DRDGOLD has set itself up for growth over the next few years by investing in its Ergo plant fine-grind flotation circuit.

DRDGOLD, the JSE- and NYSE-listed gold retreatment company, reported at a media event in Johannesburg on 22 October 2013 that reduced operating efficiencies due largely to on-going commissioning and integration of the new fine-grind flotation circuit at the Brakpan plant of its Ergo operation affected the company’s financial performance for the first quarter of 2014.

While throughput was “solid,” says DRDGOLD CEO Niël Pretorius – 9% higher at 6 098 000t compared with Q1 FY2013 – and the floatation section of the new circuit performed well, the mills in the fine-grind section were slow to get going.

This created a bottleneck of rich concentrate, resulting in weak gold production – 33 597oz compared with 37 905oz – and high unit costs. All-in sustaining costs were R436 954/kg. On the financial front, operating profit was down to R72 million due to lower gold production, higher costs and a lower average rand gold price received – R427 604/kg compared with R446 783/kg. Consequently, earnings before interest, taxes, depreciation and amortisation (EBITDA) declined, and a headline loss of R12.5 million was recorded.

Commenting on DRDGOLD’s recent wage settlement with the National Union of Mineworkers, Pretorius says that – notwithstanding a two-day strike – the negotiating process was “expeditious and largely constructive,” resulting ultimately in a settlement within budgeted parameters. The industrial action, which was peaceful, is not expected to impact materially on performance in the second quarter.

Looking ahead, Pretorius says that commissioning of the new fine-grind flotation circuit, as previously reported, will continue in the second quarter, with completion expected by December. While some impact on production in the second quarter is expected, this should be less substantial than in the first quarter, in part because the performance of the mill has stabilised. In addition, close attention is being paid to other operating parameters – including costs – in order to offset the impact.

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