DRDGold production clipped by rand

DRDGold's June quarter has underscored just how problematic exploitation of old mines with limited ore resources can be when unfavourable rand:dollar exchange rates crimp rand gold prices.

Seismicity that led to the temporary loss of underground working led to lower recovery grades and underground cash costs greater than the quarter's average gold price at the Blyvooruitzicht mine.

In other words, loss-making underground operations. At ERPM, underground operations are being closed down permanently. And, in turn, this cessation of unprofitable operations led to a 20% drop in gold production to 247690 ounces for the past financial year as a whole.

But DRDGold's future lies increasingly in the profitable processing of massive surface tonnages of low-grade mine residues on the central and (predominantly) east rand.

Chief executive Niël Pretorius is not interested in size for size's sake - his focus is on profitable operations. So while the June quarter's underground problems led to a small headline loss, surface processing cash costs came in at $673 (about R5300) per ounce of gold against $521/oz in the March quarter.

There were teething problems at one of the dumps being processed by the now wholly-owned ErgoGold, but Pretorius is confident that this will be successfully addressed during the current quarter. And he believes that profitable underground operations can be resumed at Blyvoor once the effects of the June quarter's seismic events have been resolved.