DRDGOLD
Primary tickers: NYSE:DRD, JSE:DRD, A2Xshare
Stage of development: Production
Primary mineral: Gold
Projects to promote: Far West Gold Recoveries (FWGR) and Ergo Projects aligned with Green Mining / ESG initiatives
Project location: South Africa
Website: www.drdgold.com
DRDGOLD Limited is a South African company and world leader in reclaiming surface gold resources (tailings) and, through the astute use of technology, produces gold and releases hundreds of hectares of rehabilitated land for social + industrial development, empowering host communities, reversing gold mining’s environmental legacy, aligning with “Green Mining” principles. Business is conducted to be profitable and to create value for all stakeholders in the short-, medium- and longer-term, seeking synergies between financial, human, social, nature and manufactured aspects of the business.
Cash: ZAR521.5M
Debt: NIL
Major shareholders:
SIBANYE GOLD – 50.1%
THE BANK OF NEW YORK – 28.4%
ERGO MINING OPERATIONS PTY LTD – 0.4%
DIRECTORS – 0.2%
OTHER PUBLIC OWNERSHIP – 20.9%
Management ownership – 0.10%
Financials
Management Profile
Niël Pretorius, Chief Executive Officer
BProc, LLB, LLM
Member: DRDGOLD Risk Committee
Niël Pretorius has two decades of experience in the mining industry. He was appointed Chief Executive Officer designate of DRDGOLD Limited on 21 August 2008 and Chief Executive Officer on 1 January 2009. Niël also serves as an elected Board representative of the Minerals Council South Africa.
He has been instrumental in implementing several corporate social investment strategies and environmental, educational and rehabilitation policies during his tenure, in line with the Company’s strategy to deploy its resources to maximise economic value through sustainable and responsible mining, while releasing land back to the greater Johannesburg for redevelopment.
One of the Company’s key objectives is to generate a financial return for shareholders by maintaining healthy cash flows. This focus on cash flow has enabled the Company to preserve the value created for stakeholders in the form of dividends for 17 uninterrupted years, making a total distribution of 20 SA cents per share for FY2024.
What is your rationale for taking part in 121 Mining Investment?
To grow support for DRDGOLD’s share register and market the success of the Company’s story in its next growth phase.
What recent news would you like to highlight to investors attending?
DRDGOLD refers you to our website for the latest results for the year ended June 2024 (FY2024) in respect of Reviewed Condensed Consolidated Financial Statements and Cash Dividend Declaration: https://www.drdgold.com/investors/reports-and-results. We were pleased to report to investors on the 17th consecutive year of dividend payments. FY2024’s performance should be seen in a context of work done to position our Company for its next phase to extend life-of-mine.
A key milestone achieved in FY2024 is the substantial completion of the 60MW solar photovoltaic (PV) power plant at Ergo, 20MW of which is now operational, and the addition of the 160MWh currently underway battery energy storage system. This PV facility has been tied into the Eskom grid, and the infrastructure developed to facilitate this has been handed over to Eskom, enabling the wheeling of excess energy generated at Ergo into the national grid, which will help to offset power consumption in the rest of the business.
Ergo’s near and medium-term outlook, with its newly commissioned reclamation sites and the added benefit of 60MW of renewable power, is positive and it is well positioned to deliver on its strategy to add, at a capital cost of approximately R3.1 billion, funded substantially from ongoing operations, potentially another 14 years of production.
While the buoyant gold price is welcome, the construct of our cost profile is changing to offer better resilience should the cycle turn. Key drivers in this regard include decreasing the complexity of our operations by systematically reducing the Ergo operating footprint from 15 sites to 5, lower energy costs from the solar plant and a reduction in mechanised lifting and haulage of reclamation material.
Progress at FWGR Phase II, and the establishment of the Regional Tailings Storage Facility (RTSF), continues. We anticipate capital investment of some R7 billion over the next five years, with beneficial occupation of the RTSF targeted for the second half of the 2027 calendar year.
