SA Govt. ideology standing in the way of DRDGOLD’s massive growth plans, warns CEO

Niël Pretorius. DRDGOLD CEO. Pic: Martin Rhodes

DRDGOLD’S strategy in linking up with Sibanye Stillwater had worked out exactly as planned with the next phase of growth about to start and with the real prospect of massive future expansion of tailings retreatment operations on the Far West Rand.

That’s according to DRDGOLD CEO, Niël Pretorius, who was speaking after the group reported “stellar” results for the six months to end-December which showed a doubling of operating profit to R1.4bn. There was a 2% drop in gold production to 2,984kg, but a 42% increase in the gold price to R988,998/kg helped offset the lower output.

DRDGOLD declared an interim dividend of 40c a share which is 60% up on the 25c declared for the six months to end-December 2019.

Said Pretorius: “The business is performing in a very stable way. It has good prospects and it will continue to pay dividends for as long as we are able to maintain this model”.

But he stressed future expansions would remain in line with management’s current conservative strategy and would be dependent on both movements in the gold price and political and regulatory developments within South Africa which affected the country’s attraction as an investment destination.

He described the average gold price that DRDGOLD received of R988,998/kg during the six months to end-December as “fantasy stuff”, adding that: “… the prospects for gold seem to look really attractive and we could really start pushing the boundaries of our thinking looking beyond our own resource.

“What does a model look like that could accommodate everything on the Far West Rand?  We could have a much longer life with much broader participation which would also have a far more profound impact in terms of environmental clean-up.”

But Pretorius cautioned such major investment plans could be adversely affected by how attractive the country was perceived as an investment destination.

He said South Africa’s political environment was not a topic he had talked a lot about before, but it was becoming increasingly important as a “capital investment filter.”

“We have to look at the relative attractiveness of the country in terms of issues such as the rule of law and the sanctity of our courts,” he said.

Pretorius also highlighted security of tenure, regulatory certainty, and the country’s approach to transformation and black empowerment asking: “Are we on the right track? Bringing about black empowerment is so vitally important, but are we pursuing something that is just not working except for a very select few?

“It may be necessary to revisit some of those policies.

“We don’t have to be an unattractive jurisdiction for investment to dry up. We just have to be relatively unattractive compared with other jurisdictions that are slightly more attractive than ours.

“It’s all about priorities.

“Is our priority as a nation to attract investment or is our priority as a nation more ideological? I think we need to figure that out as a nation. The relationship between capital investment and jobs is something that we don’t spend enough time talking about.”

4 COMMENTS

  1. Challenges aside, a 5.6% drop in the share price on the day that the interim results are published is glaringly at odds with the massive improvement in operating profit as well as the glowing future prospects for this company.

    Well done to Niël and the entire team at DRDGOLD.
    Keep up the good work.

  2. The inaction and poor disclosure at DRD remains problematic.
    Pan African discloses its Metallurgical Recovery Factor, DRD chooses not to.
    Pan African has tied up Mintails under option, DRD just talks and talks about its grand vision for the Carletonville area.
    What happened to the “vast opportunities” for DRD to turn Sibanye’s dumps to account?
    DRD paid out R180m on its phantom share scheme in November. That could have been a 20c dividend to shareholders.
    So @Concerned Citizen, your praise rings hollow and out of touch with the facts.

    • The facts are that the operating profit has doubled in the second half of 2020 compared to 2019.
      A further, substantial sixty percent, increase in dividend was declared.
      Perhaps there are other factors as mentioned which may have helped to improve upon this result.
      Unless DRDGOLD is operating for reasons other than profit, it would be difficult to argue that their performance has been anything other than praiseworthy.
      A listed company is expected to turn a profit, pay a dividend and provide stable growth, no?
      As an aside, gold mining share prices provide an interesting picture when viewed in conjunction with ZAR gold pricing over a longer period of say twenty years.

  3. I have complete faith in Neal & Niel, both CEOs committed to managing & growing with vision, discipline & caring. DRD’s balance sheet & prospects is an examplar of a financially conservative yet hi beta leveraged play, & possibly an option on PGM recycling.

Comments are closed.