DRDGOLD upbeat on interim dividend prospects despite tripling in 2023 capex

Niël Pretorius. DRDGOLD CEO. Pic: Martin Rhodes

DRDGOLD reported a 19% decline in adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) to R386.4m for the September (first) quarter owing to an R84m insurance payout to the company in the comparative period.

Generally speaking the quarter was solid for the gold dumps and tailings company amid a high inflationary environment. Shareholders will also be heartened that the chances of the firm paying an interim dividend in February were considered “favourable”.

All-in sustaining costs, which include expansionary capital, declined 14% quarter on quarter as the company eased back on capex. All-in costs per kilogram were R796 255/kg, decreasing 9% quarter-on-quarter.

Cash operating costs per kilogram increased 2% to R658,530 per kilogram as production was 1% higher at 1,458kg. Cash operating costs per tonne of material processed remained stable at R133/t.

Gold sold decreased 4% to 1,442kg.

Cash and cash equivalents decreased by R280.5m to R2.24bn after paying the final cash dividend of R342.5m for the year ended 30 June 2022.

While cash would be directed towards DRDGOLD’s “extended expenditure programme” for the year ended June 2023, the company was in “a favourable position to … consider declaring an interim cash dividend in or around February 2023,” it said.

DRDGOLD has targeted capex of R1.4bn for the current financial year which compares to spend of R584m last year.

The company retreats mining dumps and tailings left by gold mining firms but its operations – Ergo east of Johannesburg and Far West Gold Recoveries (FWGR) next to Sibanye-Stillwater gold mines.

Asked in August about the company’s larger-than-normal capex budget for this year, Niël Pretorius, CEO of DRDGOLD, said doubling throughput at FWGR was a big part of that as well as the installation of some 60MW of solar power generation and storage facilities.

About 40MW to 45MW would be supplied to Ergo with the balance wheeled back into the national grid for use at FWGR, provided South African president Cyril Ramaphosa’s proposal in July to partially deregulate South Africa’s energy system took hold.

As a result, DRDGOLD would be largely off-grid once the solar plant was completed. But Pretorius said he was concerned about the deteriorating nature of South Africa’s society as a result of unemployment, crumbling infrastructure, and poor policing.

DRDGOLD declared a total dividend was 60 South African cents a share compared to 80c/share for the previous 12 months after declaring lower interim payout in the previous financial year.