| Thu 2 Nov 2006, 8:00 | | DRDGOLD - Report to shareholders for the first qua |
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DRD
DRDD
DRDGOLD - Report to shareholders for the first quarter ended 30 September 2006
of the 2007 financial year
DRDGOLD LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1895/000926/06)
ARB number 086 277 616
JSE trading symbol: DRD
ISIN Code: ZAE000058723
Issuer code: DUSM
Nasdaq trading symbol: DROOY
("DRDGOLD" or "the company")
REPORT TO SHAREHOLDERS FOR THE FIRST QUARTER ENDED 30 SEPTEMBER 2006 OF THE
2007 FINANCIAL YEAR
GROUP RESULTS (Unaudited)
KEY FEATURES
- Weaker Rand lifts revenue
- Group production up 14%
- Australasian cash operating unit costs up 52%
- Australasian losses offset South African profits
- Charter equity requirement of 26% met
- $66 million Convertible Notes to be repaid in full
KEY RESULTS SUMMARY
GROUP Quarter Quarter % Quarter
Sep 06 Jun 06 Change Sep 05
Attributable gold production(*)
Australasian operations oz 58 858 41 676 41 67 920
kg 1 829 1 296 41 2 113
South African operations oz 91 339 90 181 1 67 710
kg 2 841 2 805 1 2 106
Group oz 150 197 131 857 14 135 630
kg 4 670 4 101 14 4 219
Cash operating costs
Australasian operations US$/oz 562 369 (52) 308
ZAR/kg 129 517 76 189 (70) 64 530
South African operations US$/oz 503 507 1 387
ZAR/kg 115 821 105 117 (10) 81 260
Group US$/oz 526 463 (14) 342
ZAR/kg 121 185 95 975 (26) 71 758
Gold price received US$/oz 625 618 1 446
ZAR/kg 143 963 127 902 13 93 559
Capital expenditure US$ million 14.2 14.8 4 5.3
ZAR million 101.6 95.2 (7) 34.7
* Emperor Mines Limited ("Emperor") consolidated 100% from 6 April 2006
(previously 39.52% attributable) and Crown Gold Recoveries (Pty) Limited
("CGR") which included East Rand Proprietary Mines Limited ("ERPM")
consolidated 100% from 1 December 2005 (previously 40% attributable).
STOCK ISSUED CAPITAL
324 344 165 ordinary no par value shares
5 000 000 cumulative preference shares
Total ordinary no par value shares issued and committed: 356 449 931
STOCK TRADED JSE NASDAQ FRANKFURT
Avg. volume for the quarter
per day (000) 504 2 329 37
% of issued stock traded
(annualised) 40 187 3
Price - High R11.50 US$1.63 Euro 1.24
- Low R 8.82 US$1.25 Euro 0.99
- Close R10.65 US$1.38 Euro 1.09
FORWARD LOOKING STATEMENTS
Many factors could cause the actual results, performance or achievements to be
materially different from any future results, performance or achievements that
many be expressed or implied by such forward-looking statements, including,
among others, adverse changes or uncertainties in general economic conditions
in the markets DRDGOLD serves, a drop in the gold price, a continuing
strengthening of the Rand against the Dollar, regulatory developments adverse
to DRDGOLD or difficulties in maintaining necessary licenses or other
governmental approvals, changes in DRDGOLD"s competitive position, changes in
business strategy, any major disruption in production at key facilities or
adverse changes in foreign exchange rates and various other factors.
These risks include, without limitations, those described in the section
entitled "Risk Factors" included in the annual report for the fiscal year
ended 30 June 2005, which was filed with the United States Securities and
Exchange Commission on 15 December 2005 on Form 20-F. Shareholders should not
place undue reliance on these forward-looking statements, which speak only as
of the date thereof. DRDGOLD does not undertake any obligation to publicly
update or revise these forward-looking statements to reflect events or
circumstances after the date of this report or to the occurrence of
unanticipated events.
OVERVIEW
Dear shareholder
Safety
With regret I must report that Mr Augustino Lebaka, employed as a team leader
at DRDGOLD South African Operations (Pty) Limited ("DRDGOLD SA")"s
Blyvooruitzicht Gold Mining Company Limited ("Blyvoor") mine, died in a
seismicity-related fall of ground at the mine"s No 5 Shaft during the quarter.
