FIRST production from Far West Gold Recoveries (FWGR) was a major contributor to DRDGOLD’s first six months of its 2020 financial year after gold retreatment company said today it would report a share earnings turnaround of up to 56 cents.
The company closed December 31 with double the cash and cash equivalents it had in the corresponding period of the previous financial year.
Commenting in a trading statement, DRDGOLD said share earnings would come in for the six months at between 47,78 and 49,22 cents a share. This compares to a loss in the six month period of the previous financial year of some 7.2c/share.
The expected increase in earnings per share and headline earnings per share are due mainly to a R858.9m (69%) increase in revenue to R2.1bn (2018: R1.3bn), the company said. Shares in DRDGOLD have since the middle of last year tripled in value and last week recorded a three year high of R9/share.
Of the revenue increase, FWGR comprised about 60% of some R502.3m which represented the impact of a full reporting period of production. Ergo made up the rest contributing R356.6m. The improvement was on the back of a 3% increase in gold sold and a 26% higher average rand gold price received.
Cash operating costs rose by R208.5m or 18% to R1.4bn (2018: R1.2bn), due largely to the inclusion of the cash operating costs of FWGR, amounting to R177.2m. DRDGOLD had cash and cash equivalents totalling R543.4m as of December 31 compared to R279.5m in the previous year.
DRDGold has ploughed R330.7m in a phase one development of FWGR. It said earlier this month that it had started Phase 2 of FWGR beginning with “conceptual studies” to evaluate options to treat the remaining reserves acquired from Sibanye-Stillwater.
One option is to construct a new re-treatment plant and tailings storage facility to exploit a larger, regional mineral resource, producing more gold over a longer period and rehabilitating a much larger footprint, the company said.
DRDGOLD’s performance is good news for Sibanye-Stillwater which extended its stake in DRDGOLD to 50.1% in terms of an option agreement signed in 2017.
The precious metals producer bought a 38.5% stake in DRDGOLD in return for surface dumps attached to its West Rand mines, Libanon and Driefontein. As part of the deal, Sibanye-Stillwater had 24 months to take up control of DRDGOLD.
Exercise of the option, at a total cost of about R1bn, represents excellent business for Sibanye-Stillwater because it was struck at R6.46 per share. DRDGOLD is due to report its interim results on February 12.