DRDGOLD, a South African gold producer, reported a 17% increase in pretax earnings (Ebitda) for the first quarter of the fiscal year, reaching R681 million. This growth was driven by a combination of increased gold production and a record high gold price in rand terms. The price of gold in South Africa reached an all-time high of R1.523 million per kilogram, up 5.8% from the end of September when the company closed its quarter.
Gold Production: DRDGOLD’s gold production increased by 7% to 1,319 kg, mainly due to a 13% rise in tonnage throughput. However, the yield was slightly lower, falling to 0.201 grams per ton.
Gold Sales: The company sold 1,289 kg (45,468 ounces) of gold, a 4% increase compared to the previous quarter.
Cost Management: DRDGOLD managed to reduce cash operating costs per kilogram of gold sold by 4% to R856,723/kg, benefiting from higher gold sales despite increased electricity costs associated with Eskom’s winter tariff. Additionally, cash operating costs per ton of material processed decreased by 6%, attributed to increased throughput.
The company’s strong operational performance translated into healthier cash reserves, with cash and cash equivalents increasing by R72.7 million to R594 million as of the end of September. This was achieved after paying out a cash dividend of R172.3 million and investing R323.3 million in capital expenditure.
DRDGOLD continues to focus on expanding its operations, particularly through its Far West Gold Recoveries (FWGR) project and extending the life of its Ergo operation by another 14 years. The company has earmarked R10 billion for these projects, with R7 billion still to be spent, predominantly on FWGR. These capital investments are expected to add an additional ton of gold to the company’s annual production by 2028.
Despite the positive financial performance, DRDGOLD adopted a conservative stance on dividend payments. The final dividend in August was cut to 20 South African cents per share, down from 65 cents per share in the previous year. The total dividend for the year was reduced to 40 cents per share, compared to 85 cents per share in 2023. CEO Niël Pretorius emphasized that the company would not borrow funds to pay dividends, maintaining a cautious approach to balancing growth investments and shareholder returns.
Pretorius highlighted the potential long-term benefits of the company’s investments, particularly if the gold price remains strong and DRDGOLD continues to reduce its cost profile. Shares in DRDGOLD are currently trading at R19.11 per share, marking a one-year high.
This report underscores DRDGOLD’s strong position in the gold market, with the company balancing production growth, cost management, and strategic investments while maintaining a conservative financial approach amidst a record high gold price environment.
