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DRDGold now debt-free, returns to profit at year end

The first serious dividend consideration will be at the half-year after December – Niël Pretorius, CEO DRDGold.

SIKI MGABADELI:  DRDGold today reported a profit of R62m for the year against a R67.8m profit a year ago. Revenue is up by R2.4bn from R2.1bn. Operating profit up by 13%. They also declared a final dividend of 12c, DRDGold saying they became debt-free in the 2016 financial year.

My colleague, Warren Dick spoke to CEO Niël Pretorius, CEO, who takes us through their results.

NIËL PRETORIUS:  Our target is between 14 000 and 150 000 and we missed that target by about 1 500 ounces. So we had hoped to achieve at least 145 000 ounces.

There are two things, though, one of which was entirely intentional, and that is that we had decided to in effect have really good results and we were sitting in a very comfortable position. So it’s completely the clean-up of the far west sites before starting to mine one of the newer sites that we are going to start mining to the south of Johannesburg. That impacted both on the number of units that we produced, because it’s slightly more difficult to mine from a site that’s nearing its end. And that also pushed the unit cost per tonne and unit cost per kilo of gold produced up.

I suppose if circumstances were different, if we were under a more stressed set of circumstances, we may have accelerated that exit and started mining the other site sooner. But we were in a position to do that and to exit it I think in a responsible manner and leave it behind in as good a shape as we can, properly cleaned up.

And then the other set of circumstances ….[indistinct] if they were trees they’d be standing in a hurricane now for the last two, three years. We were running them very, very hard and at our higher-grade site, the night site, we did some long-overdue maintenance to CIL tanks and also to one of the mills, and that impacted on their throughput as well. But it was mostly managed and certainly intentional.

We are going to be coming out of the clean-up site in about seven months in February. The maintenance that we wanted to do at night, that’s behind us. So hopefully from early in the new calendar year we could see some of the volume numbers improve, certainly the volume throughput will increase even further. Those will be lower-cost tonnes, so hopefully that will also flow through into the production kilo costs per unit.

WARREN DICK: So what is the guidance for the next year in terms of production?

NIËL PRETORIUS: We’re still targeting between 145 000 and 150 000 ounces. It’s a top guidance, it’s a target, but we think that we might be in the lower end of that target rather than the higher end, in view of the fact that we still have about another six or seven months of clean-up ahead of us.

WARREN DICK: Okay. You had done a bit of work on – I think you’d employed what you called the fine-grind circuit at the Ergo plant out in the East Rand. Has that yielded the improvements in the yield in the grams per ton that you envisaged?

NIËL PRETORIUS: We were targeting a reduction in the gold content of our residue, a reduction of 0.03 grams a ton and we are seeing that. What we’re also seeing, though, is slightly lower grades going into the plant. So it’s assisting us to offset the lower yields and still maintain a relatively comfortable production rate. What it’s also doing is it’s isolating a very interesting, at this stage, complex but interesting concentrate. But we think that there’s some more opportunity in further enhancing those recoveries, and to offset the lower grades even further. But that’s working to the future.

On the whole the targeted output of this particular circuit, when the capital votes were approved and submitted – we’re comfortable that those are being achieved.

WARREN DICK: And based on what you’re telling me about the areas that you’re mining up until, roughly, the start of the calendar year with the clean-up, you expect that those yields will remain in that kind of region?

NIËL PRETORIUS: I would imagine, February, maybe March of next year if we do manage to start mining this particular resource to the south of Johannesburg.

WARREN DICK: Right. And just a last question Niël, you instituted a quarterly dividend in the third quarter, you’ve announced a final dividend. Are quarterly dividends the way forward for the business now?

NIËL PRETORIUS: We look at our net cash position at the end of every quarter. I think it’s unlikely that we will be considering a dividend now after the October board meeting because it’s less than a month and half away from now and it’s more or less at that time that we’re also paying out this dividend. So we’ll look at the net cash position and take a decision.

There’s a cost involved in disbursing dividends, particularly in the United States where the Bank of New York charges a fee to distribute it, so you do want to make sure that when you do pay out a dividend that at least there’s some value for shareholders. You don’t want to unnecessarily just pay out token dividends. The first serious consideration of the dividend is once again going to be at the half-year after December.

WARREN DICK: Okay great, we’ll leave it there Niël and all the best for the New Year.

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