Mr Lebaka, from Lesotho, had almost 25 years" service with the company. He is
survived by his wife and four children, to whom I extend our deepest
condolences.
Blyvoor has had an unsatisfactory quarter all round, from a safety
perspective. Two seismic events and two underground fires were primary
contributors to deteriorations in both the disabling injury frequency rate
("DIFR") and the reportable injury frequency rate ("RIFR"), the former from
5.98 to 13.1 and the latter from 2.63 to 6.55. While ERPM recorded
improvements in both its Fatal Injury Frequency Rate ("FIFR") from 1.32 to 0
and in its RIFR from 7.93 to 6.96, its DIFR deteriorated somewhat, from 13.21
to 13.29. At Crown, the FIFR remained at 0 and the RIFR improved from 2.49 to
1.14. The DIFR, however, deteriorated from 4.97 to 9.16.
At each of DRDGOLD SA"s operations, a range of safety initiatives continue to
be implemented in order to improve safety performances.
Safety performance at the Emperor-managed Australasian operations was mixed.
Vatukoula recorded a deterioration in its Lost Time Injury Frequency Rate
("LTIFR") from 2.21 to 2.56 and in its DIFR from 7.84 to 9.97. At Tolukuma,
the LTIFR improved from 6.86 to 0, while the DIFR deteriorated from 0 to 2.85.
Both operations have in place a range of training and education programmes,
risk assessment processes and other initiatives to achieve improved safety
performances.
Production
Total attributable gold production increased by 14% to 150 197 ounces ("oz"),
mainly as a consequence of Vatukoula coming back on stream, which helped lift
gold production from the Australasian operations to 58 858 oz. While Porgera
and Vatukoula both reported improvements in gold production, Tolukuma produced
2% less, and performance at all three of the Australasian operations was
negatively affected by various factors. These are reported in more detail in
the operation-by-operation commentaries that follow.
Gold produced from the South African operations was slightly higher at 91 339
oz. Crown reported an encouraging 16% increase in gold production while
Blyvoor was stable at 40 477 oz and ERPM was 12% down, mainly as a result in a
8% drop in grade from underground.
Financial
While Group revenue increased by 22% to R642.1 million mainly as a result of
the weaker Rand, Group cash operating profit was 43% lower at R76.2 million,
reflecting a 44% increase in total cash operating costs to R565.9 million.
Revenue from the South African operations was 10% higher at R406.2 million.
After accounting for cash operating costs - 11% higher at R329.0 million -
cash operating profit was 3% higher at R77.2 million. By contrast, revenue
from the Australasian operations was 50% higher at R235.9 million but after
accounting for a 140% increase in cash operating costs to R236.9 million, a
R1.0 million cash operating loss was recorded, compared with a cash operating
profit of R58.0 million in the previous quarter. Vatukoula and Tolukuma remain
in loss-making positions.
Corporate developments
It was very pleasing to report, after quarter-end, that DRDGOLD"s Black
Economic Empowerment ("BEE") partner, KhumoGold, intends to exercise its
option to increase by 11% the 15% stake it currently holds in DRDGOLD SA, and
to place 6% of the resulting 26% stake in an employee trust. There will be a
number of desirable consequences from this, not least a broader BEE base
through employee participation in ownership of DRDGOLD SA and DRDGOLD"s early
attainment of the Mining Charter"s 10-year, 26% BEE equity target.
DRDGOLD"s offer to exchange up to $66 million of new 6% Senior Convertible
Notes due 2010 (New Notes) for its outstanding 6% Senior Convertible Notes due
2006 (Old Notes) expired on 16 October 2006. Due to limited tendering for the
New Notes, the company will repay the Old Notes in full in November 2006. The
company has arranged funding of $35 million, which together with cash on hand
will be used to settle this liability in full.
