Rand gold price rides to DRDGold’s rescue after licence snafu

THE average gold price received of R1.17m per kilogram – 22% up on the previous average of R961,000/kg – made all the difference to DRDGold in the six months to end-December by more than compensating for a 7% drop in gold output.

That drop was caused by DRDGold management falling behind in the start-up of new reclamation sites to replace existing, high-volume sites that had become depleted.

In the two years running up to end-December three major production clusters contributing 25,000 tons a day reached the end of their lives. The planned start-up at four new sites that were supposed to come into operation from October 2022 onwards help up by a combination of regulatory delays and “community-related interference”.

According to CEO Niël Pretorius the processing of water usage licences was delayed at two sites while appeal proceedings by a community forum slowed down the third and the fourth was hit by community-related interference with the construction of a pipe column.

Pretorius commented that, as a result “the 2023 calendar year became a scramble to source material from legacy and clean-up sites.”

He is looking for a far better second half performance in the financial year to end-June with all the new sites now running while management has learnt some hard lessons on dealing with the regulator for future licencing exercises.

Pretorius says DRDGold will “better anticipate the requirements of the regulator ensuring that our turnaround times improve while holding the regulator to the timelines that it is required to work to”.

So investors can thank the gold price – and their lucky stars – for the 20 cents a share dividend that DRDGold has declared after increasing headline earnings 10% to 68.4c a share (six months to end-December 2022 –  62.3c a share) despite all the logistical problems encountered.

Speaking on a webcast Pretorius said he was particularly concerned by the “social dynamic” problems with the pipe column which was the result of the collapse of government services to  many communities.

“The stark reality for many communities is that they have been let down to the point where they do not have anything.  They don’t have services; they don’t have jobs; they have poor health care; their schools are a shambles; their infrastructure and logistics are a shambles; there are no trains so if you are lucky enough to have a job you will see a third of your income getting eaten by taxi fares.

“When they do see any sort of development then everybody wants to be involved. So you have social unrest and people saying we will not let you do anything unless you give us a job. So you have rioting to get a job which is desperation.

“You combine that with criminal opportunism – sometimes with very strategic relationships – and that makes it very hard to get ahead”.

Turning to plans to diversify DRDGold’s business into commodities outside gold Pretorius said the growth project at major shareholder Sibanye-Stillwater’s platinum group metals tailings had still not been given the go-ahead.

He cited “complexities in the operational and corporate set-up of the programme” caused by the diverse ownership of the dumps and differences in the requirements of some of the minority owners.