South African junior gold miner DRDGold Limited says it is evaluating a growing number of prospects in Zimbabwe, which could emerge as the miner’s most dynamic frontier as South African operations increasingly come under immense cost pressures.
The fourth largest gold producer in South Africa said this in its financial report for the 2011 first quarter ended September 30 released on Thursday.
The JSE and Nasdaq-stock exchange-listed resources company targets starting gold production in the country “by the end of the year” through a 50-50% joint venture with ChiZim Investments.
In the report, DRDGold said first-quarter gold production rose 6% to 65,267 ounces from 61,632 ounces in the previous quarter, while total cash operating costs increased 11% to R520,7 million.
The company said it expects the costs, stoked by higher electricity winter tariffs and annual wage increases, to maintain an upward trajectory.
The cost shock is being aggravated by the strong appreciation of the rand, the functional currency, against the greenback, the gold-selling currency.
DRDGold thinks the Zimbabwe mining operation will be low-cost relative to those in South Africa, and contribute significantly to its revenue.
In the previous quarter, the company said it had achieved “very interesting” results of exploration and preliminary drilling in Zimbabwe, which began at a restricted level last year.
Jointly with its local associate, the miner is exploring for gold at Leny on the Zimbabwe greenstone belt and has described the project as a “very exciting venture”.
Last year, DRDGOLD contracted Camden Geoserve to conduct exploration on two veins and process showed grades varying from five to 25 grammes per tonne.
Buoyed by the results of the exploration, the miner has increased capital expenditure to the number of claims at Leny to 46 (covering 454ha) from 16 (covering 253ha).