DRG Gold H1 HEPS up 7%

DRG Gold, a leading gold producer, has maintained its interim dividend at 20 cents per share following a 7% increase in headline earnings per share and higher revenues. The company's CEO, Niel Pretorius, recently spoke to CNBC Africa about the financial results and the challenges faced by the company in the current operating environment. One of the key points discussed in the interview was the rising costs that DRG Gold is experiencing. Pretorius mentioned that cash operating costs had seen a significant increase in the last calendar year, driven by inflationary pressures, particularly in fuel and consumables. Despite the 10% rise in costs, they were in line with the internal forecast and budget. The all-in sustaining costs, which include a portion of capital expenditure, have also gone up due to increased investments in efficiency and risk management. The company has accelerated its capital expenditure this year, focusing on opening new areas and improving operations. Furthermore, Pretorius highlighted the company's significant cash reserves, amounting to about 2.5 billion Rand. The CEO noted that the company needs to invest this cash in the business to enhance operations or distribute it to shareholders. DRG Gold is embarking on major projects, including doubling throughput at Farways Gold operations and expanding deposition capacity in Johannesburg, necessitating substantial capital expenditure. Another key theme discussed in the interview was the impact of operational challenges on DRG Gold's results. Pretorius explained that delays in obtaining water usage licenses and power issues, especially with municipal power sources, had disrupted production. The company is transitioning to the Eskom grid to mitigate risks associated with municipal power supply. Additionally, DRG Gold is investing in a solar project to secure a stable power supply, with the first phase of 20 megawatts expected to come online in the next three to four months. In terms of logistics, Pretorius mentioned that while DRG Gold's product is transported by air, the company faces challenges in transporting required materials by road due to limited infrastructure and inefficiencies in the local logistics system. He emphasized the need for improvements in the logistics infrastructure to support the mining industry and prevent revenue losses due to bottlenecks. Overall, despite the challenges faced by DRG Gold, including rising costs, operational disruptions, and logistical issues, the company remains focused on investing in efficiency, increasing production, and enhancing sustainability. With a strong financial performance in the first half of the year, DRG Gold is poised to navigate the current challenges and drive future growth in the gold mining sector.