DRDGold (DRD) is a South African gold producer that operates in that country’s Gauteng province. It has a long history dating back to 1895, when it was incorporated under the name Durban Roodepoort Deep Ltd., explains Mike Larson, editor of Under the Radar Stocks.
DRD isn’t like other precious metals producers. That’s because it doesn’t mine deep underground. Instead, it retreats other miners’ tailings — the discarded soil, ore and other waste that they cast off after primary processing.
The goal is to take the material in these mine dumps and slime dams and re-process it to extract residual precious metals. In other words, DRD gets the gold that gets left behind.
DRD produces so-called gold “doré bars" which typically contain around 85% gold, 7% to 8% silver and a small amount of copper or other elements. Those bars are then shipped elsewhere for further refining into the purer, 99.9% gold bars you see in vaults or for sale from dealers.
All told, DRD’s revenue jumped 69% year-over-year to 2.11 billion South African rand ($141 million U.S.) in the six-month period ended December 2019. The company generated 332.9 million rand ($22.2 million) in profit, a huge swing from the year-earlier loss of 46.2 million rand ($3.1 million).
Production climbed 33%, while reserves reached 5.77 million ounces. Plus, the company’s cash position increased to more than 543 million rand ($36.3 million), while debt dropped to zero at year-end.
Things are going so well that DRD declared a dividend of 25 South African cents per share. That’s a more than fourfold increase from the last March payout in 2018, and good for an indicated yield of around 1.8% at recent prices. It’s also good for a miner, especially one in South Africa.
The operation of retreatment and processing facilities isn’t risk-free. DRD faces periodic power shortages, elevated crime and theft, occasional trouble with water supplies, and so on. But the company has implemented various strategies to mitigate those issues.
I have every reason to believe DRD’s exceptional track record will continue — especially if I’m right about this only being the second or third inning of a longer-term bull market in metals.
