| Thu 28 Jul 2005, 8:59 | | DRDGOLD - Activity report |
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DRDGOLD - Activity report
DRDGOLD LIMITED
(Formerly Durban Roodepoort Deep, Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1895/000926/06)
ARBN number 086 277 616
JSE trading symbol: DRD
ISIN Code: ZAE000058723
Issuer code: DUSM
Nasdaq trading symbol: DROOY
ASX trading symbol: DRD
(`DRDGOLD`)
REPORT ON ACTIVITIES FOR THE FOURTH QUARTER ENDED 30 JUNE 2005
OF THE 2005 FINANCIAL YEAR
GROUP RESULTS (Unaudited)
KEY FEATURES
DRDGOLD secures BEE deal over all South African operations
Re-opening of Blyvoor No. 2 Sub-Shaft to proceed
ERPM turned around successfully
A$10 million Convertible Loan and operational support for Emperor
KEY RESULTS SUMMARY
GROUP Quarter Quarter Quarter
Jun 2005 Mar 2005 Jun 2004
Attributable gold production(*)
Australasian operations oz 72 662 79 334 70 990
Kg 2 259 2 467 2 208
South African operations oz 64 752 60 733 76 294
Kg 2 014 1 889 2 373
Discontinued operations oz - 47 584 81 181
Kg - 1 480 2 525
Group oz 137 414 187 651 228 465
Kg 4 273 5 836 7 106
Gold price received US$/oz 432 431 395
ZAR/kg 89 375 83 341 85 804
Capital expenditure US$ million 4.6 1.3 4.5
ZAR million 29.4 7.1 30.1
Cash operating costs US$/oz 327 412 355
ZAR/kg 67 498 81 222 76 031
12 months to 12 months to
June 2005 June 2004
Australasian operations oz 317 134 233 190
Kg 9 864 7 253
South African operations oz 251 902 329 972
Kg 7 835 10 263
Discontinued operations oz 199 850 341 861
Kg 6 216 10 633
Group oz 768 886 905 023
Kg 23 915 28 149
Gold price received US$/oz 423 391
ZAR/kg 84 690 86 788
Capital expenditure US$ million 18.4 23.2
ZAR million 114.4 160.4
Cash operating costs US$/oz 376 344
ZAR/kg 75 122 76 209
* Attributable - including Emperor Mines Limited (`Emperor`) (45.33%) and Crown
Gold Recoveries (Pty) Limited (40%)
STOCK
ISSUED CAPITAL
296 206 048 ordinary no par value shares
5 000 000 cumulative preference shares
Total ordinary no par value shares issued
and committed: 326 348 457
STOCK TRADED JSE ASX NASDAQ FRANKFURT
Avg. volume for the quarter
per day (000) 119 19 2 239 74
% of issued stock traded
(annualised) 10% 2% 197% 7%
Price - High R8.09 A$1.42 US$1.18 Euro 0.94
- Low R4.15 A$0.76 US$0.30 Euro 0.50
- Close R5.69 A$1.12 US$0.88 Euro 0.77
SAFETY
With deep regret, we record the death of three people in work-related incidents
at our South African operations during the quarter under review - one each at
Blyvooruitzicht Gold Mining Company Limited (`Blyvoor`), East Rand Proprietary
Mines Limited (`ERPM`) and Crown Gold Recoveries (Pty) Limited (`CGR`). While
this compares with five fatalities in the previous quarter, it marks a slight
deterioration in the company`s Fatal Injury Frequency Rate (`FIFR`) from 0.50 to
0.52 due to a reduction in the total number of company employees and employees
of contractors.
Encouragingly, both the Lost Time Injury Frequency Rate (`LTIFR`) and Serious
Injury Frequency Rate (`SIFR`) declined quarter on quarter - the former from
12.20 to 7.21 and the latter from 4.02 to 3.60 - and Blyvoor achieved one
million fatality free shifts.
Clearly, however, there is no place for complacency and we must strive for
continuous improvement. Our focus on programmes to achieve positive changes in
behaviour relating to workplace safety continues to be appropriate.
PRODUCTION
Group gold production was 27% lower at 137 414 ounces (4 273 kilograms) quarter-
on-quarter, due mainly to the previously reported discontinuation of operations
at the North West Operations (Buffelsfontein Gold Mines Limited) in South Africa
during March.
Gold production at the South African operations during the quarter under review,
however, increased by 7% to 64 752 ounces (2 014 kilograms). This reflects
continuing positive turnarounds resulting from ongoing restructuring at the
Blyvoor and ERPM mines.
Australasian gold production at 72 662 ounces (2 259 kilograms) comprised 53% of
the Group`s total but was 8% lower than in the previous quarter due to various
operational difficulties experienced at Porgera, Tolukuma Gold Mines Limited
(`Tolukuma`) and Emperor Mines Limited. These difficulties, and the corrective
actions taken, are discussed later in this report.
