Full Year 2026 DRDGOLD Ltd Earnings Call Transcript
Key Points
- Record production of just under 5 tonnes of gold, exceeding the higher end of guidance by 5,000 ounces, driven by efficient plant management and a 2% increase in average yield.
- Revenue surged 42% to ZAR11.2 billion, benefiting from a 40% increase in the gold price, with the company remaining deliberately unhedged to maximize exposure.
- Strong cost discipline with cash operating costs up only 7% year-on-year, despite double-digit increases in input costs, and better-than-guidance unit costs.
- Exceptional financial performance: operating profit up 83% to ZAR6.4 billion, headline earnings up 89% to ZAR4.2 billion, and free cash flow up 85% to ZAR2.2 billion.
- Declared a final dividend of ZAR1.20 per share, marking the 19th consecutive year of dividend payments, with a payout ratio of 65% of free cash flow.
- Significant progress on Vision 2028 projects: Daggafontein TSF commissioned, DP2 plant expansion on track with first gold bar produced, and RTSF two-thirds complete.
- Improved sustainability metrics: potable water usage down 23%, carbon emissions reduced from 303,000 to 233,000 tonnes, and solar farm delivering savings of ZAR13.50-14.50 per tonne at Ergo.
- Balance sheet remains debt-free with cash and cash equivalents of ZAR2.8 billion, and environmental trust fund surpassed ZAR1 billion.
- Mineral reserves increased by 67 million tonnes from Kloof 2, adding four years to Far West Gold's life of mine.
- Strong safety performance with lost injury rates improving from 1.65 to 0.7.
- Cash operating costs increased 10% to ZAR188 per tonne, driven by higher trucking costs for high-grade material, which may shrink margins if gold price declines.
- Capital expenditure peaked at ZAR3.5 billion in FY2026, with a further ZAR3 billion planned for FY2027, limiting near-term free cash flow and dividend growth.
- Withok tailings dam approval delayed, with construction now expected by 2029, creating a 150,000 tonnes per month throughput gap until then.
- Far West Gold's cash operating costs increased 10% due to expansion-related labor and plant inefficiencies, with costs expected to rise further until Vision 2028 benefits materialize.
- Deferred tax asset grew to ZAR2.9 billion, and cash tax payments are expected to increase, with Far West potentially entering a tax-paying position next year.
- Diesel price volatility remains a significant cost risk, with a 11-17% risk factor built into FY2027 guidance.
- Environmental rehabilitation provisions increased to ZAR721 million due to higher demolition quotes and expansion, adding to future liabilities.
- The company faces execution risks on major projects, including RTSF commissioning and Libanon reclamation station, which are critical to achieving 1.2 million tonnes per month throughput.
- Uranium extraction from tailings is not feasible due to process conflicts, limiting diversification opportunities.
- Share price performance has historically lagged peers, though recent trends show improvement.
About two or three minutes. Are we ready to go? Should we wait a minute or two or is everyone online already? See, we still have about a minute to go. Okay, so we'll wait a few more seconds.
Okay. It's 10:00. I suggest we start. Good morning, everyone. Thank you very much for join us today for this presentation. Before we start, I just want to pause for a moment to remember a very good friend and adviser of ours, John Weber, who was as long as I've been with the company, he was one of our professional advisers, attorney with the Cliffe Dekker Hofmeyr, who passed away the week before last. After he was very, very sick. So we will remember him, and he was a valuable -- he was a dear friend and a valuable service provider.
All right. So it's a privilege again to be presenting to you today. This is the 19 time that I've been doing this, the year-end results or that I was part of the team that presented the year-end results. Some of you were there the very first time, many new faces. I'm joined today by my colleagues
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