[miningmx.com] — ESKOM’s winter power surcharge and wage increases have cut into the fortunes of gold producer DRDGOLD LIMITED which on Thursday reported a 24% decrease in operating profit for the quarter to end-September.
Posting an operating profit of R69.4m compared to the June quarter’s R91.5m, CEO Niel Pretorius said the biggest contributing factor was an 11% increase in cash operating costs – amounting R520m.
Cost drivers during the quarter were, in particular, power utility Eskom’s higher winter surcharge which it levies for three months on top of its normal tariff, as well as annual wage increases.
The winter surchrage added R27.8m to cash costs.
“Cash operating profit would have been R97.2m – 6% higher than in the previous quarter – but for “this peculiar practice on the part of Eskom, for which we receive no value,” Pretorius said. “That the winter power surcharge is behind us for now, will help greatly towards restoring margin.”
The company increased production during the period under review by 6% to 65 267oz on the back of a 13% production increase at Blyvoor – combining underground and surface operations. Production at DRDGOLD’s other surface operations – Ergo and Crown – remained flat.
Income from the sale of gold jumped 21% to R623.6m.
Gross profit for the quarter was R36.6m, down 50%, after stripping out a non-cash credit of R71.3m arising from the transfer of environmental rehabilitation liability adjustments, following the disposal of mining licences for Durban Roodepoort Deep and West Wits.
“We anticipate that we will continue to operate in an environment characterised by a strong gold price, but with challenges from rising costs,” according to Pretorius
He said the group’s priorities remain to improve key sustainability drivers at Blyvoor, as well as developing the Crown/Ergo operations on schedule.