One of the core principles that inform our strategic thinking is that to thrive well, you need to survive well. In practice, this means that for many years we have been investing capital and developing a system to increase business resilience and robustness.
What are your key goals in 3 months, 6 months, 12 months?
3 Months:
Short Term: 2024 : DRDGOLD will continue to focus on cash-generation, cost control in a high inflation environment and efficiency, further setting up the business for the next growth phase. We intend to fully develop the potential of the existing asset base by harnessing technology, systems and skill-sets to deliver a competitive return to shareholders and real benefits to other stakeholders, specifically local communities and the environment, and to leverage both in its relationships and its footprint to grow the business as a key partner with Sibanye-Stillwater in a greener mining future.
6 Months:
Medium Term: 2023 – 2027 : Ensuring that employee safety, development, transformation and well-being take priority, underpinned by shared values. Through acquisitions, be able to offer integrated, sustainable management solutions with international reach and by doing this, expand our role in environmental clean-up in the interest of sustainable land use, reduced pollution and societal upliftment. At the Ergo and FWGR options, we are looking to “crack the code” by increasing overall yield / reducing residue through better use of technology and information, with the use of big data and taking the next quantum steps in the development of models in terms of integrated, sustainable tailings management solutions. In addition, we are considering opportunities through our anchor shareholder, locally and internationally, in platinum group metals and battery metals.
12 Months:
The Company guides output for FY2025 of between 155 000 ounces and 165 000 ounces of gold (depending by and large on volume throughput) and cash operating costs at approximately R870 000/kg. Planned total capital investment for the year is approximately R3.5 billion.
DRDGOLD’s profile has systematically evolved over time to become increasingly “green” – to produce gold without generating new waste or tailings, and therefore are waste neutral. Less than 10% of water consumption is potable and our waste reticulation is in a closed-circuit. Over time, more than 138 mine dumps have been removed and reprocessed, clearing and restoring more than 2 000 hectares of land.
The transition to renewable energy use is an integral part of our approach to decreasing our environmental footprint and impact. Our decarbonisation strategy will see the proportion of renewable energy used rising to around 14 000MWh/month or approximately half of Ergo’s overall energy consumption by Q2 of FY2025, resulting in a significant reduction in our Scope 2 emissions.
Once commissioned, the RTSF will not only be large enough to receive the operations entire remaining resource in this region but will offer a complete solution to the ongoing impact of tailings storage facilities built over environmentally sensitive aquifers in the region. The breaking of ground at this complex on 5 June 2024 follows the appointment of a leading contractor to construct the RTSF and the receipt of the requisite permits.
What do you see as the key risks and challenges facing your company at the moment and how are you overcoming these?
Carbon footprint and power supply risk – We resolved to construct a solar power plant and a power storage facility. Eskom power supply, social unrest, increased crime + gold theft and availability of water are therefore risks being consistently addressed using technology, information to enhance operational performance, to minimise impact on the environment, with focus on employee safety and well-being, and improving the quality of life of communities surrounding our footprint.
What do you think makes your company such a compelling investment?
The legacy of adaptability and ESG; DRDGOLD is 126 years old – it has survived thus far by adapting to an ever-changing environment, taking full advantage of lucky breaks as and when they happen, and maintaining a disciplined approach. Its established relationship with Sibanye-Stillwater places it in a very strong position to continue to play a role in the future of mining in South Africa, and perhaps even internationally. Our early adoption of sustainable development, as the primary idea in shaping its thinking and informing the deployment of resources and capital, has meant that the ESG work has been done and foundations laid to continue on this path of sustainable, responsible, greener mining.
What are the top 3 key investor takeaways?
1. Awarded No.1 status among Top 100 JSE-Listed Companies in 2020
2. World leader in large-scale gold tailings retreatment
3. 17 years’ uninterrupted dividend payments