DRDGold Has Steam, But Better From A Dip

Core Viewpoint - DRDGOLD Limited maintains a Hold rating, with a promising outlook driven by bullish gold prices and operational improvements following the commissioning of new feeders at the Ergo plant [5][10]. Company Overview - DRDGOLD Limited is a gold mining company based in Johannesburg, South Africa, focused on extracting gold from surface tailings in the Witwatersrand Basin [5]. - The company holds approximately 5.8 million ounces of gold in mineral reserves and about 9.6 million ounces in mineral resources, with the Ergo segment accounting for around 60% of total mineral reserves [5]. Recent Performance - DRDGOLD shares have increased by 22.75%, or 24.45% including dividends, outperforming the S&P 500's return of 13.46% [6]. - An interim dividend of R$0.20/share (approximately US$0.011/share) was announced for the first half of fiscal year 2024, marking the 17th consecutive year of dividend payments [6]. Gold Price Impact - The price of gold is a critical driver for DRDGOLD's earnings, with an increase in gold prices offsetting declines in production and rising operating costs [9]. - The average gold price reached US$2,337.55/oz as of June 30, 2024, reflecting an 18.2% year-on-year increase [10]. Operational Developments - The commissioning of the 4L3 and 5L27 feeders at the Ergo plant is expected to enhance throughput and improve operational performance [9]. - DRDGOLD's production for the first half of fiscal year 2024 was impacted by a 7% year-on-year decline, but profitability was supported by a 22% increase in the Rand gold price [9]. Future Outlook - Analysts predict continued bullishness in gold prices, with forecasts suggesting prices could reach US$3,000/oz within 6-18 months [11]. - The company plans to invest approximately R3,500 million (around US$193.2 million) in capital infrastructure, including a 60 MW solar project and expansion at the Far West Gold Recoveries division [11]. Stock Performance - DRD shares are currently trading at $9.60, with a market capitalization of $821.87 million, slightly above the midpoint of the 52-week range [12]. - The stock is showing signs of nearing the top of its price cycle, suggesting investors may want to wait for a dip before increasing holdings [12][13].