DRDGOLD reported a strong September quarter from its two surface tailings retreatment operations in South Africa. Gold production increased 10 percent year on year to 42,021 ounces, or 1,307 kilograms, supported by a 15 percent improvement in yield, despite a 5 percent decline in the volume of material processed. Gold sales rose 14 percent to 42,568 ounces.
Revenue rose 31 percent year on year to 2.95 billion rand and operating profit increased 42 percent to 1.63 billion rand, although both were lower than in the June quarter on a lower gold price received. Cash operating costs rose 12 percent year on year to 1.3 billion rand on higher reagent and diesel costs and the purchase of gold bearing material from outside the group, partly offset at the Ergo operation by a solar plant and battery storage system that cut Eskom power consumption.
Cash generation was the standout. Free cash inflow increased to 725.8 million rand from 90.6 million rand a year earlier as profitability improved and capital expenditure fell, with growth capex down 29 percent to 555.7 million rand as Vision 2028 expansion projects near completion. Cash stood at 2.45 billion rand at the end of September after payment of the final dividend, with no bank debt.
The expansion of the Driefontein 2 processing plant at Far West Gold Recoveries near Carletonville was substantially completed by the end of September, with commissioning scheduled for this month. For a tailings producer, the investment question is reserve life in dumps rather than underground grade, and DRDGOLD’s falling capex profile means the current gold price flows increasingly to cash rather than to construction.