All that glitters is DRDGold
Mining company keeps its 12-year unbroken run of dividends going with fourfold hike for 2019
DRDGold kept up its boast of being the longest uninterrupted dividend payer of SA gold-mining companies, rewarding shareholders with a fourfold increase return of 20c a share for 2019.
In its annual results to end-June 2019, DRDGold showed the benefits of the inclusion of its new R331m tailings project, Far West Gold Recoveries, which has come into production as the gold price has taken off, boosting revenue and profit.
With the gold price trading at R754,000/kg, more than R170,000/kg above the average price received during the 2019 financial year, the effect on DRDGold will be positive.
“Time will tell if this is sustainable, but while it lasts, the impact this has on our cash flows is nothing short of remarkable,” said CEO Niël Pretorius.
“When you take the gold price now ... and multiply by the tons we produced to see what sort of impact that would have on revenue, maybe we don’t all that into consideration,” he said, pointing out that production was just 23kg shy of 5 tons for the year.
At the prevailing gold price and using the base of 5 tons of gold, revenue would be R3.8bn, which is R1bn more than that for financial 2019.
DRDGold paid an interim dividend of 5c a share in 2018, but withheld its final dividend as it invested in the Far West project.
“This is the 12th consecutive financial year of the company paying a dividend,” Pretorius said.
Posttax profit shot up to R78.5m from R6.5m a year earlier as revenue increased to R2.8bn from R2.5bn. Gold output increased by 6% to 160,014oz.
Commenting on the balance sheet, which is free of debt, and the strong cash flow of R250m generated in the second half of the year and the prospect of further cash generated this year, CFO Riaan Davel said: “When I look at this ... it looks very much like a launch pad to me.
“What will enable this launch, and with this balance sheet in mind ... is that zero-gearing gives us many opportunities,” he said, adding DRDGold had proven technology to extract minuscule amounts of gold locked up in millions of tons of tailings.
Pretorius likened the flagship Ergo tailings operation to a process of selecting just 190 people out of Africa’s population of 1-billion people.
DRDGold, a dump retreatment specialist, swapped a 38% stake in the company with Sibanye-Stillwater in exchange for tailings to the west of Johannesburg.
DRDGold had a lot to prove to Sibanye and the success of the first phase of Far West could open the way to further options locked up in Sibanye, a major producer of platinum group metals and gold.
“There are a lot of assets in the Sibanye stable that are invisible ... we are perfectly positioned to fly in their slipstream to identify and pick these things up,” said Pretorius.
Gold production in the 2020 financial year is forecast to be 175,000-190,000oz at a cash operating cost of about R490,000/kg.