Electricity constraints lower DRDGold’s output

Power-related problems shaved R27m off DRDGold’s interim revenue, contributing towards a slide into a loss for the period in which the tailings retreatment specialist began a new project.

DRDGold recorded a R46m loss for the six months to end-December compared with a profit of nearly R61m in the same period a year earlier.

Revenue was flat at R1.25bn.

DRDGold said it had lost production of 49kg directly related to power disruptions, including a fire at a substation, a lightning strike damaging a transformer at one of the miner’s sites and blackouts during the six months.

Based on an average received gold price of R554,760/kg for the period, the value of the lost production was R27.2m.

Gold output was 3% lower at 73,304oz for the period.

DRDGold produced its gold at an all-in sustaining cost of R551,131/kg, a figure skewed by the inclusion of the new project, compared with R500,125/kg a year ago.

DRDGold has concluded a deal with Sibanye-Stillwater to acquire its vast tailings dumps to the west of Johannesburg in exchange for a 38% in the dedicated tailings recovery company.

The first phase of developing a tailings retreatment business on these assets is nearing completion and DRDGold bumped up its full-year gold output target to between 157,000oz and 165,000oz from an earlier guidance of up to 154,000oz.

The cash operating cost in the full year is forecast to be about R500,000/kg.

“With Far West Gold Recoveries off to a flying start, we look forward to the benefit of its contribution in the second half of financial year 2019,” said CEO Niel Pretorius, who noted Eskom, the dysfunctional state-power utility, was the company’s biggest risk.

The flagship Ergo retreatment business had a difficult six months, with the power disruptions, trucking costs and lower grades.

DRDGold has put in place a 50,000oz hedging programme, or forward sales of gold, with prices for the metal set between R565,000/kg and R609,000/kg up to end-May 2019.

This instrument was designed to reduce the financial risk stemming from the development of the West Rand business, which already has processing plants and a critically important deposition site for fresh tailings.

DRDGold has spent R232m on the project so far.

seccombea@businesslive.co.za