DRDGold kicks off new era, aided by rand

[miningmx.com] – DRDGOLD roared out of the blocks in its first quarter
as a dedicated gold re-treatment company posting a 51% improvement in operating
profit – a quarterly performance set to be atypical for South Africa’s strike-torn gold

Once a marginal deep-level gold company that rode the highs and lows of currency
and gold price fluctuations, DRDGold now has a single asset in the consolidated Ergo-
Crown pipeline. It produced 35,815 ounces of gold on the back of higher yield in the
September quarter, an 11% increase quarter-on-quarter.

The company’s last remaining underground mine, Blyvooruitzicht was sold to Village
Main Reef earlier this year. Its books were passed fully to Village Main in the previous
June quarter, the last of DRDGold’s 2012 financial year.

The rand weakened heavily during the period as strikes erupted in South Africa’s
platinum and gold sectors. As a result, the rand gold price was 11% stronger despite
a 3% weakening in the dollar gold price.

Cash operating costs were kept in check despite having to pay two months of Eskom’s
“winter tariff’ rate, which adds a 60% premium to normal electricity use rates. The
outcome was operating profit of R173,7m and share earnings came in at 20c, 2c lower
than the previous quarter where some 16c of earnings was from deferred taxe rate

Shares in DRDGold were down a percent in morning trade to R5.85/share but had
earlier in the month tested 12-month high of R6.15/share. The company has a market
value of R2.25bn.

Niel Pretorius, CEO of DRDGold, said the company’s priorities in the coming quarter
were to stabilise production from its Ergo circuit and deliver its fine-grind project in
time. The R250m project, of which R90m has been spent, is essentially about taking
the company’s 40% yield from its existing surface dumps assets to a 50% yield.

Pretorius sounded a cautious note regarding the firm’s Zimbabwean gold exploration,
where several properties were found to be unamenable to open pit operations. “We’re
finding some gold,’ he said, but added: “We won’t be spending a lot of capital on an
underground mine in Zim’. They could be packaged and sold.
Pretorius also hinted that the company’s last remaining underground assets – the
ERPM 1 and 2 exploration prospects – might also be sold. “We’re looking at a means
of putting a bow around a parcel of assets,’ he said of the gold resources.

Commenting on future business prospects, Pretorius said the company would focus on
business innovation rather than volume growth. “If there are any young metallugists
out there, put up your hand,’ he said. “We are looking for technology to match our
recovery goals.’

“Our focus for now is that what we’ve got, we’re going to do properly. Our business is
not longer exposed to typical underground mining, but we have a different risk of
making sure we maintain the volumes and recoveries,’ he said.