DRDGOLD Limited has reported a 7% increase in gold production for the first quarter of FY2025, supported by higher tonnage throughput and strategic operational adjustments. The South African gold producer, which specializes in the retreatment of surface tailings, also highlighted key cost savings, largely attributed to operational efficiencies and a reduction in energy costs.
Battery and Energy Storage System to Boost Efficiency
One of the most notable advancements for DRDGOLD this quarter is the ongoing integration of a Battery Energy Storage System (BESS) into its solar photovoltaic (PV) power plant at the Ergo operation. The company anticipates that this system will be fully commissioned by the second quarter, further enhancing operational efficiency and reducing costs.
Once operational, the BESS is expected to contribute to a continued decline in energy expenses, positioning the company to capitalize on cleaner, more sustainable energy sources. This initiative aligns with DRDGOLD’s ongoing efforts to reduce its carbon footprint and increase the sustainability of its operations.
Production Figures and Performance
For the first quarter of FY2025, DRDGOLD reported gold production of 1,319 kilograms (kg), marking a 7% increase compared to the previous quarter. This increase in output was primarily driven by a 13% rise in tonnage throughput, despite a slight decrease in the average yield per tonne, which was 0.012 grams per tonne (g/t) lower than the previous quarter at 0.201g/t.
In terms of sales, DRDGOLD sold 1,289kg of gold during the quarter, a 4% rise from the preceding quarter. The increase in gold sold, combined with favorable market conditions, contributed to the company’s improved financial performance during this period.
Cost Reductions Drive Profitability
DRDGOLD’s ability to manage costs was a critical factor in its positive performance this quarter. Cash operating costs per kilogram of gold sold decreased by 4% to R856,723/kg, largely due to the increased volume of gold sold. This decline in costs was achieved despite higher total cash operating costs, which were impacted by seasonal winter tariffs imposed by South Africa’s state utility Eskom between June and August.
Moreover, cash operating costs per tonne of material processed fell by 6%, down to R176/tonne, driven by increased throughput and a gradual reduction in the number of mechanically reclaimed clean-up sites. These sites, which are more costly to operate compared to hydro mining, are being phased out, and this trend is expected to continue, further reducing the company’s cost profile over the remainder of the financial year.
Sustained Cost Reductions and Future Outlook
In addition to operating cost reductions, DRDGOLD reported a significant decrease in all-in sustaining costs (AISC) per kilogram, which fell by 5% quarter-on-quarter to R933,686/kg. This decrease was primarily due to lower cash costs and a reduction in sustaining capital expenditure. Meanwhile, all-in costs per kilogram saw an even more dramatic drop, falling 56% to R1,152,406/kg, a result of lower growth capital expenditure compared to the previous quarter. Notably, the previous quarter included the purchase of the BESS for the solar PV power plant.
These ongoing cost reductions signal a positive outlook for DRDGOLD, as the company continues to improve operational efficiencies. The reduction in more expensive reclamation methods, combined with the benefits of sustainable energy solutions, is expected to support a continued decrease in the company’s cost base in the coming quarters.
EBITDA and Liquidity Improvements
DRDGOLD also posted a 17% increase in adjusted EBITDA, reaching R680.8 million for the quarter. The rise in EBITDA was mainly attributed to the increase in gold sold and the higher gold price achieved during the quarter.
As of 30 September 2024, DRDGOLD’s cash and cash equivalents increased by R72.7 million to a total of R594.2 million, despite the company paying a final cash dividend and incurring capital expenditure of R323.3 million during the quarter. This increase in liquidity positions DRDGOLD well for future investments and capital expenditure.
Capital Expenditure Plans for FY2025
The company has indicated that the additional cash generated during this quarter will be directed towards its extended capital expenditure programme for FY2025. DRDGOLD has emphasized the importance of ongoing investments in infrastructure and technology to maintain its competitive edge in the gold production industry.
A portion of the capital will likely be allocated to the final phases of the BESS integration at Ergo, which promises to deliver further cost savings once fully operational. The company also remains committed to exploring additional growth opportunities, including expanding its capacity for sustainable mining practices.
Higher Gold Prices and Market Conditions
Another key factor in DRDGOLD’s strong performance this quarter was the favorable gold market conditions. The company benefited from a higher gold price, which helped offset some of the seasonal cost increases experienced earlier in the quarter. With global economic uncertainty driving investor interest in gold as a safe-haven asset, prices have remained robust, contributing to improved profitability for gold producers like DRDGOLD.
The higher gold price has not only supported DRDGOLD’s current operations but also enhanced its liquidity position, enabling the company to pursue its long-term growth strategies without compromising its financial stability.
Conclusion
DRDGOLD’s 7% increase in gold production and significant cost reductions signal a strong start to FY2025. The company’s strategic investments, particularly in sustainable energy solutions such as the BESS at Ergo, are expected to continue delivering cost savings and improving operational efficiency. As DRDGOLD moves forward, its focus on sustainability, combined with favorable market conditions, positions the company for continued success in the gold production industry.
With plans for an expanded exploration and capital expenditure programme, DRDGOLD remains committed to driving growth while maintaining a disciplined approach to cost management. As global demand for gold remains high, DRDGOLD’s ability to capitalize on its efficient operations and strategic investments will be key to sustaining its competitive edge in the years ahead.
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