CASH OPERATING COSTS
Group cash operating costs were 21% lower at US$327 per ounce, primarily due the
exclusion of the discontinued North West Operations. Blyvoor continued to show
very encouraging cash cost reductions while Tolukuma and Porgera both recorded
reversals, reflecting lower production and fuel price increases.
GOLD MARKET REVIEW
The quarter can be divided into two halves, although not of equal proportion, as
the company finally saw a weakening of the Rand, which has been stubbornly
strong for some time now. The currency moved from R6.22/US$ to end at R6.65/US$,
seeing highs of R5.96/US$, and dipping as low as R6.88/US$.
While the first two months of the quarter (April/May) were still tough on the
revenue line (average spot price was R85 338/kg) the weaker Rand - brought about
by interest rate cuts in South Africa and interest rate rises in the US, thus
closing the yield differential - saw gold comfortably over the magical R90
000/kg barrier. This resulted in a spot gold price for the quarter of R88
011/kg, slightly below our received gold price of R89 375/kg.
We are also encouraged by the continued interest in gold, especially in Exchange
Traded Funds (`ETF`), which has seen gold in the ETF hit over 8 million ounces.
This is gold out of circulation, which, combined with the more robust
supply/demand fundamentals of the metal, should be an encouraging underpin for
the US$ gold price for the remainder of the year.
As for South Africa, we believe the slightly weaker exchange rate, especially to
the Euro and US dollar, can only be positive for the economy, which has grown
robustly. The growth is somewhat skewed, however, as the export component and
balance of payment, and thus current account, have suffered under the strong
currency.
CORPORATE DEVELOPMENTS
Today, simultaneously with these production results, DRDGOLD has announced that
it has signed a Memorandum of Understanding (`MOU`) with its established Black
Economic Empowerment (`BEE`) partner, Khumo Bathong Holdings (Pty) Limited
(`KBH`), regarding the acquisition by KBH of a 15% stake in DRDGOLD`s South
African operations.
The transaction envisages the exchange of 45% of KBH`s 60% stake in CGR and ERPM
for 15% of DRDGOLD`s wholly owned Blyvoor. The effect would be the ownership by
KBH of 15% of DRDGOLD`s South African operations. DRDGOLD intends to facilitate
the BEE transaction through vendor financing.
The MOU includes an option for KBH to lead a broad-based consortium in the
acquisition of a further 11% of DRDGOLD`s South African operations, the
intention being to bring DRDGOLD into full compliance with the 10-year, 26% BEE
equity requirement contained in the Mining Charter (`the BEE transactions`).
Dr MP Ncholo, Non-Executive Chairman of DRDGOLD, has an interest in KBH greater
than 35% and, as a result, in terms of the Listings Requirements of the JSE
Limited, the BEE transactions will constitute small related party transactions.
It is subject, therefore, to regulatory approvals and to confirmation by an
appointed, independent expert that it is fair and reasonable to DRDGOLD
shareholders.
In a move related to the overall restructuring of DRDGOLD`s South African
interests - specifically to position CGR`s Crown and ERPM operations for growth
- DRDGOLD has acquired from the Industrial Development Corporation of South
Africa (`IDC`) all of the IDC`s CGR and ERPM debt through the issue of 4 451 219
DRDGOLD shares.
Australasian operations
Porgera (20% of the Quarter Quarter % Quarter
Joint Venture) Jun 2005 Mar 2005 Change Jun 2004
Ore milled t`000 297 297 - 327
Yield g/t 4.65 5.07 (8) 4.74
Gold produced oz 44 409 48 406 (8) 49 834
kg 1 382 1 506 (8) 1 550
Capital expenditure
US$ m 4.0 0.9 (343) (1.1)
ZAR m 25.4 5.0 (408) (7.2)
Cash operating costs
US$/oz 227 191 (19) 179
ZAR/kg 46 715 37 073 (26) 41 396
12 months to 12 months to
June 2005 June 2004
Ore milled t`000 1 200 941
Yield g/t 5.07 4.87
Gold produced oz 195 394 147 475
kg 6 079 4 587
Capital expenditure US$ m 11.7 4.1
ZAR m 73.3 28.3
Cash operating costs US$/oz 186 196
ZAR/kg 37 293 43 480
Gold production declined 8% to 44 409 ounces (1 382 kilograms), reflecting an 8%
decline in yield to 4.65 grams per ton (`g/t`) (5.07 g/t) and ore milled
unchanged at 297 000 tonnes.