Looking ahead
The skip-cage incident at Vatukoula during October (see Vatukoula commentary)
was an unfortunate and serious setback to Emperor"s plan to achieve 350 000 oz
of gold production at a cash operating cost of US$350/oz by June 2007. The
South African operations are on the way to attaining an acceptable level of
stability, notwithstanding the slower than expected volume ramp-up at Blyvoor
resulting from repairs to No 6 shaft following the shaft accident there, and
underground yield issues at ERPM arising from increased seismicity and
consequent safety concerns.
Mark Wellesley-Wood
Chief Executive Officer
NOTE REGARDING FINANCIAL INFORMATION
The condensed consolidated financial statements below are prepared in
accordance with International Financial Reporting Standards ("IFRS").
CONSOLIDATED Quarter Quarter Quarter
Income statement Sep 06 Jun 06 Sep 05
(Unaudited) R m R m R m
Continuing operations
Gold and silver revenue 642.1 526.3 295.2
Cash operating costs (565.9) (393.6) (226.4)
Cash operating profit 76.2 132.7 68.8
Corporate administration and
other expenses (56.7) (36.8) (32.6)
Share-based payments (3.4) (6.5) -
Exploration costs (4.2) (5.9) -
Care and maintenance cost (2.1) (41.1) (2.1)
Cash profit from operations 9.8 42.4 34.1
Retrenchment costs 1.0 (4.6) (1.0)
Investments income (4.5) (42.3) 13.2
Finance charge (18.8) (13.3) (11.7)
Net operating (loss)/profit (12.5) (17.8) 34.6
Rehabilitation (3.3) (23.8) (0.8)
Depreciation (59.5) (29.3) (11.5)
(Loss)/profit on financial
instruments (4.2) 49.1 (0.5)
Movement in gold process 12.8 (1.8) 18.3
(Loss)/profit before taxation (66.7) (23.6) 40.1
Taxation (16.4) (16.5) (17.2)
Deferred taxation 2.6 (9.7) 1.5
(Loss)/profit after taxation (80.5) (49.8) 24.4
Profit/(loss) on sale of
assets/investment - 92.0 (3.3)
Impairments - 68.1 (28.9)
Loss from associates - - (25.5)
Discontinued operations
Profit/(loss) for the period
from discontinued operations 0.1 24.7 (3.6)
Minority interest 14.3 0.1 -
Net(loss)/profit (66.1) 135.1 (36.9)
Headline loss per share-cents
from continuing operations (20.6) (7.8) (1.6)
from total operations (20.6) (15.6) (0.4)
Basic (loss)/profit per share-cents
from continuing operations (20.6) 34.6 (11.1)
from total operations (20.6) 42.3 (12.3)
Calculated on the weighted average
ordinary shares issued of: 321092406 319411281 299847342
Diluted headline loss per
share-cents (20.6) (15.6) (0.4)
Diluted basic (loss)/profit per
share-cents (20.6) 42.3 (12.3)
SEGMENTAL INFORMATION FOR THE SEPTEMBER 2006 QUARTER
South Africa Australasia Other
Rm Rm Rm
Gold and silver revenue 406.2 235.9 -
Cash operating costs (329.0) (236.9) -
Cash operating profit/(loss) 77.2 (1.0) -
Corporate administration and
other expenses (14.9) (29.6) (12.2)
Share based payments - - (3.4)
Exploration costs - (4.2) -
Care and maintenance costs - - (2.1)
Cash profit/loss from
operations 62.3 (34.8) (17.7)
Retrenchment costs - 1.0 -
Investment income 1.4 2.4 (8.3)
Finance charge (2.2) (11.0) (5.6)
Net operating profit/(loss) 61.5 (42.4) (31.6)
Rehabilitation (2.3) (0.2) (0.8)
Depreciation (19.5) (47.3) 7.3
(Loss)/profit on financial
instruments - (4.2) -
Movement in gold process 0.8 12.0 -
Profit/(loss) before taxation 40.5 (82.1) (25.1)
Taxation (0.1) (16.3) -
Deferred taxation - 2.6 -
Profit/(loss) after taxation 40.4 (95.8) (25.1)
