AN increase in gold production and the higher price of the metal combined to produce a 17% increase in DRDGOLD’s first quarter pretax earnings (Ebitda) to R681m.
The strong performance comes as the rand gold price reaches another all-time high. It is currently trading at R1.523m per kilogram, some 5.8% higher than at end-September when DRDGOLD closed its first quarter.
Gold production increased by 7% from the previous quarter to 1,319kg primarily due to a 13% increase in tonnage throughput despite yield being 0.012g/t lower at 0.201g/t, while gold sold increased by 4% to 1,289kg (45,468 ounces).
Cash operating costs per kilogram of gold sold decreased by 4% from the previous quarter to R856,723/kg due to the increase in gold sold despite higher electricity charges in terms of Eskom’s winter tariff agreement.
Cash operating costs per ton of material decreased by 6% from the previous quarter to R176/t due to the increase in tonnage throughput.
DRDGOLD said it expected its unit costs would trend down throughout the year as the number of ‘clean up’ sites declined compared to hydro mining, which is less costly.
The upshot is an increase in cash and cash equivalents, up some R72.7m to R594m as of end-September after paying a R172.3m cash dividend and capital expenditure of R323.3m.
Additional cash would be put into DRDGOLD’s capital programme aimed at adding a ton of gold to its annual production by expanding its Far West Gold Recoveries (FWGR) operations and setting up Ergo for another 14 years of economic life.
Of R10bn set aside for these projects, R7bn is still to be spent, mainly on FWGR before the start of the 2028 financial year. The high capex bill is also likely to see no step increase in the firm’s approach to paying dividends.
DRDGOLD sharply cut in its final dividend in August to 20 South African cents a share from the previous final of 65c/share. That took the total dividend to 40c/share for the year (2023: 85c/share) despite the company posting a 4% rise in headline earnings to 154.1c/share (148.2c/share).
“If we have free cash other than the growth capital then we will continue to pay dividends but the one thing we are not going to do is borrow money to pay dividends,” said Niël Pretorius, CEO of DRDGOLD in August. “We are putting facilities in place for project funding but we do not want to play ‘pretend pretend’ and pay dividends with money that we are borrowing and paying interest on,” he said.
“There is still a lot of money that needs to be spent but, imagine if we get it right adding a ton of gold to our production profile and the gold price stays where it is and we have a reducing cost profile. That could be very exciting,” he said.
Shares in DRDGOLD of R19,11/share are at a one year high.