Upbeat about prospects for FY2019
05 September 2018
DRDGOLD announces higher production, operating profit, heps in FY2018
Johannesburg, South Africa. 5 September 2018. DRDGOLD Limited (DRDGOLD; JSE, NYSE: DRD) today reported a year-on-year increase of 38% in operating profit to R355.2 million.
This was the result of a 10% rise in gold production to 4 679kg and a 6% drop in cash operating costs to R458 866/kg – notwithstanding a 3% decline in the average Rand gold price received to R534 344/kg.
Headline earnings per share were higher at 1.7 cents per share compared with 0.2 cents per share in the previous year. Free cashflow of R93.4 million was generated, compared with a negative of R45.1 million in FY2017.
Three major projects at Ergo – part of an ongoing drive to keep the cost line below the revenue line – were completed by the end of FY2018:
Regarding Far West Gold Recoveries (FWGR) – recently acquired from Sibanye-Stillwater and previously known as the West Rand Tailings Retreatment Project (WRTRP) – a R300 million revolving credit facility has been secured from ABSA Bank Limited and work has already begun on the first phase of development.
Phase 1 involves the upgrading of the Driefontein 2 plant to process tailings from the Driefontein 5 dump at a rate of between 400 000 and 600 000tpm and depositing the residue on the Driefontein 4 tailings dam. First production is expected in the first quarter of calendar 2019.
The FWGR acquisition increases DRDGOLD’s gold reserves by approximately 82%, to 6.0Moz.
Pretorius says the company is looking forward both to improved performance from its Ergo operation in the 2019 financial year (FY2019) as benefits start to flow from the various projects activated, and to a material, bottom-line contribution from FWGR.
For the Ergo operation in 2019, gold production of between 148 000 and 154 000 ounces is planned, at a cash operating cost of around R490 000/kg.
With its results, the company announced that – while its long-term strategy is to remain unhedged and to keep borrowings to a minimum – the need for medium-term borrowings for the first-phase development of FWGR introduced some liquidity risk. To mitigate this, it has traded a zero-cost collar to provide price protection against a possible decrease in the Rand gold price while borrowings are in place.
50 000 ounces of gold is being committed, spread equally over nine months, with a floor of R 565 000/kg and a ceiling of just under R609 000/kg cash settled at the end of each month.
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Forward looking Statements
Many factors could cause the actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, adverse changes or uncertainties in general economic conditions in the markets we serve, a drop in the gold price, a sustained strengthening of the Rand against the Dollar, regulatory developments adverse to DRDGOLD or difficulties in maintaining necessary licenses or other governmental approvals, changes in DRDGOLD’s competitive position, changes in business strategy, any major disruption in production at key facilities or adverse changes in foreign exchange rates and various other factors. These risks include, without limitation, those described in the section entitled “Risk Factors” included in our annual report for the fiscal year ended 30 June 2017, which we filed with the United States Securities and Exchange Commission on 31 October 2017 on Form 20-F. You should not place undue reliance on these forward-looking statements, which speak only as of the date thereof. We do not undertake any obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after the date of this report or to the occurrence of unanticipated events. Any forward-looking statements included in this release have not been reviewed and reported on by DRDGOLD’s auditors.
- Ramp-up of reclamation from the 4L50 slimes dam, containing some 20.5Mt of material with an average grade of 0.256g/t. Reclamation and retreatment over the next four years is expected to result in greater plant stability and thus, efficiency.
- Conversion of the plant’s electro-winning circuit to zinc precipitation. This is expected to yield cost savings of between R2 million and R2.5 million a month due mainly to a major reduction in the time to complete the final stage of gold recovery – to around three hours from 18 hours – and from significant cuts in the consumption of caustic soda and cyanide.
- The installation of two 60 000tpm ball mills reclaimed from the company’s decommissioned Crown plant and refurbished at a cost of R41 million in order to process higher grade sands at better margins. An estimated 12-15Mt of sand is recoverable from the Benoni Cluster. Over the next five years 7.3Mt will be targeted for reclamation.