DRDGold CEO Niel Pretorius puts his money where his mouth is

Niël Pretorius. CEO, DRDGold. Pic: Martin Rhodes © Martin Rhodes

DRDGold shares have been sliding since the end of January – despite a temporary boost in late March when shareholders agreed the Sibanye-Stillwater tailings deal – and CEO Niel Pretorius has been buying the stock all the way down.

DRDGold stood around 390c at the end of January but dropped as low as 290c on April 20 before recovering slightly since then. Since February 26, Pretorius has been buying the stock in a series of deals through which he has invested some R311,854 buying 100,681 shares at an average price of 310c each.

While nearly all the gold stocks listed on the JSE are down over the past three months because of the slide in the rand gold price – the exception is Harmony – the drop in the DRDGold share price is worth noting for two reasons.

It has taken place in spite of the Sibanye-Stillwater deal which Pretorius lauded as a “step change” for DRDGold and stated “should give some impetus to the share price now.” On March 28 Pretorius told Miningmx that, “instead of making a huge crap-load of money, we’re just going to make a crap-load of money.” That was in reply to a question on the impact of the lower rand gold price on the deal.

Pretorius stands out as CEO of a quoted SA gold company in that he has been prepared to publicly state his opinions on his company’s share price and “put his money where his mouth is” as he has just done again.

On August 30, 2016 he actually cautioned investors about the volatile nature of the DRDGold share price because of the way it responds to factors other than the actual performance of the business. He commented, “if you are an astute investor – a professional, and this is probably the domain of the professional because I don’t think amateurs should be dabbling in this – you can make money on either side.”

Major factor now affecting DRDGold’s future is the Stillwater-Sibanye deal which shareholders approved on March 28 but which the weakness in the share price might indicate the market is not really happy with.The deal gives Sibanye-Stillwater the chance to get control of DRDGold through an option to increase its holding in the company to 50.1% within 24 months and to do so without making an offer to minorities.

Pretorius was challenged on this by Nedbank mining equities analyst Leon Esterhuizen who commented, “giving away control of your company is a big thing, Sibanye will call the shots.”

Pretorius denied he was selling DRDGold “on the cheap” and commented, “there is a very real prospect of much enhanced earnings. I don’t think we are giving anything away.”