DRDGold expects earnings to drop as high input costs bite

SA gold producer DRDGold expects headline profit to decrease by up to a third for the full year to end-June, weighed down by a lower rand gold price and an increase in input costs from diesel and chemicals.

The company, which specialises in the production of gold from the retreatment of surface tailings, reported on Wednesday that headline earnings per share (HEPS) are expected to fall by between 33% and 13% (to between 113c and 147c) for the year, from 168c in the previous year, when the group generated a headline profit of R1.4bn.

DRDGold comprises two subsidiaries — Ergo, about 50km east of Johannesburg in Brakpan, and Far West Gold Recoveries, near Carletonville, west of Johannesburg where it uses chemical processes to recover residue metal from the retreatment of surface tailings left over from mining.

Revenue from these operations fell 3% to R5.1bn, DRDGold said.

The company managed to exceed the upper limit of its production guidance for the year, producing 183,900oz of gold against a guidance of between 160,000oz and 180,000oz.

This was offset, however, by a 3% decrease in the rand gold price received, a 13% increase in cash operating costs and a 3% decrease in gold sold from Ergo — the larger of its two re-mining operations.

The group said increases in costs at both operations were mainly caused by above-inflation increases in the costs of key consumables such diesel, steel and cyanide.

Ergo’s revenue decreased 6% to R3.7bn from R3.9bn. Far West Gold Recoveries performed better, with revenue increasing 7%, to R1.4bn from R1.3bn mainly due to a 9% increase in gold sold.

The miner remains debt-free and had cash of R2.5bn at the end of June, from R2.18bn in the previous year.

In early trade on Wednesday, DRDGold’s shares held steady at about R10,50 having fallen about 20.5% so far in 2022.

erasmusd@businesslive.co.za