PB: More Durban news from last week. Bob
Durban Deep delivers the turnaround goods
Johannesburg (Business Day, August 3, 2000) - Gold producer Durban Roodepoort Deep has delivered the operational turnaround it promised, cutting costs and raising revenue to achieve a 121% increase in cash profit to R49,7m for the June quarter.
However, it posted a R763m bottom-line loss for the year to June after writing down closed and discontinued operations by almost R450m.
Durban Deep chairman Mark Wellesley-Wood, who took over after former chairman Roger Kebble resigned in the wake of scandal earlier this year, said the group had implemented new corporate governance structures which would ensure the highest possible standard of governance for the group.
Durban Deep has closed its loss-making underground and surface operations at Durban Deep and West Wits, and has come to the end of a phase of heavy capital spending. It has also reduced and restructured its hedge book.
CE Mike Prinsloo said the bulk of its production would now come from Blyvoor and Hartebeesfontein, which are longerlife, lower-cost operations.
Although SA gold production was down 5% to 8550kg, the group's output was boosted to just more than nine tons by the first-time consolidation of newly acquired Australian gold mine Dome Resources.
Cash costs fell to $239/oz and the group aims to cut this to 230/oz. Gold revenue received was up 5% to $263/oz, despite a fall in the spot price, as Durban Deep benefited from the restructuring of its hedge book. The group has removed 2-million ounces off its hedge book over the past nine months, leaving a million ounces, or a year's worth of production.
This is spread over four years, although finance director Ian Murray said Durban Deep planned further restructuring to ensure no more than 20% of production was hedged in any one year.
Wellesley-Wood indicated Durban Deep would be interested in making further acquisitions in Australia, and in buying SA assets appropriate to Durban Deep's style of management.
Analysts believe it could buy some of AngloGold's assets, such as the marginal Savuka shaft at the Western Deep Levels complex or certain of the Freegold shafts.
However, Wellesley-Wood quashed earlier speculation that Durban Deep was interested in some of the other remnants of the old Randgold empire such as Western Areas or the assets in Randgold Resources.
Wellesley-Wood said Durban Deep needed critical mass in Australia to add to Dome's 80000oz a year. It now had a head office and listing in Australia and would seek incremental additions to business there.
He described Durban Deep as "the most non-South African" of SA's gold mines, with 65% of its shares held in the US and only 10% in SA.
Mineral resources consultancy SRK estimates the life of its mines to be eight years, but the group, putting the figure at 10-13 years, believes this estimate is conservative.
By Hilary Joffe
Copyright 2000 Business Day. Distributed via Africa News Online.
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