DRDGold considers 33% cut in local output
By Nicky Smith
Cape Town - DRDGold, formerly Durban Roodepoort Deep, was considering shutting down a third of its South African production, it told a group of fund managers at last week`s mining Indaba in Cape Town.
Ilja Graulich, the investor relations executive, said the proposal to cut production was one of a range being considered and had come from the company`s discussions with its shareholders and institutions.
But, he said, nothing had been decided on how to structure the South African operations to deal with the ever-virile rand.
It was inappropriate to speculate about what effect the proposals would have on jobs.
In the past 18 months the company has had to cut 6 000 jobs and now has 14 000 employees. In the past 12 months it has cut South African output by about 70 000 ounces.
The company produces about 560 000 ounces a year in South Africa while its Australasian operations produce about 350 000 ounces.
A fund manager, who asked not to be named, said DRDGold had a strategy session at the weekend where the proposals had been considered.
It was after this session that fund managers were briefed in Cape Town.
He said the company was considering splitting into two units, with the primary listing of its Australasian operations being on the Toronto Stock Exchange
.
These operations would have their secondary listing on the JSE Securities Exchange.
The local operations would continue to be listed on the JSE and the marginal operations - which offer investors leverage to the gold price - would trade on an American depositary receipt programme in the US.
There have been suggestions in analysts` research reports that DRDGold would shut down all its South African operations.
The fund manager said DRDGold was sensitive to its shareholders` need to have exposure to its large resources in South Africa.
The Australasian operations include a 45 percent stake of the Emperor mine in Fiji, its Papua New Guinean mine Tolukuma, and its 20 percent stake in Porgera.
Graulich said the average cash costs at these operations was about $250 an ounce, or R50 240 a kilogram, while the South African operations produced at about $400 an ounce.
Yesterday afternoon gold was trading at about R82 414 a kilogram. Graulich said the local operations `would need a comfort level of about R87 000 a kilogram`.
DRDGold shares closed 10c up on the JSE yesterday at R9. The gold mining sector gained 0.65 percent.
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