JOHANNESBURG (miningweekly.com) – JSE-listed Village Main Reef would move to get back on track after suffering “headwinds that had blown us significantly backwards” in the past six months, CEO Bernard Swanepoel said on Friday, as the company posted a basic loss from continuing operations of 43.13c a share during the June quarter.

This comes as the JSE-listed gold producer cut funding to the “unsustainable” cash-consuming Blyvooruitzicht (Blyvoor) mine, which booked a R469-million impairment, and idled the Buffelsfontein operation.

“The company has been through a very difficult quarter where we consumed some R107-million in cash, mainly resulting from a materially lower gold price, funding operational losses at Blyvoor and the impact of the retrenchment costs at Buffelsfontein,” said Swanepoel.

He commented in a conference that Village’s “clear strategy was disrupted by loss-making mines that were not meant to be loss-making”, adding that the company, which took operational control at Blyvoor last year, “did not mean to invest in a loss-making Blyvoor”.

The unexpected negative performance comes on the back of, besides others, weak gold prices, strikes at Consolidated Murchison and Blyvoor and a significant seismic event that had knocked out 40% of Blyvoor production. Village was not in a position to fund the repairs to Blyvoor.

Swanepoel said Village sought to “make money out of gold mining”, while, at the same time, look at diversifying its portfolio of assets.

The group’s first move in diversification included the acquisition of a 16.24% stake in Continental Coal.

Village aimed to examine investments in other coal and platinum assets as “obvious first choices” for the future growth values, but would continue to generate cash from existing gold operations, such as the better performing Tau Lekoa mine.

During the quarter ended June, Village incurred a loss before interest and tax of R28.4-million, compared with a profit before interest and tax of R32.3-million in the prior quarter.

The group recorded a R12-million operating loss from continuing operations, compared with the R40-million profit achieved in the previous quarter, with Blyvoor contributing R88-million to the cash loss.

Although production for the quarter improved, revenue fell 5% to R569-million owing to a lower realised gold price of R421 898/kg, compared with R467 358/kg in the March quarter.

Village delivered group output of 1 448 kg, or 46 537 oz, of gold during the quarter under review – 4% higher than the 1 394 kg, or 44 806 oz, reported during the third quarter.

Interventions normalising operations at its flagship Tau Lekoamine, after it underperformed in the preceding quarter, had resulted in a 26% quarter-on-quarter improvement in the mine’s production to 26 267 oz, or 817 kg.

However, the group’s total cash operating profit fell 73% from R80.2-million in the March quarter, to R21.7-million by June.

“The restructuring process at our Buffels operation is complete. The cost savings from this very painful, but necessary process will start to materialise during the latter portion of the September quarter,” he said.

In the interim, he noted that the care-and-maintenance cost should decrease to about R7-million a month, compared with the R27-million a month lost operating the asset during the March quarter.

Village held a positive R154-million cash balance as at June 20, but R105-million was committed to the Department of Mineral Resources for rehabilitation guarantees.

“A number of actions have been taken during the quarter to reduce the losses at Buffels and to ensure that the production at Tau is more sustainable; we are confident that these measures will have a positive impact on the first quarter of 2014's financial results,” Swanepoel concluded.