DRDGold, South Africa’s gold producer, expects earnings to fall due to lower commodity prices and a surge in input costs from chemicals and diesel.
In its trading update for the year ended June 30, released yesterday, the Sibanye-Stillwater’s dump retreatment subsidiary said headline earnings per share (Heps) were expected to drop between 33 percent and 13 percent, to between 113 cents and 147c for the year, from 168c in the previous year, when the group generated a headline profit of R1.4 billion.
It flagged that earnings per share for the six months to end-June were expected to drop to between 402c and 447c a share.
The decline was partly attributed to the revenue of its two subsidiaries, Ergo Mining, which is the reclamation operations owned and managed by DRDGold, and Far West Gold Recoveries Proprietary Limited.
Ergo’s revenue decreased by R238.1 million, or 6 percent, to R3 704.9m, due mainly to a 3 percent decrease in the rand gold price received and a 3 percent decrease in gold sold.
“The decrease in gold sold resulted from a 4 percent decrease in volume throughput offset by a 1 percent increase in yield,” it said.
Far West Gold Recoveries’ revenue increased by R87.6m, or 7 percent, to R1 413.6m, compared to 2021’s R1 326m due mainly to a 9 percent increase in gold sold.
“The increase in gold sold resulted from an 8 percent increase in yield, notwithstanding volume throughput decreasing by 1 percent," DRDGold said.
The impact of the decrease in revenue on earnings and headline earnings was further impacted by an increase in cash operating costs of R391.1m, or 13 percent, to R3 463.8m compared to the previous year’s R3 072.7m.
“The increases in costs at both operations were mainly caused by above-inflationary increases in the costs of key consumables, diesel, steel and cyanide,” the group said.
DRDGold said its cash and equivalents were R2 525.6m compared to the previous year’s R2180m, with a revolving credit facility with Absa of R200m available if needed.
“During the current reporting period, DRDGold generated free cash flow, cash inflow from operating activities less cash outflow from investing activities of R871.6m and paid cash dividends of R513.3m. The group remains free of bank debt,” it said.
In afternoon trade on Wednesday, DRDGold’s shares were flat and traded at about R10.50. In the past six months the shares have dropped by 20.5 percent.
The share prices of both DRDGold and Sibanye-Stillwater have declined this year because of the dull performance of the gold price, a strike at Sibanye-Stillwater, and the seven-week closure of Sibanye’s plant in Montana, US, due to flooding.
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