Niël Pretorius speaks to Hilton Tarrant on the production update for the second quarter 2014.
Hilton Tarrant: Niël Pretorius is chief executive of gold miner DRDGOLD – production update for the second quarter 2014 out today, that’s the three months to December. Niël take us through the update...recoveries and costs...
Niël Pretorius: We are pleased to see a slight recovery back to the levels where we were prior to the first quarter. We had a poor first quarter so we were anxious and keen to see recovery levels back to where we were, because that then provides support for the commissioning of our new plant. Production was up 4%, cash operating profit was up 17% and we saw a nice decline also in all-in sustaining costs of about 14% which is a function of the higher production, obviously. We’re now in the process of really trimming our new flotation/fine-grind (FFG) circuit to get it into straight and level. We are seeing some encouraging results. We had our first smelt there - 22kg came out and it was close to the initial project assumptions. We are getting a 75% recovery out of that circuit. The flotation efficiency is certainly as efficient as we had hoped and had planned for. Over the next few weeks, what we would very closely track and monitor is to see the impact that the circuit is having on the older part of the plant... the lower grade part of the plant and hopefully we can get to the 60-40 split gold production that we are targeting.
Hilton Tarrant: The ramp-up of that circuit to reach full production took you slightly longer than expected, but outside of this reporting period, you are now at full production.
Niël Pretorius: Yes we are. We are in full production with the high grade circuit and we are working towards now also bringing stability in the lower grade circuit because obviously it’s not receiving all the gold that it used to. Some of the gold that previously came out of the low grade circuit now actually gets produced out or leached out in the high grade circuit. So we’re working towards achieving stability there as well and profitable balance between the two circuits. We were late in commissioning the circuit... we had hoped to actually start at the beginning of January already, and we only saw full commissioning and first production coming out of the high grade circuit in the third week of January. This had to do with the fact that we had to commission an additional thickener. In our initial planning we thought that two thickeners would be enough to receive all the volumes coming out of the flotation tail and that just turned out to be inadequate – so that added quite a few weeks as well as additional costs to the commissioning process.
Hilton Tarrant: With the gold price where it is, with the rand exchange rate where it is, how are you reading this environment currently? Obviously we saw earlier on in that quarter... quarter two that the rand gold price had dipped under R400,000/kg and now north of R450,000/kg or thereabouts. The weaker currency helping on the one hand but the reality of a lower gold price is evident.
Niël Pretorius: Oh absolutely. It’s a very healthy gold price for us... R450,000/kg is a very good gold price. I would have loved for it to rather have been because the dollar price was high and the rand was strong, because most of our key consumables, bulk consumables are import parity priced... produced or supplied by local suppliers but they have pricing policies that have the effect that in the event of a decline in the value of the rand, you actually see industry inflation, and very steep industry inflation, so I’m a little nervous about what’s going to be happening with costs, free-agent costs, power costs, fuel costs and steel... and hopefully we could build up some sort of margin or buffer through better efficiencies over the next few months, before the cost line catches up with the revenue line.