DRD Gold: EPS, Dividend Better Than Expected

DRDGOLD has reported better than forecast FY13 underlying results on August 27, 2013 although reported results are affected by ZAR238m of impairment charges. FY13 gold production increased 8% year-on-year to 146.4koz, ahead of the 135-140koz target, and cash operating costs of ZAR310,763/kg were only marginally higher than our ZAR305,306/kg forecast. FY13 headline EPS increased 11% y-o-y to ZAR68.4c and FY13 DPS increased 180% y-o-y to ZAR28.0c, ahead of our forecasts by 9% and 40% respectively.


FY13 gold production increased 8% y-o-y to 146.4koz, ahead of management’s 135-140koz target, and cash operating costs of ZAR310,763/kg were only marginally higher than our ZAR305,306/kg forecast. Gold sales were 2.7koz lower than production in Q413 and FY13 gold sales of 145.7koz were 2.6% lower than our 149.6koz forecast.

ZAR238m of impairment charges were recorded: ZAR101m relating to the Village Main Reef investment; ZAR50m against the Zimbabwe exploration assets;

ZAR40m against the decommissioned Crown tailings complex; ZAR21m against the Cason underground assets; and ZAR26m regarding the rehabilitation trust fund.

FY13 headline EPS increased 11% y-o-y to ZAR68.4c and FY13 DPS increased 180% to ZAR28.0c, ahead of our forecasts by 9% and 40% respectively. Net cash of ZAR209.6m at 30 June 2013 was lower than our ZAR247.8m forecast due to higher than forecast investment cash outflows, including ZAR25.6m higher than forecast capital expenditure at Ergo. Commissioning of the flotation/fine-grind circuit remains on schedule for completion by December 2014.

We will review our forecasts and valuation in due course. Our base case valuation is currently ZAR5.86/share and our upside case valuation is ZAR8.46/share.

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