DRDGOLD Limited Q4 FY2022 earnings call

Management Statement and Operational Highlights

• Revenue and Earnings: Revenue was up 7% for the year, operating profit rose 8% to over ZAR1.8 billion, headline earnings increased 14% to over ZAR1.2 billion, and a 16th consecutive dividend was paid.
• Operating Trends: Volumes faced pressure in the second half of the year but were offset by increased yield. Delays in new sites and reclamation programs impacted throughput. Ergo and Far West Gold had specific challenges with site delays and load curtailment.
• Financial Review: Ergo showed strong revenue and operating profit growth despite lower tonnages. Far West Gold faced challenges with site grades. The group's operating margin improved, free cash flow was affected by growth CapEx but the cash position was positive. Headline earnings per share increased 13%.
• Environmental and Social Initiatives: Potable water usage was reduced by 10%, continued rehabilitation spend, social investment in community development and education, and progress in solar power and tailings management were highlighted.

Segment Performance

• Ergo: Revenue increased 11% year-on-year, driven by a 16% rise in average rand gold price received though gold sold was down 5%. Cash operating costs rose 6% year-on-year. Operating profit for Ergo jumped 26% year-on-year, contributing just over ZAR920 million.
• Far West Gold: Revenue fell 2% year-on-year with gold sold down 15%, offset by a 16% increase in average gold price. Cash operating costs increased 11% year-on-year. Operating profit for Far West Gold declined 6% year-on-year, contributing just below ZAR900 million.

Guidance

• Production guidance was revised with slightly more ambitious production expectations. Cash operating cost guidance was set at ZAR770,000 per kilo. A capital expenditure of ZAR3.5 billion was planned, with a large portion allocated to solar and tailings projects.

Risks

• Supply chain and logistical issues hindered site commissioning. Load curtailment impacted production at Far West Gold. Environmental challenges like rainfall disrupted rehabilitation activities. Potential social unrest and crime posed threats to operations.

Question and Answer

Q: Breakdown of ZAR3.5 billion capital spend.

A: The majority of the ZAR3.5 billion was allocated to the solar project at Ergo, expansion at Far West Gold, and reclamation sites at Ergo.

Q: Contribution to decommissioning liabilities.

A: Vegetation of tailings facilities was affected by weather and community disruptions, but the company was committed to increasing spend to between ZAR30 million and ZAR40 million.

Q: Confidence in converting resources to reserves and CapEx over 5 years.

A: Planning to convert resources was underway, but uncertainties due to mining contingencies meant projections were subject to change.

Q: Security improvement and PGM recycling.

A: Security challenges required a national response, and the PGM recycling project was in a consultation phase with complex legal and ownership structures involved