DRDGOLD - Focused on Dividends, Costs & Growth

• DRDGOLD is a South Africa-based gold producer that extracts gold from old mine waste tailings through a hydro-mining process.
• The company hit some operational challenges in 2023 during a transition period with commissioning delays at new sites, leading to an 8% drop in production. These issues have now been resolved.
• DRDGOLD pays significant dividends, ranking 2nd among South African companies over the past 5 years for dividend payments. The company started 2024 with 2.5 billion Rand available.
• The company is investing heavily into a large 60MW solar plant and power storage to control costs and increase ESG credentials.
• Management aims to optimize existing assets through 2028 while also expanding the business model more broadly, including potentially outside South Africa.

About DRDGOLD

DRDGOLD Ltd is a South Africa-based gold producer uniquely focused on surface tailings retreatment. The company was founded in 1895 and operates in the areas surrounding Johannesburg. DRDGOLD extracts gold from old mine waste tailings through a specialized high-pressure water jet hydro-mining process and sophisticated recovery techniques. This allows the company to produce gold in a sustainable manner while also remediating and restoring land. DRDGOLD is listed on both the Johannesburg and New York Stock Exchanges.

Interview with Chief Executive Officer, Niel Pretorius

Overcoming 2023 Transitional Challenges

DRDGOLD faced some operational challenges during a transitional period in 2023. Several new hydro-mining sites were scheduled to come online to replace depleting ones, but commissioning faced delays due to regulatory and community issues. This forced DRDGOLD to lift material mechanically from old legacy sites to make up volumes, increasing costs. However, CEO Niel Pretorius notes that as of January 2024, the new sites are all now operating, restoring DRDGOLD's low-cost hydro-mining production funnel. While 2023 production sank 8% because of these challenges, the company succeeded in minimizing the shortfall through its efforts. With the hydro-mining issues now resolved, Pretorius expects costs to benefit going forward in 2024.

Industry-Leading Dividend Payer

Even while overcoming the 2023 challenges, DRDGOLD continued its track record as an industry-leading dividend payer. As Pretorius highlights, the company ranked 2nd among South African firms for total dividend payments over the past 5 years, only narrowly missing out on 1st place. This reflects the strong cash generation potential of DRDGOLD’s operating model. After paying over 500 million Rand in dividends and investing heavily into expansion projects in 2023, the company still entered 2024 with a substantial balance of 2.5 billion Rand available. This provides DRDGOLD financial flexibility for further dividends, growth projects, and navigating any future commodity downcycles. For income-focused investors, DRDGOLD presents an extremely attractive opportunity within the gold mining space.

Investing into Solar Energy

In addition to its uniquely specialized gold tailings operations, DRDGOLD also controls costs by investing significantly into solar energy and power storage. Pretorius explains how the company is constructing a 60MW solar plant, set for completion by October 2024, along with associated battery storage capacity. By securing its own renewable power supply, DRDGOLD aims to offset rising South African electricity prices and reduce exposure to power grid instability. The solar plant’s setup also allows any excess power to be sold back to the grid. Overall, the solar investment enhances DRDGOLD’s cost profile, profitability, carbon footprint, and security of the power supply. It again showcases management’s focus on optimizing operations.

Growth Trajectory & Prospects

Looking ahead, Pretorius notes DRDGOLD is concentrating strategic efforts on further optimizing its existing assets through 2028. This includes extending capacity and mine life at processing plants while also becoming a regional tailings retreatment player. Outside of South Africa, the CEO sees potential to roll out DRDGOLD’s specialized operating model more widely to other gold miners globally. This would involve assessing the quality of available tailings resources and deciding whether to take full operational control or serve more as an advisor. By integrating mine site remediation with commercial goals, DRDGOLD can deliver holistic solutions supporting sustainable development outcomes. For investors, these growth avenues provide longer duration upside beyond the company’s already strong dividend payouts.

Conclusion

With its unique production process, DRDGOLD offers investors leveraged exposure both to gold prices and the company’s specialized capability to transform mine liabilities into assets. Despite some transitional headwinds hitting production in 2023, DRDGOLD’s current operational position appears positive looking out through 2028. The company’s solar plant investment also enhances environmental credentials while boosting cost control and profitability. DRDGOLD has an impressive dividend track record and balance sheet strength that together provide downside resilience. As management pursues further optimization and potential international expansion initiatives, investors can watch for additional catalysts in the years ahead. For both income and growth-oriented investors, DRDGOLD stands out as an attractive gold producer.