SEGMENTAL INFORMATION FOR THE JUNE 2006 QUARTER
South Africa Australasia Other
Rm Rm Rm
Gold and silver revenue 369.6 156.7 -
Cash operating costs (294.9) (98.7) -
Cash operating profit 74.7 58.0 -
Corporate administration and
other expenses (16.7) (35.8) 15.7
Share based payments - - (6.5)
Exploration costs - (5.9) -
Care and maintenance costs - (39.9) (1.2)
Cash profit/loss from
operations 58.0 (23.6) 8.0
Retrenchment costs - (4.6) -
Investment income 2.1 19.8 (64.2)
Finance charge (2.6) (11.7) 1.0
Net operating profit/(loss) 57.5 (20.1) (55.2)
Rehabilitation (16.1) 0.2 (7.9)
Depreciation (22.4) (12.1) 5.2
(Loss)/profit on financial
instruments (17.4) 58.3 8.2
Movement in gold process (1.2) (0.6) -
Profit/(loss) before taxation 0.4 25.7 (49.7)
Taxation (1.7) (14.8) -
Deferred taxation - (9.7) -
Profit/(loss) after taxation (1.3) 1.2 (49.7)
CONDENSED CONSOLIDATED As at As at As at
Balance Sheets 30 Sep 06 30 Jun 06 30 Sep 05
Rm Rm Rm
Employment of Capital
Net mining assets 2 016.1 1 850.6 735.8
Investments 39.0 38.9 5.1
Investments in associates - - 100.7
Environmental trust funds 62.9 60.4 44.1
Other non-current assets 245.7 219.3 217.0
Current assets 913.7 820.6 342.0
Inventories 260.5 208.7 109.3
Trade and other receivables 123.8 102.1 56.5
Derivative instruments 12.2 20.8 -
Cash and cash equivalents 517.2 489.0 176.2
Non-current assets classified
as held for sale 15.0 15.0 -
3 292.4 3 004.8 1 444.7
Capital employed
Shareholders equity 1 093.3 1 015.3 517.8
Shareholders interest 850.2 782.2 512.0
Minority shareholders interest 243.1 233.1 5.8
Long-term borrowings 335.9 403.0 428.6
Post retirement and other
employee benefits 20.7 24.4 3.3
Rehabilitation 332.4 322.3 129.9
Deferred mining and
income taxes 96.2 92.0 41.5
Current liabilities 1 413.9 1 147.8 323.6
Trade and other payables 541.3 407.5 247.2
Derivative instruments 199.3 183.4 4.2
Current portion of long-term
borrowings 673.3 556.9 72.2
3 292.4 3 004.8 1 444.7
CONDENSED Quarter Quarter Quarter
Statement of changes Sep 06 Jun 06 Sep 05
in equity (Unaudited) Rm Rm Rm
Balance at the beginning of
the period 1 015.3 612.2 483.1
Share capital issued 41.5 35.5 57.3
for acquisition finance
and cash 40.0 27.9 60.3
for share options exercised 0.3 2.4 -
increase in share-based payment
reserve 3.4 6.5 -
for costs (2.2) (1.3) (3.0)
Net (loss)/profit attributed to
ordinary shareholders (66.1) 135.1 (36.9)
Net loss attributed to minority
shareholders (14.3) (0.1) -
Increase in minorities - 218.6 -
Currency translation adjustments
and other 116.9 14.0 14.3
Balance as at the end of the
period 1 093.3 1 015.3 517.8
Reconciliation of headline loss
Net (loss)/profit (66.1) 135.1 (36.9)
Adjusted for:
Impairment of assets and
investments - (68.1) 28.9
(Gain)/loss on discontinued
operations (0.1) (24.7) 3.6
(profit)/loss on sale of assets - (92.0) 3.3
Headline loss (66.2) (49.7) (1.1)
CONDENSED CONSOLIDATED Quarter Quarter Quarter
Cash Flow Statement Sep 06 Jun 06 Sep 05
(Unaudited) Rm Rm Rm
Net cash (out)/in flow from
operations (11.5) 19.0 20.6
Working capital changes 71.2 (89.7) (28.6)
Net cash outflow from investing
activities (105.8) (95.2) (30.7)
Net cash in/(out) flow from
financing activities 38.4 512.5 (29.7)
(Decrease)/increase in cash and
cash equivalents (7.7) 346.6 (68.4)
Translation adjustment 35.9 9.4 3.4
Opening cash and cash
