JOHANNESBURG (miningweekly.com) – Low-cost gold production from surface material was starting to fill the gap left by the closure of the high-cost East Rand Proprietary Mines (ERPM) underground operation, DRDGold CEO Niël Pretorius said on Friday.

The company had R545-million in cash or cash equivalents and had maintained a strong balance sheet, DRDGold CFO Craig Barnes reported, adding that most of the cash was at the level of DRDGold, which had a large assessed loss.

DRDGold’s shares rose 3,5% on the JSE on Friday to close at R6,55 a share.

Pretorius told Mining Weekly Online that, by September, the gap left by ERPM’s underground closure would not only be completely erased but in fact overtaken when the now 100%-owned ErgoGold achieved steady state production at a targeted rate of 6 400 oz/m of gold.

“Obviously, those ounces will come at a considerably lower cost per unit,” Pretorius said.

Pretorius said that September would be an important date from which to platform the company towards more ambitious growth as its current ownership of the entire East Rand and Central Rand surface gold circuit, as well as the rights attached to that circuit, provided the company with the opportunity to “think a little wider” and to exploit synergies.

The potential 20 000 oz a quarter from a steady state ErgoGold would combine the current 32 000 oz a quarter from DRDGold’s Blyvoor underground operation and 20 000 oz a quarter from Crown to total 72 000 oz a quarter, more than one half of it from low-cost surface material.

The company’s output in the March quarter was only 58 997 oz, down 2% on the December quarter.

Pretorius said that the quarter to March 31 would also be the company’s last high capital-expenditure quarter for some time.

With the shift towards surface production, the company’s stay-in-business capital would be significantly lower going forward, he added.

Pretorius said that the Top Star dump, now being mined, was living up to expectations.

While it had been modelled on 0,7 g/t gold, Top Star was achieving a higher 0,9 g/t gold.

“It’s a significant contributor to bottom-line earnings in the group,” he said.

Throughput at Crown and City Deep would be maintained at 400 000 t/m at least for the next six months, with ErgoGold coming in at 1,2-million tons a month, with the possibility of an envisaged second circuit doubling that throughput.

Pretorius told Mining Weekly Online that the company had access to surface material that could feed the plant for a “very, very long time”, the Elsburg tailings complex alone having sufficient material for 12 years.

Crown, which processes surface material, produced a R79-million cash-operating profit for the quarter with costs of $529/oz, and the mainly underground Blyvoor produced a R90-million cash-operating profit for the quarter with costs of $630/oz.

Barnes reported a 13% increase in gold revenue to R536-million, against 5%-lower net operating costs of R406-million – largely as a result of ERPM’s closure – providing a 38% increase in operating profit of close to R130-million.

Before-tax quarterly profit was up 51% to R95-million from R65-million in the previous quarter and net profit was up 30% at R43,5-million.

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