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viewDRDGOLD Ltd

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 Ltd

Price: 9.12 USD

NYSE:DRD
Market: NYSE
Market Cap: $779.86 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:

On February 16, 2021, the company revealed that it is on track to reach the upper range of its output guidance for fiscal 2021 as it reported a 41% increase in revenue for its first half. 

In the six months to December 31, 2020, the gold producer reported revenue of R2,977.4 million (US$205.2 million).

This increase was largely due to the higher average Rand gold price received - at R988,009 per kilogram (kg) (US$68,070), which also offset the 2% decrease in gold production across the group.

The miner also declared an interim dividend of 40 South African cents per share for the period.

As reported earlier in the same month, as of December 31, 2020, DRDGold said its cash and cash equivalents was R2,169.4 million (US$149.2 million) with a revolving credit facility with ABSA Bank Limited of R200 million (US$13.7 million) available.

Notably, it remains free of any bank debt at the end of the year and its liquidity is enhanced by current high Rand gold price levels.

In the boardroom, on January 26, 2021, DRDGOLD announced that Geoffrey Campbell, its independent non-executive chairman had advised the company that he does not intend to make himself available for re-election as a member of the board when his current contract expires on November 30, 2021.

Accordingly, Campbell’s tenure as director and chairman of the board will come to an end with effect from December 1, 2021. DRDGOLD said the timing of his notification affords the company ample time to identify a suitable successor.

Inflection points:

  • High gold price continues to support margin
  • Plans group gold production for 2021 of around 185,000 ounces at a cash operating cost of around 535,000 rand per kg.

What the boss says:

When reporting the firm's latest results, DRD Gold's CEO Niël Pretorius told investors: "The gold price outlook and the performance of the business allow us to take a bolder view on the design parameters of Phase 2 in terms of volume throughput and deposition capacity, to position it strongly for regional consolidation. At Ergo, planning work on increasing deposition capacity is well advanced."

Pretorius added: “Much about the pandemic’s passage – in South Africa and the world – remains uncertain. All of our capital investment strategies, therefore, are viewed with due regard to the potential volatility and risk associated with this.”

Contact the author at jon.hopkins@proactiveinvestors.com

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DRDGOLD increases revenue by 40% year-on-year as it maintains 'solid production'

DRDGOLD Limited (NYSE:DRD) (JSE:DRD) CEO Niël Pretorius tells Proactive the South African mine tailings group reported revenue of R2,977.4 million (US$205.2 million). Pretorius says the increase largely due to the higher average Rand gold price received, in addition to the team's priorty on...

2 weeks, 3 days ago

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