DRDGold’s strategy pays dividends


DRDGold’s strategy pays dividends

Published Date: 2019-09-04 | Source: Stephen Gunnion | Author: Stephen Gunnion

DRDGold’s strategy pays dividends

The mine tailings re-treatment specialist has quadrupled its dividend due to rising production and a stronger gold price.

DRDGold says last year's acquisition of the West Rand Tailings Retreatment Project from Sibanye-Stillwater has more than paid off, despite the massive dilution to shareholders at the time.

The mine tailings re-treatment specialist took the West Rand mine dumps, which it renamed Far West Gold Recoveries (FWGR), in exchange for 38% of its equity. It invested R331 million in capital infrastructure and refurbishment for Phase 1 of the project, funded in part through a R192 million drawdown from its revolving credit facility. Thanks to an increase in production and a rising gold price, it's already repaid the debt and still sits with cash of R280 million, down from R329 million a year ago.

The group is also paying a 20c dividend for the year. Last year it didn't declare a final dividend but made an interim payout of 5c per share.

Gold production rose 6% to 4,977 kilograms in the year to-end June as the 484kg produced by FWGR made up for a 4% dip in production to 4,493kg at Ergo Mining on the East Rand.

Cash operating costs rose 9% to R499,749 per kilogram, mainly due to a 12% rise in Ergo's cash operating costs. The average cost of power rose 8.3% over the year, while water was 12.2% up and reagents increased by 6.2% from a year earlier. All-in sustaining costs were 4% higher at R524,713 per kilogram.

For the year, total revenue increased by 11% to R2.76 billion, boosted by a higher average rand gold price. It reported a 5% rise in operating profit to R372 million and headline earnings surged 939% to R72.7 million, including a non-recurring credit of R60 million relating to a change in the estimate of provisions for environmental rehabilitation. Headline earnings per share were 541% higher at 10.9c after it issued 265 million shares to Sibanye-Stillwater for the acquisition.

The group is targeting gold production of between 175,000 and 190,000 ounces this year at a cash operating cost of about R490,000 per kilogram. At the time of writing the results commentary, Pretorius said the gold price was around R740,000 per kilogram, up R162,000 on the average price received in the 2019 financial year.

Its shares rose 5.2% to R7.10 yesterday.

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