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HC Wainwright reiterates 'Buy' rating, $13.75 target on DRDGOLD as production increases

Published: 11:45 29 Oct 2019 EDT

Gold nuggets
HC Wainwright analysts believe the company could raise its dividend if operations continue to run smoothly

Analysts at HC Wainwright reiterated their 'Buy' rating and $13.75 ADR price target on DRDGOLD Limited (JSE:DRD) (NYSE:DRD) after the South African gold producer reported a substantial increase in output for the quarter ended September 30 compared with the three months to June. 

In a note to clients, HC Wainwright analysts Heiko F Ihle and Tyler Bisset said that total quarter-on-quarter production increased by 5% to 48,001 ounces of gold, as throughput and grades improved.

“The better throughput was due to the Far West Gold Recoveries operations processing its mills at the planned capacity of 500,000 tonnes per month,” the analysts said.

Investors responded well, with DRD shares nearly 4% higher to $4.83 on Tuesday morning.

READ: DRDGOLD output jumps by 5%, boosted by Far West Gold Recoveries tailings operation

The HC Wainwright analysts noted that overall yield increased by 1% compared to the previous quarter for the Johannesburg and New York-listed gold producer mainly due to improved head grade at Ergo Mining.

“We believe the firm should see quarter-on-quarter throughput growth during 2Q20 as Far West Gold Recoveries operates for a full quarter based on the aforementioned capacity,” they said.

DRD's cash and cash equivalents increased to 333.6 million rand (US$229.3 million) from 279.5 million rand (US$19,2 million) after paying a cash dividend of 136.4 million rand (US$9.4 million) for the year ended 30 June.

The company also increased its working capital lock-up by 133.9 million rand (US$9.2 million) for the quarter. Meanwhile, external borrowings remained at zero.

DRD’s board of directors said it expects to consider a further dividend payment following the finalization of the firm’s half-year results.

“We believe the company could raise its dividend if its operations continue to run smoothly,” noted the analysts.

Contact Uttara Choudhury at uttara@proactiveinvestors.com

Follow her on Twitter: @UttaraProactive 

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