JOHANNESBURG – DRDGold, the gold tailings retreatment company, on Wednesday, berated Eskom for production losses as disruptions rocked operations and operating profit halved in the six months to December.
The listed company, which has fallen more than 3 percent on the JSE, blamed Eskom for the 3 percent production decline in the period under review a day after Harmony Gold Mining Company flagged the state-owned power utility’s proposed 15 percent tariff increase would cripple its mines and place jobs at risk.
DRDGold chief executive Niël Pretorius, said yesterday that production at the company’s Ergo mine in Brakpan, east of Joburg, fell 3 percent after being hard hit by the Eskom crisis.
Pretorius added that Ergo’s lower throughput was a consequence mainly from major power interruptions experienced over 11 days during the second quarter of the 2018 financial year, caused by a fire at an Eskom sub-station, a lightning strike on the Brakpan tailings complex transformer yard and load-shedding by the Joburg municipality.
“Sadly, the once mighty Eskom is now Ergo’s single biggest risk factor,” Pretorius said.
On Tuesday Harmony Gold chief executive Peter Steenkamp warned that the proposed 15 percent increase would kill its intensive power consuming Kusasalethu and Khotsong Moab mines and also place jobs at risk. Harmony announced that it was mulling sourcing alternative electricity from a solar-powered plant.
DRDGold fell 0.32 percent to R3.09 on the JSE as profit declined 54 percent to R102.2 million, on both of lower production and higher costs.
The group said total cash operating costs were 9 percent higher following the inclusion of Far West Gold Recoveries (FWGR) and a 6 percent increase at Ergo. It said overal cash operating unit costs rose by 13 percent to R510 111 a kilogram due mainly to a 9 percent increase in Eskom’s power tariff, trucking costs and a drop in production.
The company revised production projections for Ergo to between 157 000 and 165 000 ounces at a cash operating cost of about R500 000 a kilogram for the 2019 financial year from a previous forecast of 148 000 and 154 000oz.
The company also incurred a headline loss of R46.3 million or 7.2 cents per share compared with headline earnings of R60.4m or 14.3c a share in the six months to June.
DRDGold acquired FWGR from Sibanye-Stillwater in July last year. It is a surface gold retreatment operation which treats old slime dams in the West Rand gold fields.
The FWGR is currently under construction phase, which includes the refurbishment and upgrading of the Driefontein 2 plant and relevant infrastructure.
Pretorius said the group was expecting to benefit from its contribution in the second half of 2019.