UPDATE 2-DRDGOLD posts deeper loss, warns on lack of cash
Thu Feb 24, 2005 04:28 AM ET
(Adds analyst comment, more details, updates shares)
By Eric Onstad
yahoo.reuters.com
JOHANNESBURG, Feb 24 (Reuters) - South African gold miner DRDGOLD (DRDJ.J: Quote, Profile, Research) posted a deeper first-half loss on Thursday and warned that it might run short of cash as it restructures mines that are not profitable.
The company has been hit hard by a buoyant rand currency which cuts export income, since it has the most low-grade mines of South Africa's major gold producers.
DRDGOLD shares, which tumbled 60 percent last year, dipped a moderate 1.6 percent to 8.10 rand by 0845 GMT since many investors expected bad news after a trading statement last week.
"They're in a bit of a pickle because they need to restructure and bring down the high costs and that's going to cost money which they don't have," an analyst said.
The country's fourth-largest gold producer said that at the end of last year current liabilities exceeded current assets. It also listed a series of risks to its business, including further appreciation of the rand.
"These conditions ... indicate the existence of a material uncertainty which may cast significant doubt about the group having sufficient cash resources to meet its current obligations," a statement said.
Such a cash squeeze might impact on the company's ability to continue operating as a going concern, it added.
The company planned to finance commitments from existing cash resources, the sale of assets and from debt facilities already in place or that would be negotiated, Chief Executive Mark Wellesley-Wood said in the statement.
DRDGOLD posted a headline loss for the six months to end-December of 64.4 cents per share, compared with a loss of 18.5 cents in the same period a year ago.
The company, which recently changed its name from Durban Roodepoort Deep, also said it had taken an impairment of 214 million rand ($36.57 million) for its North West mining assets, which were in the process of being restructured.
Headline earnings strip out capital, non-trading and extraordinary items. The net loss per share, including the impairment, ballooned to 149.9 cents from 18.1 cents.
MIGHT CLOSE MORE SHAFTS
The red ink was expected after the firm warned last week the headline loss would grow by more than 200 percent.
The company also said last week that it might have to close or mothball as much as one third of its South African production due to the strong rand, which has strengthened by more than 130 percent since late 2001.
It did not give details of changes at the North West mines, which underwent one round of restructuring in late 2003 that cut a fifth of output and 3,000 jobs.
North West operations, consisting of the Hartebeestfontein and Buffelsfontein mines, accounted for 54 percent of the firm's South African output and 34 percent of total production.
Underground costs at the North West mines in the first half were nearly 15,000 rand per kilogramme higher than the current domestic gold price of 81,000 rand/kg.
The company's other South African operations at Blyvoor recently underwent restructuring, but underground costs there were still more than 20,000 rand/kg above current prices.
DRDGOLD has been expanding in Australasia to lessen its exposure to the South African currency, and its overseas mines now make up 37 percent of total output.
The foreign operations contributed 188.6 million rand in first half cash operating profit while the domestic mines recorded a 81.4 million cash operating loss.
The firm had previously released production data showing first-half gold production increased slightly to 443,821 ounces from 435,800 ounces in the year-ago period. |
