DRDGold gives priority to R10bn capex over dividends

CAPITAL expenditure will take priority over dividend payments for the next three years until DRDGold completes a R10bn programme to add another ton of gold to its annual production by expanding its Far West Gold Recoveries (FWGR) operations and setting up Ergo for another 14 years of economic life.That’s according to CEO Niël Pretorius answering questions at a presentation at the JSE today over DRDGold’s sharp cut in its final dividend which was chopped to  20c a share from the previous final of 65c.That made a total of 40c for the year (2023 financial year – 85c) despite the company posting a 4% rise in headline earnings to 154.1c a share (148.2c a share).Reason is the R3bn (R1.1bn) which DRDGold spent on capex during the year mainly on building a solar energy plant and associated battery energy storage system at Ergo which reduced available cash to R521.5m at year-end from R2.47bn a year previously.Still to come is another R7bn to be spent mainly on FWGR before the start of the 2028 financial year. Plans are to push FWGR’s output from the current 0.6mt/month to 1.2mt/month while Ergo will operate at an interim throughput capacity of 1.65mt/month which will push overall gold production to 6t/year from the current 5t/year.“If we have free cash other than the growth capital then we will continue to pay dividends but the one thing we are not going to do is borrow money to pay dividends,” said Pretorius.“We are putting facilities in place for project funding but we do not want to play ‘pretend pretend’  and pay dividends with money that we are borrowing and paying interest on.”Pretorius in the past has been outspoken for a CEO on prospects for his company’s share price and he once advised investors not to buy DRDGold shares because they were trading too high and not on company fundamentals.Asked for his assessment of DRDGold’s value at current share price levels around R17.7 Pretorius replied, “the only shares that I own in my own portfolio are DRDGold shares and I am not selling them now.“There is still a lot of money that needs to be spent but, imagine if we get it right adding a ton of gold to our production profile and the gold price stays where it is and we have a reducing cost profile.  That could be very exciting.“We want to get this right. We want to take advantage of this opportunity and spend the capital while we can afford the capital. At some point or another this margin will be a lot flatter than it is now.“Once you get to that point you want all of this capital to have been invested. You do not want to be paying off debt. You want to be running off a clean sheet.“So, three years from now when we are not spending two or three billion rands a year in capital and we have that different revenue profile with a relatively attractive cash cost profile then …you run the numbers.   We can make up for the dividends.”Pretorius expects DRDGold’s costs to be reduced with the new Ergo operation running five recovery sites instead of the current 15 which will drop transport and logistics costs while the solar installation is expected to drop energy costs at Ergo by between R9/t and R15/t treated.He commented: ”Reality for Ergo was either the plant was closed down or we invested the necessary capital to open up another 14 years of production. We decided on the latter because it makes commercial sense.”The post DRDGold gives priority to R10bn capex over dividends appeared first on Miningmx.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com