[miningmx.com] – VILLAGE Main Reef (VMR) sought to turn a new leaf putting in a strong operating performance in the first quarter of its new financial year with its flagship gold mine Tau Lekoa coming to prominence.
The bottom line, however, was still affected by the costs of the company’s now discontinued mines, Blyvooruitzicht and Buffelsfontein. Nonetheless, the market seems to have looked forwards in respect of VMR with the share gaining 12% in early Johannesburg trade.
VMR reported an operating profit of R117m for the first quarter largely on the back of Tau Lekoa which turned in record gold production and generated R156m in cash. The problem came in with some R150m in costs related to Blyvoor and Buffels.
The likelihood is that as costs from Buffels – on care and maintenance – could be offset in the future if VMR’s other operating asset, Consolidated Murchison, can be brought back to profitability. It suffered the effects of a strike, and slow build-up after the strike, which took nearly a third of its revenue figure.
Ferdi Dippenaar, CEO of VMR, said the company remained in a cash neutral position in terms of cash generation. Cash and cash equivalents stood at R176m from about R154m quarter-on-quarter.
Commenting on the prospects of generating cash going forward, Dippenaar said that losses from both Blyvoor and Buffels had been addressed and Cons Murch was returning to “.. normalised operational levels”.
“It is anticipated that Village will generate strong cash flow at current gold prices during this quarter,” Dippenaar said in notes to the company’s published results.
VMR reported a R95m cash outflow in the year ended June 31, and a near R1.2bn reversal in its profit profile to a R909m loss – a performance informed by some R525m in write-downs at Buffels and Blyvoor.
Dippenaar said on September 30 that the company’s future turned on operating Tau Lekoa to its potential. He estimated the mine had an all-in sustaining cost breakeven of about $1,000/oz.
“That provides us with a margin of about 25% which is pretty healthy. And we think it can produce sustainably between 940 to 950 kilograms of gold per quarter.’