equivalents 489.0 133.0 241.2
Closing cash and cash
equivalents 517.2 489.0 176.2
Reconciliation of net cash (out)/in
flow from operations
Net operating (loss)/profit
from continued operations (12.5) (17.8) 34.6
Net operating profit/(loss) from
discontinued operations 0.1 24.7 (3.6)
(12.4) 6.9 31.0
Adjusted for: interest provision
on convertible bond 7.0 7.3 7.2
Amortisation of convertible cost 1.7 4.3 1.9
Financial instruments 4.2 46.9 0.5
Unrealised foreign exchange
loss/(gain) 16.4 (15.3) (1.6)
Growth in Environmental Trust
funds (0.8) (1.5) (1.2)
Other non cash items 3.4 6.5 -
Interest paid (12.2) (14.4) (4.4)
Taxation paid (18.8) (21.7) (12.8)
Net cash (out)/in flow from
operations (11.5) 19.0 20.6
KEY OPERATING AND FINANCIAL RESULTS (Unaudited)
AUSTRALASIAN OPERATIONS
Porgera (20% of the Quarter Quarter % Quarter
Joint Venture) Sep 06 Jun 06 Change Sep 05
Ore milled t"000 262 305 (14) 281
Yield g/t 3.48 2.77 26 4.80
Gold produced oz 29 379 27 215 8 43 395
kg 913 846 8 1 350
Cash operating costs
US$/oz 401 173* (132) 264
ZAR/kg 92 539 36 200* (156) 55 383
ZAR/t 322 100 (221) 266
Cash operating profit
US$ m 4.5 11.7 (62) 7.8
ZAR m 32.2 75.5 (57) 51.1
Capital expenditure (net)
US$ m 1.8 5.8 69 2.0
ZAR m 12.9 37.0 66 12.9
* Cash operating cost for the June 2006 quarter included deferred stripping
costs capitalized during the quarter. Cash operating costs normalized for the
June 2006 quarter was US$397/oz (R83 013/kg).
Attributable gold production rose by 8% to 29 379 ounces ("oz") mainly as a
result of a 26% increase in yield to 3.48 grams per ton ("g/t"). However,
production was affected by unplanned mill downtime, suspension of mining in
the mini-pit to allow construction of the lower buttress, and unseasonably
high rainfall. Low-grade long- term stockpiles provided lower than expected
grades but this was offset by higher grade open pit and underground ore.
Remediation of the west wall cutback continues and is 65% complete. The
Porgera Joint Venture expects mining of ore in the pit to begin later in 2006,
which should result in improved production levels and cash operating costs.
Cash operating costs were US$401/oz for the quarter.
Tolukuma Quarter Quarter % Quarter
Sep 06 Jun 06 Change Sep 05
Ore milled t"000 43 45 (4) 47
Yield g/t 8.77 8.58 2 9.40
Gold produced oz 12 141 12 408 (2) 14 199
kg 377 386 (2) 442
Cash operating costs
US$/oz 835 761 (10) 441
ZAR/kg 192 634 157 850 (22) 92 466
ZAR/t 1 689 1 354 (25) 870
Cash operating (loss)/profit
US$ m (3.0) (0.3) (900) 0.4
ZAR m (20.8) (1.9) (995) 2.9
Capital expenditure (net)
US$ m 2.0 0.6 (233) 1.1
ZAR m 14.3 3.8 (276) 7.3
Gold production was 2% lower at 12 141 oz, reflecting a 4% decline in ore
milled to 43 000 tonnes ("t"). Yield was 2% higher at 8.77 g/t.
Production was affected by the suspension of stoping operations in the D2
decline/Gulbadi area on 31 August at the instruction of the new General
Manager in order to address safety issues. At the time that stoping operations
were suspended in this area no alternative stoping blocks were accessible for
production.
ROM stocks were nil and a decision was made to shut the mill down until
sufficient ROM stocks and ore flows could be produced to sustain milling
operations. The mill re-started on 2 September and ROM stocks have since been
maintained at more than 600t of ore.