The lower output was attributable mainly to production being severely restricted
by wet weather and the unbudgeted removal of slip material from the West Wall
instability. Mud from this instability covered high-grade Stage 4 ore and
delayed access to Stage 5, resulting in a lower feed grade. A plan to mitigate
the effects of the West Wall instability is currently being prepared.
Cash operating costs were 19% higher at US$227 per ounce, reflecting lower
production, costs associated with the West Wall failure and higher fuel and
maintenance costs.
Tolukuma Quarter Quarter % Quarter
Jun 2005 Mar 2005 Change Jun 2004
Ore milled t`000 52 52 - 52
Yield g/t 11.21 11.27 (1) 12.65
Gold produced oz 18 769 18 878 (1) 21 156
kg 583 586 (1) 658
Capital expenditure
US$ m 0.5 0.5 - 2.8
ZAR m 3.7 3.2 (16) 18.9
Cash operating costs
US$/oz 418 321 (30) 251
ZAR/kg 85 806 62 404 (38) 52 685
12 months to 12 months to
June 2005 June 2004
Ore milled t`000 211 196
Yield g/t 11.24 13.60
Gold produced oz 76 314 85 715
kg 2 372 2 666
Capital expenditure US$ m 3.4 6.0
ZAR m 21.3 41.3
Cash operating costs US$/oz 348 259
ZAR/kg 69 566 57 522
Gold production was down 1% at 18 769 ounces (583 kilograms) as a consequence of
ore milled being static at 52 000 tonnes and yield slightly lower at 11.21 g/t.
Wet weather and power outages impacted negatively on access to planned higher-
grade stope ore and resulted in delays in underground development, particularly
of the declines.
An incident of sabotage of the mine`s hydro electric plant contributed to the
power outage problem and to underground flooding. A lasting solution to the
sabotage issue continues to be pursued with local community leaders.
Cash costs were 30% higher, reflecting the lower production arising from
operational difficulties, higher fuel costs resulting both from price increases
and from having to run the diesel generators for longer due to the hydro
electric plant sabotage incident and to higher than normal maintenance costs.
Emperor Quarter Quarter % Quarter
(45.33% attributable) Jun 2005 Mar 2005 Change Jun 2004
Ore milled t`000 45 63 (29) -
Yield g/t 6.53 5.95 10 -
Gold produced oz 9 484 12 050 (22) -
kg 294 375 (22) -
12 months to 12 months to
June 2005 June 2004
Ore milled t`000 213 -
Yield g/t 6.63 -
Gold produced oz 45 426 -
kg 1 413 -
A 10% increase in yield to 6.53 g/t was insufficient to compensate for a 29%
drop in ore milled, leading to a 22% decline in gold production to 9 484 ounces
(294 kilograms).
The lower output was attributable to various factors, including winder problems
on the Philip Shaft. These have now been resolved but affected production for
two months of the quarter under review. Other contributors were heavy dilution
and poor heavy vehicle availability.
During the quarter, the Emperor Board announced a plan to return the company`s
Vatukoula Mine in Fiji to profitability. This followed an earlier announcement
in which the company said it expected to report a loss from ordinary activities
before income tax and exceptional items of about A$18 million dollars for the
year ended 30 June 2005.
On 12 July, DRDGOLD announced a financing and operating package to assist
Emperor with implementation of the plan, including a A$10 million Convertible
Loan Facility, which is subject to Emperor shareholder approval to be sought at
a meeting scheduled for 29 August 2005.
A key objective of the recovery plan, to be driven by recently appointed Chief
Operating Officer Michael Marriott and General Manager Sean O`Connor - both from
DRDGOLD and whose services have been supplied in terms of an operating support
agreement - is to drive development and reduce dilution, largely through
workplace change, which has already begun.
The plan envisages production of some 650 000 tonnes of ore at an average grade
of 8.00 g/t, delivering 145 000 ounces of gold for the current financial year.
