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DRDGOLD Ltd. Message Board

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  • ckmb54 ckmb54 Jun 7, 2004 7:51 PM Flag

    SA golds get thumbs down 1

    The cash costs of the local producers bear him out. Even without factoring in a wage increase of around 10 percent due at the end of this month - which will increase costs of local operations by somewhere around 5 percent - the situation looks dire.
    At the end of the March quarter, cash cost analysis show DRD and Harmony�s local operations to be underwater at the current rand gold price, while Gold Fields at R76,087/kg is making a paper-thin margin. Harmony showed cash costs of R82,852/kg and DRD, which has recently started mining only the highest grade areas of its local operations to boost margins, had cash costs of R81,398/kg locally. DRD has been rescued, however, by its Papua New Guinea operations, which turned in costs of an equivalent R45,400/kg, bringing the group-wide average to around R70,000/kg. It is DRD�s performance, as well as the more-profitable offshore operations of AngloGold � and to a lesser extent Gold Fields - that speak eloquently of the imperative for gold producers to seek more of their production from outside South Africa. It is also this that will give added impetus to Harmony to pursue its growth aggressively in Papua New Guinea, through its acquisition of Abelle. In the meantime, though, Harmony, along with all its South African peers, will have its hands full in trying to staunch the bleeding at its local operations. That task will be all the more testing given the increasingly-hostile reception that cost cutting efforts are being greeted with by local unions. Whatever the solution is, it will not be cheap or painless.