DRDGold share price plunged 6.4% to R16.91 per share after it announced that it had to scramble around for production to attain its targets for the year to June, 2024.
This is a situation that brought up costs by 20% although it is now reducing legacy mining sites from 15 to five ahead of a planned intensive capital reinvestment to boost output by one ton.
Production for the full year under review tanked by 5% to 160 818 ounces while gold sold was also lower by a similar margin at 160 400 ounces for the full year.
A 20% upswing to about R1.2 million/kg in the average gold price received by the company boosted operating profit for the year to June by 14% to R2 billion.
Resultantly, headline earnings per share climbed by 4% to 154.1 cents, the company said.
However, costs for the year to end June, 2024 were more elevated, with cash operating costs for the year 20% to R833 536/kg while all-in sustaining costs were up by 14% to R946 848 over the same period.
“It was a year under which we had to scramble around in order to get within reach of our target production and the scrambling made more costs. We had to accelerate the rate at which we had to clean up some of our legacy sites,” DRDGold CEO Niel Pretorius told Business Report in an interview yesterday.
The company was now pivoting on a “tight capital reinvestment programme” as it sets up “infrastructure to boost capacity to produce 6 tonnes of gold, which is a tonne more” to what it produced this year.
“So we are going to need stable production going forward,” he said.
DRDGold will close 10 operating sites at its Ergo project in South Africa to manage costs, although it is also significantly investing in expanding its production.
The South African gold miner saw dividends for the year to June, 2024 fall from 65 cents a year ago to 20 cents, with Pretorius saying the company would prioritise capital investment to boost production.
“While the buoyant gold price is welcome, the construct of our cost profile is changing to offer better resilience should the cycle turn,” Pretorius said.
He cited the reduction of the company’s Ergo unit’s operating footprint from 15 sites to five, lowering energy costs from the solar plant and a reduction in mechanised lifting, and haulage of reclamation material as key to this strategy.
“We had to dig deep to find replacement tonnes, and in the end we had to accelerate the rate at which we were mechanically clearing and cleaning up and legacy sites. By November, 2023 we had run out of legacy material,” explained Pretorius.
During the period under review, gold production from Ergo decreased by 7% to 3 639kg due to the reduction in tonnage throughput as a result of the late commissioning of two sites after the Department of Water and Sanitation requested unanticipated design amendments and studies which resulted in further delays.
Furthermore, “community-related disruptions for inclusion in projects experienced at the 5L27 site in the first half of FY2024, led to production from this site being delayed”until late January, 2024.
Gold production at FWGR increased by 1% to 1 363kg, driven by a 9% increase in tonnage to 6.2 million tonnes although yields had decreased by 7% to 0.221g per tonne. This has been attributed to the lower head grade of the top-layer material reclaimed at Driefontein 3.
The company is planning capital investment of R7 billion over the next five years for FWGR, adding an estimated 25 years to the project’s life of mine.
DRDGold ended the year to June with cash and cash equivalents of R521.5 million as cash applied to capital rose to R2.9bn. A greater portion of this was related to growth capex.
Nonetheless, the company remained free of bank debt as at the end of the period under review although it had secured a bank facility and a revolving-credit facility with Nedbank ahead of DRDGold’s repositioning capital programme in 2028.
BUSINESS REPORT