DRDGOLD raked it in during the six months to end-December as an average gold price received of $3,788/oz (R2.1m/kg) transformed the gold dump retreater’s results despite a planned 9% drop in gold production.
As CEO Niël Pretorius put it – in a classic piece of understatement – “the record gold price could not have come at a better time for us.”
The reason is DRDGold’s booming revenues have allowed it to cover the huge capital expense of its ‘Vision 2028’ expansion strategy out of free cash flow and still be able to pay a record 50c interim dividend and boost its net cash and cash equivalent position to R1.7bn at end-December. That compares with R1.3bn at end-June and R661m at end-December 2024.
Vision 2028 involves capital expenditure of some R10bn to boost gold production to 200,000 ounces a year from the current level of around 150,000 oz over the next three years. When it began investing in the project, DRDGold put in place a R2bn loan facility with Nedbank to help cover forecast capital costs but this remains untouched as the company has been able to fund the expansion out of cash flow.
DRDGold follows a policy of non-hedging giving it full exposure to the rising gold price and the company remains debt-free.
Other major positives recorded during the six months included: signing a five year single wage agreement with organised labour at Ergo; a 23% reduction in electricity costs at Ergo thanks to the Ergo Solar Plant without which Ergo’s electricity costs would have tracked Eskom’s 12.74% increase; and the addition of 67 million tons to the group’s mineral resources with the transfer of the Kloof 2 dump to DRDGold’s developing Far West Rand Gold Recoveries (FWGR) operation.
The DRDGold price has responded dramatically jumping from around R26 in August last year to hit a high of R64 before pulling back to current levels around R53/share.
Said Pretorius: “It is very pleasing to see our share price is following the same trend line as that of our peers”. He attributed some of the improvement in the share price to DRDGold management’s success in delivering on a number of “very ambitious projects that the company had embarked upon” such as the Ergo solar plant.
He added “it will be interesting” to see how the market reacts as DRDGold delivers on the interim goals of the Vision 2028 programme and how the market might anticipate these achievements.
Noah Capital analyst René Hochreiter is already high in anticipation, commenting in a research note that: “The production increase over the next three years will be phenomenal starting in financial year 2027. No other gold company in the world is likely to do better than this in over three years in terms of increasing production.
“Our DCF (discounted cash flow model) is yielding target prices for DRDGold at around R111 per share offering great value at current spot prices. With the higher gold price the company is in a fortunate position to be able to pay reasonable dividends whilst it is ramping up.”
