DRDGOLD Ltd (NYSE:DRD, JSE:DRD, OTC:DRDGF) told investors it grew first-half revenue by 6% as it took advantage of a favorable gold price.
The company, which recovers gold from processing mine dumps and tailings dams, reported revenue of 2.65 billion Rand (R) for the six months ended December 31, 2022 mainly as a result of an 11% increase in the average rand gold price received to R961,022 per kilogram (kg).
Headline earnings per share (HEPS) for the period was 62.3 cents, up from 58 cents a year earlier. It generated free cash flow of R215 million, allowing it to declare an interim cash dividend of 20 cents per share. Full-year 2023 will be the 16th consecutive year it will have paid a dividend, the company added.
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The company noted that lower production and a 10% increase in cash operating costs to R1.84 billion decreased group operating profit by 5% to R792 million.
The company's Ergo Mining Proprietary Limited unit grew revenue to R1.96 billion from R1.8 billion in 1H 2022 despite a 5% decline in gold production to 1,996 kg as a result of a 14% decrease in production throughput to 9.8 metric tonnes (Mt) and a 10% increase in yield to 0.203 grams per tonne (g/t).
During the six months, DRDGOLD said Ergo conducted late-phase clean-up at several sites that are nearing the end of production and where, as the last material is lifted from the site floor, volumes are typically lower and head grades slightly higher. Several interruptions in power supply added to lower tonnes.
Although Ergo has extensive backup power capacity and draws power mainly off the Eskom grid, the company said unprecedented load shedding at the tail end of the current reporting cycle caused interruptions at areas serviced by Johannesburg City Power in City Deep. These sites have since been connected directly to an Eskom substation. A number of unscheduled Eskom trip-outs at the Ergo plant and excessive rain also decreased throughput, it added.
Far West Gold Recoveries
Revenue at DRDGOLD’s Far West Gold Recoveries (FWGR) unit increased marginally to R696 million from R694 million a year earlier, the company said.
Gold production at FWGR decreased by 7% to 735 kg due to a 3% decrease in tonnages from 3.1 Mt in 1H22 to 3.0 Mt. Yield reduced by 5% to 0.245 g/t from 0.257 g/t as a result of the material being processed from the lower grade areas of its Driefontein 5 operation and the periodic suspension of milling in terms of the load curtailment arrangement with Eskom during periods of load shedding, which requires a percentage reduction in electricity consumption.
DRDGOLD said its single largest capital investment this year is in its own power-generating capacity, with the construction of a solar power plant and power storage facility at Ergo continuing apace. Four new reclamation sites due for commissioning before financial year end should also reverse the throughput trend of the period under review, it added.
The company said it remained free of bank debt as of December 31, 2022.
DRDGOLD, which is majority-owned by Sibanye-Stillwater, the major platinum group metals and gold producer, operates the Ergo Mining Operations business on the eastern Witwatersrand, and also the Far West Gold Recoveries project.
Contact the author at stephen.gunnion@proactiveinvestors.com