South African operations
Blyvooruitzicht Quarter Quarter % Quarter
Jun 2005 Mar 2005 Change Jun 2004
Area mined m2 000 42 36 17 53
Development m 423 453 (7) 288
Face length m 1 187 1 234 (4) 1 990
Stoping width cm 110 108 2 109
Ore milled
Underground t`000 138 140 (1) 207
Surface t`000 807 780 3 719
Total t`000 945 920 3 926
Yield
Underground g/t 7.83 7.36 6 6.59
Surface g/t 0.25 0.27 (8) 0.31
Total g/t 1.36 1.35 1 1.72
Gold produced
Underground oz 34 755 33 115 5 43 886
kg 1 081 1 030 5 1 365
Surface oz 6 559 6 880 (5) 7 201
kg 204 214 (5) 224
Total oz 41 314 39 995 3 51 087
kg 1 285 1 244 3 1 589
Capital expenditure
US$ m 0.1 (0.1) (201) 1.2
ZAR m 0.3 (0.6) (150) 7.2
Cash operating costs
US$/oz 393 422 7 467
ZAR/kg 81 545 81 606 - 99 922
12 months to 12 months to
June 2005 June 2004
Area mined m2 000 158 203
Development m 1 854 2 382
Face length m 1 348 2 064
Stoping width cm 109 110
Ore milled
Underground t`000 587 831
Surface t`000 2 932 2 287
Total t`000 3 519 3 118
Yield
Underground g/t 7.31 7.42
Surface g/t 0.25 0.47
Total g/t 1.43 2.33
Gold produced
Underground oz 137 958 198 211
kg 4 291 6 165
Surface oz 23 920 34 883
kg 744 1 085
Total oz 161 878 233 094
kg 5 035 7 250
Capital expenditure US$ m (0.1) 8.8
ZAR m (0.7) 60.4
Cash operating costs US$/oz 453 385
ZAR/kg 90 598 85 453
Total gold production increased by 3% to 41 314 ounces (1 285 kilograms) quarter
on-quarter, mainly as a result of a 6% increase in underground yield.
Productivity, in terms of grams per total employee costed (`g/tec`) was
marginally lower at 122.72 g/tec. Continuing improvement is expected to result
both from a tripling in the rate of training and coaching for in-stope personnel
and from action steps to further reduce the average temperature at working
faces.
Area mined increased by 17% to 42 000 metres?. Opening up of previously mined
areas improved by 17% to 1 080 metres. Development at 423 metres, however, was
7% lower primarily due to ore pass hang-ups. The addressing of this problem,
together with an incentive scheme for development crews, is expected to
accelerate the pace of development.
The increase in underground yield to 7.83 g/t, resulting mainly from improved
face advance in higher grade areas on the eastern side of No. 5 Shaft, more than
offset a slight decline in underground ore milled, leading to a 5% increase in
underground gold production to 34 755 ounces (1 081 kilograms).
The mine`s strategy to improve its mine call factor (`MCF`) continued during the
quarter with a focus on communication of daily targets, better drilling quality
and improved blasting efficiencies. Settler dam cleaning and renovations to
pumps at No. 5 Shaft, paid out of working costs, has resulted in more efficient
mud pumping and a reduction in gold losses.
Although Slimes Dam Project surface material milled rose by 3% to 807 000
tonnes, surface yield was 8% lower at 0.25 g/t, resulting in a 5% reduction in
surface gold production to 6 559 ounces (204 kilograms). The project turnaround
continues and is operating well beyond design capacity.
Overall cash costs continued to decline satisfactorily, for the quarter under
review by 7% to US$393 per ounce, reflecting operational improvements.
An agreement reached with the mine`s workforce on a revised working calendar at
the end of the second quarter, in terms of which Saturdays are worked in return
for weekends off following pay-days, has already resulted in a significant
reduction in lost shifts. The agreement is effective until the end of the March
2006 quarter.
Two projects at Blyvoor with a total capital cost of R82.8 million - the re-
establishment of mining operations from the No. 2 Sub-Shaft in two phases
costing R80.5 million and a R2.3 million expansion of the Slimes Dam Project -
will be presented to the DRDGOLD Board of Directors for approval when it meets
on 24 August.
In total, the No. 2 Sub-Shaft project is expected to yield some 770 491 oz
(24 772 kg) of gold from 2.4 million tons of ore with an average delivered grade
of 8.16 g/t, restoring Blyvoor`s life to 17 years.
The project - the first phase of which has been modelled at a gold price of R84
056 per kilogram - is cost-sensitive, however, and could be jeopardised by
excessive increases in major items such as wages, which account for 49% of total
working costs.
Decommissioned in 1993 by the previous owners, the No. 2 Main Shaft has
deteriorated beyond repair but the No. 2 Sub-Shaft is accessible from both No`s
5 and 6 Shafts on 15 and 33 levels. Phase 1 of the project, costing R23.1
million, began during the quarter and involves re-equipping 15 level. Main Reef
and Carbon Leader ore reserves accessed en route to the No. 2 Sub-Shaft will be
mined to offset the cost of the first phase.
In phase 2, scheduled to begin in March 2006, the sub-shaft, winders, ropes and
conveyances will be repaired and refurbished, and mine levels 17 to 31 equipped
at an estimated cost of R53.6 million. The No. 2 Sub-Shaft project is expected
to deliver 2.4 million tonnes of ore, with an average grade of 8.16 g/t, to the
Blyvoor plant.
The expansion of the Slimes Dam Project - scheduled for completion by the end of
the September 2005 quarter, involves the installation of an additional pump and
wider gauge pipes on the residue pipeline from the plant in order to ease
congestion and further improve plant efficiency, together with the
implementation of a number of in-plant process upgrades to ease maintenance
demands.
