DRDGOLD positions for interim dividend after cash surges through R2bn

DRDGOLD is considering paying an interim dividend after generating R300m in cash in the September quarter taking total cash on hand to over R2bn.

The numbers stacked up impressively for DRDGOLD during the three-month period: production increased 45% to 48,676 ounces owing to an increase in tonnage throughput and a 15% improvement in yield.

Given the higher gold price – more than $200 per oz better quarter-on-quarter at some $1,896/oz – the company registered adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of $45.6m, 141% higher than $18.9m in the previous quarter. In rand terms, adjusted EBITDA was 110% higher at R770.4m.

The rand gold price received averaged R1,03m per kilogram for the period, a 6% increase over the previous quarter’s R970,198/kg.

DRDGOLD said in an operating update that it would put cash, which stood as of September 30 at R2.02bn, into its extended capital programme for the year ended June, 2021. However “… management positions the company favourably to, in the absence of unforeseen events, consider declaring an interim dividend in February 2021,” it said.

The company paid a 35 cents final dividend for its 2020 financial year, capping an extraordinary year of production disruption, sky-high gold pricing, and corporate developments in which gold and platinum producer, Sibanye-Stillwater, became the firm’s 50.1% controlling shareholder.

Capital costs over the next three years are significant at some R3bn, however. This will be on the second phase of the firm’s Far West Gold Recoveries (FWGR) project bought from Sibanye-Stillwater and representing dumps from its Driefontein and Kloof mines. DRDGOLD is also focusing on the continued development of Ergo, its East Rand operations.

FWGR contributed about 46,000 ounces of DRDGOLD’s 174,386 oz for the 2020 year (up 9% year-on-year) – whilst a second phase expansion at a cost of R2.5bn to R3bn will take monthly processing of mined ore from 500,000 tons to as much as two million tons depending on the expansion route.

Costs were controlled in the September quarter: cash operating costs per kilogram fell 10% from the previous quarter to R489,750/kg but all-in sustaining costs came in higher at R613,206/kg (June: R588,239/kg) owing to an increase in sustaining capital expenditure.