JOHANNESBURG (miningweekly.com) – Despite a difficult environment, debt-free DRDGold has declared a dividend of 20c a share for the financial year ended June 30 – representing a threefold increase on the dividend declared for the 2018 financial year.

This also marked the company’s twelfth consecutive year of dividend yield.

At a presentation of the JSE- and NYSE-listed miner’s results, on Tuesday, CEO Niël Pretorius described the financial year as having been “exceptionally challenging” for the industry as a whole, especially considering disruptive labour action, the near-collapse of power utility Eskom and the loss of investor confidence.

Nevertheless, DRDGold increased its headline earnings a share to 10.9c, up from the 1.7c reported for the prior financial year.

Gold production for the 12 months was 6% higher year-on-year, 160 014 oz, mainly owing to the 4 855 oz produced at the company’s “new kid on the block” – Far West Gold Recoveries (FWGR).

Gold production from the Ergo operation, meanwhile, was 4% lower year-on-year owing to a 5% decline in ore milled, which dropped to just over 23.16-million tonnes.

The combination of Ergo and FWGR helped DRDGold increase its group revenue by 11% to R2.7-billion – R2.5-billion of which came from the Ergo operation, and R184.6-million from FWGR, even though it has only been in production for four months.

Group operating profit was up by 5% to R371.8-million after accounting for group cash operating costs of R2.4-billion.

The company is debt-free, and has just under R280-million in the bank, Pretorius told Mining Weekly Online on Tuesday, ahead of the company’s presentation.

While Pretorius said that the group’s performance was “not just contrary to the industry trend”, he added that the positive performance during the financial year was “testimony to the resilience of a business model that has been several years in the making”.

Pretorius said DRDGold was looking 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 the group’s bottom-line during the 2020 financial year.

SIBANYE-STILLWATER

DRDGold, which is predominantly a tailings retreatment specialist, exchanged a 38% stake in the company to dual-listed Sibanye-Stillwater in exchange for FWGR, to the west of Johannesburg, in July 2018.

Sibanye has the option, until year-end, to acquire full control of DRDGold.

Pretorius was supportive of Sibanye exercising this option. He added that DRDGold was “fairly certain” that Sibanye would take control of the company, as it made “financial sense”.

Should Sibanye decide to exercise its option to acquire control of DRDGold, it would be to DRDGold’s advantage, considering that an additional 12% stake for Sibanye would translate into about R1-billion additional capital for the tailings retreatment specialist, which Pretorius said would be used to further develop some of the company’s assets.

The relationship with Sibanye, he added, “if looked after” and if DRDGold were to continue delivering good results, could be leveraged to be of further mutual benefit.

OUTLOOK

For the 2020 financial year, group gold production was forecast at between 175 000 oz and 190 000 oz, Pretorius told Mining Weekly Online.

He further said that, should the current higher gold price of about R740 000/kg, which is R162 000/kg more than the average gold price received during the 2019 financial year, remain, this would generate about R162-million in additional revenue for every ton of gold DRDGold produces.

“Things have become harder and I think that these are dynamics that they [analysts] are having difficulty  interpreting,” he noted, and, as a result, “only time will tell if this is sustainable”.