Earnings Labs

DRDGOLD Limited (DRD)

Q2 2022 Earnings Call· Wed, Aug 24, 2022

$27.35

-3.90%

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Transcript

Riaan Davel

Management

Thank you very much, Niël. Good morning, everyone, from my perspective. Just want to echo from Niël perspective, the intro that he has given and the financial results. In context of many, many challenges, he named a few and he elaborated further in the Letter to Shareholders, which I will encourage everyone to read in our results booklet and also more detail on the financial results. But as he mentioned, high summer rain fall, load shedding, supply pressures, cost pressures, and again, it’s testimony to operational teams at Ergo and Far west Gold recoveries with notwithstanding all those challenges making sure that the trains come through in our 24 hour a day, seven day a week, 365 day year operation. So always my privilege then to present the results of a team that look at things on a per second basis and cannot keep, can’t take your eyes off anything. So this is the result of 365 days of hard work and my testimony to the teams that produced this. So within the context that Niël provided on tons, yield and production, Ergo, has had a very, very stable performance. Again, its resiliency shining through, where maybe a couple of years ago, it faced maybe less challenges with more sporadic achievement. It’s remarkable when I look at these results, the stability that Ergo has our flagship operation producers. We say that first half of 2021 year was the remarkable six months from a gold production, gold price, almost R1 million per kilogram and it shows throughout, you will see in the presentation, it’s just a remarkable six months. But year-on-year, Ergo’s revenue down by 6%, 3% of that sitting in the average rand gold price received and 3% less in gold sold, but overall stable. The cash operating cost that…

Operator

Operator

A - Niël Pretorius: So I just want to open the chat feature here and then I should be able to see the questions. Is it just me or there are questions. Riaan looks like we covered everything.

Riaan Davel

Management

I just see one -- I see one from let me read it from an Arnold [inaudible] Hello, Arnold. Neil could you please give us a sense of your same business CapEx evolving over the next three years? Niël Pretorius: Yes. Certainly, Arnold. So obviously the key focus areas for same business CapEx for the next few years. So same business is mostly focused on opening new pump stations and new dumps for retreatment, two of those are happening in the next year. That’s the number three dump and also for the Eastern program, and Roy Crowe, certain facts we see. So it’s kind of a CapEx going into that, and then work to the plants itself towards the improvements of efficiencies. And then from next year onwards, there’s not a lot for this year, other than the purchase consideration for the landlady RTSA [ph] extract that we bought $15 million set aside for that. But from next year, the next financial year onwards, you will see some, some big numbers coming through in terms of the expansion of the Brakpan tailings dam, and also work on expanding what was Gold’s tailings deposition facility. The former is called RTSA that will be up and running in 2029. So we bought ourselves five years of infant deposition. While we deal with that design specifications of the parties, the regional tailings facility, construction there has to start two years before deposition and deposition will start in 2029. So that gives you a bit of a profile in terms of the investment business side. We don’t look at the investment into solar staying business, but I suppose it’s part of that because it unlocks some of our resources by making -- affordable or less expensive and more secure by having a flat cost…

Riaan Davel

Management

Yes. Thanks, Andy. So obviously, as you know, we determine that by the goal tax formula, obviously impacted this year by the amount of CapEx we have spent and then you would have noted a good guide, maybe for 2023 but not specifically for that year going forward is our measurement of the deferred tax liability. So that and then we will see it in the detail booklet, where for Far West we decrease that rate from 30% to 29%. Obviously, as you know, the corporate general income tax rate, also decrease so that impacts the gold tax rate formula as well. And then for Ergo, we decreased the deferred tax rate from 25% to 22%. And again, it’s an estimated rate based and that formula, take into account assumptions around gold price CapEx, and spend over the updated life of mine. So hopefully, that will give you a sense of deferred tax and how we look at that over the life. Yes and then your question on grades -- that is given for us that’s something we deal with. But we look more as Neil alluded to it more towards volume, as well. And yes, if you look at our mineral reserves overall yes, the grade is declining over time. So we will have to manage that. And hopefully, we will be able to talk to that, as Neil said at that time that we put that information together around fewer sites, managing our cost of time, and managing it -- the declining growth through volume and also stability in our operations. That’s something we have to deal with over time, but hopefully, and we will be publishing more information about our life with our -- obviously this process now continues through our integrated report and full financial statements,…

Riaan Davel

Management

Yes. So, simple answer is -- so we have yes forecast -- taken all the increases into account in our forecast or the guidance that we provided, Nick. We have yes so we comfortable with that obviously, we have to work hard to still get the tons and the kilos out because that’s obviously not the only cost measure. But yes, it was a difficult budget, as we have alluded to in an environment with many products services across the board increasing. So I believe we have factored that into the budgeted cash operating costs. Niël Pretorius: Yes. Peter wants to add to that in terms of CapEx, maybe?

Riaan Davel

Management

Yes. I think so to just talk with what Niël said. So the only one that is still outstanding on the cost day is that we Eskom increases so we have allowed for a significant increase. But I do understand that there was a case won by Eskom recently, and the full extent of how that’s going to be implemented. We are not 100% sure. So that’s the only portion which we haven’t allowed for 100%. But we have allowed for a significant portion of that already. And then from a capital perspective, we have, as Neil has indicated, we expecting to build or to spend approximately R1.4 billion worth of capital during this year and a significant increase in capital expenditure even here. Niël Pretorius: Thanks Nick. I don’t see any other questions. I think that is a wrap. Thank you very much, everyone who for joining us, and for listening to our presentation, watching our presentation, and we will keep you updated as we go along on anything material. Well, have a good day. Thank you.

Riaan Davel

Management

Thanks everyone.