DRDGOLD's lower output offset in fiscal 3Q as it digs into stockpiles and realises higher gold price sales

DRDGOLD Limited (NYSE:DRD) told investors that despite a 13% drop in gold output in its fiscal third quarter, the tailings retreatment firm sold 47,004 ounces in the three months to end March, which was only 3% lower than the previous quarter. While throughput was 4% down at 6.56 million tonnes and yield 9% lower, resulting in a 13% decline in gold production to 1,346 kilograms, the group's gold sales came in at 1,462 kilogram due to the company selling inventory in expectation of the coronavirus lockdown, the company told investors. READ: DRDGOLD resumes work at reduced levels at its South African gold mines DRDGold operates the Ergo and the Far West Gold Recoveries businesses to the east and west of Johannesburg, South Africa, respectively. The decline in sales was also offset by a 13% higher gold price, which pushed earnings before interest, tax, depreciation and amortization (EBITDA) up 18% to R389 million (US$20.8 million), the company revealed. Notably, the firm generated R423 million (US$22.7 million) of free cash flow in the three months. DRDGold had cash of R1.8bn (US$96.5 million) at the end of March, which was up from R543 million (US$29.1 million) at the end of December, boosted by a cash injection of R1.09 billion (US$58.4million) on the sale of shares to mining titan Sibanye-Stillwater, the group's biggest shareholder. For the year to end June, DRD said it expected output to come at the lower end of its earlier guidance of between 175, 000 and 190, 000 ounces due to the impact of the coronavirus pandemic. An interim dividend to shareholders totaling R213.6 million (US$11.4 million) was paid during the quarter. External borrowings remained at zero. DRDGold has been able to operate during lockdown on a limited basis because it has surface operations where staff can maintain social-distancing. On March 25, the firm implemented measures to temporarily halt production and to place its operations in a state of care and maintenance, as it supported the national lockdown. On April 15, the gold producer revealed that it had resumed work at its Ergo and Far West Gold Recoveries (FWGR) operations at reduced levels. DRD treats more than 24-million tonnes of tailings a year to the east of Johannesburg and has, with the Sibanye transaction, started processing 500,000 tonnes a month of tailings. Contact the author at giles@proactiveinvestors.com