JOHANNESBURG (miningweekly.com) – Tailings gold miner DRDGold appears to have turned a corner, lifting gold output by 8% to 37 005 oz in the first quarter of the 2015 financial year.

This after the gold producer experienced several successive quarters in which it battled inefficiencies, low yields and high costs associated with the initial start-up of the flotation/fine-grid (FFG) circuit at its Ergo recovery plant, on Gauteng’s East Rand.

“This was a good quarter for us and the best quarter in terms of production that we have seen [for some time].

“The carbon absorption inefficiencies and throughput issues that plagued the initial start-up of the circuit did not manifest this time around and inventory build-up in the FFG [circuit] impacted gold output exactly as expected,” DRDGold CEO Niël Pretorius told investors on Friday.

The positive swing on gold production over the last six months, he added, was 23%, or 6 879 oz.

Quarterly output, meanwhile, benefited from a 12% increase in the average yield to 0.194 g/t, which offset a “small” reduction in volume throughput as a result of plant downtime.

Gold sold was 17% higher, at 38 291 oz, a consequence of the sale during the September quarter of 1 286 oz of gold produced in the June quarter.

Cash operating costs were 1% lower in the quarter ended September 30, at R375 044/kg, mainly owing to higher gold production, notwithstanding an increase in energy utility Eskom’s power tariff from July 1 and yearly wage increases.

All-in sustaining costs increased 26% to R427 631/kg, which was owing mainly to the impact of a “favourable” R94.7-million decrease in environmental costs.

“Total all-inclusive cash expenditure for the quarter, including all operational and corporate cash costs and capital expenditure (capex), excluding only the R73.3-million loan note repayment in July, was R478.4-million. This translates into all-inclusive cash expenditure of R415 659/kg of gold produced, down from R430 234/kg in the previous quarter.

“We consider this to be an important measure to enable us to track all-in breakeven costs and the net cash flows of the business,” he commented.

Capex was 18% lower at R16.6-million, reflecting both the completion of all major projects and specific planning to reduce capex during the winter months.

FINANCIAL PERFORMANCE
Taking a closer look at DRDGold’s financial showing, the group posted an 18% increase in revenue for the period to R528.5-million on the back of the increases in gold production and gold sold, and a 1% rise in the average rand gold price received to R443 760/kg.

Operating profit was 52% higher, at R79.7-million, but a R2-million charge for environmental rehabilitation in the quarter under review, together with retrenchment costs of R5.8-million, resulted in a 73% reduction in gross profit to R25.6-million.

After accounting for other expenses and taxation, a loss of R4.7-million was recorded, compared with a profit of R7.9-million in the previous quarter.

Earnings before interest, taxes, depreciation and amortisation were 58% lower, at R48-million, and the headline loss position was zero, compared with headline earnings of 0.10c a share in the previous quarter.

ONGOING TESTWORK
Noting that he was encouraged by the early results of the testwork on the FFG circuit thus far, Pretorius said work would now focus on five important “indicators”, the first of which was maintaining float circuit efficiency with a mass pull of between 3.5% and 4% of throughput and containing at least 40% of the gold contained in the feed.

“This target was achieved early on in testwork and is being maintained,” he outlined.

DRDGold would also target a reduction in size of the mill feed to between 20 and 22 microns, while not exceeding a certain grinding media consumption rate.

“Although the grind is [currently] within specification, the media consumption rate is still higher than we are targeting and we intend to run a number of further tests in this regard,” he said.

While carbon efficiencies were trending “very favourably” and dissolved losses were within specification, the group believed the combined leach and carbon
efficiency would benefit from a different leach and adsorption configuration.

“We will test this assumption during October and, if it turns out to be correct, a minor engineering adjustment will be made to bring about the reconfiguration,” he noted.

Testwork would also focus on the effect of the FFG on the downstream low-grade carbon-in-leach (CIL) circuit.

While an initial concern was that the reagents used in the float cells could impact carbon adsorption efficiencies downstream, the miner had not observed adverse effects and was closely monitoring this to keep the low-grade CIL in steady-state.

The company would further aim to drop the washed residue grade by 0.03 g/t of
gold.

“While it is still early days and we have not as yet obtained an adequate number of consistent samples to declare success, early trends are promising and increasingly consistent with the outcomes that the float and grind efficiencies suggest we ought to expect,” he advised.

DRDGold remained on track to complete testwork and make the associated changes by the end of December.