JOHANNESBURG (miningweekly.com) – Many South African gold mines would find themselves in distress unless the rand gold price increased significantly, DRDGold CEO Niël Pretorius said on Friday.

Pretorius, who reported an 11% increase in cash operating profit in the March quarter to R96,9-million mainly from surface operations, said in reply to JP Morgan Cazenove mining analyst Allan Cooke that the JSE- and Nasdaq-listed-listed DRDGold itself was at a crossroads as far as the company's own Blyvooruitzicht (Blyvoor) underground gold mine was concerned.

While Blyvoor had just emerged from a successful period of judicial management, the higher electricity price increases meant that the mine would have to improve its output in order to remain profitable.

On the upside, Pretorius said that the tough economic times for gold miners might result in a corporate rapprochement.

"Perhaps it will push corporates a little bit closer together," he said, only days after Gold Fields CEO Nick Holland told Mining Weekly Online that he was open to discussions with AngloGold Ashanti on possible asset consolidation.

"If we don't bulk up, we're all going to stand exposed, because it's becoming increasingly difficult for South African gold mines to raise capital in traditional markets, simply because of the additional risk factors.

"It's going to be a matter either of focusing on one specific type of gold mining - in our case surface mining and exiting underground mining completely - or it's going to be a matter of bulking up in the long-term and presenting investors with what could resemble an annuity and which would otherwise resemble an option," Pretorius added.

DRDGold itself could not continue merely to "tread water" and would either have to shrink and exit deep-level underground mining completely, or grow by building a bigger portfolio and putting the right assets in the right corporate entity.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.