JOHANNESBURG (miningweekly.com) – JSE-listed Village Main Reef says the decline in the gold price during April, combined with the impact of higher electricity costs owing to winter tariffs, will negatively impact on the profitability of the Village operations during the June quarter.

The gold price had been volatile in recent weeks, with the realised price averaging R430 000/kg in April, compared with the average R467 000/kg achieved during the March quarter.

This came as the company posted an operating loss from mining activities of R16-million for the quarter, compared with the R18-million profit achieved in the previous quarter. 

This translated into a basic loss a share of 2.67c, compared to earnings a share of 2.38c for the quarter ended December 31, 2012.

“The March quarter is traditionally a weak period for the mining industry. The slow start-up following the festive season, combined with the safety-related stoppages arising from the fatal accidents at our Tau Lekoa and Buffelsfontein mines, contributed to slightly lower overall gold production,” commented Village joint CEO Marius Saaiman.

Gold production totalled 44 806 oz in the March quarter, 9% lower than the 49 111 oz produced in the December quarter, while antimony production of 1 433 t was 14% higher than that produced in the prior quarter.

Depressed gold output, as well as the lower realised gold price of R467 358/kg negatively impacted on revenue, which decreased to R703-million in the third quarter from R769-million the previous quarter.

In contrast, total cash costs continued to be well controlled, increasing by 2% to R680-million, while cash cost on a per kilogram basis increased by 13% to R484 151/kg from R428 505/kg in the previous quarter, largely owing to the lower production volumes.

However, Saaiman pointed out that there were a number of positive achievements during the quarter, the most significant being the positive cash contribution by Blyvooruitzicht in February and March, following industrial strike action last year.

“This performance highlights the importance of labour stability and the positive impact the restructuring plan has had,” he said in reference to the turnaround strategy at the mine, which saw the retrenchment of some 960 employees.

Meanwhile, at Village’s Consolidated Murchinson mine, antimony and gold production increased by a strong 14% and 38% respectively, with its disposal process well under way.

“Several attractive offers were received and the short-listed bidders have started their due diligence processes,” the company reported.   

Moreover, Village expected, subject to South African Reserve Bank approval, to conclude its transaction with Continental Coal in the coming quarter.   

Last month, the gold miner entered into a private placement agreement with Aim- and ASX-listed thermal coal company Continental Coal, which would see Village subscribing for 100-million ordinary shares in Continental for A$0.08 a share.

If approved, the transformative deal would also give Village the option to acquire further Continental shares on the market at a price of up to A$0.10 a share, thus increasing its shareholding to 19.9%.

The transaction reflected Village’s continued diversification strategy, while maintaining its investment in cash-generating assets.