| Wed 28 Feb 2007, 8:53 | | DRDGold quarterly results |
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Total gold production for the quarter was 12% lower at 132 125 oz, mainly as a result of a 24% reduction in gold production from the Australasian operations. While all three Australasian operations experienced production problems, the most seriously affected was the Vatukoula operation in Fiji, which was placed on care and maintenance in December after a three-month review showed that continued mining operations were not economically viable. Vatukoula's production for the quarter was just 9 143 oz, down 47% from the previous quarter, reflecting not only the care and maintenance but the residual impact of damage and subsequent down-time at Philip Shaft due to a skip/cage incident. At the South African operations, gold production was 4% lower at 87 322 oz. While the Crown surface operation performed better following pipeline upgrades and Blyvoor held its own in spite of an underground fire at Blyvoor No. 5 Shaft in December, underground faulting encountered at ERPM impacted negatively on both volume and grade.
Group financial results for the quarter ended September 2006 have been re-stated to account for the discontinuation of operations at Vatukoula and are thus comparable with results for the quarter under review. Vatukoula incurred a loss of R145.6 million in the quarter ended December 2006 and an impairment of R783.1 million. Revenue from continuing operations was 5% lower at R548.5 million and cash operating costs declined by 4% to R466.3 million, resulting in a cash operating profit of R82.2 million, down 7% on the previous quarter. Revenue from the South African operations was 4% lower at R390.6 million and after accounting for cash operating costs, which was 1% lower at R324.3 million. Cash operating profit was R66.3 million, 14% down on the previous quarter. Revenue from the continuing Australasian operations was 6% lower at R157.9 million but a 10% reduction in cash operating costs to R142.0 million resulted in a 39% increase in cash operating profit to R15.9 million. In the quarter under review, DRDGold repaid its USD66 million convertible bond. corporate developments. The group reported a total headline loss of 47.5cps (20.6cps).
Prospects
DRDGold's operating and financial performance continued to be marred in the quarter under review by the ongoing difficulties of the 78.72%-owned Emperor. Shareholders will be aware that Emperor and DRDGold recently completed a strategic review of the former, which concluded that Emperor should consider either the divestment of key assets, or seek a suitable merger partner in order to grow the value of its asset base. Emperor continues to pursue these restructuring options, with the assistance of Rothschild Australia Ltd. Meantime, a new short-term finance facility, to be re-paid within an agreed timeframe from the proceeds of restructuring, has been arranged with Australia and New Zealand Banking Group Ltd. DRDGold regards DRDGold SA, in which it holds a 74% stake with black economic empowerment partner Khumo Gold, as core to the group. While Blyvoor has been adversely affected by illegal industrial action during the current quarter, ERPM has received the pleasing news that its application to the Department of Minerals and Energy for a prospecting right over a second portion of the neighbouring Sallies lease area has been granted. The area, to be known as ERPM Extension 2, is 5 500 hectares in extent and has an exploration target of 7-11 million ounces. This presents the exciting prospect of a new deep-level mine with a life of more than 15 years. At the Crown surface operation, a R10.5 million project for the reclamation of the 3L2 slimes dam has been approved, with the prospect of treating through the Crown plant some 270 000 t per month at an average yield of 0.3 g/t over a 20-month period. Crown has lodged its application for a mining right for the Top Star dump on 1 February 2007.
