Shares in DRDGold, described by chief finance officer Riaan Davel as one of the best performing stocks on the JSE, inched up by 5% yesterday after the company raised earnings and declared a dividend for the full year to end June in spite of lower production.
DRDGold had mixed fortunes over the year under review, with stronger performance in the second half year at some of its operations. However, the company, whose stock has performed 71.7% stronger on the JSE in the year to date, was propped up by stronger rand gold prices, higher recoveries at some operations and firmer investment into its production processes.
Yesterday, after the release of its full year financials to end June, DRDGold traded 5% stronger at R18.8 per share.
Davel said the gold miner, which was also sizing up its opportunities in platinum group metals value chain, was the top performing on the JSE as investors show confidence in its operations.
“We are one of the best performing shares on the JSE,” said Davel. DRDGold CEO Niel Pretorius said the company’s share price was trekking the gold price which has been on an upward trend to the current levels of around $1 900 (R357 665) per ounce.
Stronger prices of the precious metal came to the rescue of DRDGold, whose production for the year ended June 2023 nosedived by 8% to 169 820 ounces.
“We witnessed a steep increase in the gold price in the first half compared to the second half of the year. Our volumes for the period were down but the yield was higher,” Davel explained.
Sales volumes for the period also dipped 8% to 169 531 ounces amid a 16% quickening in cash operating costs that surged to R697 382 per kilogram of gold.
Diesel, electricity and security were major cost drivers for the period. Pretorius, however, said DRDGold was opposed to roping in private armies to shore up security although he admitted that there was growing incidences of infrastructure destruction and other equipment.
On average, DRD Gold realised gold prices amounting to R1 041 102 compared with R894 409 per kilogram in the previous contrasting period. Group revenues subsequently firmed up by 7% to R5.4 billion while the operating profit for the period paced up by 8% to R1.8bn.
This translated to a 14% increase in headline earnings that touched R1 274.1 million for the period under review while on a per share basis there was a 13% rise to 148.2 cents. After payment of cash dividends of R515.3 million, DRDGold closed the period with cash and cash equivalents that were 2% lower at R2.4bn as it remains “free” of bank debts.
About R1.1bn of the company’s cash trove has been reinvested back into capital expenditure while DRDGold also paid R314.8m in income tax.
The decline in gold production for the period has been attributed “mostly to significant load shedding at the beginning of the financial year” with major impacts on the City Deep 4A8 operation, which drew power directly from Joburg City Power.
“A further contributing factor to the reduction in tonnage was the depletion of high-volume reclamation sites at City Deep and Ergo,” said Pretorius.
At Ergo, gold production dipped 5% to 3 931kg although the yield was 21% firmer. At Far West, gold production decreased by 14% to 1 351kg due to the lower tonnage and lower yields achieved as well as increased machine hire costs.
In spite of delays experienced in obtaining the necessary authorisations to reclaim higher-grade material at Valley Silts, reclamation had commenced in April 2023, making significant contribution to gold production during the year. In the outlook, DRDGold – missed its 2023 mid-range guidance of 170 000 ounces by about 180 ounces – expects to invest as much as R3.5bn into capital investment.
BUSINESS REPORT