[CNBC Open Exchange] - Interview with Niël Pretorius
Speaks about their full year headline earnings per share.
Presenter: Welcome to Open Exchange. Lets head over to the JSE. Sue good morning.
Sue Beukes: Good morning to you Stephen. I’ve just got my copy of the results from Niel Pretorius now so we’re going to go and unpack the numbers with him. Niel, thanks so much for joining us this morning. Increase in headline earnings per share to 23.9c. What are the major reasons behind this?
Niël Pretorius: Well we had a very steady production quarter. Surface operations at Ergo in particular showed a very handsome increase in production and profit. The rest of the operations were marginally steady and then we also had a number of transactions in terms of which we could factor out some of the provisions that we make for rehabilitation and so forth. This is part of a corporate reorganisation that simmers out smaller assets or redundant assets.
Sue Beukes: Now your key at Blyvoor is trending towards stability. What fundamental things have you done there to improve that mine?
Niël Pretorius: Its varied the output per capita. We’ve got the same number of people deployed at the mine but fewer are now deployed in services, more of them focusing on [Unclear] work so per capita output has increased. We’ve also significantly increased face length and we’re mining more tons. That’s a mine that’s now increasingly mining more tons. What is lagging though is grade. The grades are not exactly where we want them to be so as a consequence their production came in slightly lower but they’re certainly trending in the right direction. So there are a number of sustainability drivers that we are keeping a very keen eye on and those are all trending in the right direction.
Sue Beukes: If you look at the overall mining situation in South Africa, a very tumultuous time at the moment - we’ve got a change in legislation to a large degree and also we’ve got striking going on at the moment. What will be the impact on your business and just your thoughts around the future of the mining sector here in South Africa?
Niël Pretorius: We were in a stage where you’ve got to be very focused on where you take your business. You’ve got to be aware of the new risks that have emerged and you’ve got to manage the business towards those risks. You can’t simply just rely on people working harder and the gold price going up. You’ve got to be so disciplined when it comes to costs. So I think the mining industry is probably approaching a stage now where it will have to look at some sort of a consolidation, where you can cut your overheads, slash your overheads where you still can, make sure that you’ve got the right people deployed in the right direction and manage your risks effectively. Be realistic about your risks and manage them effectively. And I think our team at Blyvoor in particular, they’ve shown that it can be done. They were on judicial management last year and they managed to trade themselves out of judicial management and they’re handsomely trending towards a sustainable business and I think that’s become a model, almost a benchmark both insofar as efficiency is concerned and also safety is concerned. And you have to make peace with your regulator. The regulator has a very challenging portfolio that he has to deliver into. He’s go to balance transformation with the commercial exploitation of mineral resources and we have to assist them and we have to support them.
Sue Beukes: And what about the strikes? Is that impacting DRD Gold at this stage?
Niël Pretorius: Not yet, no.
Sue Beukes: Lets talk a bit about Zimbabwe. You’ve started exploring there. How are things going?
Niël Pretorius: Things are going really well. We managed to increase the size of our footprint by almost 80%. We’ve done some IP surveys there as well - I’m starting to pick up on the geological terms here - the geologists are educating me. We found some very interesting anomalies, that’s the term that they use, which are changes in the rock formations underground and we started drilling. We hit hard rock yesterday at an 80m depth and what we’re seeing there is very, very interesting. So it’s a very exciting venture for us in the sense that it hardly cost us anything. We already have a footprint that I think is large enough to build a mine on and everything that we’re finding there is a good surprise so we’re very happy with progress.
Sue Beukes: So in terms of when a physical production will start taking place there, do you have any indication?
Niël Pretorius: It depends on the weather if we set it up because some of the reefs affect outcrop on surface. We’ve deployed a gravity plant with some earth moving equipment and essentially we’ll be [Unclear] within the next few months and we’ll see some production by the end of the year.
Sue Beukes: Okay. No concerns there about the investment climate and the trading environment.
Niël Pretorius: Not al all. Zimbabwe’s a friendly place. Obviously there are concerns that arise from the political situation but if you go one level down, the administrator is Zimbabwe is very accommodating. To give you an example, we wanted to increase the size of our tenement because we saw these anomalies, these two distinct structures merge into one and it was just outside our tenement. It took us two weeks to get an exploration licence for that at a cost of 500 dollars. There are very few jurisdictions where the administrative regime allows for that sort of efficiency and speed.
Sue Beukes: Niel Pretorius thanks so much for joining us this morning. That was Niel Pretorius, CEO of DRD Gold.