JOHANNESBURG (miningweekly.com) –  There’s a wonderful gold-price tailwind behind all gold companies at the moment but it’s the self-generation of solar electricity that served as the key catalyst of change for Ergo.

Following the company’s declaration of a doubled final 2025 cash dividend on 69% higher cash operating profit and earnings, revenue touching R8-billion and strong free cash flow, Mining Weekly spoke to DRDGOLD CEO Niël Pretorius in a Zoom interview. (Also watch attached Creamer Media video.)

“The self-generation of solar electricity was the catalyst and what the gold price is doing for us at the moment is helping us to make the changes that are necessary to extend Ergo’s LoM – and they are very much focused around alternative deposition storage capacity.

“The gold price cycle has prompted a new direction in the thinking of DRDGOLD, in the sense that the initial capital invested was premised on a mining programme of 12 years and it was going to start running out of steam roughly four years ago, when decommissioning would have started.

“But instead, the decoupling and rebasing of gold relative to other economic drivers and indicators pointed to closing perhaps being premature because there were still a lot of resources left.

“It's just that those resources were deemed non-viable, and DRDGOLD had to take a very long and hard look at the cost construct of Ergo.

“One of the things that really got in the way was the uncertainty with regards to the supply and the cost of electricity and if the company could find a solution for that, then many of the other things we'd be able to do by way of engineering solutions.

“So, we decided on the 60 MW solar farm, which was duly built, and that was coupled to the battery energy storage system, which is a 180 MW storage system, which means that we could basically run Ergo and related infrastructure for 12 hours a day on renewable energy.

“It's like a halving of Ergo carbon footprint, and it brought down the risk categorisation. It changed the risk profile of Ergo because electricity moved from number two to a lot lower down in the risk hierarchy of Ergo.

“Brakpan tailings dam, which has been around since 1984, has to all intents and purposes served out its term as a useful facility.

“It's now not quite in a decommissioning phase, although we've reduced deposition onto that dam from 2.1-million tons per month back in 2022 down to 1.65-million tons per month, and it will progressively be reduced even further. The focus point for Ergo is to create new deposition space and to resume deposition on Daggafontein, which is another available deposition facility, that at 500 000 t a month can be used for another 20 years.

“The gold price is helping us to do that. We could spend all of this capital, at Ergo about R4-billion over the next few years, without having to dip into our facility, and the same applies to Far West Gold.

“We've been talking about Far West Gold Phase 1 and Far West Gold Phase 2 since the early days of acquiring Far West Gold and we're now executing on Phase 2.

“We're doubling the size of the plant from a design capacity of 600 000 t a month to 1.2-million tons a month and under way is the construction of the Regional tailing storage facility, the RTSF, which is an 800 ha facility that's going to be fully lined. That's been going since June of last year, and that's going along really well.

“There have been some rain interruptions and so forth, but that facility is going to facilitate a change in throughput profile and change in production profile for Far West Gold going forward, also adding about 20 years of life, so that target we spoke about at DRDGOLD's 130th anniversary celebration earlier this year, and hopefully we'll be here to celebrate our 150th anniversary.

“The gold price is helping us to put in the infrastructure without incurring debt at this stage, to establish the infrastructural capacity to make that ambition hopefully a reality by 2028. That's where we've put the pin in the calendar. That's where we want to move from our current throughput rate and output rate of 150 000 oz/y to 155 000 oz/y to 200 000 oz/y, off the back of a very significantly increased throughput profile of three-million tons a month, 36-million tons a year, as opposed to this year's 25-million tons,” Pretorius outlined.

Mining Weekly: This year’s 130th anniversary of DRDGOLD proved that the company has resilience and robustness. But it also comes with important ESG attainment. How has the environment benefited from the work of DRDGOLD in the last ten years?