A 15% increase in volume, to approximately 300 000 tonnes per month, a 12%
increase on gold production to 74 kilograms a month, a slight reduction in
operating costs to R12.50 per tonne, and an additional contribution of R450 000
a month are expected. The capital cost of the expansion was minimized by
acquiring pipes, pumps and valves second-hand from AngloGold Ashanti`s Ergo
surface reclamation operation which closed earlier in the year.
Crown Quarter Quarter % Quarter
(40% attributable) Jun 2005 Mar 2005 Change Jun 2004
Ore milled t`000 904 841 7 952
Yield g/t 0.37 0.39 (5) 0.41
Gold produced oz 10 886 10 643 2 12 603
kg 339 331 2 392
Cash operating costs
US$/oz 397 428 7 334
ZAR/kg 81 879 82 723 1 70 743
12 months to 12 months to
June 2005 June 2004
Ore milled t`000 3 552 4 011
Yield g/t 0.40 0.40
Gold produced oz 45 424 51 982
kg 1 413 1 617
Cash operating costs US$/oz 395 343
ZAR/kg 78 890 75 967
Although overall yield was 5% lower at 0.37 g/t, tonnage treated was 7% higher
at 904 000 tonnes, resulting in a 2% increase in gold production to 10 886
ounces (339 kilograms).
While the Crown plant`s tonnage for the quarter improved due to the successful
commissioning of the 3L17 reclamation site, the low yield of material from the
established Consolidated Main Reef (`CMR`) site reporting to the Crown plant at
the start of the quarter accounted for the lower overall yield. Problems with
rock from the CMR site experienced during the previous quarter were overcome
successfully.
The City Deep and Knights plants were primarily responsible for the increase in
tonnage treated as the Crown plant`s tonnages continued to be compromised by
pipeline difficulties. These could continue until the pipeline replacement
project under way is completed in nine months` time.
Work continues to bring the new CMR (2/A/1) reclamation site on stream. Material
from this site will report to the Crown plant.
ERPM Quarter Quarter % Quarter
(40% attributable) Jun 2005 Mar 2005 Change Jun 2004
Area mined m2* 000 18 16 13 29
Development* m 513 253 103 240
Face length* m 715 694 3 1 081
Stoping width* cm 127 126 1 140
Ore milled
Underground t`000 33 30 10 56
Surface t`000 194 197 (2) 86
Total t`000 226 227 - 142
Yield
Underground g/t 9.18 7.61 21 6.61
Surface g/t 0.44 0.42 5 0.26
Total g/t 1.72 1.38 25 2.75
Gold produced
Underground oz 9 800 7 433 33 11 896
kg 305 231 33 370
Surface oz 2 752 2 662 2 708
kg 85 83 2 22
Total oz 12 552 10 095 24 12 604
kg 390 314 24 392
Cash operating costs
US$/oz 370 462 20 334
ZAR/KG 76 395 89 408 15 70 801
12 months to 12 months to
June 2005 June 2004
Area mined m2* 000 75 128
Development* m 948 2 585
Face length* m 716 1 253
Stoping width* cm 129 126
Ore milled
Underground t`000 145 230
Surface t`000 752 87
Total t`000 897 317
Yield
Underground g/t 7.58 5.97
Surface g/t 0.38 0.25
Total g/t 1.55 4.40
Gold produced
Underground oz 35 392 44 189
kg 1 101 1 374
Surface oz 9 208 707
kg 286 22
Total oz 44 600 44 896
kg 1 387 1 396
Cash operating costs US$/oz 411 367
ZAR/kg 82 287 81 543
* Represents total mine
Overall gold production rose by 24% to 12 552 ounces (390 kilograms), mainly as
a result of a 33% increase in underground gold production to 9 800 ounces (305
kilograms).
The increase in underground gold production was due mainly to a 21% increase in
yield to 9.18 g/t; area mined at 18 000 m? and underground ore milled was 10%
higher at 33 000 tonnes. Other contributory factors, however, included a
concerted campaign to improve sweepings and the resolution during April of
technical problems on both the rock hoist and decline belt between 70 and 75
levels at Far East Vertical Shaft (`FEV`) that impacted negatively on production
in the previous quarter.
Productivity in terms of grams per total employee costed improved by 25% to
129.84 g/tec, reflecting the improved yield.
Development increased by 103% to 513 metres for the quarter.
Gold production from the Cason Dump surface retreatment operation increased by
2% to 2 752 ounces (85 kilograms), a 5% increase in yield to 0.44 g/t
compensating for a 2% decline in material milled to 193 000 tonnes.
