In a display of resilience and sound business strategies, DRDGold has clinched the second spot in the Sunday Times Top 100 Companies, up from 14th place last year.
The gold producer, valued at about R15.5bn on the JSE, reported an operating profit of R1.8bn for the year ended June 30 2023, producing 169,820 ounces.
“This was 180 ounces shy of our mid-range guidance of 170,000 ounces,” says CEO Niël Pretorius, adding that a stronger gold price worked in the company’s favour.
DRDGold specialises in the recovery and reclamation of mine waste.
“The global outlook for the gold price has been consistently positive, with strong fundamentals supporting gold. Factors such as an oversupply of fiat currency [a currency not backed by a commodity] and changing buying patterns have contributed to this trend,” says Pretorius.
“Gold's value is no longer solely bolstered by Western demand, as accumulation in the East also plays a significant role”
— CEO Niël Pretorius
“Gold's value is no longer solely bolstered by Western demand, as accumulation in the East also plays a significant role.
“In recent years, we observed gold prices reaching $2,000, then retreating to about $1,100, and bouncing back to higher levels. This erratic behaviour reflects a new and distinct appetite for gold. This shift disrupts the conventional patterns, particularly in growing economies.”
Higher throughput is expected for the coming year.
“The past year proved to be interesting,” says Pretorius. “Few things unfolded according to our initial plans but, in a way, they fell into place. Ultimately, we reached our desired destination, not exactly after the route we initially charted.”
DRDGold paid R515.3m in dividends, reinvested R1.1bn in capital expenditure and paid R314.8m in income tax.
Continued investment in its solar project can be expected.
“We have made significant progress on the first 20MW phase of the project,” says Pretorius. “That is now nearing completion and over the next two years we will add a further 40MW. A 160MWh power storage facility will also be added, feeding back into the grid and setting us up to offset power consumption in the rest of the business through wheeling.”
Commenting on operational conditions, he says: “You must adeptly navigate the local risks and effectively handle the volatility tied to the gold price. The uncertainties that inevitably surface require you to make calculated decisions, pinpointing the areas with the most substantial risks.”
Power is one such area, and Pretorius says miners will increasingly invest in power supply.
“This represents one of the most significant challenges we face, along with water issues and crime. Over the past decade and a half, we've made strategic investments to address specific, prevalent risk factors in South Africa. These efforts have enhanced the inherent resilience of our operations in the country.”
According to Pretorius, the specific product blend approach employed by the company played a pivotal role in mitigating the volume challenges it encountered, effectively cushioning the impact and minimising disruptions to its production volumes.
“We remain hopeful we will reach our targeted gold production goal for the year, capitalising on the enduring attractiveness of gold in the global currency market relative to our currency. We have managed to sustain healthy margins, which reflected positively in our share price.”
Pretorius says suppliers play a pivotal role in achieving success in today’s business landscape as logistics and the supply chain continue to face significant pressure.
“We are all mindful of the inflationary pressures, risks and challenges that prevail. Now more than ever, maintaining strong relationships is of utmost importance, particularly with specialised suppliers who handle bulk goods movement. Having suppliers who are genuinely invested in our business is a necessity.”
Pretorius says DRDGold continuously communicates and collaborates with its suppliers to improve efficiency and mitigate the challenges posed by escalating costs.
The mining sector is increasingly aware of the importance of not excluding local communities to avoid potential disruptions caused by perceptions of corporate South Africa being the adversary, he says.
“Given our operations within cities and communities, we have observed a growing trend of greater community accommodation. We place substantial effort into nurturing these relationships, recognising that social equity plays a significant role in our successful operations within South Africa.
“It's about achieving social equity without assuming the role of being everything to everyone, as this is neither feasible nor a substitute for government responsibilities.”
In terms of the government, Pretorius says the prevailing trend for corporate South Africa extends beyond strategic involvement to include execution. Adopting an enclave mentality — focusing only on one's own interests without concern for broader societal issues — is no longer sustainable, he says. This represents uncharted territory for the private sector.
“We can't deny the challenges we confront in South Africa. Nevertheless, our outlook remains optimistic. There's no reason we can't position ourselves to continue mining gold successfully within our business for at least another 30 years.”
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