In the media

SAfm: DRDGOLD Q1 results: Niël Pretorius (DRDGOLD) & Peter Major (Cadiz Corporate Solutions)

ALEC HOGG: If anything scares me, it’s to see a share price go up and up and up, and in August the share price of DRDGOLD was just over R3. It’s now R5.20, David Shapiro. Doesn’t that scare you too?

DAVID SHAPIRO: No, not at all. It’s about time the gold shares started...

ALEC HOGG: Peter Major, does it scare you?

PETER MAJOR: Most gold shares scare the hell out of me, Alec.

ALEC HOGG: But this one - from R3 to R5 in two months.

PETER MAJOR: DRD has got a history. It’s probably the most volatile gold share in South Africa in the last 30 years, and that’s why the foreigners like it. And it seems every one or two years the price goes from R4 to R10 and then back to R4. So we are overdue. It was last at R10 about two years ago. So now it’s up to R5.20 - it’s still got a long way to go to be where it was.

ALEC HOGG: It’s supposed to be a company now that’s trying to be a steady business. Earlier today our colleague, Geoff Candy, got hold of DRDGOLD’s Niël Pretorius, the chief executive. Listen to this clip. Geoff picked up on an aspect that was raised at the public presentation. With the gold price booming, shareholders are saying, “When are we going to see these dividends coming through?”

NIËL PRETORIUS: We won’t hold on or hang on to cash which we don’t need immediately. We run the business for the shareholders and for the other interested parties but in accordance with predetermined criteria. And if we don’t need the money we’re not going to hold on to something that diminishes in value when our shareholders can maybe do something else with it. So yes, I think the whole issue of a special dividend or as an agenda item, looking at the cash balance and deciding whether or not there’s something available for distribution, that’s something that will occur. It’s unlikely to occur in the immediate future. I think the next dividend would probably be the year-end dividend, because that has become our policy - obviously if circumstances continue to be favourable. But I think once we’ve spent the capital and once we’ve secured our obligations with regard to rehabilitation cover and so forth, we might be with a bit of surplus cash from time to time and we will want to give that to shareholders. That’s certainly, I think, the sentiment in our board.

GEOFF CANDY: And, of course, it’s something clearly that investors want as well, especially as gold companies begin to become treated as just general equities, as well.

NIËL PRETORIUS: Absolutely. You have to give shareholders a reason to buy your share and not just buy the ETF. That reason is that you pay them for holding your stock and you want to pay them 2%, 3%, 5%.

ALEC HOGG: So it’s on the agenda that there might be a special dividend at some time in future, and the share has rocketed. Come on, Pete, that’s crazy.

PETER MAJOR: Well, look, I think the special div would be almost 100% related to do they sell Blyvooruitzicht or not. I don’t think there’s any reason to have a special div if you don’t sell Blyvoor.

ALEC HOGG: And what are the chances of that?

PETER MAJOR: I think it’s very good. The question is - are they going to sell it for cash, or are they going to sell it for some cash and then a promise to maybe pay a royalty? You are going to say who are the bidders for that, and the rumours going around are the bidders are two or three locals, and maybe a foreigner from Hong Kong that bid on Pamodzi. And so the odds are anybody taking on a risky asset doesn’t want to spend too much money just buying the asset. They want to keep it for capex working capital, so they might make Niël a deal - can we buy 50%, 60% and we’ll give you a free carryon 40%, and we’ll pay you a certain percent of what we make. I’m just guessing here, though.

ALEC HOGG: Pete, would you be buying the shares after this surge? As you say, it’s virtually doubled in the past two months.

PETER MAJOR: You know, he’s just about eliminated the underground risk, if this Blyvooruitzicht sale goes through. You are running a risk that it could be another two or three months if the sale doesn’t go through. You’ve seen how quickly Blyvoor can go from making R50m to losing R100m, R150m. This is a very risky share and he hasn’t de-risked it yet until Blyvoor is off his books.

ALEC HOGG: It looks like DRD is a pretty big punt if you are that way inclined, and Peter Major says if they sell Blyvoor, perhaps. But it’s a big perhaps.

DAVID SHAPIRO: It’s too hard to make money out of gold shares at the moment. It’s too much PT.