DRDGOLD

Financial Mail - Investors Monthly - - Opening Bell -

Share price: 226c JSE code: DRD

BUY DRDGOLD — PRE­VI­OUSLY KNOWN AS the “Rood­e­poort Rocket” by en­thu­si­as­tic pun­ters in mar­ginal gold mines — is plug­ging away at its busi­ness of treat­ing gold-bear­ing tail­ings dumps around Johannesburg. And it’s start­ing to make a tidy sum of money each month do­ing so.

Tail­ings re­treat­ment, re­pro­cess­ing ma­te­rial from which other com­pa­nies have al­ready ex­tracted what gold they could with the tech­nol­ogy of the time, is a tricky busi­ness. It in­volves ex­tract­ing parts per hun­dred mil­lion and mov­ing vast amounts of ma­te­rial. The latest ad­di­tion to its Ergo plant near Brak­pan is a fine grind and flota­tion cir­cuit. The feed ma­te­rial is ground down finer than face pow­der, un­lock­ing an ex­tra 0.03g per tonne that will bump up to­tal re­cov­er­ies to 16g of gold for ev­ery 100 tonnes treated, which is about half the con­tained gold go­ing into the plant.

The ad­di­tional cir­cuit pushed Ergo’s monthly pro­duc­tion in March to the high­est since DRDGold restarted the plant in 2008.

DRDGold is the largest tail­ings treat­ment com­pany in SA, mov­ing about 2-mil­lion tonnes of ma­te­rial a month. It has un­locked valu­able prop­erty south of down­town Johannesburg re­mov­ing, in some cases, iconic land­marks.

It is tar­get­ing out­put of 154,325oz of gold a year. It had a fairly high all-in sus­tain­ing cost of about R420,000/kg in Q1. It has min­i­mal debt and a healthy cash bal­ance of R286m, which should start flow­ing to share­hold­ers pro­vided doesn’t it add many more cir­cuits or run into prob­lems with its ex­ist­ing pro­cesses.

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