DRDGold says that adverse world market conditions and rand strength will hurt its operations and affect its profitability in future. The shutting down of various sites and relocation of business during last year also had a negative impact on the miner.Photo: Supplied
Durban - DRDGold said on Wednesday that adverse changes in the global market and the sustained strengthening of the rand against the dollar were likely to hurt its operations and affect the company’s profitability in the future.

The company said these factors had already impacted on its operations in the six months to December.

The miner said the price of gold, which has tumbled more than $200 (R2643) since July last year, had dented its profitability prospects. Jordan Weir, equities trader at BayHill Capital, said the fall in the bullion spot price and the currency appreciation had squeezed most companies in the gold sector.

“They have all been affected by the a gentle fall in the gold spot price at the back end of the fourth quarter in 2016 as well the almost 9.5percent strengthening of the rand against the US dollar,” Weir said. “The all-in sustaining costs - the cost of extracting the gold from the ground and general operating costs - have been squeezed higher.”

DRDGold said the all-in sustaining costs margin increased to 6 percent during the period and said it expected the uncertainties to continue this year.

In its results, the company reported a headline loss of R10.2 million for the six months to end-December compared to R10.9 million headline earnings reported in 2015.

It blamed the losses on the start of the final clean-up and closure of various sites at its Crown mines, causing accelerated depreciation and retrenchment costs of R18 million each.

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However, revenue increased to R1.19 billion, slightly up from R1.13 billion reported a year ago. Operating profit was up 4 percent to R172.6 million on a 7 percent lower gold output. Gold production of 2100kg reflected a 2 percent decline in throughput to 12.6 million tons and a 6 percent decline in yield to 0.166 grams per ton.

DRDGold shares dropped 1.57 percent to close at R8.17 on the JSE.

Weir said the shutting down of the various sites and relocation of business during the period also had a negative impact. “This gave rise to retrenchment costs as well as the accelerated write-downs of certain assets that were involved in the company’s Crown projects,” he said. “These costs are expected to last until at least the third quarter of 2017.”

The company said it remained worried that regulatory developments which have resulted in difficulties in maintaining necessary licences or other governmental approvals could hurt its competitive advantage. “Changes in business strategy, any major disruption in production at key facilities or adverse changes in foreign exchange rates and various other factors can impact on the results in the year ahead,” the company said.