“Community-related interference” caused delays of several months to new projects being developed by gold producer DRDGold, which operates from sites near Johannesburg in Gauteng.
The group reported a 10% rise in profit for the six months to end-December despite a 7% drop in output, which was a result of a delay in the commissioning of new sites to replace high-volume sites, which had reached the end of their life cycles.
Presenting the group’s interim results to shareholders on Wednesday, CEO Niël Pretorius said during 2023 they had fallen behind on the starting up of four new gold tailings reclamation sites.
The sites were set to come into operation from October 2022 but there were delays in the processing of water usage licences on two sites, the lodging of appeal proceedings by a community forum on a third and community-related interference with the construction of a pipe column to the fourth site.
Pretorius said: “The 2023 calendar year became a scramble to source material from legacy and cleanup sites.”
DRDGold is one of the world’s largest gold tailings retreatment companies. It retreats existing tailings dams and mine dumps to extract gold.
Pretorius said in many of the areas where it operates, such as Brakpan and Carletonville, “communities are now in a situation where they have very little. They don’t have services or jobs, the healthcare and schools that they have access to [are] very poor, the infrastructure is a shambles.
“When they do see any sort of development or any kind of opportunity for economic empowerment everyone wants to be involved. If you have social unrest, where people say they will not let you proceed with a project unless you give us a job, that is desperation.”
Speaking to Business Day, he said where DRDGold had, for example, started building power lines running from its solar plant to the Brakpan tailings facility, it didn’t take long before a group of people gathered and started putting up barricades restricting access to the site.
“They would then not allow us to continue work before their demands are heard. We have a policy in this regard to see to what extent we can make use of local labour. With the solar project we employed about 250 temporary staff members that were sourced through a forum of community representatives.”
In other instances the pressure did not come from community groups, but rather from local councillors. These councillors, said Pretorius, did not really have anything to offer their constituents in terms of improved service delivery so they tried to facilitate job opportunities instead.
“When their demand is jobs we listen, but when they start demanding that a percentage of revenues and proceeds from the project has to find its way to that community we remind them that we already pay 28% companies tax and 45% income tax that amounted to the better part of R600m in taxes last year. We suggest to them they need to find out how much of that tax money made its way back to their communities.”
All of these interactions could result in several months of delays. With future projects, the company would start engaging earlier with communities to prevent similar delays from occurring, he said.
Water infrastructure
Pretorius also expressed concern about the deterioration in water infrastructure in Gauteng and the risk this could pose to the business in the future. “We are one drought away from a very serious crisis.”
The water management system in Gauteng was not in good shape and catching up would take a very long time, he said.
“We do have sufficient access to water, but we are concerned that we will face competing claims for that water when Gauteng starts running out.”
Despite a 7% decrease in gold production to 81,888oz and its all-in-sustaining costs — the industry metric that shows the total cost of gold production — rising 19%, the group’s headline earnings per share rose to 68.4c in the six months to end-December from the previous matching period.
“The first half of the 2024 financial year started well for us with solid throughput and good plant efficiencies, bolstered by a very attractive gold price,” Pretorius said.
The gold market has held up reasonably well over the past 18 months, supported in part by its safe haven characteristics in light of the increasingly uncertain global environment. Central banks have also been strong buyers of bullion, helping to keep the price at about $2,000/oz.
The company’s production outlook for the remainder of the financial year was positive, with all new sites up and running, while production costs were expected to be lower.
The gold producer declared an interim dividend of 20c per share, unchanged from the previous matching period.
Update: February 14 2024
This story has been updated with new information throughout.
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