Ergo plant to receive 1.8-million tons of material a month, the decommissioning of two reclamation sites, the commissioning of two new sites and the phasing out of production at the Crown and City Deep plants.
Pretorius pointed out that the capital investment in the Crown/Ergo pipeline was achieved without any dilution to shareholders.
“We purchased 5.4-million shares on the open market during February and March, which we hold in treasury to offset the potential dilution of employees exercising share options,” he said.
Looking ahead, Pretorius stated that construction of a R250-million flotation/fine-grind circuit at Ergo’s Brakpan plant had started and was expected to increase gold production by between 16% and 20% by optimising its 11-million ounce surface resource.
The circuit would be used for about 30% of the gold DRDGold produced that did not respond to its metallurgical processes.
“We ended the quarter with cash and cash equivalents of R379.8-million and therefore believe we can also implement this project without any dilution to shareholders,” he assured.
The circuit is expected to reach full tonnage capacity in August next year.
The flotation/fine-grind circuit would also bring uranium recovery within Ergo’s reach and effect a by-product credit reduction in gold production costs of between 5% and 8%, assuming production of 11 t/m and a uranium spot price of $50/lb.
The flotation fine-grind process is amenable to the addition of resin-in-pulp technology to extract uranium. A feasibility study was under way to verify these assumptions, including the estimated capital cost of between R150-million and R200-million.
The disposal of DRDGold’s 74% interest in Blyvoor to Village Main Reef continued during the quarter. The disposal of DRDGold’s loans to Blyvoor and transfer of control to Village were expected to be completed by May, while the disposal of its ordinary shares in Blyvoor would be closed on February 11, 2014.
Pretorius said in the meantime, DRDGold would continue to work on optimising its gold circuit in pursuit of its objective to produce between 140 000 oz/y and 150 000 oz/y at a cash cost of R260 000/kg to R270 00/kg or $1 000/oz to $1 100/oz. This included a maintenance capital of about R11 000/kg or $42/oz.
Looking at the next quarter, DRDGold CFO Craig Barnes said that the 16% hike in electricity prices that State-owned power utility Eskom would impose in April, as well as winter power tariffs, would impact the company’s results in terms of profit and operational costs.