JOHANNESBURG (miningweekly.com) – The once thriving Ergo gold recovery plant on Gauteng’s East Rand will be turned into a massive real-time research centre in the three months to December as DRDGold strives to reboot its faltering new flotation/fine grind (FFG) circuit, which has caused gold output to nosedive instead of shoot up.

The Johannesburg- and New York-listed DRDGold is holding thumbs for good news by Christmas but should the new technology continue to cause metallurgical instability and carbon inefficiencies downstream in the existing carbon-in-leach (CIL) circuit low-grade section, the company will move into a five-to-six-year closure mode instead of having 15 to 20 more years of operation, DRDGold CEO Niël Pretorius told analysts and journalists on Wednesday when the company presented a harrowing set of March quarter results, which saw it plunge into a R36-million pretax loss on abysmal production and soaring all-in sustaining costs. (Also watch attached video)

Since DRDGold commissioned the new high grade, carbon-in-pulp section, it has veered off steady state and seen its share price more than halve to 315c a share at 15.00 on Wednesday.

The one-time reputed world leader in surface gold tailings retreatment was forced to suspend the recently constructed high-grade section of its faltering FFG circuit on April 4 in order to determine the cause of the metallurgical problems.

Instead of increasing recoveries by 15% to 20%, incessant rains during February and March and surges, dips and interruptions in the power supply dragged headline earnings of 14c a share a year ago down to a 7c a share loss in the third-quarter of the company’s financial year to the end of March.

“We wanted to be doing our victory lap at this stage but instead of doing that victory lap and waving to the crowd, we are having to deal with hard reality, ” Pretorius told Mining Weekly Online.

The company sees itself as a technology-driven business that processes into profit gold-bearing tailings that others have dumped.

But in order to exploit its 11-million-ounce resource to its full extent, the company budgeted R250-million for the refurbishing of its float circuit to receive 1.8-million tons of material a month and the building of a fine-grind mill to liberate gold in the pyrite floated out and allow it to respond to the company’s metallurgical process.

But while the float circuit and the mills meet the target of freeing an additional 0.03 g/t of material entering the plant, or 30 particles per billion, the integration of the float tail and the high-grade tail into the lower-grade CIL turned out to be hugely problematic.

Unabating rain on its reclamation sites threw the water balance out of kilter, which, in turn, impacted on carbon efficiencies and thickener performance.

Drain valves have had to be installed to prevent silting up of the float cells during power fluctuations, as well as auxiliary power units to thickener underflow pumps to prevent silting up of thickeners during electricity trip-outs.

“We’ve had a dreadful quarter,” said Pretorius, who is taking a series of remedial measures and a restarting of the technology on a third of the FFG will only begin after the winter electricity tariff period ends in September.

Tests will endure for at least three months to fix the level of confidence. As the process cannot be simulated, Ergo will become “a massive research facility”, with nothing being rushed into as happened the first time around.

“Hopefully by Christmas, we will be able to buy ourselves a nice little congratulatory Christmas present because the new technology is working as well as it is supposed to work,” said Pretorius.

Gold produced and sold quarter-on-quarter was 14% lower at 30 126 oz.

“We remain firmly of the view that the difficult part of the project is behind us,” said Pretorius of the problems the company has been experiencing at the Brakpan gold-from-slime plant, where the average yield was 13% down at 0.161 g/t in the quarter, even though throughput was only marginally lower at 5 823 000 t (5 856 000 t),

Lower gold production led to a 25% increase in cash operating unit costs to R413 562/kg and all-in sustaining costs soared 24% to R463 823/kg.

Capital expenditure was 51% lower owing to the completion of the FFG circuit, allowing the treasury balance to improve 3%, quarter-on-quarter.

Financial review revenue was down 5% to R427.4-million, the lower gold sales offset by a 10% increase in the average rand gold price to R456 161/kg.

Operating profit was 39% lower at R51.3-million on a 3% rise in net operating costs to R376.1-million.

The cash operating margin weakened to 9% from 20%, and the all-in sustaining costs margin was -2% compared with 9% in the previous quarter.

Cash and cash equivalents rose from R199-million to R207-million.

In the first nine months of the 2014 financial year the average yield was 0.173 g/t, resulting in gold production declining by 11% to 98 766 oz.

Nine-months earnings declined from R401.3-million to R89.9-million and a headline loss of 10c a share was recorded compared with earnings of 59c a share.

“The flotation circuit and the mill's work, and our theory that we can isolate the gold-bearing pyrites, and grind them down to liberate the gold they shield, have been proven in practice.

“Our focus and efforts, therefore, remain to find a way to take advantage of this technology without compromising the ‘bread-and-butter’ part of the operations,” said Pretorius.

“Because of the very high confidence threshold that we are demanding before we will again expose the low-grade circuit to the FFG and high grade circuit process, we have decided that, rather than work towards a date, we will work towards an outcome,” he added.