South Africa's fourth-largest gold producer, Durban Roodepoort Deep (DRD), said yesterday that, while it does not see growth opportunities in the country through exploration or expansion, it does see possible growth through acquisitions and consolidation - a trend resulting from the “crisis” in South Africa's gold industry.

South African gold producers have, in recent times, seen their profits eroded by the strengthening rand, which is biting into their dollar-denominated export earnings.

Executive chairperson Mark Wellesley-Wood, reporting the group's results for the quarter ended September 30, told a conference call that DRD has “come a long way to arresting the bleeding for its South African operations”. He added that the company thus foresees a “clean” December quarter, and - as long as the rand gold price remains above the R82 000/R83 000/kg level - no further retrenchments are expected.

The September quarter, however, saw the reviews of three of the company's local operations - Blyvoor, North West Operations and ERPM - resulting in the downscaling of DRD's labour force by about a third. Labour costs, said Wellesley-Wood, make up some 50% of the company's costs.

Following the retrenchment of 1 619 employees, at a cost of R24-million, in September, a six-month plan has been put in place aimed at returning Blyvoor to breakeven.

Wellesley-Wood commented that the basis of this plan is to reduce mining of areas serviced by expensive infrastructure and to focus on areas where improved efficiencies will result.

The retrenchment of employees at Blyvoor was achieved in record time and a principle of 'best man for the job' was applied to ensure retention of key competences. Metallurgical improvements have resulted in an increase in recoveries of 53%.

Other sources of surface production are being investigated in order to utilise excess capacity in the gold plant.

Wellesley-Woods explained that the group was now seeking to develop the mine into a lower-ton high-grade operation to ensure its sustainability into the future.

After the retrenchment of 119 employees, at a cost of R3,7-million, at the Buffels section, DRD's North West Operations have kept No 9 and No 11 shafts at Buffels in production.

The principal focus, however, is on improving recovered grade and consequently the balance of mining will move to higher-grade shafts at Harties - No 2 shaft, No 4 shaft and No 5 shaft - with only selective mining taking place at No 6 shaft, No 7 shaft and No 8 shaft.

All production from underground is now treated at the South plant and treatment rates of 125 000 t a month are planned for the rest of the financial year. During the quarter, the North plant was recommissioned and fed with screened waste rock dump material. This will continue until such time that the current source of material is depleted, with additional possibility of processing alternative surface source material. This project generated 2 572 oz (80 kg) of gold during September.

Meanwhile, troubled marginal mine ERPM has undergone extensive restructuring, resulting in the retrenchment of 806 miners. This has led to a significant reduction in cost, coupled with improved productivity. As a result, the mine has been restored to profitability, and the original planned closure of the underground section has been postponed.

Group gold production was slightly down quarter-on-quarter, at 220 524 oz (6 859 kg), due mainly to lower production from the South African operations, specifically Blyvoor, where a 60-day review was completed, resulting in a slowdown in production.

Group unit costs were slightly higher as a direct result of lower production in South Africa, but the second quarter's costs are expected to be in line with those of the June quarter now that restructuring has been completed.

The average gold price received for the quarter under review was $403/oz (R82 785/kg) compared to $395/oz (R85 804/kg) the previous quarter.

In order to strengthen its global exposure and achieve further geographical diversity, Wellesley-Wood pointed out that the company would seek growth opportunities beyond South Africa and the Pacific Rim, where it already has established operations.