JOHANNESBURG (miningweekly.com) – The high quality of the gold tailings retreatment infrastructure that surface gold mining company DRDGold has acquired on the Far West Rand in partnership with Sibanye-Stillwater is enabling the company to get into production very quickly, DRDGold CEO Niél Pretorius said on Wednesday.
Speaking in a video conference call from New York, Pretorius said the securing of long lead items well in advance had enabled DRDGold to hit the ground running at what has been renamed the Far West Gold Recoveries Project. (Also watch attached Creamer Media video).
The first gold pour is scheduled for the first quarter of next year, Pretorius told investors, analysts and journalists at the company’s presentation of 10% higher gold production to 150 000 oz in the 12 months to June 30 and the generation of R93.4-million worth of free cash flow.
DRDGold, which has its main base on the East Rand at Ergo, has been in the saddle on the Far West Rand since the start of last month, increasing its accessible, on-surface gold reserves by a high 82% to nearly six-million ounces of gold with yields anticipated to be 25% higher than those on the East Rand.
There is no waiting for a large and expensive tailing treatment plant and deposition facility to be built at this “nicely concentrated” Far West Rand gold recovery area, which is providing optionality at relatively modest capital cost.
The company has secured a R300-million revolving credit facility for Phase 1 and expects self-generated cash flow to help it along the way.
“We’re not locking ourselves up into one specific model here,” Pretorius said.
Reclamation from the Driefontein 3 and Driefontein 5 tailings dams, which are referred to as the first phase of the Far West Gold Recoveries operations, has a 12-year life.
DRDGold has also undertaken to look into the incorporation of that footprint into a far larger one, which will be the subject of a two-year study from when production begins in the first quarter of next year and which could mean a far longer life-of-mine.
“There is a 15-year model and then also an 18-year to 20-year model,” he told Mining Weekly Online.
Although the current focus is on assets the company has acquired, there are very many dumps in the area not owned by DRDGold.
Many of those are attractive dumps, taking in the Western Deep Levels belt, the Driefontein-Kloof belt.
“Those were spectacularly rich reefs and the gold content in those tailings dams is good and they’d feel comfortable in our portfolio, there’s no doubt about that, and if you could add a few hundred million more tonnes, it just makes your model for a larger plant so much easier because the hurdle rate drops. The opportunity will certainly present itself,” Pretorius forecast.
However, one of the key considerations of the company is net cash flow per share and it believes in a conservative approach.
“Net cash flow per share is what you can use to buy bread and milk with. You can’t buy milk with a fair value adjustment or a ‘deferred’ whatever you want to call it. Cash is something you can apply to build infrastructure. This is not a runaway growth story. We want to stay committed to our core philosophy of real actual value and that there is underlying value that supports the business.
“So, yes there’ll be plenty of opportunities and we’ll look at those opportunities with an open mind and we’ll want to participate with those that share our value system and our commitment to dealing with these things responsibly,” Pretorius said in response to Mining Weekly Online.
DRDGold CFO Riaan Davel reported a 10% increase in gold production, which benefitted from high-grade sand material reporting to DRDGold’s Knights plant, providing an important gold output uplift by increasing the yield “quite handsomely”.
The Johannesburg- and New York-listed company, which saw its share price rise by 6.09% in early morning trade, chalked up a 38%-higher operating profit to R355.2-million in the period, when it generated a free cash flow generation of R93.4-million compared with a negative cash flow of R45.1-million in the previous financial year.