B D : DRDGold desperate to reduce costs as gold price falls
MINER DRDGold would start discussions with trade unions on ways to adjust production at its Blyvooruitzicht underground mine to bring costs below R245000/kg, DRDGold CEO Niël Pretorius said yesterday.
He could not put a figure on possible retrenchments, he said, because this depended on the outcome of discussions with the unions. The timing of the process, in the middle of annual wage negotiations, was not intended to be antagonistic but to deal with new pressures from the strong rand and the 32% hike in electricity tariffs imposed by Eskom.
DRDGold’s cost-cutting measures were announced a day after another junior gold miner, Simmer & Jack, said it was closing one of its shafts at Buffelsfontein to cut costs.
The price of gold realised by South African miners has dropped as low as R232500/kg this year from more than R320000.
DRDGold has also decided to close its ERPM underground mine completely because it could not cover care and maintenance costs from remnant clean-up, as expected. The last 140 staff at the mine would be retrenched. DRDGold would retain the main shaft at ERPM because it would provide access to water for future tailings retreatment, but would seek a buyer for the rest of the underground assets, Pretorius said.
Revenue for the June quarter dropped 22% to R421m because of the lower rand-gold price, reflecting the strong rand, and there was a 2% decline in production volumes after seismic activity at Blyvoor in May, which destroyed seven panels.
For the full year, revenue rose 4% to R1,9bn from R1,8bn on a higher average gold price received, offset by lower production as the group closed its ERPM underground mine in December. But costs rose because of the inclusion of 100% of Ergo Gold’s costs from April while it was operating at only 50% of volume capacity, as well as the electricity tariff hike.
From the beginning of this month the second circuit at Ergo Gold came into production and it was expected to be at a steady state by next month .
Headline earnings rose to 33,8c from 30,3c last year, but the board decided to cut the dividend to 5c from 10c, balancing the need to reward shareholders with the negative effect of the strong rand.
Pretorius said DRDGold would focus on rehabilitating the damaged panels at Blyvoor, which would take about six months, and accessing the main reef. It would also grow production at Ergo Gold and continue with a study into linking the Crown retreatment plants by pipeline to the Brakpan tailings site to ease constraints at Crown.
