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Turnaround at Goldplat’s SA, Ghana operations swing company to Q3 profit

9th May 2014

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) – Aim-listed African gold producer Goldplat’s third quarter saw a turnaround by its two gold recovery operations in South Africa and Ghana, with several initiatives aimed at improving the efficiency and profitability having returned the mines to profitability in the three months ended March 31.

Describing its third-quarter performance as “highly encouraging”, Goldplat on Thursday reported a profit after tax of £313 000 for the quarter and an operational profit of £459 000 – reducing the half-year operational loss of £694 000 to a loss of £235 000 for the nine months to March 31.

Similarly, a positive operational performance by its South African gold recovery subsidiary Goldplat Recovery (GPL) had reversed the 2014 financial year’s first-half operational loss of £138 000 to a year-to-date profit of £260 000 for the nine months.

This equated to a profit from operations of £398 000 for the quarter.

In addition, Goldplat's gold recovery operation in Ghana further increased its profitability from an operating profit for the half year of £201 000 to £532 000 in the first nine months of 2014.

This resulted in an operational profit of £330 000 for the quarter under review.

Meanwhile, the company's Kilimapesa gold mine, in Kenya, did not fare as well as its counterparts, increasing its operational loss to £448 000 for the nine months and £167 000 for the third quarter of the year.

While the company’s cash position decreased marginally from £634 000 on December 31 to £568 000 on March 31, the company said it was confident that its cash position would continue to improve in the fourth quarter as the South African and Ghanaian operations’ profitability continued to strengthen in line with management's expectations. 

GOLDPLAT RECOVERY

Looking more closely at Goldplat’s operating divisions, the company attributed the strong performance of its recovery plant in South Africa to the successful implementation of various initiatives by the management team to improve efficiencies.

“These included the introduction of a 24-hour shift for the by-product section, an increase in the throughput of lower-grade by-product material, the achievement of a Responsible Gold accreditation and the realisation of cost savings from the use of liquid cyanide,” it said in a statement.

An improved gold price, combined with a weaker rand against the dollar, also contributed to the stronger performance.

“The growth outlook remains positive for the remainder of the year. Other improvements and potential revenue generators [for this business] include the reprocessing of existing tailings at GPL.

“Following positive results from initial in-house testwork on the tailings, Goldplat has engaged a South African university to undertake a project to design a process for the retreatment of the tailings with the objective of recovering additional gold during the reprocessing phase,” said the company.

This initiative, Goldplat claimed, would provide a new revenue stream at a “very low”cost. GPL was currently in the process of licensing a final deposition site for the tailings.

The gold miner was also evaluating other business growth opportunities at the plant and had secured and successfully executed a two-month toll treatment project for a local client in February and March.

“The toll treatment strategy for local and international clients, coupled with the continuous building of stockpiled reserves, remains GPL's focus and has given Goldplat significant production flexibility,” the company noted.

Meanwhile, the miner’s project at Central Rand Gold's No 4 shaft was progressing well and was contributing towards GPL's profits, but Goldplat cautioned that the sustainability of the project remained subject to securing a safe second outlet and access for the workforce and materials handling. 

“Management remains optimistic that this objective can be achieved in the short term and that the project will deliver sustainable revenues in future,” it maintained.

Goldplat was also working towards potential diversification into platinum-group metals (PGMs) as part of its long-term growth strategy to capitalise on a more stable platinum price. 

The various by-products from the platinum mining industry were currently being evaluated, with a trial project scheduled to start in the fourth quarter.

“We also continue to work closely with the Department of Mineral Resources (DMR) to curb illegal mining activities on surface. GPL expects to assist the DMR by cleaning up surface areas that are currently threatening local communities and by processing the material removed from the illegal mining sites at GPL to benefit from the gold recovery,” Goldplat said.

GOLD RECOVERY GHANA

In Ghana, Goldplat said plans to mitigate the risks to the gold price had been implemented by management at Gold Recovery Ghana (GRG) in the first half of the year and had been successfully executed.

“The positive results achieved during the third quarter were a direct result of these interventions,” it noted.

Profitability for GRG's tolling agreement with miner Endeavour Resources to process tailings from artisanal and small-scale miners had improved over the quarter and was largely owing to the purchase price of tailings reducing to normal levels on the back of support from the Ghanaian government, which continued to apply pressure to legalise all mining operations in Ghana.

At GRG's carbon-in-leach (CIL) section, in Tema, gold recovery improved by milling the oversize material, which increased the profitability of the CIL section. 

Adjustments to the flow sheet had decoupled the mill and the thickener was allowing greater production flexibility during breakdowns. 

Options for the disposal of the final residue were being investigated, while reduced cyanide consumption impacted positively on costs, in contrast with recent increases in power and fuel costs, which reversed this positive trend.

A second spiral circuit had been commissioned at the spiral and incinerator section, which improved the capacity for the treatment of high-grade carbon. 

“Importantly, the first batch of material procured outside of Ghana has been received and the volume of fine carbon received continues to increase in line with Goldplat's strategy to significantly grow this profit centre through new clients and more favourable contracts with existing clients,” said the company.

Existing lower-grade material had also been exported to GPL to realise further profits and reduce the pressure on storage capacity at GRG while the plans for the kiln installation were progressed.

“We remain confident that we can expand this business substantially into the rest of Africa and further afield and we continue to review other opportunities to grow our recovery operations,” Goldplat noted.

KILIMAPESA

During the quarter under review, Kilimapesa continued with ore production to keep the mill operational and reduce the overall costs of the operation.

Included in its operational loss were the costs for primary development of a new adit to access the reef at a lower elevation and secondary development at the mining areas to ensure sufficient ore remained available for processing. 

“Goldplat remains cost-conscious and mindful of group objectives of focusing in the near-term on the success of its cash-generative niche gold-recovery business in Africa and, as a result, we continue to progress discussions with joint venture (JV) partners to advance the development of Kilimapesa,” it stated.

To date, the company had signed two nondisclosure agreements and a third potential investor had been identified. 

DEVELOPMENT ASSETS

As the group had now returned to profitability, which enabled it to evaluate its expansion into West Africa, it indicated that it would now prioritise the development of the Burkina Faso-based Midas gold recovery operation. 

Licensing issues had not yet been finalised but were in progress.

The Anumso and Nyieme gold projects, in Ghana, remained “deprioritised”, but Goldplat said it would continue to evaluate opportunities to realise value or monetise these projects through JVs or trade sales. 

Commenting on the company’s results, analyst firm SP Angel described Goldplat’s performance as “positive”, noting that it had reduced its assumption of cash at the year-end from £1.7-million to £1.3-million.

It added that the recent board addition of former De Beers group marketing director Nigel Watt, who had a background in specialised materials and processing, would strengthen the company.

“Overall, we retain our numbers for the full year at the group operating profit level, with an increase in losses at Kilimapesa offset by lower general and administrative expenses,” the firm concluded.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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