DRDGOLD will post headline share earnings of 82.4 cents a share for its 2020 financial year largely driven by elevated gold pricing, especially in the latter half of the period.
The numbers – to be published in full on September 1 – compare to headline earnings for 2019 of 10.9c/share.
The improvement in share earnings was despite having absorbed the impact of issuing shares to Sibanye-Stillwater. This was in terms of an option granted to Sibanye-Stillwater that it increase its holding in the firm to 50.1% from 38.5% – exercised in January.
As a result of that transaction, DRDGOLD issued about 168.2 million new shares taking its total shares in issue up 24% to 864.6 million shares.
DRDGOLD was paid just over R1bn for the shares to Sibanye-Stillwater which helped account for its flush financial position. As of June 30, the company has cash and cash equivalents of R1.72bn.
Commenting in a trading statement today, DRDGOLD said: “Liquidity is further enhanced by current high rand gold price levels” – raising the prospect the group could sanction an ample dividend.
The rand gold price has increased about 40% in the last 12 months and although it has weakened this week it is still above R1m/kg, – a record level when it was first breached in April amid the initial months of the Covid-19 pandemic.
Heightened revenue numbers easily rubbed out the effects of the Covid-19 related hard lockdown on DRDGOLD’s operations through March and April. Total revenue was 52% higher year-on-year – equal to an increase of some R1.422bn – and made up for the 33% decline in gold sold from Ergo, DRDGOLD’s east rand operations.
Ergo was also affected by interruptions in power supply from Eskom and the City of Ekurhuleni. DRDGOLD also received the first full year of production from Far West Gold Recoveries (FWGR), the West Rand operations it bought for shares from Sibanye-Stillwater.
Cash operating costs totalled R2.6bn, an increase of 8% or some R203m owing to the inclusion of FWGR for the full financial year. The increase of 8% in cash operating costs is also reflective of the total volume throughput increasing by 8% with the cash operating costs per unit being stable at R100/t, the company said.
“Everybody is flocking to the arms of gold,” Pretorius told Bloomberg News earlier this month. “And because our company does provide exceptional gearing to the gold price, and it is traded at a multiple to movement of the gold price, it is always a favourite pick.”
Shares in DRDGOLD are some 210% higher year-to-date. At the time of the Bloomberg News article, DRDGOLD was the best-performing share on the MSCI ACWI Select Gold Miners Investable Market Index this year.
“If the sentiment turns against gold, there could be some big losses,” Pretorius warned.