JOHANNESBURG (miningweekly.com) – A 10% increase in gold production provided an important fillip for surface gold mining company DRDGold, which benefitted from high-grade sand material in the 12 months to June 30.
The Johannesburg- and New York-listed company, which saw its share price rise by 6.09% in early morning trade, chalked up a 38%-higher operating profit to R355.2-million in the period, when it generated free cash flow of R93.4-million compared with a negative cash flow of R45.1-million in the previous financial year.
The high-grade sand material reporting to DRDGold’s Knights plant provided the important gold output uplift by increasing the yield “quite handsomely”, DRDGold CFO Riaan Davel told Mining Weekly Online in an in-studio interview. (Also watch attached Creamer Media video).
Increased gold production also cut cash operating costs by 6% to R458 866/kg, notwithstanding a 3% decline in the average R534 344/kg rand gold price received. The all-in sustaining costs (AISC) margin was increased by 5.5% to R505 622/kg, which also takes in rehabilitation, corporate and sustaining capital costs.
“The costs, that’s what we’re really proud of. The initiatives that we put in place to keep the plant stable and efficient has given us that 38% higher operating profit line,” said Davel.
SHORT-TERM PRICE PROTECTION
While DRDGold has reaffirmed its long-term strategy to remain an unhedged gold producer and to keep borrowings to a minimum, the development of the first phase of Far West Gold Recovery project will necessitate medium-term borrowings that will introduce some liquidity risk to the group. To mitigate this liquidity risk, management traded a zero-cost collar to provide price protection against a possible decrease in the rand gold price while the borrowings will be in place.
As a result, DRDGold is committing 50 000 oz of gold under a zero-cost collar with a floor of R565 000/kg and a ceiling of just under R609 000/kg, spread equally over the next nine months, and cash settled at the end of each month.
FAR WEST GOLD RECOVERIES PROJECT
The Far West Rand Gold Recoveries Project partnership with Sibanye-Stillwater increases DRDGold’s gold reserves by a substantial 82%, with the formerly debt-free company justifiably securing a R300-million revolving credit facility from Absa Corporate and Investment Banking for the first phase of the two-phase development already under way.
“That’s the growth story for us, that’s the consolidation of the Far West for us, that’s a high-yield story, which we’re really excited about,” Davel enthused to Mining Weekly Online.
DRDGold describes itself as being “already flat out” on the West Rand, the first phase of which involves upgrading the Driefontein 2 plant to process tailings from the Driefontein 5 dump at a rate of between 400 000 t/m and 600 000 t/m and depositing the residue on the Driefontein 4 tailings dam. First production is expected in the first quarter of calendar 2019.
“The big prize is Phase 2 and the Far West consolidation, even further than the assets we’ve currently purchased from Sibanye-Stillwater,” Davel said.
EAST RAND GOLD PROJECTS
Three major projects were completed at the Ergo dump material retreatment plant on the East Rand as part of an ongoing drive to keep the cost line below the revenue line.
Reclamation from the 4L50 slimes dam, containing some 20.5-million tonnes of surface material with an average grade of 0.256 g/t, was ramped up at Ergo, where retreatment over the next four years is expected to result in greater plant stability and efficiency.
That will provide the company with 450 000 t of material a month.
“We’re mining it in a very efficient way,” he said.
The company will also benefit from the conversion of the electrowinning circuit at the Ergo plant to zinc precipitation, which is expected to yield cost savings of between R2-million and R2.5-million a month, owing mainly to a major reduction in the time to complete the final stage of gold recovery from 18 hours to three. It also facilitates significant cuts in the consumption of caustic soda and cyanide.
Two 60 000 t/m mills, reclaimed from DRDGold’s decommissioned Crown site, have also been installed at Ergo.
The company will be targeting half of the high-grade material in that area over the next five years to increase margin.
“We’re really looking forward to those three projects making Ergo more stable and ultimately keeping the cost line below the revenue line,” said Davel.
DUST SUPPRESSION AND SOCIAL EXPENDITURE
Having taken strong ongoing steps to suppress dust arisings from surface dumps, DRDGold was able to report dust exceedances of a low 0.58% in the 12 months to June 30.
“We measure dust at various points throughout our vast footprint and the low dust exceedance shows that the vegetation we grow and keep on growing on the tailings dams helps to suppress dust,” he said.
The company’s social expenditure is focused on youth education and poverty alleviation.
“We invest heavily in training and at grassroot levels we teach people to grow vegetable gardens in areas the size of a garage door, and that for us is the most basic empowerment of the communities in our areas, where we also contain dust for their benefit,” he added.
Davel said he expected the Ergo projects to deliver stability and efficiency going forward and expressed the determination that the first phase of the Far West Gold Recoveries Project is completed on time and on budget, with its first gold poured in the first quarter of next year.