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DRDGOLD is a world leader in the recovery of gold from the retreatment of surface tailings

Snapshot

The acquisition of Sibanye-Stillwater’s West Rand Tailings Retreatment Project, virtually doubled DRDGold's gold reserves to 5.9M ounces from 2.99M

DRDGOLD Limited -

Quick facts: DRDGOLD Limited

Price: 5.93 USD

NYSE:DRD
Market: NYSE
Market Cap: $407.36 m
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  • Founded in 1895, the South African firm is listed in Johannesburg and New York
  • Its Ergo Mining Operations (EMO) business operates on the eastern Witwatersrand
  • The Far West Gold Recoveries (FWGR) project was boosted by the acquisition of Sibanye-Stillwater’s West Rand Tailings Retreatment Project
  • 2019 total group gold output expected at between 175,000 and 190,000 ounces

What DRDGOLD does:

DRDGOLD Limited (JSE:DRD) (NYSE:DRD) is a Johannesburg and New York-listed South African gold producer and a world leader in the recovery of gold from the retreatment of surface tailings.

The company’s origins can be traced back to the frenzied prospecting and business activities that followed the discovery of gold in Johannesburg in the mid-1880s.

Founded in 1895 alongside other mining giants which have come and gone, DRDGOLD remains the oldest, continuously listed company on the Johannesburg Stock Exchange (JSE).

Its Ergo Mining Operations (EMO) business operates on the eastern Witwatersrand where two of its four plants - Ergo in Brakpan and Knights in Germiston – run around the clock.

The flagship Ergo plant treats material from a variety of sources including the Elsburg tailings complex which comprises 186 million tonnes (Mt) of tailings material and contains an estimated 1.7 million ounces (Moz) of gold. The satellite Knights plant processes material from various sites.

The Crown and City Deep plants have been decommissioned and re-engineered, and are currently operating as pump and milling stations.

Material from DRDGOLD’s surface tailings deposits on the central and western Witwatersrand is fed to the Ergo plant via an extensive pipeline network - including a bespoke 50 kilometer (km) completed at the end of 2011 at a cost of 305 million rand (around $20 million).

EMO also owns 100% of East Rand Proprietary Mines Limited (ERPM) which has been sold to Walcot Capital subject to a number of suspensive conditions.

Following a roll-up of the stake in EMO, its broad-based black economic empowerment (BBBEE) partners - Khumo Gold SPV Proprietary Limited and the DRDSA Empowerment Trust – have direct holdings in DRDGOLD of 8.1% and of 2.4% respectively.

The group’s other project, Far West Gold Recoveries (FWGR) was boosted by the November 2017 acquisition of gold and platinum miner Sibanye-Stillwater’s West Rand Tailings Retreatment Project (WRTRP), which virtually doubled DRDGOLD’s gold reserves to 5.9 million ounces from 2.99 million ounces.

The West Rand assets currently include a range of gold-bearing dumps near Carletonville west of Johannesburg, as well as three processing plants.

In return for the WRTRP assets, the company issued approximately 265 million shares to Sibanye-Stillwater, giving the South African miner a holding of approximately 38% of DRDGOLD.

Sibanye-Stillwater has the option to subscribe for shares for cash to increase its holding in DRDGOLD to 50.1% within 24 months after the close of the transaction, but the firm will not have to launch a mandatory offer to DRDGOLD’s other shareholders.

How is it doing:

At the end of August, DRDGOLD reported revenue and profit for its full year to end June 2019, which were boosted as the Far West Gold Recoveries (FWGR) tailings project came online.

The company saw group gold production for the 12 month period increase by 6% to 4,977 kilogrammes (kg), mainly due to the 484 kg produced by the FWGR operation.

The group's after-tax profit jumped to 78.5 million rand (US$5.19 million) from 6.5 million rand (US$0.43 million) a year earlier, as revenue increased to 2.8 billion rand (US$0.2 billion) from 2.5 billion rand (US$0.17 billion) and gold production rose by 6% to 160,000 ounces.

DRDGOLD said the contribution from its Ergo unit to revenue was 3% higher year-on-year due to the higher average rand gold price received, which moderated the impact of a 4% fall in gold sold.

The group noted that FWGR made a maiden contribution with revenue of 184.6 million rand ($12.1 million), most of it from 1 April 2019 when commercial production began.

It pointed out that FWGR’s revenue and cost of sales were lower than had been forecast due to commercial production only starting on 1 April 2019, instead of the initially planned date of 1 January 2019, the result of a three- month delay in the anticipated effective date of the transaction.

The group noted that FWGR’s all-in sustaining costs per kg were also disproportionately impacted by the unwinding of the environmental rehabilitation provision for 11 months and the inclusion of gold sold mostly from 1 April 2019.

In response to the strong results, the company said it would pay a dividend of 20 South African cents per share, a threefold increase on the dividend declared the previous year and marking 12 consecutive years of dividend rises.

DRDGOLD ended the year with cash and cash equivalents of 279.5 million rand ($18.3 million), versus 302.1 million rand ($19.8 million) at the end of 2018, and borrowings of nil after 192 million rand ($12.6 million) was raised and repaid on its revolving credit facility during the year.

Inflection points:

  • 2019 total group gold output expected at between 175,000 and 190,000 ounces.
  • Plans group gold production for 2020 of between 175,000 and 190,000 ounces at a cash operating cost of around 490,000 rand per kg.

What the boss says:

DRD Gold's CEO Niël Pretorius told investors with the group’s full-year results: “DRDGOLD looks forward to seeing the full benefits of Ergo’s completed capital projects and the attainment of steady-state operations at FWGR Phase 1 flowing through to the group bottom-line. We expect also to advance planning for commencement of FWGR Phase 2."

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on 10/29/2019

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