Lower grades, weak prices see Freda Rebecca’s topline drop 7% at $72,1 million
FREDA Rebecca reported a marginal 7% drop in revenue at $72.1 million from $77.5 million last year largely due to a combination of grades and recoveries that were lower than expected and the persistently weak gold prices.
The gold miner sold 57 799 ounces in the period from 58 704 last year at an average price of $1 247 from $1 319.
Tonnes mined and milled were at 1.18 million tonnes and 1.20 million from 1,09 million and 1,06 million tonnes last year respectively. Gold production was 58 714 ounces from 58 704 with the head grade at 2.01g/t from 2.1t in 2014.
Parent Mwana Africa, in its financial results statement said production at the miner was in line with the prior year but slightly below managements’ expectation and this was due, in part, to equipment failures that gave rise to recovery problems in the processing plant, and also because accessing the mine’s higher‐grade ore bodies took longer than expected.
The group said the mill head grades fell as mining had to pass through lower-grade areas before reaching the better grades of the richer reefs. And this lowering of the head grade contributed to reduced overall mill recoveries.
“Recoveries were particularly affected during the third quarter when the mine was supplied with substandard carbon for the carbon-in-pulp circuit,” said Mwana.
Executive chair Yat Hoi Ning however said the problems had been rectified. “I confidently expect that our underground and surface operations will attain their full potential during the 2016 financial year.”
The group said in order to get past the issue of lower prices, milling capacity as well as recoveries will be increased if the mine is to remain competitive. That means a number of investments will be needed both in milling and in processing capacity. Recovery in the period was at 78.9% from 82%.
All-in sustainable costs during the period totalled $66.6 million (2014: $62.6 million) for the year, resulting in an EBITDA of $5.4 million (2014: $14.3 million). The miner subsequently posted a net loss of $2 million from a profit of $3.4 million last year.
“ Freda Rebecca will need to work hard to ensure that its all-in sustaining cost is reduced through improved performance and cost efficiencies.”
The group said that the mining emphasis has been on stabilising grade by blending lower-grade ore from the main stopes with higher-grade material from areas where ore was converted from resource to reserve category.
The drive to reduce operating costs continued throughout the year. Service provider contracts were renegotiated and reductions in overall prices of fuel and cyanide contributed to a 2% decrease in total operating costs. The full benefits of the strategy will be realised in F16.
The group said the project to evaluate the viability of retreating the mine’s 20 million tonnes of tailings residues was put on hold during the year under review as the benefit was no longer viable
under the prevailing gold prices.
Operation cashflows were however positive at $10 million. The company invested $5.6 million (2014: $5.7 million) in capital expenditure, and utilised $5.7 million (2014: $6.1m) in financing activities, including full settlement of the IDC loan (excluding interest) of $4.3m (2014: $2.2m), and repayment of Mwana group loans of $4.8 million (2014:$4.0 millio) also excluding interest.
Non-current assets of $46.4 million (2014: $48.3 million) decreased from the prior year, mainly due to a provision for bad debts raised against a non-current receivable of $1.4 million related to the loan to the community trust, and a minor movement in property, plant and equipment.
Current assets excluding cash decreased from $17.1 million to $17.6 million, which comprised mainly an increase in tax receivable of $0.3 million (2014: nil) and an increase in inventory from $8.2 million to $8.5 million. Non-current liabilities decreased from $34.4 million to $29.4 million after taking into account the repayment of Mwana group loans of $4.8m (2014:$4.0m), and an increase in deferred tax liabilities from $9.6m to $10.1m.
Going forward, the group said gold production in F16 is expected to improve on the previous year despite the need for scheduled replacements of worn mill liners, which is now completed. This will be achieved through sustained recoveries and improved mill throughput.