DRDGold’s expansion plans have gained momentum after a cash windfall from record gold prices freed up capital in the three months to end-September.
Soaring gold prices helped the small-cap miner overcome an uptick in operating costs, allowing it to increase its spending on growth by 9% to just shy of R800m.
The extra cash sets the stage for DRDGold’s next phase of expansion, in which the company plans to reclaim three mine dumps populating the vast area of land immediately to the southeast of Johannesburg's CBD, around Nasrec.
More than a century of Witwatersrand mining has left mountains of mud-like residual ore waste across Gauteng, which the company transports to its Ergo and Far West Gold Recoveries (FWGR) tailings retreatment operations to extract leftover gold.
DRDGold CEO Niël Pretorius believes the expansion project will enhance the group’s investment case as it extends Ergo’s lifespan beyond 2040 by enhancing its capacity with the three new sites, and reworks its cost profile.
The project could also have positive environmental, social and governance (ESG) implications, as processing the mine dumps would eliminate “a huge environmental burden in terms of dust and water management”, Pretorius said in the group’s annual results.
In a trading update on Thursday, DRDGold said its increased liquidity and cash generation stemming from elevated gold prices in the first quarter would fund its extended capital expenditure programme for the current financial year.
Surging gold prices, coupled with a 2% quarterly uptick in metal production, pushed adjusted earnings before interest, tax, amortisation and depreciation up slightly to R1.09bn, offsetting a jump in operating costs.
Annual labour cost increases across both Ergo and FWGR, together with two months’ winter electricity tariffs, made gold tailings retreatment particularly expensive in the three months to end-September, with cash operating costs tracking 8% higher than in the quarter to end-June at R179/tonne.
The small-cap gold miner is majority owned by Sibanye-Stillwater. Its current operations include Ergo, acquired from AngloGold Ashanti in 2007, and stretching from central Johannesburg to Ekurhuleni, and FWGR near Carletonville in Gauteng.
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