Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DRDGold Ltd (DRD, Financial) reported a 14% increase in revenue, reaching over ZAR6 billion, driven by a favorable gold price.
- The company maintained its dividend record, marking the 17th consecutive year of dividend payments, despite a smaller final dividend of ZAR0.20.
- DRDGold Ltd (DRD) invested in a 60-megawatt solar plant and battery storage, which is expected to significantly reduce electricity costs and improve sustainability.
- The company achieved a 58% decrease in water consumption, with 95% of water used in mining being recycled, showcasing strong sustainable development efforts.
- DRDGold Ltd (DRD) is focusing on extending the life of its operations, with plans to increase gold production to 6 tonnes per year by 2028 through strategic investments and resource optimization.
Negative Points
- The final dividend was reduced due to significant capital expenditure, which may continue to impact dividend payouts in the near future.
- DRDGold Ltd (DRD) faced challenges in achieving its targeted volume throughput, reaching only 84% of the goal, which affected overall production efficiency.
- Cash operating costs increased, coming in higher than guidance at ZAR833,000 per kilogram, due to lower volume throughput and other operational challenges.
- The company experienced a fatal incident, marking the first fatality in six years, highlighting ongoing safety concerns.
- DRDGold Ltd (DRD) is undertaking a high capital expenditure program, which may prioritize capital investments over dividend payouts, potentially affecting shareholder returns.
Q & A Highlights
Q: Can you talk about the implications for your dividend payouts over the next three years of this high capital expenditure program?
A: If we don't make money, then there won't be a dividend. If we do continue to have free cash other than the growth capital, then we'll continue to pay a dividend. But we've got to be responsible in how we manage our cash flows. We are putting facilities in place for project funding, but we don't want to borrow money to pay a dividend. So, yes, capital will take priority over dividends.
Q: At ZAR70 or ZAR80 a share, what is your assessment of DRD's value in the current share price?
A: The only shares I own in my portfolio are DRD shares, and I'm not selling them now. We're going to be getting some shares soon, and I think I'll be taking up those shares and keeping them. If we get our projects right, adding a tonne to our profile with a reducing cost profile could be very exciting.
Q: Is there anything you could tell us about the work you're doing around assessing a possible copper recovery operation?
A: We're doing an assessment of the ore body. We have an option to acquire half of that resource. It's a complex mentality, and we've drilled some holes. The samples are being analyzed, and we'll decide after that. It's a substantial opportunity but relatively cheap and accessible compared to other copper opportunities.
Q: The business case for solar seems compelling. Would you consider expanding solar to the West Rand or going 100% solar at Ergo?
A: We do not have plans to build another solar farm for the foreseeable future. However, we are always on the lookout for green energy opportunities. If opportunities arise to pull green units off the grid, we will certainly consider them.
Q: Could you give more color about your production target and yield after 2028?
A: After 2028, for at least seven years, we are targeting 3 million tonnes per month and 6 tonnes of gold per annum. The yield will be lower due to introducing lower head grades into the circuit from 2027 onwards.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