The first phase of the three-phase plugging project to isolate FEV from the rest
of the mine is on schedule for completion at the end of July and on budget. Work
on phase two has begun. Meanwhile, three phases of an eight-phase programme to
upgrade pumping facilities at FEV have been completed. The three-year programme,
costing some R24 million, will be paid for out of working costs, supplemented by
the continuing Government pumping subsidy.
Salvaging operations at the discontinued Hercules Shaft were completed during
the quarter, the sale of scrap generating close to R1 million. Surface
reclamation is 95% complete and surface rehabilitation, including the
dismantling of the headgear, is scheduled to begin shortly.
Underground reclamation at Central Shaft has been completed and the shaft placed
on care and maintenance. Management is co-operating with the Department of Water
Affairs and the Council for Geoscience on an investigation to determine the
feasibility of diverting water from the Central Wits Basin to the Elsburg Vlei
via an underground tunnel from Central Shaft, and of constructing a purification
plant to render the water suitable for commercial re-use.
Following a preliminary investigation into the feasibility of extending ERPM`s
ore reserve into the neighbouring Sallies lease area, application has been made
to the Department of Minerals and Energy for a prospecting license. If the
license is granted, and should the ensuing prospecting prove successful, there
is potential to significantly increase the life of ERPM`s underground mining
operations.
Discontinued operations
North West Quarter Quarter % Quarter
(Hartebeestfontein Jun 2005 Mar 2005 Change Jun 2004
and Buffelsfontein mines)
Area mined m2 000 - 70 (100) 91
Development m - 7 366 (100) 11 017
Face length m - 2 404 (100) 3 147
Stoping width cm - 120 (100) 118
Ore milled
Underground t`000 - 246 (100) 396
Surface t`000 - 320 (100) 63
Total t`000 - 566 (100) 459
Yield
Underground g/t - 4.68 (100) 5.84
Surface g/t - 1.03 (100) 3.38
Total g/t - 2.61 (100) 5.50
Gold produced
Underground oz - 37 006 (100) 74 333
kg - 1 151 (100) 2 312
Surface oz - 10 578 (100) 6 848
kg - 329 (100) 213
Total oz - 47 584 (100) 81 181
kg - 1 480 (100) 2 525
Capital expenditure
US$ m - (0.1) (100) 1.7
ZAR m - (0.7) (100) 11.0
Cash operating costs
US$/oz - 665 100 421
ZAR/kg - 133 275 100 88 341
12 months to 12 months to
June 2005 June 2004
Area mined m2* 000 243 355
Development* m 26 148 41 756
Face length* m 2 759 3 101
Stoping width* cm 120 120
Ore milled
Underground t`000 986 1 665
Surface t`000 884 1 493
Total t`000 1 870 3 158
Yield
Underground g/t 5.44 5.58
Surface g/t 0.96 0.90
Total g/t 3.32 3.37
Gold produced
Underground oz 172 522 298 681
kg 5 366 9 290
Surface oz 27 328 43 180
kg 850 1 343
Total oz 199 850 341 861
kg 6 216 10 633
Capital expenditure US$ m 3.3 4.3
ZAR m 20.3 29.8
Cash operating costs US$/oz 508 400
ZAR/kg 101 701 88 710
Buffelsfontein Gold Mines Limited, a wholly owned subsidiary of DRDGOLD and
operator of the Buffelsfontein and Hartebeestfontein mines - better known as
DRDGOLD North West Operations - was provisionally liquidated on 22 March 2005.
All operations were suspended on that date and the company was placed under the
control of three provisional liquidators appointed by the High Court. During
the quarter, the provisional liquidators appointed Simmer & Jack Limited to
manage and preserve the mine, and to conduct limited surface mining on their
behalf. Discussions are ongoing between the provisional liquidators and Simmer &
Jack Limited to negotiate terms for the acquisition of Buffelsfontein Gold Mines
Limited.
A claim for damage and production losses arising from the earthquake that struck
the North West Operations on 9 March 2005 has been lodged with insurers for the
benefit of the provisional liquidators.
CASH OPERATING COSTS
Cash operating costs per ounce are non-US GAAP financial measures that should
not be considered by investors in isolation or as alternatives to production
costs. While the Gold Institute has provided definitions for the calculation of
cash operating costs, the calculation of cash costs per ounce may vary
significantly among gold mining companies, and these definitions by themselves
do not necessarily provide a basis for comparison with other gold mining
companies. However, we believe that cash operating costs per ounce are useful
indicators to investors and management of an individual mine`s performance and
of the performance of our operations as a whole as they provide:
- an indication of a mine`s profitability and efficiency;
- the trend in costs;
- a measure of a mine`s margin per ounce, by comparison of the
cash operating costs per ounce by mine to the price of gold; and
- a benchmark of performance to allow for comparison against other
mines and mining companies.
