Our opinion on the current state of DRD

DRDGOLD, established in 1895, holds the distinction of being the Johannesburg Stock Exchange's (JSE) oldest listed company, a title it took over from SA Breweries, which was listed in 1897 and later acquired by Anheuser Busch. Currently, DRDGOLD specializes in surface gold treatment operations, boasting an all-in sustaining cost of extraction slightly over R627,247 per kilogram—a figure that is notably lower than the average gold price received of R917,996. The company's focus on re-treating surface dumps that contain residual gold allows for a less risky operation compared to traditional underground mining, given the reduced union exposure and absence of the challenges associated with underground operations. This method also enables precise knowledge of the life, grade, and profitability of the operations.

DRDGOLD's operations exhibit a degree of volatility, largely due to their dependence on fluctuating gold prices. However, the company maintains a debt-free balance sheet and robust free cash flows, underscoring its financial health. A significant development for DRDGOLD was the agreement with Sibanye, allowing for the exchange of surface dumps for an additional 265 million DRD shares, which subsequently increased Sibanye's shareholding to 38%. Further, on 10th January 2020, Sibanye exercised an option to raise its stake to 50.1% for R1086 million.

Under the leadership of CEO Niel Pretorius, DRDGOLD aims to consolidate various tailing projects on the West Rand to establish a large-scale, unified re-processing operation. Additionally, the company is investing in renewable energy with the construction of a 20 MW solar and battery facility.

For the six-month period ending on 31st December 2023, DRDGOLD reported a 12% increase in revenue and a 10% rise in headline earnings per share (HEPS), despite a 7% decline in gold production and an 8% decrease in gold sales. The increase in the average gold price received by 13% has partially offset these declines. The company has seen some relief in the latter half of 2023, owing to the commissioning of high-grade sites like the Valley Silts and Rooikraal.

Despite reaching a peak share price of 2458c on 9th May 2023, DRDGOLD's shares have since experienced a downturn, illustrating the inherent volatility associated with commodity shares, particularly those tied to the gold market. This volatility reflects the broader challenges and opportunities within the gold mining industry, influenced by global market dynamics and the price of gold.