JOHANNESBURG (miningweekly.com) – Despite incurring a 15% increase in total cash operating costs for the six months ended December 31, surface gold miner DRDGold achieved a 1% increase in operating profit to R165.9-million, compared with the R164.1-million recorded for the six months to December 2014.

Speaking at a presentation of DRDGold’s interim results, on Tuesday, CEO Niël Pretorius highlighted that the company had declared an interim dividend of 12c a share.

He said the settling of the operating performance at the company’s Ergo plant, the receipt of most of an outstanding value-added tax (VAT) reimbursement and a strong increase in the rand gold price were factors that contributed to the company declaring the dividend.
 
“Gold production was 1% lower at 72 436 oz, compared with 73 015 oz during the same period last year, as a result of a reduction in overall head grade, lost production owing to unscheduled maintenance at the Knights plant and inventory build-up in five new carbon-in-leach (CIL) tanks, as well as a new high-grade CIL circuit,” Pretorius explained.

However, he said these operational challenges had been offset by an 11% increase in throughput of 12.8-million tons of material, which was an increase from the 12.1-million tons processed in the prior comparable period.

Pretorius added that, towards the latter half of the reporting period, production had increased, reflecting the attainment of the desired 0.03 g/t drop in residue grade from the completed flotation-fine-grind circuit and steady-state operation of the Ergo plant.
 
Meanwhile, CFO Riaan Davel noted that the company’s revenue had increased 11% year-on-year to R1.1-million, mainly as a result of a 12% increase in the average rand gold price received to R491 993/kg, compared with R439 418/kg in the six months to December 2014.
 
He further commented that unit cash operating costs for the six months were 16% higher at R429 271/kg compared with R370 101/kg in the prior comparable period, owing to the combined effect of various factors.

These included lower yield requiring more material to be processed to maintain production, lower production from the Knights plant owing to unscheduled maintenance, increases in wages, averaging 9%, and an 8% increase in the cost of power, as well as the higher cost of various consumables, such as water and reagents.

Pretorius pointed out that, in spite of “the relentless march of inflation” as a result of the weakness of the rand, the overall cost increase of consumables was contained by the company to an average of below 5%.
 
Davel said DRDGold’s cash position remained “favourable”. He added that, at the end of the period under review, there was R254-million in cash and cash equivalents, with operations contributing cash flows before working capital changes of R112-million.

This was after the repayment of the last of the domestic medium-term notes of R22.5-million, payment of a cash dividend of R42.2-million, investment of R60.3-million in additions to property, plant and equipment and the buyback of 3.2-million shares at around R2 a share.
 
DRDGold’s cash balance increased by a further R29.5-million after the end of the reporting period, with receipt, in January, of a late VAT reimbursement, Davel noted.
 
Pretorius said recent improvements in metallurgical efficiency had reduced operational risk and that throughput risk was currently the most likely factor to impact production.

“This risk is managed through continued initiatives to improve management systems and planned maintenance,” he remarked.
 
Pretorius stated that DRDGold had a “substantial gold resource” that offered “significant opportunity” at various head grade and volume configurations.

“We are studying the feasibility of these scenarios with a view to growing our reserves and extending our life-of-mine,” he concluded.