[miningmx.com] – DRDGOLD’s hopes of returning to profitability and rebuilding its cash buffer were dealt a blow after it announced today the suspension of its high-grade technology at its Ergo plant following technical problems.
Poor metallurgical recoveries at its flotation fine grind (FFG) circuit, commissioned in the December quarter following capital expenditure of R600m over a two-year period, would result in a 14% decline in March quarter gold output.
All in sustaining costs would increase 24% for the quarter but the company had managed to preserve its cash position – which had fallen R133m in the December quarter to R199.4m – owing to the higher rand gold price in the March quarter.
Shares in DRDGold were relatively untroubled in mid-afternoon trade on the Johannesburg Stock Exchange, but the technical problems perhaps explain DRDGold’s under-performance against other gold stocks since mid-March.
Shares in the company were 19% weaker in the last two weeks compared to a 17.5% decline in the value of Harmony Gold, and weaker share prices for Gold Fields (-10.3%) and AngloGold Ashanti (-11%).
DRDGold CEO, Niel Pretorius, told Miningmx in July that the commissioning of the FFG circuit, which was built to yield more gold from tailings at better efficiencies, would be a crunch moment for the company.
“This model was intended to be resilient,’ he said. “This gold price will show us if we’ve been successful or not,’ he said of the 25% slide in the gold price during 2013.
In its announcement, DRDGold said it had temporarily suspended the flotation circuit, a set of fine-grind mills and the cyanide leach and carbon in pulp (CIP) circuit in order to solve metallurgical problems.
Although the new FFG technology had achieved positive float and grinding results, the CIP section “… has not yet stabilised and appears to have also contributed to metallurgical instability and carbon inefficiencies downstream in the existing carbon in leach (CIL) circuit or low grade section”.
“Suspending the new section will enable the operational team to stabilise the low grade circuit and to determine the factors that could be affecting carbon efficiencies in both circuits,” said DRDGold.
It forecast stable production from its original CIL section in a month while test work on the FFG circuit would be completed “… within a further three to four month period”. It also blamed metallurgical instability on the old and new sections of the plant on power supply interruptions and ‘incessant rains’ in February and March.
DRDGold reported teething problems commissioning the FFG in the previous December quarter which, combined with a lower gold price and a decline in production (and resultant increase in costs) during the period, led the company into a R11.9m interim headline loss compared to a R170m headline profit year-on-year.
