DRDGOLD, Limited’s (JSE: DRD) financial results for the first half of FY24 paint a picture of a company making calculated investments for future growth while facing current challenges. Revenue rose 12%, driven by a 22% increase in the rand gold price, but offset by an 8% decline in gold sold. This highlights the ongoing struggle with production delays at new high-volume sites.
Despite the production dip, DRDGOLD managed to maintain its operating margin at 30% and its all-in-sustaining cost margin at 20%, demonstrating efficient cost management. However, the company’s headline earnings per share remained flat compared to the previous period.
The most striking aspect of the results lies in the significant increase in capital expenditure (CapEx), up 177% to ZAR1.1 billion. This reflects DRDGOLD’s commitment to investing in its large-volume sites, laying the groundwork for future production growth. Notably, the company prioritizes environmental sustainability, with significant investments in clean-up projects and reclamation activities.
Technical Analysis:
DRDGOLD’s 1-week chart reveals a technical picture fraught with both opportunities and risks. The share price currently sits below key resistance levels, trapped within a falling wedge pattern. This pattern suggests a potential downward trend, further exacerbated by recent price breaks below the 50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line) lines.
However, a glimmer of hope emerges with the upward-sloping 50-SMA crossing above the 100-SMA and 200-SMA. This bullish crossover indicates potential for a trend reversal. Additionally, the price finds support at the 78.60% Fibonacci retracement level, which could act as a springboard for a bounce.
The RSI currently sits at 34.32, near the oversold territory. This could signal a potential short-term correction followed by an upward move, potentially reaching the 61.80% Fibonacci retracement level (R15.06). A successful bridge of the initial resistance could trigger a run, with the 50.00% Fibonacci retracement level (R17.05) and 38.20% Fibonacci retracement level (R19.03) resistance levels acting as the next significant levels higher.
However, a sustained push lower, on significant volume, could offer short-term trading opportunities towards the initial support at the 78.60% Fibonacci retracement level (R12.24) price level—the next significant levels lower lie at R10.00, and the major swing low of R8.64.
Summary
DRDGOLD’s current situation presents a complex picture. While the company faces headwinds from production delays and cost increases, its strategic investments in high-volume sites and commitment to sustainability offer long-term promise. The technical analysis suggests a potential for a short-term bounce, but the overall trend remains uncertain. A move towards R15.06 is possible with sustained positive momentum, while downside risks involve testing support at R12.24 and potentially R10.00.
Sources: TradingView, DRDGOLD, KoyFin, Dow Jones Newswire, Seeking Alpha, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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