17th Feb 2014 12:08
LONDON (Alliance News) - Goldplat PLC Monday said its operating profit in the current financial year will be "materially" below the profit it reported last year after its Goldplat Recovery Ltd gold recovery plant in South Africa was hit by lower gold prices and lower grade recoveries during the fiscal first half.
The Africa-focused gold producer said that it received lower than usual gold grades from by-products at the plant and this, along with the fall in the gold price, have led to a reduction in the site's profitability during the six months to end-December.
It said it has implemented a number of initiatives which it believes will result in a stronger trading period in the second half of the financial year and beyond. It has focused on revising by-product procurement contracts and cancelling low grade contracts with existing suppliers.
The company said that smaller sections of the plant, previously run on a single shift system for security reasons, will be run on 24-hour shifts with additional security measures being taken. It also plans to convert the plant to liquid cyanide supply during the second half of the current financial year following positive cost savings in cyanide consumption since October 2013.
Goldplat is also looking to increase its stockpiled by-product reserves to add production flexibility going forward and a number of new contracts have been, or are, close to finalisation on a corporate level, rather than with individual plants.
Goldplat believes that this strategy will enable it not only to obtain by-products on a more economical basis, but also provide the supplier with an all-inclusive service.
The company added that the plant's profitability during the period was hit by the company having to hold operations as it went through the process of accreditation to become a certified Responsible Gold producer in December 2013. Goldplat said that it expects revenues from by-product sources to return to its usual levels in the near term and the certification should have a significant and positive impact on future contracts, profits and cash flows at the plant.
Goldplat said that its Gold Recovery Ghana Ltd operations benefited from a substantial deterioration in the Ghana Cedi currency which has helped offset lower gold prices and it believes that trading should be improved for the site in the second half, due to higher procurement prices and increased tonnage production.
The company also noted that it believes it can expand the Ghana plant's carbon-in-leach operations, benefiting from a better tax environment, and will work to achieve this during the rest of 2014.
It said that with the depreciation in the South African Rand against the US dollar, more streamlined operations and more cost-effective contracts, it expects the operational and trading outlook for the second half of the year to be much stronger.
Goldplat shares were down 13.9% to 5.81 pence Monday morning, putting it in the top five AIM losers.
By Tom McIvor; [email protected]; @TomMcIvor1
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