In the media

DRDGOLD records R87m cash operating profit

[Business Day] - The Group has announced a 4% increase in gold production to 59 866oz for the quarter ending in December 2009, which together with a higher rand gold price and a drop in operating costs resulted in a profit of R 87.4 million.

The Group has announced a 4% increase in gold production to 59 866oz for the quarter ending in December 2009, which together with a higher rand gold price and a drop in operating costs resulted in a profit of R 87.4 million compared with a loss of R4.2m the previous quarter.

South Africa-focused DRDGOLD has a mix of assets, including underground mines, surface re-treatment operations and exploration.

The company did not declare an interim dividend.

In an online statement, CEO Nil Pretorius says higher gold production reflected continued production build-up at the company’s ErgoGold surface retreatment operation and more ounces from its Crown and Blyvoor surface operations.

Headline earnings - the key profit measure in South Africa, stripping out capital, non-trading and some extraordinary items rose to 1,4 cents per share, from a loss per share of 13,1 cents the previous quarter. Given the strength of the rand, the company said it would focus on reducing its exposure to risk, controlling costs and managing margins in the near term.

In line with strategy, surface gold production rose by 12% while gold from underground dropped by 11%. Lower-risk, lower-cost, higher-margin surface gold production now comprises more than 73% of DRDGOLD’s total.

The average Rand gold price received rose by 12% to R268 302/kg. Cash operating costs were 8% lower at R223 653/kg due to the increase in gold production and the lower summer-month electricity tariff applicable.

Pretorius says "a series of recent events and transactions" - agreement with Mintails Limited on the DRDGOLD group’s acquisition of Mintails’ 50% interest in the Ergo Joint Venture; placing Blyvoor under judicial management; and agreement with Aurora Empowerment Systems on Aurora’s acquision of 60% of Blyvoor - all contributed towards our ongoing efforts to de-risk the business of DRDGOLD.

With an eye to further growth in terms of surface retreatment, Pretorius says, the company is close to making a decision on construction of a pipeline linking the Ergo and Crown operations, in order to exploit major synergies between the two.