DRDGold aims to build on growth
Management’s focus is to ensure that share dilution is offset by earnings from its West Rand tailings project early on
Gold-tailings treatment specialist DRDGold expects to grow output 7%-11% in the year to June after a strong performance in the first half of its financial year, when its plants and pipelines fired on all cylinders.
Sibanye-Stillwater and DRDGold agreed late in 2017 that Sibanye would inject its West Rand Tailings Retreatment Project (WRTRP) into DRDGold in return for a 38% stake, with an option to increase it to 50.1%.
The project is a complex of residual dumps near Carletonville in western Gauteng containing almost 3-million ounces of gold in reserves.
CEO Niël Pretorius said on Thursday the circular on the transaction would be posted to shareholders later in February, ahead of a meeting to vote on it.
Management’s focus was to ensure that share dilution was offset by earnings from the WRTRP from an early stage.
The first phase would require R288m to develop but had a net present value of R1.3bn.
In the second phase, volumes processed would rise to about a million tonnes a month from 400,000-600,000 tonnes a month, but if there was a delay phase one could be extended.
Pretorius said DRDGold was aiming to produce between 147,000oz and 153,000oz of gold in its current financial year compared with 137,000oz in the year to June 2017, after raising production 11% to 75,267oz in the six months to December. This reflected a stable performance from the Ergo processing plant and a steady delivery of material as two new reclamation sites reached full production.
In the past week, work began on a third site which would increase throughput, Pretorius said.
DRDGold realised a 4% average lower gold price at R547,653/kg in this period as the rand firmed against the dollar, but cut all-in sustaining costs by 7% to R500,125/kg.
The company has managed to wring significant savings out of using less cyanide and installing a central water-treatment plant, which has cut the cost of water 41%.
Headline earnings turned from last year’s loss of 2.4c a share to a profit of 14.3c a share and an interim dividend of 5c a share was declared. The dividend reflected both the "robust" performance of the past six months as well as the spending required on the WRTRP, if the transaction is approved by shareholders, Pretorius said.
DRDGold shares added 2.5% to 363c on the JSE in line with a general surge in equities after the resignation of Jacob Zuma as president, although the strengthening of the rand is negative for local miners.
Pretorius said that the immediate priorities were to commission a new zinc precipitation circuit, which would improve the efficiency of the Ergo plant, as well as two new ball mills that would enable it to process higher grade sand.