DRDGOLD Limited Q2 FY2022 earnings call

Management Statement and Operational Highlights

• Context: The year was marked by challenges including riots, extreme weather, load shedding, inflation, and rising crime. These factors impacted costs and operations.
• Operational Trends: Ergo faced volume challenges due to weather and electricity issues but maintained stable operations. Far West Gold had stable volume but benefited from higher head grades and improved yield.
• Financials: Revenue decreased 3% mainly due to lower gold prices. Cost of sales increased 10%, while operating profit decreased 20% and headline earnings decreased 22%. Free cash flow was R871.6 million.
• ESG and Strategy: Focus on reducing potable water usage, significant rehabilitation spend, advanced tailings management, and social-economic development. Emphasis on collaboration and sustainable growth to navigate challenges.

Segment Performance

• Ergo: Revenue down 6%, with 3% due to lower gold price and 3% less in gold sold. Cash operating costs increased close to 13%, but operating profit remained stable. Volume throughput was affected by weather and electricity interruptions, but yield per tonne increased. Production kilos were relatively flat. Revenue contribution from Ergo was impacted by these factors.
• Far West Gold: Gold revenue increased 7%, with gold sold up 9% and yield up 8%. Cash operating costs increased 12%, but operating profit rose 3%. Volume throughput was flat, but higher head grades and improved yield contributed to the positive performance. Revenue contribution from Far West Gold was boosted by these factors.

Guidance

• Production: Expected to be 160,000 to 180,000 ounces depending mostly on volume throughput.
• Cash Operating Costs: Slightly up due to rising costs such as fuel and logistics.
• CapEx: Expected R1.4 billion, with half being strategic CapEx, including Ergo's solar project and Far West Gold expansions.

Risks

• Operational: Weather disruptions, electricity interruptions, logistical challenges, and rising crime impacting operations and costs.
• Environmental: Managing tailings and potable water usage, with ongoing efforts to reduce environmental impact.

Question and Answer

Q: Can you please give us a sense of your same business CapEx evolving over the next three years?

A: Key focus areas include new pump stations, retreatment dumps, plant improvements, and solar projects. For example, Ergo's solar project and Far West Gold's expansions are part of the CapEx plan.

Q: Are there plans for self generation of power and forward scope similar to those that can have at Ergo not individually?

A: In conversation with Sibanye-Stillwater, but individually, there are no immediate plans to build own pump stations. Surplus power at Ergo may be used off the grid.

Q: Can you please kindly provide guidance of the effective tax rate for 2023? Why would the slow in 2022?

A: Determined by the gold tax formula, impacted by CapEx spend. Deferred tax liability and corporate tax rate changes affect the effective tax rate. Guidance for 2023 will be based on these factors.