[miningmx.com] – DRDGOLD took share repurchases to R58m on
Wednesday, buying some 4.4 million shares for an average price of R5.67/share. It
said, however, that it may be more conservative with cash in the short term as it
sought to bed down the consolidation of its surface operations into Ergo.
“We’ve been through a good period in the last few months, but we are consolidating
Ergo and so probably need to take a more conservative approach and see how that
plays out,’ said Niel Pretorius, CEO of DRDGold. “What we do say, however, is that if
shareholders don’t take care of the share [by selling], then we will [by buying],’
Pretorius added. “We’ll look after the shareholders who do value it.’
Shares in DRDGold traded nearly 3% weaker on the JSE to R5.56/share, which
compares with Pretorius’ view that R6.29/share might be a better valuation. “The
share is trading at a discount but DRDGold is liquid; investors also buy or sell the
share on trends rather than fundamentals of the business,’ Pretorius said.
The market has recognised DRDGold, however. The stock has gained nearly two-
thirds of its total value in the last 12 months, and currently has a market
capitalisation of R2.14bn. Over the same period, DRDGold completed a R300m
project building a pipeline connecting its west Rand Crown surface operations to
Ergo in the east. Ergo was also upgraded to a processing capacity of 1.8 million
tonnes/month of tailings. Two reclamation sites were also decommissioned.
DRDGold said in an announcement to the JSE that windfall profits would be
distributed to shareholders. The latest tranche related to the reimbursement of a
working capital balance in Blyvoor, an underground mine it sold to Village Main for
R150m. The cash – some R25m – was actually unsold gold that was still “in the
system’ during the period the asset was sold. “We hadn’t accounted for that cash
flow so we returned it to shareholders. We need a cash buffer, but we won’t sit on
cash either,’ said Pretorius.
