[miningmx.com] – DRDGOLD, the gold retreatment company, said it would consider embarking on more aggressive growth in two to three years once it had extracted the benefits of its current seven-year strategy which now boils down to successfully commissioning its fine-grind flotation circuit at its Ergo plant.
The plant has been constructed to improve yields from gold slag especially as total volumes from DRDGold’s stockpiles are likely to fall in the coming years.
Niel Pretorius, CEO of DRDGold, said one possible strategy was to become a third party toll treatment operator for other gold producers with significant gold dump stockpiles. Co-operation with other companies such as Mine Waste Solutions and Sibanye Gold could not be discounted, he said.
“We’re not looking at building another R1bn plant. We don’t have the capacity for that. So we’ll look around, at our leisure, in the next little while,” he said at the group’s September quarter operating and financial results, the first quarter of its financial year.
As it turned out, it wasn’t DRDGold’s best quarter. The company posted its first headline share earnings loss – a negative 3 cents/share – since 2010, a performance Pretorius put down to teething problems with the fine-grind circuit.
Pretorius said there were no ‘fatal flaws’ in the new flotation system and forecast stable gold production in the current (second or December quarter) with the full financial benefits of the new plant due by the end of the financial year.
Yet cash flew out of the business for the second successive quarter with some R45.9m out following R46.1m in cash burn in the June quarter.
Pretorius said if there was another period of net cash outflow in the current December quarter, the company’s interim dividend would be assessed. “We’ll probably pay out something, but smaller,” he said. “It’s something we will have to look at, but I don’t have a feel for the cash situation at the current time,” he said.
Craig Barnes, CFO of DRDGold, said the company’s balance sheet was still in relatively good shape. “We have about R330m in cash on balance sheet which will see us through this commissioning phase of the flotation fine-grind plant,” he said.
Borrowings stood at about R165m as at the end of the quarter with the company since repaying R20m. A further R70m would be paid by the end of the financial year, Barnes said. Debt: equity currently stood at 10% which was “relatively conservative”, he added.
Pretorius raised the prospect of cutting back staff, especially among the higher echelons of management.
“We will be looking increasingly from January and February about … whether we have redundancy. Have we organised the resources in such a way that they are optimal and we are not over-spending?” he said. This would extend to the executive.
“Is the skills set proportional to what is being spent. We will definitely do some introspection,” said Pretorius. Barnes is due to leave the company as he is emigrating to Perth.
Pretorius also said the company remained a seller of its 9% stake in Village Main Reef, but added the company wouldn’t dump the stock. “We think it is geared to the gold price, so we will sell if the gold price ticks up,” he added.
DRDGold’s gold production came in at 33,597 ounces in the September quarter compared to 35, 815 ounces in the corresponding quarter of the previous financial year. In rand terms, operating costs increased 22% which hit the company’s all in sustaining margin to a negative 2% compared to a positive 15% in the previous (June) quarter.
