JOHANNESBURG (miningweekly.com) – While Aim-listed Goldplat has taken action to reverse the effects of the company’s difficult trading period during the first six months of the 2014 financial year, the gold producer said on Monday that it still expected its 2014 operating profit to be materially below that of the 2013 financial year.
The company explained that its recovery plant in Benoni, Gauteng, Goldplat Recovery Pty Limited (GPL), had a difficult trading period during the six months ended December 31, as a result of a lower gold price environment and several temporary factors that affected parts of the plant’s operations.
“During the first half of the year, the gold grade content of by-products that was delivered from the mines were lower than historic grades and, at the same time, had been procured at higher gold prices. This, combined with the fall and volatility of the gold price during 2013, led to a reduction in GPL's profitability for the period,” the company explained.
However, to help mitigate the decrease in the gold price and boost operating margins, Goldplat focused on revising by-product procurement contracts and cancelling low-grade contracts with existing suppliers. In line with this, smaller sections of the plant, previously run on a single shift system for security reasons, would be run on 24-hour shifts with additional security measures in future.
Further, as announced on November 6, Goldplat had agreed to buy cyanide directly from local suppliers in liquid form rather than through intermediaries to help reduce costs.
Goldplat achieved major cost savings in its cyanide consumption from October 2013 and planned to increase these savings further by converting the plant to liquid cyanide supply during the second half of the 2014 financial year.
“These actions should improve margins and result in an increased overall yield going forward,” the company said.
Goldplat was also looking to increase its stockpiled by-product reserves to add production flexibility in future, with a number of new contracts finalised or close to finalisation.
“The board believes that this strategy will enable Goldplat not only to obtain by-products on a more economical basis, but also provide the supplier with an all-inclusive service, adding to Goldplat's leading service offering,” the company said.
Goldplat added that while the rand depreciation had helped to mitigate some of the impact of lower gold prices, it was unlikely to offset the deterioration in the margin during the first half of the 2014 financial year.
GHANA
Meanwhile, Goldplat said its Gold Recovery Ghana (GRG) operation was also sensitive to gold price fluctuations; however, during the period under review, this was to an extent offset by the substantial deterioration in the Ghana cedi.
With regard to GRG’s tolling agreement with Endeavour Resources, the company had experienced margin pressures during the six-month period owing to difficulties in procuring tailings at a commercial rate from artisanal and small-scale miners to be processed at the GRG operation.
While challenges remained, procurement prices had been substantially improved and tonnage production had increased, which should help to significantly enhance trading in the second half of the financial year.
Further, after an initial decision to close GRG’s carbon-in-leach (CIL) section in the 2013 financial year, owing to margin pressures sustained from procurement of sustainable by-products, GRG had now begun to retreat the stockpiles on site through the CIL circuit and the operation was currently running at a profit.
Meanwhile, GRG was also intending to significantly grow its incinerator section, which recovered high-grade gold from fine carbon and rubber mill liners from blue-chip mining clients.
During the first half of the 2014 financial year, several new clients were successfully contracted to procure fine-carbon and rubber mill liner by-products, and existing contracts were renewed on more favourable terms.
As a result, GRG had managed to increase its fine carbon business substantially, expecting to increase production and profitability when an additional incinerator plant was commissioned in March 2014.
The company was confident that it could expand its business into the rest of Africa and even further afield, and would work to achieve this during the remainder of 2014, Goldplat said.