Environmental rehabilitation: Watch this space as DRDGold doubles operating profit
The earnings season for SA gold producers has kicked off with DRDGold, which is a small player but has a fascinating business model. It extracts gold from mine dumps and tailings dams accumulated over decades of industrial-scale mining around Johannesburg. It is helping the industry to clean up its aftermath and making money in the process.
DRDGold, a subsidiary of Sibanye-Stillwater, which reports its results on Thursday, said its operating profit for the six months to December 2020 doubled to R1.44-billion. This was on the back of a higher average rand/gold price, which at almost a million rand per kg, fetched 42% more than in the comparable period in 2019. That sets the tone for the bigger players to follow.
Gold’s status as a safe haven investment has been polished to a healthy glow by the Covid-19 pandemic and the unfolding economic uncertainties around it. Its elevated price will be flowing straight to the bottom lines of many producers.
DRDGold at first glance is small fry – its guidance for the full financial year is 185,000 ounces of production. The likes of Gold Fields produce more than 10 times as much. But it has an intriguing business model that seems almost purpose-fit for ESGs – environmental, social and governance concerns – which are all the rage in the current corporate age. It is ridding the landscape of mine dumps and their toxic dust, and making money at the same time by unlocking the gold left behind in them through an elaborate production and chemical process that ends with a bar of the precious metal.
Asked during an online results presentation if this business model could be extended elsewhere, or if the company had considered this, CEO Niel Pretorius responded: “We look at operations from time to time, we don’t have anything worth mentioning at this stage on the radar just yet, but we certainly are not closing our minds to anything.
“We do believe that the shortcut to some of the operations outside of South Africa would be through our group association with Sibanye-Stillwater.”
Another area where the company could find a niche is in applying its expertise as a service provider to other mining companies to help clean up their act while their mines are still operational.
“Something we are working on is trying to see if we can establish ourselves as a sort of a tailings solution, in other words the whole tailings management cycle.
“Oftentimes mines leave rehabilitation right up until the end. And more often than not companies will sell a mine with five or 10 years of life left, but then in terms of rehabilitation just contain the impact of their operations on the environment. We haven’t seen any sort of concurrent rehabilitation,” Pretorius said.
“I think that model is probably going to come under scrutiny and it will be expected of operations to demonstrate how they are keeping up the rehabilitation with the life of the mine.”
Environmental rehabilitation is fast becoming one of the mining sector’s growth areas, so this is a space to watch. DM/BM
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