DRDGOLD Limited, South Africa’s fourth largest gold miner, has announced it will start gold production in Zimbabwe “by the end of the year” following “very interesting” results of exploration and preliminary drilling, which began at a restricted level last year.
In partnership with ChiZim Investments, its 50-50% joint venture associate in Zimbabwe, the resources company is exploring for gold at Leny on the Zimbabwe greenstone belt and has described the project as a “very exciting venture”.
It paid R7 million for the equity.
In an interview with CNBC Africa on Thursday, the miner confirmed it sees a seam of fortune where those operating in Zimbabwe see risk, and would not hesitate to commit more funds into the project.
By June 30, the company had spent R5,2 million on the project, including the acquisition of plant and equipment.
“Things are going really well. We managed to increase the size of our footprint by almost 80%,” CEO Niël Prestorius said in the interview, after presenting DRDGOLD’s financial report for the quarter ended June 30 to shareholders and investors.
“It (timing of production) depends on the weather if we set it up because some of the reefs affect outcrop on surface. We’ve deployed a gravity plant with some earthmoving equipment and essentially we’ll be (in a position to know) within the next few months and we’ll see some production by the end of the year.”
The company thinks the Zimbabwe mining operation will be low-cost relative to those in South Africa, and contribute significantly to its revenue.
For the quarter, gold production declined 1% to 61 632 ounces despite an 8% increase in the average rand gold price. Profit after tax increased to R247,9 million from R12,9 million the previous quarter.
Last year, DRDGOLD contracted Camden Geoserve to conduct exploration on two veins and results showed grades varying from five to 25 grammes per tonne.
Buoyed by the results of the exploration, the Johannesburg and Nasdaq Stock Exchange-listed miner has increased capital expenditure to the number of claims at Leny to 46 (covering 454 hectares) from 16 (covering 253ha).
ChiZim has completed a magnetic survey and proceeded to do an induced polarisation survey across the entire area of the claims on which it has identified three target areas for the first phase of core drilling.
Asked if DRDGOLD was not worried about Zimbabwe’s investment climate and trading environment, Pretorius said the company doesn’t see the country risk and won’t waste time brooding over it.
“Not at all, Zimbabwe’s a friendly place. Obviously there are concerns that arise from the political situation but if you go one level down, the administrator in Zimbabwe is very accommodating,” he said.
“To give you an example, we wanted to increase the size of our tenement because we saw these anomalies; these two distinct structures merge into one and it was just outside our tenement.
“It took us two weeks to get an exploration licence for that at a cost of $500. There are very few jurisdictions where the administrative regime allows for that sort of efficiency and speed.”