DRDGold lifts output and cuts costs in March quarter
The group’s costs and debt levels fall as it nears completion of a large new tailings project
Tailings retreatment specialist DRDGold lifted production in the March quarter and lowered its all-in costs as it put the bulk of its investment in a new project behind it and started reaping the benefits.
DRDGold concluded a deal in 2018 to acquire tailings dumps, a processing plant and a deposition site from Sibanye-Stillwater in exchange for a 38% stake in the tailings company.
The new Far West Gold Recoveries business promises to be a game changer for DRDGold, giving it 82% more reserves, which now stand at about 6-million oz of gold.
DRDGold poured R188m into the Far West business during the December quarter, a number which reflected in the very high all-in cost of R732,394/kg against a received gold price of R564,218/kg.
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In the March quarter, capital expenditure on growth fell to R11.5m. The all-in costs for the quarter dropped to R563,539/kg compared to a received gold price of R588,025/kg.
Gold output for the March quarter grew by 15% to 41,120oz, or 1,279kg.
The increase came mainly from the Far West gold project.
DRDGold reported a quarter-on-quarter doubling to R58.3m of its adjusted earnings before interest, tax, depreciation and amortisation (ebitda), which is not a recognised accounting metric but one used by DRDGold's lenders in loan agreements.
DRDGold said this increase came from a 4% higher gold price and steady operational costs.
The company owns the Ergo plant in Brakpan, 50km east of Johannesburg. The plant can treat up to 2.1-million tons of tailings a month and draws material from more than 700-million tons of tailings in and around Johannesburg.
Pleasingly for shareholders, borrowings fell to R17m from R173m at the end of December. Cash dipped to R169m from R209m.
The first phase at Far West, which will process up to 600,000 tons a month, will deliver gold from June 2019, adding up to 120kg or 3,800oz of gold a month to DRDGold.
The company will spend the next two years studying a much larger plant capable of processing 1.2-million tons a month.
“It’s going to cost a lot of money. It’s a big plant. We will want to look around a bit and see if we can hold hands with other operators with equally large reserves and resources,” CEO Niël Pretorius said in a recent interview, adding that those talks would happen during the next 24 months.