SIKI MGABADELI: DRDGold swung into profit in the first nine months of its financial year, as gold production grew by 11% and costs shrank. DRDGold, which treats old mine dumps around Johannesburg to extract gold, reported net profit of R7.8m in the nine months to end-March, compared with a loss of R42m in the same period a year ago, Cash balance was up by 18% in the March quarter.
Joining us now is Niël Pretorius, who is CEO of DRDGold. Niël, thanks for your time this evening. A swing in profits, increased production – how was that achieved?
NIËL PRETORIUS: Well, I think we were fortunate in the sense that we managed to push our volumes up quite nicely. And our metallurgical efficiencies are also finally starting to come together. It’s been a tough year for us to get new technology integrated into the existing plant. It has finally come together quite nicely and we’ve managed to increase our cash balance by R45m, which really takes the net cash inflow for the last nine months to about R140m. So we are quite pleased with that.
SIKI MGABADELI: And that was technological advances around the metallurgical efficiencies?
NIËL PRETORIUS: That is indeed so, yes. We built a flotation circuit and some fine-grind mills to get our extraction efficiencies up by about 8% to 52% extraction efficiency – it’s an additional recovery of 0.03g/ton of gold. That plant has kicked in quite nicely towards the end of the quarter. In fact in March we had an all-time record month out of the Ergo plant, more than we had ever produced from the Ergo plant.
SIKI MGABADELI: How are you managing costs?
NIËL PRETORIUS: Well, the cost cycle at this stage is not to bad for us, because with the exception of the electricity of course, where you have above-inflation costs, our labour arrangement, our wage contract, is going to extend for another year. So we’ve got predictability there. And most of our suppliers have stopped charging import parity price – not entirely voluntarily but they have. They are now charging us what it’s costing them to produce their product, which means that we can take advantage of the weaker rand and the margin has actually increased quite nicely. So our costs are not really too hard to contain at this stage.
SIKI MGABADELI: And what sort of price were you receiving for your gold during the year?
NIËL PRETORIUS: Well, at the moment the gold price is R468 000/kg, which is pretty good. It’s a very, very good gold price and we are achieving a cash margin of roughly about R80 000/kg at this stage. So the cash flows are quite robust.
SIKI MGABADELI: Your line is deteriorating, unfortunately. But thank you so much for making the time today, Niël Pretorius. David, I like that – costs under control.
DAVID SHAPIRO: See what a good miner accountants make! [Laughter] He’s a chartered accountant – putting the costs under control. This is the oldest listed company on the JSE.
SIKI MGABADELI: I know. It’s nice that it’s still there.
DAVID SHAPIRO: I’m glad it’s still around. And Niël is still there, still surviving, still battling along.
SIKI MGABADELI: Especially with the whole doom and gloom around commodity prices. It’s a pity. I would have wanted to chat to him a bit more about their Ergo mining operations and of course whether they are going to be acquiring anything else. But when the line is not so great – that’s radio, and you’ve got to hear what’s being said on the other side.