The processing facilities and water filtration beds at the Ergo gold recovery plant, run by DRDGold. Picture: BLOOMBERG
The processing facilities and water filtration beds at the Ergo gold recovery plant, run by DRDGold. Picture: BLOOMBERG

Mine tailings retreatment specialist DRDGold expects its profit to increase nearly seven times on the back of a one-third higher gold price.

DRDGold, which is majority owned by Sibanye-Stillwater, a major platinum group metals (PGMs) and gold producer, grew its cash holdings by six times to R1.7bn at the end of June, up R208m from a year earlier, leaving it debt-free and well positioned for the next phase of its growth.

The gold price has surged more than 25% so far in 2020.  

Sibanye vended tailings dumps near Carletonville into DRDGold in exchange for shares, giving the tailings retreatment specialist an important anchor investor and providing Sibanye a solution on how to cost-effectively treat dumps around its gold mines.

DRDGold, which is one of the world’s largest gold tailings dump reprocessors, expects its basic earnings to grow nearly sevenfold to 82.5c per share in the year to end-June compared to 11.8c a year earlier. Headline earnings are similar. 

DRDGold will report results on September 1.

Revenue grew by 50% to R4.2bn, with the new Far West Gold Recoveries business that was formed out of the Sibanye tailings, adding R1.1bn in revenue, while the existing Ergo mining business grew its revenue contribution by nearly R500m to R3.1bn.

Both businesses experienced a one-third increase in the received rand gold price, which more than offset declines in output caused by the Covid-19 lockdown SA entered at the end of March, which disrupted the entire country’s economy.

The Far West operations restarted mining on April 4 and Ergo on April 9, albeit on a limited basis.

Ergo sold 11% less gold, not only because of the lockdown but also due to interruptions to electricity supplies from Eskom and the Ekhurhuleni municipality. The disruptions and increased throughput at Far West contributed to an 8% increase in cash operating costs, which were R2.6bn during the period.

“Liquidity is further enhanced by the current high rand gold price levels,” the company said.

DRDGold’s shares have trebled in value so far this year, making it one of the top performing stocks on the JSE.

seccombea@businesslive.co.za

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