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DRDGOLD LIMITED

DRD JSE Listed

Investment Analysis: DRDGOLD Limited (JSE: DRD)

Date: 9 January 2026 Share Price: ~R52.36 (5,236c) Analyst Role: Senior Equity Analyst, JSE

Step 1: Data Gathering & Source Verification

I have reviewed the most recent financial disclosures and relevant SENS announcements, noting the company's fiscal year-end is June.

  • Operating Update: Reviewed the Operating Update for the quarter ended 30 September 2025 (Released 16 October 2025).
  • Annual Results: Reviewed the Reviewed Condensed Consolidated Financial Statements for the year ended 30 June 2025 (Released 20 August 2025).
  • SENS Activity (L12M): Key announcements include the suspension of strike action at Ergo (December 2025), the disposal of the Stellar Energy solar interest (December 2025), and dividend declarations.

Data Sources:

  • Annual Results (Aug 2025): https://www.drdgold.com/investors/sens-news/2025/1785-reviewed-condensed-consolidated-financial-statements-and-cash-dividend-declaration-for-the-year-ended-30-june-2025
  • Operating Update (Oct 2025): https://www.drdgold.com/investors/sens-news/2025/1799-operating-update-for-the-quarter-ended-30-september-2025

Step 2: Metric Extraction

| Metric | Value | Notes | | --- | --- | --- | | Market Cap | ~R45.3 Billion | A significant player in the gold sector, with high correlation to the Rand gold price. | | Dividend Yield (L12M) | ~1.34% | Low. Total L12M dividend of 70 cents (Interim Feb 2025: 30c + Final Aug 2025: 40c). The payout ratio is conservative as cash is retained for the "Vision 2028" capital expansion. | | Liquidity Check | Highly Liquid | Average daily volume is robust, often exceeding 1 million shares/day. No liquidity risk for standard position sizes. | | P/E Ratio | ~20.1x | High. Based on FY2025 HEPS of 260.6 cents. The stock trades at a premium due to its leverage to the gold price and "green" tailings retreatment narrative. | | Net Asset Value (NAV) | ~1,027 cents | The stock trades at a massive premium to book (~5.1x P/B), which is typical for DRDGOLD given its low asset base (tailings dumps) relative to the cash flow they generate. |

Step 3: Operational & Strategic Analysis

Business Overview DRDGOLD is a unique gold producer that does not mine underground. Instead, it retreats surface tailings (mine dumps) to recover gold.

  • Ergo (East Rand): The larger, high-volume operation currently transitioning to lower-grade sites.
  • Far West Gold Recoveries (FWGR): Higher grade, lower cost operation currently in an expansion phase (Phase II).
  • Strategic Pivot: The company is executing "Vision 2028," a capital-intensive plan to increase throughput to 3 million tonnes per month and extend life-of-mine by building new mega-tailings storage facilities (TSFs).

Performance Trend

  • Revenue: Stable to Growing. Q1 FY2026 revenue rose marginally by 2% to R2.25bn, sustained by a record Rand gold price (~R1.94m/kg).
  • Margins: Under Pressure. While revenue is up, cash operating costs are rising (up 3% quarter-on-quarter in Q1 FY2026) due to winter power tariffs and reagent costs. However, the high gold price is effectively subsidizing these cost pressures, keeping EBITDA margins healthy.
  • Production: Steady. Gold production increased slightly by 2% in the latest quarter (1,191kg), driven by better yields at Ergo.

Sector Context

  • Gold Price: The Rand Gold Price remains near all-time highs (>R1.9m/kg), acting as a massive tailwind.
  • Power Security: DRDGOLD has mitigated some Eskom risk with its solar plant and battery storage at Ergo, and recently concluded a renewable energy supply agreement (Dec 2025) to further secure power for 2028 onwards.

Step 4: The Verdict

Bull Case (Why Buy): Leverage without the Deep-Level Risk. DRDGOLD offers the best "pure play" leverage to the Rand Gold Price without the safety risks and labor intensity of deep-level mining. With the recent suspension of strike action and the solar plant reducing power costs, the company is a cash-printing machine at current gold prices. The "Vision 2028" expansion provides a clear growth story that many peers lack.

Bear Case (Why Sell): Valuation & Capital Cycle. At ~20x P/E and >5x NAV, the stock is expensive. The yield (1.3%) is unattractive for income seekers because cash is being diverted to the massive capital spend required for the new TSFs and FWGR Phase II. If the gold price corrects, the high fixed-cost nature of volume-based tailings retreatment will crush margins instantly, leading to a sharp de-rating.

Fair Value Estimate: R45.00 - R48.00 Current price (~R52.36) includes a significant "gold euphoria" premium.

Final Rating: HOLD / TAKE PROFITS The stock is priced for perfection. While the operations are solid, the valuation leaves little room for error or a gold price pullback. Investors might consider locking in some gains at these levels.

AI Generated Analysis Last Updated: 2026-01-14