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DRDGOLD earnings up by hefty 115%

[businesslive.co.za] -- DRDGOLD on Monday reported a 115% increase in its full year headline earnings per share as the company delivered on its strategic objectives to reduce risk, manage costs and to increase its margin.

DRDGOLD on Monday reported a 115% increase in its full year headline earnings per share as the company delivered on its strategic objectives to reduce risk, manage costs and to increase its margin.

Headline earnings per share for the 12 months to end June 2011 were 28c, compared to 13c the year before and gold production grew 10% to 265,179 ounces from 241 194 ounces in the year to end June 2010.

The increase in production reflected continued recovery of the underground circuit of the Blyvooruitzicht Gold Mining Company (Blyvoor) from the negative impact of seismicity-induced damage to high-grade production areas at No 5 Shaft and continued bedding down of the Ergo surface retreatment circuit.

Revenue for the year increased by 29% to R2.57 billion from R1.99 billion the previous year, reflecting higher gold production and a 15% increase in the average Rand gold price received to R308,221/kg from R267,292/kg.

Cash operating unit costs for the year were 8% higher at R251,296/kg, compared to R233,122/kg due primarily to electricity price increases and higher winter tariffs imposed by power utility Eskom. Operating profit was 76% higher at R477.0 million, against R271.6 million last year.

The company declared a dividend of 7.5c a share - its fourth dividend in a row - which is up 50% from the previous year.

"I have always believed that the true measure of the health of a business is its net cash flow. This year our company generated net cash of R323.9 million from operations, up 504% from last year," said DRDGOLD CEO Niël Pretorius.

Gold production from mechanised 24/7 recycling circuits comprised 66% of production and Pretorius said the company also gave credence to earlier statements that its underground operation is a ring-fenced risk, when it suspended financial assistance to Blyvoor in June.

Blyvoor, the last deep-level mining operation within DRDgold’s portfolio, has been fully impaired to the tune of 547.7 million rand in the year under review.

Total gold production for the quarter to the end of June 2011 was 2% higher at 63,079 ounces as a result of strong performances by the Blyvoor surface retreatment circuit and the Ergo circuit offsetting the impact of lower production from the Blyvoor underground and Crown circuits.

Revenue for the quarter was 21% higher at R630.2 million with cash operating unit costs 15% higher at 280,240 rand/kg than the same quarter a year ago. Operating profit was 21% higher at R111.0 million and headline earnings per share were 67% lower at 8c. This drop in headline earnings was mainly due to the Blyvoor impairment.

Looking ahead, Pretorius said the company intended to further grow surface recovery exposure while phasing out its deep level underground mining operation.

"Responsible growth means that our internal growth will be focused on organic business enhancement with near term payback. External growth will remain focused on exploration opportunities in Zimbabwe, and possibly Mozambique," he said.

At Blyvoor the business rescue practitioner is preparing a business plan that will facilitate divestiture on appropriate terms. Pretorius said it is the company’s objective to have certainty on a new Blyvoor structure by the end of this calendar year.