Recovery operations achieved a combined operating profit for the six months ended 31 December 2020 of £3,042,000 (31 December 2019: £2,810,000). Within this, the South African operation achieved an operating profit of £2,200,000 (31 December 2019: £2,659,000) and the Ghana operation increased operating profitability by more than 5-fold to £842,000 (31 December 2019: £151,000).
The following events have contributed to continued profitability during the six months:
During the period, there has been significant investment of time and resources in gathering data to optimize our current production lines in South Africa and also on our Tailings Storage Facility (TSF). These investments contributed to a reduction of operating profit year-on-year. The goal remains to establish production lines that can operate profitability on a sustainable resource.
Capital expenditure in the amount of GBP 180,000 was incurred on the further optimisation of the largest milling and Carbon-in-Leach ('CIL') processing unit with the addition of equipment to optimise the recovery from carbon contaminated material. We will start seeing results from current investment towards the end of this quarter. In the interim we succeeded in sourcing better quality material that will support production through this circuit during the 3rd quarter, with January already showing improved production numbers.
Normal operating costs increased, specifically as a result of electricity price increases, more water used from the Rand Water Board and rental of yellow machinery for material handling purposes in addition to higher security and engineering costs.
The arrangements made to transport our staff in a hygienic and safe manner as a result of Covid-19 restrictions, cost the South African subsidiary an additional £75,000.
We also evaluated an alternate PGM resource at some cost. We achieved mixed results but will continue our endeavours to penetrate and pursue this market.
In South Africa we expect that approval for the construction of the new TSF will be received by July, and we plan to start pre-construction work during the fourth quarter. In the interim, a further GBP80,000 of capital expenditure has been incurred to extend the deposition area and to manage the current TSF whilst the new TSF is being constructed, at an estimated cost of GBP700,000.
The test work on re-processing the existing TSF has advanced to the point where we have established what we believe to be the optimal processing routes in terms of gold recovery, processing volumes and operating costs. These options will now be evaluated by accredited technical facilities to obtain the data on which the final processing plan can be designed.
We experienced a good supply from our regular clients during the period.
Our efforts in Mali, Burkina Faso and Ivory Coast to secure additional sources of supply continue, with engagements at mine and Government level.
We have received a low-grade trial batch from another mine in Mali for evaluation purposes and initial results are encouraging. By achieving a larger geographical spread with more clients, our objective is to have a steady supply to our plant in Tema from current production rather than ad hoc supplies from stockpiles.
We are still engaging with relevant authorities in Ghana on re-entering the processing and tolling of tailings material.
We are encouraged with the progress made during the last month on the sale of Kilimapesa to Mayflower. The transaction has been approved by a majority of Papillon shareholders, Papillon creditors deeds have been executed and we are in a position to complete the due diligence.
The approval processes in Kenya are progressing well.
We plan to release the unaudited consolidated financial statements for the six months ended 31 December 2020 in the beginning of March.
We remain committed to our strategy of increasing long term visibility of earnings in the recovery businesses through key initiatives. These key initiatives include:
Werner Klingenberg, CEO of Goldplat commented: "I am pleased to report continued operational profitability and especially the improved operational performance in Ghana. We are investing time and resource to achieve our goals of sustainable supply and profitability that can form the base for the declaration of dividends in future.
The sale of Kilimapesa is progressing well and we will keep market updated during February as the transaction advances.