JOHANNESBURG (miningweekly.com) – JSE-and Nasdaq-listed gold miner DRDGold has plunged into a R63,3-million net loss in a September quarter of seismicity, labour and currency hardships.

"There was almost a conspiracy of challenges in the last few months," DRDGold CEO Niel Pretorius said of the company's underground Blyvooruitzicht gold mine.

While he believed that Blyvoor would emerge from its litany problems, Pretorius hinted that Blyvoor could go the same way as East Rand Proprietary Mines (ERPM), which DRDGold has closed: "When ERPM started becoming a risk to the entire group, we closed it."

While closing mines was not a pleasant exercise, ERPM's surface turnaround had been significant.

"If change is necessary, our management team are bold enough to make those changes," Pretorius said.

He said that the company had managed to increase its revenues, contain costs and keep production steady in what were some of the most challenging circumstances ever experienced.

The prospects for ErgoGold, where surface processing is taking place using surface material from ERPM and elsewhere, remained encouraging.

"Hopefully, we will start returning to some of the results that we started getting used to and enjoying earlier this year and during the course of last year," he said.

DRDGold made a R42-million profit in the June quarter.

"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 to do in the future like managing our costs, orebody and people and taking the right decisions when they are needed," Pretorius said.

He hoped to be able to report improvement at ErgoGold, improved recoveries at Blyoor, increased production and improvement in revenues in the December 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 when we don't, notwithstanding our best efforts," he added.

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, reflecting 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 retreatment operation. Underground gold production – for which the underground operations of Blyvoor are now the only source – was 14% lower, which was a consequence of 11 production shifts being lost owing 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 the No 5 Shaft to the western side.

Total revenue for the quarter was 6% higher at R445,2-million, an 8% increase in gold sold off-setting the impact of a 2% drop in the average rand gold price received to R239 098/kg.

Cash operating costs were 3% higher at R434,2-million, owing mainly to power utility Eskom's 32% general tariff increase effective from July 1 and to a provision for wage increases.

Pretorius said that margins, in the face of further electricity price hikes, would remain under pressure until the rand gold price recovered.

In the near term, DRDGold's focus would be the optimisation of the ErgoGold surface retreatment operation and a reduction of Blyvoor's fixed overhead costs through restructuring.

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