Media releases

Restructuring continues at DRD

Johannesburg, 3 November 2000: Durban Roodepoort Deep, Limited (DRD) today reported a cash operating profit of R26.9 million (US$3.8 million), a decrease of some R22 million from the previous quarter. 006/00-cdr

Johannesburg, 3 November 2000: Durban Roodepoort Deep, Limited (DRD) today reported a cash operating profit of R26.9 million (US$3.8 million), a decrease of some R22 million from the previous quarter. Commenting on the results, Chairman Mark Wellesley-Wood said that DRD's restructuring programme was continuing. "In addition to the bold steps taken to refocus the Australian operations, actions to recover funds owed to the company in Australia and the closure of the South African loss-makers, DRD is also actively restructuring its balance sheet and hedge book."

"These actions, compounded by a 7% wage increase and a low gold price, have resulted in less than anticipated results for the company. We expect to see the restructuring manifest in a highly leveraged million ounce gold producer with an improving earnings profile over the next year."

Gold production at 8 961kg (288 107oz) was marginally (2%) lower than the previous quarter, but in line with budgeted production levels. Cash costs increased by 5% to R54 995/kg (US$245/oz).

The South African operations, comprising Harties, Blyvoor, Buffels and Crown, performed well and maintained production at similar levels producing 8 504kg (273 414oz). Cash costs were maintained to a 3% increase to R54 561/kg (US$243/oz) despite a 7% annual wage increase.

The company has concluded a gold-linked tariff agreement with Eskom, the South African electricity utility, whereby 50% of the group's South African electricity consumption over the next five years is linked to the gold price.

Net capital expenditure was 29% lower than the previous quarter at R20.1 million (US$2.8 million). Principal capital investments were the Blyvoor 2000 Project, Harties 7 shaft underground infrastructure and West Wits pre-concentration spiral plant upgrade. Capital expenditure in the next three quarters is expected to be in the region of R20.9 million (US$2.8 million).

Loss after taxation for the quarter amounted to R44.5 million (R737.2 million the previous quarter, which included exceptional write-downs). The results for the previous quarter have been restated - mainly due to final asset write-downs ? following the finalisation of the annual audit.

Said DRD Chairman, Mark Wellesley-Wood: "The consolidation and restructuring of the operations is continuing. During this quarter, the DRD head count has reduced by 1 222 (6.2%) following the closure of the Durban Deep and West Wits Sections as well as other rationalisation. The Perth office has also been considerably downsized, which will reduce the annual overhead cost from A$2.3 million to A$0.8 million. The focus of this office will now be on the generation of cash flow from the Tolukuma mine."

Steps have been taken to strengthen DRD's balance sheet. An agreement to settle the Western Areas advance and to dispose of the associated share portfolio has been concluded. In addition, a separate agreement has been reached with Rothschild Australia to capitalise debt of A$12 million. The terms of repayment of the iProp loan note of R38 million (US$5.2 million) has also been finalised. These measures will reduce the interest charge to the income statement by R2.3 million (US$0.3 million) per month.

The Special Committee appointed by the Board has completed its work to the satisfaction of the auditors. Lawyers have been instructed to institute recovery proceedings. Full provision has been made for the loss of value to the company and the Committee is of the opinion that prospects for recovery are promising.

"The restructuring process, with an intense focus on reducing cash costs to below US$220/oz, will continue unabated in the light of weak dollar gold prices. The recent depreciation of the South African Rand together with a curtailment of the capital expenditure programme will contribute to higher cashflows while, with the conclusion of the investigation, overhead costs will also decline further.


Charmane Russell
(011) 880 3924
27 82 372 5816

Janice Dempsey
(011) 880 3924
27 82 372 5816

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