A reconciliation of cash operating costs to production costs for the three
months ended 30 June 2005; 31 March 2005; and twelve months ended 30 June 2005,
is presented below:
For the three months ended 30 June 2005
Blyvoor Tolukuma Porgera Continued
Operations
Cash operating
costs US$000 16 225 7 838 10 091 34 154
Adjusted for:
Revenue from
byproducts US$000 (96) (295) 2 548 2 157
Other non-operating
cash costs US$000 73 573 (618) 28
Production costs US$000 16 202 8 116 12 021 36 339
Cash operating
costs US$/oz 393 418 227 327
Discontinued Group
Operations
Cash operating
costs US$000 - 34 154
Adjusted for:
Revenue from
byproducts US$000 - 2 157
Other non-operating
cash costs US$000 231 259
Production costs US$000 231 36 570
Cash operating
costs US$/oz - 327
For the three months ended 31 March 2005 (Restated)
Blyvoor Tolukuma Porgera Continued
Operations
Cash operating
costs US$000 16 888 6 066 9 240 32 194
Adjusted for:
Revenue from
byproducts US$000 - (309) (2 667) (2 976)
Other non-operating
cash costs US$000 148 835 751 1 734
Production costs US$000 17 036 6 592 7 324 30 952
Cash operating
costs US$/oz 422 321 191 300
Discontinued Group
Operations
Cash operating
costs US$000 31 625 63 819
Adjusted for:
Revenue from
byproducts US$000 - (2 976)
Other non-operating
cash costs US$000 674 2 408
Production costs US$000 32 299 63 251
Cash operating
costs US$/oz 665 412
For the twelve months ended 30 June 2005
Blyvoor Tolukuma Porgera Continued
Operations
Cash operating
costs US$000 73 316 26 521 36 437 136 274
Adjusted for:
Revenue from
byproducts US$000 (142) (1 161) (226) (1 529)
Other non-operating
cash costs US$000 554 2 561 1 659 4 774
Production costs US$000 73 728 27 921 37 870 139 519
Cash operating
costs US$/oz 453 348 186 314
Discontinued Group
Operations
Cash operating
costs US$000 101 606 237 880
Adjusted for:
Revenue from
byproducts US$000 (15) (1 544)
Other non-operating
cash costs US$000 3 146 7 920
Production costs US$000 104 737 244 256
Cash operating
costs US$/oz 508 376
For the three months ended 30 June 2005
Blyvoor Tolukuma Porgera Continued
Operations
Cash operating
costs ZAR000 104 785 50 025 64 560 219 370
Adjusted for:
Revenue from
by products ZAR000 (595) (1 891) 15 665 13 179
Other non-operating
cash costs ZAR000 485 3 694 (3 693) 486
Production costs ZAR000 104 675 51 828 76 532 233 035
Cash operating
costs ZAR/kg 81 545 85 806 46 715 67 498
Discontinued Group
Operations
Cash operating
costs ZAR000 - 219 370
Adjusted for:
Revenue from
byproducts ZAR000 - 13 179
Other non-operating
cash costs ZAR000 1 573 2 059
Production costs ZAR000 1 573 234 608
Cash operating
costs ZAR/kg - 67 498
For the three months ended 31 March 2005 (Restated)
Blyvoor Tolukuma Porgera Continued
Operations
Cash operating
costs ZAR000 101 518 36 569 55 832 193 919
Adjusted for:
Revenue from
byproducts ZAR000 - (1 868) (16 409) (18 277)
Other non-operating
cash costs ZAR000 894 5 072 4 533 10 499
Production costs ZAR000 102 412 39 773 43 956 186 141
Cash operating
costs ZAR/kg 81 606 62 404 37 073 58 129
Discontinued Group
Operations
Cash operating
costs ZAR000 197 247 391 166
Adjusted for:
Revenue from
byproducts ZAR000 - (18 277)
Other non-operating
cash costs ZAR000 4 072 14 571
Production costs ZAR000 201 319 387 460
Cash operating
costs ZAR/kg 133 275 81 222
For the twelve months ended 30 June 2005
Blyvoor Tolukuma Porgera Continued
Operations
Cash operating
costs ZAR000 456 162 165 011 226 707 847 880
Adjusted for:
Revenue from
byproducts ZAR000 (881) (7 222) (1 406) (9 509)
Other non-operating
cash costs ZAR000 3 447 15 932 10 322 29 701
Production costs ZAR000 458 728 173 721 235 623 868 072
Cash operating
costs ZAR/kg 90 598 69 566 37 293 62 871
Discontinued Group
Operations
Cash operating
costs ZAR000 632 174 1 480 054
Adjusted for:
Revenue from
byproducts ZAR000 (95) (9 604)
Other non-operating
cash costs ZAR000 19 573 49 274
Production costs ZAR000 651 652 1 519 724
Cash operating
costs ZAR/kg 101 701 75 122
EXPLORATION - TOLUKUMA
Brownfield`s on mine site
The major focus on exploration during the quarter has been to evaluate the
encouraging drilling results achieved on several newly-discovered structures
within the Mining Lease. Results of intersections on the Fundoot and Gulbadi Red
structures have been reported in prior quarters but include bonanza grades up to
60 g/t of gold over a width of 1.8 metres with individual sample results up to
148.7 g/t of gold over 0.6 metre. These bonanza grades are frequently associated
with visible gold in the drill core.
