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DRDGold LTD 21 February 2022

Growth Still In The Wings

Nic Dinham

Financial Results For the period ending December 2021, DRD earnings fell to 58cps from 111cps recorded at the prior comparable period (pcp) ending December 2020. The fall in earnings reflects the 13% fall in the company’s received rand price of gold. The earnings are tracking better than we expected but we retain our full year forecast of 94cps. 

Gold Production The group produced 92,787ozs of gold in H1, which makes it likely that it will achieve the 180,000ozs that management guided as the upper end range of its target for the year. 

FWGR The FWGR operation produced 92,787ozs of gold in H1, which makes it likely that it will achieve the 180,000ozs that management guided as the upper end range of its target for the year. The feature of the reporting period was the operations low unit cost increase of just 3% yoy. 

ERGO continues to see a slow decline of recovered grade, resulting in gold production falling 3% to 2,090kgs despite higher volumes than the pcp. The operation is experiencing large cost increases related to the activity of moving the centre of gravity of operations away from the City Dumps. 

Growth details are emerging from FWGR which is likely to add another 40,000ozs of output when the proposed interim storage facility for its treated materials is approved.

ERGO will soon be able to upgrade a large part of its resources into reserves. As a result, we expect the 13-year life of ERGO to be extended by several years which should provide a stable platform for group growth.

DRD is SA’s corporate frontrunner to install a 20MW Solar Power project along with an array of batteries. Further details of this project are expected in May. However, there remains an array of obstacles to its finalisation, related to third party permissions and documentation that still needs to be finalised

Blue Skies DRD has the long-term possibility of developing a PGM recovery project in the Rustenburg area. Recent management commentary points to the project being developed with more seriousness than previously considered although a near-term announcement looks unlikely.

Valuation: Our Fair Value Valuation Range (FVVR) remains R11.60/s - R15.90/s. The detailed support for these valuations is described in our recent January 2022 Report (Green Growth report).


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