DRDGold to maintain first-half profits

Gold producer DRDGold expects its profits to have risen as much as 15% in the six months ended December, boosted by the higher randgold price.

Its headline earnings per share (HEPS), the main profit metric in SA that strips out oneoff items, is likely to rise to between 65.3c and 71.5c versus 62.3c in the same period a year ago, DRDGold said in a statement on Tuesday.

The gold market has held up reasonably well over the past 18 months, supported in part by its safe-haven characteristics in light of the increasingly uncertain global environment.

Central banks have also been strong buyers of bullion, helping to keep the gold price at about $2,000/oz.

However, DRDGold was not able to take full advantage of the favourable gold price during the reporting period because of cost pressures that included a high electricity and diesel bill, as well as machine hire costs.

DRDGold is one of the world’s largest gold-tailings retreatment companies. It retreats existing tailings dams and mine dumps to extract gold.

At its Ergo Mining tailings retreatment operation in Johannesburg, revenue increased by R234.5m to R2.19bn, mainly due to a 22% increase in the randgold price received.

However, gold sold dropped 8% to 1,872kg as a result of a decrease in throughput tonnages.

Revenue from its Far West Gold Recoveries operation near Carletonville rose by R85.4m to R781.2m, but was offset by an 8% decrease in gold sold to 663kg.

At Ergo, cash operating costs rose 12% to R1.79bn, partly due to double-digit increases in machine hire costs. At Far West Gold Recoveries, cash operating costs surged 24%, to R305.1m.

CAPITAL EXPENDITURE

The group’s capital expenditure also soared 177% to just over R1bn as a result of setting up a solar power plant at Ergo, which is scheduled to be complete in March, with battery storage facilities scheduled to be complete by October.

DRD said it was still on track to achieve the lower end of its full-year production guidance of 165,000oz and 175,000oz. However, it had increased its cash operating unit cost guidance to R800,000/kg from R700,000/kg.

Regarding other projects, the company said specialist studies required for the environmental and water-use licence authorisation for the expansion of the Brakpan-Withok tailings storage facility were ongoing.

Its shares were down 1% to R15.05 on the JSE by early Tuesday afternoon trade but have surged more than 500% over the past five years on a total return basis, according to data compiled by Infont.