Areas in which cable theft is rife may eventually be left off the power grid as it is economically unsustainable to keep replacing infrastructure, especially if power provision becomes partially privatised, says DRDGold CEO Niël Pretorius.
The 128-year old debt-free company, founded as Durban Roodepoort Deep in 1895, released half-year results on Wednesday, noting revenue grew 6% thanks to a rising gold price.
The firm that retreats existing tailings dams and mine dumps to extract gold, is on track to pay its sixteenth full-year dividend when it reaches the end of its financial year. It paid a 20c per share dividend for the interim period after generating free cash flow of R215.4m.
It faced a 10% increase in operating costs to R1.8bn, due to rising costs of fuel and cyanide used in gold extraction. Inflation and lower volumes mined decreased group operating profit 5% to R792.4m.
The company faced challenges due to load-shedding as facilities in City Deep, part of the Ergo plant, were connected to Eskom via a City of Johannesburg substation.
Mines typically are excluded from load-shedding by Eskom but are “curtailed” — they have to reduce power use at different stages. However, its connection via Johannesburg City Power led to significant load-shedding
Cables were stolen during blackouts and it faced delays being reconnected to the grid. It connected to the Eskom grid directly at its own expense in December.
Decisive campaign
Pretorius said a decisive campaign is needed to curb the scourge of vandalism and theft of infrastructure.
“Cable theft has now become cable robbery. People are getting shot at to pave the way for cable theft.”
Pretorius said there will come a time when infrastructure is “just not going to be replaced again. You can’t put stuff in only for it to be stolen again. It’s simply no longer economically sustainable.
“The government is increasingly transitioning away from being the sole supplier [of power] and not everybody is equally enthusiastic about continually replacing infrastructure.”
As a result there could “dark spots”, where the grid no longer extends to certain areas.
“The obligation is now going to be shared more broadly, and there will no longer be a political angle to power generation.
“Those communities will have to rely on themselves. People are innovative. So you’ll probably see some sort of localised power generation initiative or more solar panels.”
He also praised Eskom for the way it dealt with the mining industry.
“As much as Eskom has become the pet target for criticism, the engagement that we’re having with staff that manage the curtailment has been good.
He said technicians “were working under extreme conditions”, often facing gun-wielding criminals.
The company is spending about R400m in the 2023 financial year on a solar plant and battery backup at its Ergo plant, extending from central Johannesburg to Ekurhuleni to provide 20MW of electricity with 40MW to be added later.
In the six month period, Ergo revenue grew 10% to R1.9bn. Gold production fell 5% amid a 14% decrease in production throughput and a 10% increase in yield.
At Far West Gold Recoveries revenue increased marginally to R695m from R693m.
However, gold production decreased 7% due to power curtailment and a 5% fall in yield as a result of lower-grade material being processed.
Speaking on the company’s social development programmes with communities that included food production and gardening, Pretorius said the informal economy is “what will ultimately bring poverty alleviation and social development”.
Headline earnings per share, a main profit measure used in SA, was 62.3c.
DRDGold’s share price closed 1.18% lower at R13.40.
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