Consulting geologists have undertaken a detailed interpretation of all the
existing mine data together with those from recent drilling. The outcome is a
greatly improved understanding of the structural controls to gold
mineralisation. As a result, a total of 16 drill targets have been identified
within the immediate environs of the current mine workings and infrastructure.
A major drilling programme has been commenced to systematically test these
targets on a prioritised basis over the coming year utilising three surface
drill rigs and two underground rigs. It is also proposed to acquire an
additional underground rig to expedite resource infill drilling in order to
convert discovery intersections to resources.
The abovementioned Fundoot and Gulbadi Red structures have been included in the
mine`s latest resource estimates and are expected to contribute approximately 85
000 ounces to resources with the present data coverage. Further drilling is
expected to increase this resource base.
Regional Papua New Guinea
Consultants have also been engaged to evaluate all the historic data from
several exploration programmes with a focus on target generation and
prioritisation of future exploration. The company currently has in excess of 9
000 square kilometers of exploration title held through current Exploration
Licenses (EL`s), EL`s under renewal and under application. These licenses are
held in areas adjacent to and in a similar geological province to the Tolukuma
mining lease.
ML 104 EXPLORATION
120/Zine North Extension
After the completion of three drill holes at Mt Sen (EL 580)the drill rig was
moved back to ML 104 to test the Far Northern area of the 120 Zine vein. The two
holes (120/ZN009 and 120/ZN10) drilled intersected both targeted structures.
These structures were found to continue down dip and along strike. Results are
consistently low with the highest being 1.3 metres at 1.8 g/t of gold. Results
from this will be reviewed and if necessary additional surface work will be
carried out before any additional drilling will be done.
Hole No From depth To depth True width Au(g/t) Ag(g/t)
(m) (m) (m)
120/ZN_009 100.6 102.2 1.1 0.3 6.0
120/ZN_009 121.0 122.9 1.3 1.8 3.0
Sawmill Vein
The Sawmill vein has been drilled from surface. A total of eight holes have been
completed. A splay in SM007 returned a weighted average of 0.8 metres at 57.7
g/t of gold including 0.4 metre at 105.2 g/t of gold. This splay had abundant
visible gold. Although the splay was intersected in several other holes, the
grades were not repeated which could have been due to the large core loss in the
oxidized portion of the structure.
Hole No From depth To depth True width Au(g/t) Ag(g/t)
(m) (m) (m)
SM006 54.6 56.5 1.3 6.8 113.0
SM007 28.5 30.7 0.8 57.7 23.0
SM007 137.9 139.3 0.3 4.2 15.0
SM008 83.5 86.0 0.2 1.4 3.0
SM009 54.4 57.7 1.1 8.2 93.0
SM011 31.7 34.8 1.1 2.5 53.0
SM011 88.1 89.0 0.3 5.9 1.0
SM012 179.4 180.0 0.2 0.5 8.0
SM013 162.9 163.1 0.2 2.7 4.6
Underground LMA90 drilling
The drill rig completed the central and Northwestern area of the Degot/Fundoot.
Work has indicated a high-grade zone with the following parameters:
Average width of the high grade zone 1.8 metres
Weighted average grade across structure 32.9 g/t of gold
Average height of high grade zone 50 metres
Average quartz width 0.8 metre
Weighted average quartz grade 71.9 g/t of gold
Strike length of high grade zone 170 metres
Underground drilling continued along the Milihamba drive, testing the
Southwestern extent of the Degot/Fundoot and Zine/Gulbadi structures.
Hole No From depth To depth True width Au(g/t) Ag(g/t)
(m) (m) (m)
TU048 254.2 255.3 0.3 1.3 9.0
TU050 188.9 194.0 1.3 2.2 15.0
TU051 148.9 154.9 4.5 3.7 6.0
TU051 184.7 186.7 1.6 0.4 3.0
TU052 210.1 210.7 0.5 4.1 25.0
TU054 137.6 140.6 2.8 0.2 3.0
TU055 80.
