DRD Gold gross profits fall 47.7%

DRD Gold, a South African gold mining company, has seen a 48% drop in group profit and higher input costs impacting its bottom line, leading to a halved interim dividend payout. Neil Pretorius, the CEO of DRD Gold, sat down with CNBC Africa to discuss the company's recent performance and future outlook. Pretorius reflected on the challenges faced in the first half of the period, attributing the decline in performance to lower-grade reserves and a decrease in the gold price compared to the previous period. Despite these challenges, DRD Gold managed to generate over 400 million in free cash flow and maintain its streak of 15 consecutive dividend payouts, indicating stability in the business. One of the key factors affecting DRD Gold's financials is the price of gold. Pretorius expressed optimism about the current gold price, considering it still relatively good despite not reaching the high levels seen at the onset of the pandemic. He emphasized that the market has priced in a lot of downside for gold equities, potentially undervaluing them. The company's ability to invest in capital projects and generate solid margins at the current gold price level bodes well for its future prospects. Inflationary pressures have also been a concern for DRD Gold, with rising input costs affecting the company's operations. Pretorius highlighted the impact of the weak rand and external factors like the cost of steel on the business. However, he believes that the worst may be behind them in terms of cost escalation, with the situation expected to stabilize in the near term. DRD Gold is also working towards reducing its reliance on national power provider Eskom by investing in alternative power sources like a 20-megawatt solar power plant. The company's investment in renewable energy aligns with its long-term goal of increasing self-sufficiency and reducing operational costs. While the initial phase of the solar power project represents a manageable investment for DRD Gold, Pretorius hinted at potentially expanding the capacity based on future market conditions. The company's ambition to reach the 100-megawatt threshold for alternative power generation depends on regulatory approvals and market dynamics. Despite facing bureaucratic delays in obtaining regulatory approvals for its power projects, DRD Gold remains committed to enhancing its energy sustainability and operational efficiency. The CEO expressed frustration with the slow pace of government processes but remains optimistic about the company's growth trajectory. With a strategic focus on cost management, renewable energy investments, and operational efficiency, DRD Gold aims to navigate the challenging market conditions and drive value for its shareholders in the long run.