DRDGOLD Limited Q2 FY2021 earnings call

Management Statement and Operational Highlights:

• Financial Results: Stellar financial results with 41% revenue growth, operating profit doubling, headline earnings ~ZAR 950 million, and a dividend declared. Supported by strong throughput and recoveries at operations.
• Operational Performance: Ergo showed plant stability and volume throughput, though gold production was slightly down. Far West Gold had good gold production and high margins per tonne, with cash flows retained for future investment. Group had an operating margin of almost 50%.
• ESG and Rehabilitation: Spent ~ZAR 52 million on rehabilitation, vegetating 52 hectares of tailings. Focus on community resilience through networks established during COVID, collaborating with universities for informal economy research.
• Strategic Relationships: Collaboration with Sibanye-Stillwater informing strategy, focus on sustainable development and ESG, with emphasis on concurrent rehabilitation and community empowerment.

Segment Performance:

• Ergo: Revenue increased, operating profit doubled, gold production slightly down but supported by throughput and recoveries. Contributed significantly to the group's ~ZAR 3 billion revenue.
• Far West Gold: Gold production remained strong at over 700 kilos, margin per tonne high, with cash flows withheld for future investment. Contributed ~ZAR 700 million to revenue.
• Group: Revenue up 41% to just under ZAR 3 billion, operating profit doubled to just under ZAR 1.5 billion, gold production just under 3 tonnes, headline earnings just under ZAR 950 million, with a dividend of ZAR 0.40 per share declared.

Guidance:

• Tracking towards the upper end of previously provided guidance.
• Cash operating costs in line with guidance, with continued focus on capitalizing the business and social aspects.
• Revisiting guidance at the end of the financial year, with updates provided as needed.

Risks:

• Supply and availability of affordable electricity, impacting business operations.
• Political and regulatory environment, affecting capital investment attractiveness.
• Social destitution and its potential impact on communities, requiring proactive measures for resilience.

Q: Question on broadening expertise elsewhere and growth profile/ milling costs A: Discussed potential for tailings service provider role, noting factors like resource size, electricity, and regulatory environment. Stated growth profile will be revisited at end of financial year, and milling costs are not ones-off; milling circuit changes are ongoing for better efficiencies, with higher winter tariffs being cyclical