DRDGold is likely to miss its annual production guidance for a second consecutive year after heavy rains disrupted its Gauteng gold mining operations in the third quarter.
The group reported a 12% drop in output for the three months to end-March, with sales volumes down by a similar margin, which it attributed to “unprecedented weather conditions”.
Continuous rainfall blocked access to certain sites and ultimately affected the average yield achieved, the company said.
Given the decrease in tonnages and yield in the quarter, the company expects output to fall slightly short of its full-year production guidance of between 155,000oz and 165,000oz.
As a result, it may also exceed its revised cash operating unit cost guidance of R870,000/kg, said DRDGold.
The group also fell short of its production and cost guidance last year due to the late commissioning of two mining sites, unexpected design amendments by the department of water & sanitation department and community-related disruptions.
The misstep comes at a time of huge capital investment by the company, whose balance sheet has been propped up largely by record gold prices over the past year.
As a price taker, avoiding hedges or forward contracts, the soaring gold price has seen DRDGold reporting steady earnings growth over the past two years, even though output has declined.
In the 2024 financial year, revenue rose by 14% despite gold production falling 5% from the previous year. In the six months to end-December, operating profit surged by 74% despite output climbing just 1% year on year.
To prepare for a possible downturn in prices, the group has pinned its hopes on an aggressive capital reinvestment programme aimed at adding another tonne of gold to annual production by 2028.
The miner’s growth ambitions hinge on expanding its Far West Gold Recoveries operation near Carletonville by adding a new regional tailings storage facility (RTSF), which has been under construction since last June.
However, with poor weather conditions disrupting construction activities at the RTSF in the third quarter, the plans hit a bump, evidenced by a 26% drop in non-sustaining capital expenditure (capex) for the three months to end-March.
The group spent more than R1bn on capital infrastructure in the first three quarters, though that’s still less than half the R3.5bn capex bill it had initially planned for the year to end-June.
In its latest trading update, DRDGold said the cash generated during the final quarter would go towards its extended capex programme.
That, coupled with the recent surge in the gold price, places the group in a favourable position to consider declaring a final dividend in August, it said.
The group reported adjusted earnings before interest, taxation, depreciation and amortisation at R761.7m, down 2% from the previous quarter.
Revenue was up 4% year on year, thanks to a 10% increase in the average gold price received during the period.
Update: May 7 2025
This story contains new information throughout
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