Pretorius: We've done the better part of 700 ha and maybe almost 800 ha of cleanup of material. All of our production comes from retreatments of old mine dumps. If you looked at the Johannesburg skyline 20 years ago, starting in Brakpan and then moving all the way along the main reef to Roodepoort, you would see that there have been very significant changes to that skyline. Some of them more prominent than others, like the Top Star Drive-In, which was built on top of a mine dump that's been completely cleared and rehabilitated. When we adopted the idea of sustainable development as core to our strategic thinking and execution a decade and a half ago, we set our sights on growing capital in respect of all five of the very distinct sustainable development capital stocks. But because of our size and because of our capacity, we had to do that in such a way that the one complemented the other. The fancy way of describing that is an integrated value creation model. This means that whatever you invest in terms of environmental capital or nature capital, with regards to solar now, and with regards to water, for example, it also needs to contribute towards your financial bottom line. Or some of the other capitals like the environmental, the removal of dumps and also the cladding of our storage facilities. These efforts also make a contribution towards social capital, because it improves the quality of life of the communities around our operations. We believe that for a business to prosper, you cannot be an island of stability in an ocean of social instability. You have to be socially relevant without creating a culture of dependence, so you need to assist communities to also become self-sustainable. Firstly, you want to do that in an environment that is conducive to a better life quality, and that means, for example, not living right next to an old toxic mine dump. When that mine dump gets removed, your environment is suddenly enhanced, and it's better. Now you just need to make sure that it doesn't become a dumping site, or it doesn't get invaded by illegal occupiers and turned into an informal settlement. Those are the sort of things on which we have been focusing in terms of social capital and the environment, the nature capital. Those are more distinct. It's the containment of operations, it's the water and it's also the solar. It's been core to our business. It's really become embedded, not just in terms of our strategy, but I think it's become an important part of our value system. After 15 years, you actually hear that in the planning language and the execution language. For several years now, I've really been a spectator to a team of people that are technically and strategically astute, and I listen and watch them as they put these plans together and the language they use. It’s fantastic to see how these things have just become part of the everyday thinking. If it's that deeply embedded into your business system, it adds to your resilience and to the robustness. It's very hard to be really disciplined and have high quality in respect of one aspect of the business and not in the other. It rubs off, so by driving these programmes the way that they have, the general quality of your systems benefits from that, and that ultimately finds its way into where you are with regards to risk, and the ability to overcome the gold price cycles and so forth. One of the things that's been very important to us is that we do want to offer full exposure to movements in the gold price. As a relatively small company with an operating model that is relatively predictable, you need to bring a measure of excitement into your business proposition, and taking full exposure to the gold price introduces that volatility. If you want to take exposure to movements in the gold price, then the stock offers that at a multiple. It does mean that you need to be able to maintain a holding pattern during the down cycle and still spend the right sort of capital and be able to contain costs and maybe even switch off certain aspects of your costs to remain positioned to take full advantage of the upcycle. That's what you're seeing this year, that notwithstanding the fact that our production was relatively flat – last year we were just north of five tons of gold production and this year we were just south of five tons of gold production at a 3% difference year-on-year – we saw a doubling of just about everything. Cash operating profit was up 69%, earnings up 69%, revenue came in just below R8-billion rand and that's because we weren't locked into some sort of a forward sale hedge that we had to take out years ago when we had to invest capital, or when we needed money to see through us through the next down cycle. It requires dedication and commitment, but I think the team has just made it their own. The way that they do their planning and the way that they execute, is geared towards that. It's a common goal, there's a common purpose in the organisation, and it's shared by all. You could be in procurement, financial management, environmental management, community affairs, you share that common purpose that common goal.  We going to mine these six million ounces profitably, and we're not going to compromise on quality.

Will DRDGOLD ever be totally green from a renewables point of view?

We're not looking at building new solar stations. We've been looking at ways of increasing the number of renewable units that we may recognise, but that would be by way of supply agreements with power suppliers. We've set some very specific. We don't want to go back. We don't want to have a larger carbon footprint than the one that we have now, and if you're going to be taking your tons from 25-million tons a year to 36-million tons a year, which is what we planning for 2028 and onwards, that means you're going to be pumping more material, you're going to be using more electricity. Also, one of the plants, at least, will be significantly larger. To maintain the current carbon footprint as a percentage of total power consumption, we are going to have to bring in some new and additional renewable units, but that will be from external suppliers that won't be ourselves.

What collaboration is DRDGOLD receiving from government in general and the Department of Mineral Resources and Petroleum in particular?

We had to take stock of our own mindset and our own attitude towards regulation. When we when we decided that we were going to extend ERGO, we entered a new arena of the renewal of licenses and application for new license and so forth, which was different compared with what we had in the past. In retrospect when we did our own post mortem as to potentially be a natural resource. There are areas that have been affected by 130, 140 odd years of mining in and around the Johannesburg area where what we do could play a role in just reversing that. For a long time, we've been using the little slogan of reversing or rolling back the environmental impact of mining and cleaning up a particular stream, for example. We’re really keen to do that and I think there's recognition that this is something where we could play a role. We won't come at the cost of the taxpayer facilitating that. Some of the old abandoned dumps, which don't necessarily form part of our portfolio, is there a way that we could be a participant in an initiative in terms of which those could be dealt with to no longer pose that nuisance to their surrounding communities and so forth. I'm really positive. I know we like trashing South Africa, and we're always complaining about stuff and so forth but there are pockets of excellence everywhere. If you go into these things with the right attitude, and I'm the first to admit that my attitudes not always been the right attitude, but if you go into these conversations with the right sort of attitude, it's reciprocated, and I'm hoping that we could build on that, because we really want to do that. We do want to be around for at least another 20 years with regards to these assets, and we do want to move a lot more waste, not just from dumps, but also from water systems and so forth. We'll do well, we get paid well, our shareholders hopefully will get paid well. The single largest liability that we carry is a deferred tax liability. Because of the unique dispensation with regards to capital expenditure, you recognise a deferred tax liability going forward, and it's our single largest liability. If we can pay those taxes and they can be applied for the for the benefit of South Africa, we're going to be doing that with a smile, because this is our place.

The knowledge that has been imparted by DRDGOLD programmes to some community members is enabling them to supply major chain stores with great pride. How many participate in your initiatives?

We've had 11 000 participants in our agricultural initiative that's teaching people how to take that first step out of poverty. In terms of youth programmes, there are workshops to provide guidance on how to take the right sort of decision at crucial times in your life. There are small business programmes as well. We call them mini MBAs for the informal sector. There are five distinct programmes, and most of these programmes are designed in such a way that what you gain by participating initially is knowledge. It's a how-to programme, and you get guided through that, but then for those who really show commitment, there's sometimes also a bit of a capital nudge. Assisting people to get things going, the informal economy, I believe, is really going to be the thing that will lift South Africa out of unemployment and poverty. That's where it's happening, and I think that's where the opportunity lies to really grow the South African economy and also grow the middle class. We’re seeing a real desire among people to be empowered with knowledge and they’re having success. We've got some of our initial participants, people who started with a little vegetable garden the size of a door, because that's where they start. A garden the size of a door can feed a family of four for a year. That's the underlying principle, and now they’re suppliers to large brands, to large franchises. It's nice to see how people simply just grab the opportunity and how they run with it.