Our opinion on the current state of DRDGOLD(DRD)DRDGOLD (DRD) was listed in 1895 and is the JSE's oldest listed company. It was followed by SA Breweries, which was listed in 1897 and has now been acquired by Anheuser Busch.
DRD is now a gold surface treatment operation which is at an all-in sustaining cost of extraction of just over R627247 per kilogram which compares to the average received gold price of R917996. They are re-treating surface dumps which still have traces of gold that can be profitably extracted with modern extraction methods.
The benefit of this type of operation is that it is far less risky than underground gold mining operations because it has far less union exposure and has none of the expenses or difficulties of an underground operation. Its life and grade, and hence its profitability, are precisely known.
The share tends to be volatile because it depends on the current price of gold, but the company has a debt-free balance sheet and strong free cash flows. A deal was concluded for Sibanye to swap out its surface dumps for an additional 265m DRD shares - which took Sibanye to a shareholding of 38%. Then on 10th January 2020, Sibanye announced that it had exercised its option to increase its stake to 50,1% at a cost of R1086m.
The CEO of DRD Gold, Niel Pretorius, wants to join up with other tailing projects on the West Rand to create a massive unified re-processing operation. The company is building a 20mw solar and battery facility.
In its results for the year to 30th June 2024 the company reported revenue up 14% and headline earnings per share (HEPS) up 4%. Gold production and sales were down 5% while cash operating costs increased by 20% in rands. The company said, "We are now positioning to bring on stream by the financial year ending 30 June 2028 ("FY2028") a combination of reclamation sites designed to lift tonnage throughput to 3 million tonnes per month, and gold production to just over 6 tonnes per annum."
In an update on the 3 months to 30th September 2024 the company reported production up 7% and sales up 4%. All in sustaining costs fell by 5% to R933686 per kilogram. The company said, "Cash operating costs per kilogram of gold sold decreased by 4% from the previous quarter to R856,723/kg due to an increase in gold sold, despite an increase in total cash operating costs driven mainly by two months of winter tariffs which Eskom charges between June and August each year."
In a trading statement for the 6 months to 31st December 2024 the company estimated that HEPS would increase by between 60% and 70%. The company said, "Group revenue increased by R828.1 million, or 28%, to R3,802.3 million (2023: R2,974.2 million), as a result of a 26% increase in the Rand gold price received, and a marginal increase in gold sold from 2,535kg to 2,567kg."
Technically, the share made a high of 2458c on 9th May 2023 and then began a downward trend. It broke up through its long-term downward trendline on 3rd July 2024 at 1673c indicating a new upward trend. It remains a volatile commodity share subject to the international gold price.
