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DRDGold claims it will rise from mine-liquidation ashes
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22nd April 2005
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Marginal South African gold-miner DRDGold yesterday said that remedial actions taken during the past quarter, coupled with a continued turnaround at the South African operations' Byvooruitzicht mine, have established a sound platform for the company's recovery and future growth.

Chief executive officer Mark Wellesley-Wood noted that key among these actions was the provisional liquidation of Buffelsfontein Gold Mines and the consequent discontinuation of mining at the North West Operations.

Last month's shutdown of the Buffelsfontein and Hartebeesfontein mines came after a strong rand and low productivity eroded profits at the operations, which recorded a loss of R270-million for the last quarter of 2004 – 75% of the group's total loss for the period.

The group said yesterday that the focus on better production and the liquidation of Buffelsfontein Gold Mines meant that DRDGold reported a 16% decline in gold production, to 187 651 oz (5 836 kg) for the quarter ended March 31.

The effect of the liquidation of Buffelsfontein, Wellesley-Wood said, was to immediately staunch the unsustainable drain on the company's resources, particularly from its offshore operations, in the preceding six months.

As a result of the shutdown of the North West Operations, Wellesley-Wood pointed out that more than 50% of the group's production now comes from the Australasian region – some 319 000 oz/y, opposed to 259 000/y from its South African assets.

However, the majority of DRDGold's reserves and resources remain in South Africa, a fact that demonstrates the group's commitment to the country, Wellesley-Wood added.

Meanwhile, DRDGold will also focus on expanding its reserve base offshore, in a bid to replace mined ounces to beyond 2010.

Other remedial measures during the quarter have included a 30% reduction in DRDGold's corporate headcount, a 50% cut in corporate costs and the sale of the company's Johannesburg corporate office.

Funding for future growth has also been a major focus in the quarter under review, Wellesley-Wood said, with the key contributors being a R180-million share issue and clawback offer and R38-million recovered from JCI and Consolidated African Mines.

Although gold production from the company's Australasian operations was 10% lower, at 79 334 oz (2 467 kg), due mainly to mining and ore treatment difficulties at Porgera and to disappointing results from Emperor, production from the South African operations, excluding the discontinued North West Operations, was slightly higher, at 60 733 oz (1 889 kg).

A 6% increase in gold production at Blyvoor, to 39 995 oz (1 244 kg), reflects both continued application of the new mining plan, together with further throughput improvements achieved at the slimes dam project, the gold producer said in a statement.

Underground gold production was 7% higher, at 33 115 oz (1 030 kg) and surface gold production 4% higher, at 6 880 oz (214 kg).

Development at Blyvoor, focused on 5 and 6 shafts, increased by 76%, to 453 square metres. The mine's productivity, in terms of grams per total employee costed (g/tec), increased by 6%, to 124,75 g/tec.

Wellesley-Wood also revealed that a six-month project is under way to determine the viability of re-establishing mining operations from Blyvoor's 2 shaft sub-shaft, at an estimated capital cost of R50-million ($8-million). If viable, this project could restore the life-of-mine to 20 years.

At the slimes dam project, an investigation is in progress to determine the potential for increasing throughput by 33%, from 240 000 t a month to 320 000 t at an estimated capital cost of R7-million.

Gold production from the 40%-owned Crown Gold Recoveries (CGR) ERPM and Crown surface operations was 4% and 8% lower, respectively.

At ERPM, technical problems - now resolved - led to a 7% decline in underground gold production, to 7 433 oz (231 kg), while gold production from the Cason surface retreatment project was 6% higher, at 2 662 oz (83kg), reflecting a 17% improvement in yield to 0,42 g/t.

“The South African operations are now running at a breakeven situation, meaning the option is 'back in the money'. Our balance sheet health has been restored and this, together with our offshore cash flow, is now available to establish a new platform for growth,” Wellesley-Wood concluded.
Edited by: Martin Czernowalow


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