DRDGold rewards shareholders despite drop in revenues at interim stage

Covid had limited impact on performance, though climate change is now noticeably affecting operations.
West Rand Tailings Retreatment Project. Image: Supplied

Surface gold treatment group DRDGold has rewarded shareholders with a 20c a share dividend, paid out of income reserves – despite a 48% drop in earnings per share.

Revenue was down 16% to R2.48 billion for the six months to December 2021, due to a 13% drop in the rand price of gold. Gold production was down 3% to 2 886kg, with average yields 4% lower than the previous reporting period.

The lower revenue and higher costs pinched operating margins from the previous 48.4% to 33.3%.

The group has no bank debt and is sitting with cash of about R2.24 billion. Shareholders are to receive a 20c dividend, which is half that paid out for the prior period in 2020. The current dividend will be drawn from reserves built up in prior periods.

Earnings per share were down 48% to 58c (six months to December 2020: 111c).

The group operates two surface treatment plants, Ergo and Far West Gold Recoveries, both of which exceeded forecasted production by just over 5 980 ozs. This softened the impact of the depletion of higher-grade reserves at Ergo and set the business up favourably to achieve full-year production guidance, says DRDGold.

Covid had limited impact on group operations due to the attitude of staff and better than forecast production.

Group cash operating unit costs were 13% higher at R576 444/kg.

Capex at R145.1 million was slightly lower than the prior period and was predominantly for sustaining operations.

CEO Niël Pretorius says the impacts of climate change are noticeable, with weather patterns increasingly volatile.

“Droughts are drier and longer, and rainstorms more frequent and fiercer. We are also operating in an environment of power supply and cost uncertainty.”

The group says it will build a solar power plant and a power storage facility, and capex for this project has been approved by the board. This involves an upgrade to the existing supply line to DRDGold’s Brakpan/Withok tailings storage facility (TSF), and the construction of an initial 20MW PV plant and the first ten power storage facilities of 10MW each.

The group is also exploring the feasibility of expanding its Driefontein 2 plant to process 1 million tonnes a month, doubling its current volume capacity. The design of a previous plan to build a regional tailings facility – capable of receiving 800 million tonnes of displaced mine waste over its operating lifespan – was rejected by the Department of and Sanitation, prompting the group to explore alternatives.

DRD share price over three years

Source: Moneyweb

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