DRDGOLD Limited Q1 FY2022 earnings call

Management Statement and Operational Highlights

• Business Response: The business responded positively in Q2 2021 in terms of volume and extraction efficiency despite electricity and weather disruptions. The company was over 5,000 ounces ahead of the six-month forecast.
• Operational Trends: Ergo had stable volume throughput and improved yield. Far West Gold maintained stable volume throughput, saw yield improvements, and production reached 792 kilos for the half year.
• Environmental and Social Spend: Significant environmental spend on solar projects, water conservation (10% decrease in externally sourced potable water). Social spend was just under R20 million, focused on broad-based livelihood programs.
• Strategic Alignment: Aligned with Sibanye-Stillwater's strategy, looking to expand globally within the identified product band, focusing on sustainable mining and environmental containment to roll back mining's environmental legacy.

Segment Performance

• Ergo: Revenue down 9% due to a 13% decrease in gold price and slight drop in gold sold. Cash operating costs increased by 12% due to higher reagent consumption and price taker products like electricity. Operating profit for Ergo decreased by 52%.
• Far West Gold: Gold sold increased by 13% due to the implementation of the copper elution circuit and yield improvement. Despite a 13% decrease in gold price, revenue remained stable. Group-wide, revenue was down 16%, gross profit decreased by 48%, and headline earnings per share dropped by 48% compared to the prior year.

Guidance

• Group headline earnings per share decreased by 48% year-on-year.
• Planned capital expenditure of R600 million, with a significant uptick expected.
• Interim dividend declared for the 15th consecutive financial year, maintaining cash return to shareholders.

Risks

• Cost pressures from reagents, electricity, and inflation.
• Regulatory challenges in obtaining tailings facility license approvals.
• Dependence on gold price volatility affecting revenue and earnings.

Question and Answer

• Q: Update on green metal strategy, commodities like uranium, copper, and yield normalization. A: Aligning with Sibanye-Stillwater, early stages for uranium exploration, yield normalization linked to site expansion and reserve updates.
• Q: Timeline for PV launch and total expenditure. A: Waiting for regulatory approval, expecting progress soon, considering internal or off-balance sheet funding.
• Q: Ergo costs increase. A: Costs due to reagents, trucking, and steel, with expectation of stabilization as moving to larger sites.
• Q: Alignment with Sibanye-Stillwater outside of South Africa. A: Open to opportunities globally within identified product band, in consultation with Sibanye-Stillwater.