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DRDGOLD shuts loss-making ERPM
Allan Seccombe
Posted: Thu, 20 Nov 2008

[miningmx.com] -- DRDGOLD, a junior South African gold producer, is putting its ERPM underground mining operation into care and maintenance because of the high cost of R115m and the time it would take to resolve the water problems.

DRDGOLD said it had started talks with the union of its intentions to close the mine and figure out the future of the 1,700 people working there.

There is little surprise in the decision, which DRDGOLD flagged at its quarterly results presentation earlier this month.

ERPM's underground operations has seen production drop off sharply to just below 11,000 oz in the September quarter from nearly 18,000 oz for the same period a year ago. Cash operating costs for the underground workings ballooned to $1,062/oz from $647. Overall, including the surface operations, ERPM made a cash operating loss of R16m in the September quarter.

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Apart from the difficulties in mining, there is a serious water problem at the mine, which DRDGOLD says is the reason for the closure. Mining was stopped on 31 October when the pumps could no longer keep up with the amount of water flowing into the mine.

DRDGOLD's management says it will cost R115m to install extra pumps and it would take 12 months to do the work.

"The capital cost and the cost of maintaining the workforce on full pay are beyond the financial means of ERPM, which incurred a loss of R128.1m after accounting for impairment of assets for the quarter ended 30 September 2008 and a loss of R102.7 million before tax in the previous financial year ended 30 June 2008," it said.