Proactive Investors - Run By Investors For Investors

DRDGOLD reports higher profit and production; upbeat about 2019 prospects

Its strategy is to remain unhedged but keep borrowings to a minimum
gold bars and US dollars
DRDGOLD is a South African gold producer and a specialist in the recovery of the metal from the retreatment of surface tailings.

DRDGOLD Ltd (JSE:DRD) (NYSE:DRD) reported on Wednesday an increase in both operating profit and gold production, saying the prospects for the company going into 2019 are bright.

The company said its year-on-year operating profit climbed 38% to R355.2mln (US$23.01mln) while gold output rose 10% to 4,679kg, although the average rand price for gold received slipped 3% to R534.34/kg (US$34.63/kg).

The company announced that while its long-term strategy is to remain unhedged and to keep borrowings at a minimum, the need for medium-term borrowings for the first-phase development of Far West Gold Resources  (FWGR) introduced some liquidity risk.

To mitigate or reduce the risk, DRDGOLD has traded a zero-cost collar to provide price protection against a possible decrease in the rand gold price while borrowings are in place. A zero-cost collar is an option-based strategy that offsets the volatility risk by putting a cap and a floor as a form of insurance against possible losses.

Shares of DRDGOLD in Johannesburg gained 3.2% to settle on Wednesday at R322. In New York, the stock was trading 1.2% higher at US$2.07 on Wednesday.

BIG PICTURE: DRDGOLD glitters with vast reserves in its flagship Ergo and Sibanye-Stillwater West Rand Project

As for FWGR and the recently acquired West Rand Tailings Retreatment Project (WRTRP), the company said an R300mln (US$19.44mln) revolving credit facility has been secured from ABSA Bank Limited and work has already begun on the first phase of its development.

Phase 1 involves the upgrading of the Driefontein 2 plant to process tailings from the Driefontein 5 dump at a rate of between 400 000 and 600 000 tonnes per month and depositing the residue on the Driefontein 4 tailings dam. First production is expected in the first quarter of calendar 2019.

The FWGR acquisition increases DRDGOLD’s gold reserves by approximately 82% to 6mln oz.

Three major projects at its Ergo project were completed by the end of FY2018. For 2019, gold production of between 148,000 and 154,000 ounces is planned, at a cash operating cost of around R490,000/kg (US$31,754), DRDGOLD said.

DRDGOLD is a South African gold producer and a specialist in the recovery of the metal from the retreatment of surface tailings.

(R1 = US$0.065)

View full DRD profile View Profile

DRDGOLD Limited Timeline

Related Articles

The firm's geology in Bolivia
May 05 2019
The company picked up its flagship Silver Sand project in Bolivia when it bought Alcira for US$40 million two years ago
January 09 2019
ECR is building an impressive portfolio of gold exploration assets
gold mine
May 09 2019
Drilling at Kochang is scheduled for July with process plant construction to start in September
Copyright ©, 2019. All Rights Reserved - Proactive Investors North America Inc., Proactive Investors LLC

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use