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Fragile gold prices swing Goldplat to H1 loss

Fragile gold prices swing Goldplat to H1 loss

Photo by Bloomberg

10th March 2014

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) – Weakened gold prices in the latter half of 2013 dampened London-listed gold miner Goldplat’s first-half results, swinging the company to an operating loss of £694 000 for the six months ended December 31, from a profit of £2.05-million for the first half of the prior fiscal year.

“This has been a difficult period for the company as we have adapted to the substantial reduction in the gold price experienced during the period under review.

“Goldplat's income is dominated by the sale of gold and the gold price for the six months ended December 31, 2012, while the price averaged some $1 300/oz for the period under review.

“It follows that the same volume of gold sales would result in income of some $300/oz less than for the 2013 financial year,” Goldplat chairperson Brian Moritz said in a results statement on Monday.

He noted, however, that the second half of the year was “already performing more strongly” and, in line with market expectations, the company was expected to return to profitability by year-end. 

Revenue for the period decreased from £15.5-million in the six months ended December 31, 2012, to £9.6-million, which swung the miner to a loss for the period of £912 000.

Goldplat posted a loss a share of £0.54 for the six months.

The bulk of external revenue came from the group’s recovery operations, which posted total revenues of £9.4-million, while mining and exploration activities contributed £271 000 to overall earnings.

GOLD RECOVERY OPERATIONS

Goldplat Recovery South Africa (GPL), which recovered gold from by-products of the mining process, such as woodchips, mill liners, fine carbon, slags, sludges and waste grease, was over the period accredited as a responsible gold depositor, in line with international guidelines.

The company previously announced the implementation of a number of changes at GPL, focusing on adapting the recovery operation to the currently suppressed gold price environment. 

“To assist in mitigating the decrease in the gold price and boosting operating margins, we have focused on revising our by-product procurement contracts and cancelling lower-grade by-product contracts with existing suppliers. 

“Additionally, as previously announced, we have agreed to buy cyanide direct from local suppliers in liquid form, rather than import [it] in briquette form, and to automate the dosing system to reduce costs,” Moritz said.

Since October, the company achieved “major” cost-savings in cyanide consumption and would further increase these savings by converting the plant to liquid cyanide supply during the first half of the year. 

GPL was also expected to improve margins and increase overall yield in future.

“We are also looking to increase our by-product processing throughput at GPL to help increase production. In line with this, small sections of the plant, previously run on a single shift system for security reasons, will be run on 24-hour shifts to increase production and additional security measures will be taken. This will be effective from April,” Moritz commented.

Meanwhile, to provide a source of high-grade material for processing at Goldplat’s main plant, in Benoni, the company had obtained the right to mine ore from Central Rand Gold's Crown East No 4 shaft.

Mining was undertaken by a third-party contractor.

Moritz said the small-scale operation operated profitably for the period under review and the company intended to continue the development and “opening up” of this project.

“This constant investment in our recovery operations underpins our commitment to ensuring that we maintain a competitive service offering and stronghold on gold recovery in the area at GPL,” he said.

Meanwhile, Goldplat’s Gold Recovery Ghana (GRG) operation, which would enjoy a tax-free status until 2016, benefitted from a reduction in the value of the Ghana cedi, which helped to offset the lower gold price environment, but still sustained marginal pressures, which impacted profitability during the first half of 2014.

The operation experienced difficulties in procuring tailings at a commercial rate from artisanal and small-scale miners over the period, owing to high material prices and an increase in transport costs.  

“However, we introduced measures to mitigate these factors by sourcing higher-grade material closer to miner Endeavour's Nzema plant to reduce the transport costs and [engaged] with the Ghana Small-Scale Mining Association to assist in our procurement programme and ensure that acceptable practices are adhered to,” Moritz noted.

The Ghanaian government had also acted to curtail unlawful trading activities over the period. 

Moritz added that, while challenges remained, procurement prices had substantially improved and tonnage production had increased, which was expected to “significantly” enhance trading in the second half of the financial year.

GRG's second profit centre, the carbon-in-leach (CIL) section at Tema, struggled with margin pressures after the initial decision to close the CIL section in 2013.

However, the operation had now started to retreat the tailings dam on site through the CIL circuit and was currently running at a profit.

MINING AND EXPLORATION

Following a 2013 strategic review in which Goldplat's main value drivers, growth potential and centres of profitability were analysed, the company deprioritised its exploration and development assets to stem losses and focus in the near-term on growing its cash-generative, niche gold recovery business.

The company was continuing to evaluate opportunities at its two greenfield gold exploration projects, which included the 29 km2  Anumso gold exploration licence, in Ghana, and the 246 km2 Nyieme project, in southern Burkina Faso, to realise value or monetise these projects either through joint ventures or trade sales.

Goldplat's wholly owned Kilimapesa gold mine, in western Kenya, currently operated at reduced levels to defray costs but continued to suffer losses, albeit at a reduced rate.

Moritz noted that the board was currently evaluating its options regarding the future of Kilimapesa.

“New Kenyan legislation, which is expected to be published soon, will clarify rules for local participation. A recovery plan, which takes into account the expected local participation rules, has been submitted to the government.  

“[As such], we are talking to potential joint venture partners to carry the capital costs for expansion. The government has been supportive and willing to assist in this process,” he said.

PROSPECTS

In line with Goldplat’s longer-term growth strategy, the miner continued to evaluate opportunities for expanding its gold recovery operations in Africa and, more specifically, in Burkina Faso, but remained focused in the near term on the operational profitability and success of its South African and Ghanaian operations.

“We are also reviewing different options to monetise our gold exploration and development mining assets in Kenya, Ghana and Burkina Faso, be it through sale, development or joint venture opportunities,” he concluded.

Goldplat declared a dividend for the period of 0.12p a share.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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