Gold flows from underground during September were from development headings in
Zine 1515 North and South and Zine 1535 South and old gold recovered from the
P5 and P2 decline areas. Surface stocks of low grade ore supplemented
underground ore flows to maintain the mill profile.
Due to the mill shutdown, cash operating costs rose to US$835/oz.
Vatukoula ("Old" Emperor) Quarter Quarter % Quarter
100% consolidated from Sep 06 Jun 06 Change Sep 05
6 April 2006(Previously
39.52% attributable)
Ore milled t"000 80 23 248 54
Yield g/t 6.74 2.78 142 5.94
Gold produced oz 17 338 2 053 742 10 326
kg 539 64 742 321
Cash operating cost #
US$/oz 642 515 (25) 536
ZAR/kg 148 006 112 281 (32) 112 413
ZAR/t 997 312 (219) 681
Cash operating loss #
US$ m (1.7) (2.4) 29 (1.6)
ZAR m (12.4) (15.6) 21 (10.3)
Cash operating loss
attributable to DRDGOLD
US$ m (1.7) (2.4) 29 -
ZAR m (12.4) (15.6) 21 -
Capital expenditure (net) #
US$ m 5.6 3.6 (56) 2.3
ZAR m 40.0 23.3 (72) 14.8
Capital expenditure (net)
attributable to DRDGOLD
US$ m 5.6 3.6 (56) -
ZAR m 40.0 23.3 (72) -
# Represents total operation
Vatukoula produced 17 338 oz of gold for the quarter at a grade of 6.74g/t, a
significant improvement on the previous quarter"s 2 053 oz at 2.78 g/t which
was a consequence of a scheduled shutdown and the start of the Accelerated
Development Programme.
Results for the quarter under review, however, were negatively influenced by a
number of factors: geological grade estimation and reconciliation issues; on-
going labour negotiations regarding the proposed 30-day continuous operating
policy, the stoppage of Philip Shaft for four weeks in September to carry out
vital repairs in the shaft; and delayed commissioning of some key heavy mobile
equipment and the 18 level underground workshop.
As previously announced, a skip-cage that fell down Philip Shaft during post-
maintenance testing on 14 October caused damage to the surface winder
mechanism. No serious injuries occurred as safety procedures had been
followed. A comprehensive investigation has begun to establish the cause of
the failure. It is likely that Philip Shaft will remain closed for some time
as investigations continue and repairs are undertaken.
Cash operating costs for the quarter were US$642/oz.
SOUTH AFRICAN OPERATIONS
Blyvoor Quarter Quarter % Quarter
Sep 06 Jun 06 Change Sep 05
Ore milled
Underground t"000 182 178 2 173
Surface t"000 966 920 5 873
Total t"000 1 148 1 098 5 1 046
Yield
Underground g/t 5.15 5.26 (2) 6.23
Surface g/t 0.33 0.33 - 0.33
Total g/t 1.10 1.13 (3) 1.30
Gold produced
Underground oz 30 125 30 124 - 34 626
kg 937 937 - 1 077
Surface oz 10 352 9 806 6 9 196
kg 322 305 6 286
Total oz 40 477 39 930 1 43 822
kg 1 259 1 242 1 1 363
Cash operating costs
Underground US$/oz 627 607 (3) 429
ZAR/kg 144 491 126 037 (15) 90 021
ZAR/t 744 663 (12) 560
Surface US$/oz 293 276 (6) 230
ZAR/kg 67 565 57 289 (18) 48 269
ZAR/t 23 19 (19) 16
Total US$/oz 542 526 (3) 387
ZAR/kg 124 817 109 155 (14) 81 260
ZAR/t 137 123 (11) 106
Cash operating profit
US$ m 3.2 4.4 (27) 2.3
ZAR m 23.0 28.5 (19) 14.8
Capital expenditure (net)
US$ m 2.7 2.2 (23) 2.2
ZAR m 19.1 14.3 (34) 14.3
Total gold production was slightly higher at 40 477oz as a consequence of a 6%
increase in gold produced from surface sources to 10 352 oz.
Underground gold production was unchanged at 30 125 oz. While a 2% increase in
ore milled to 182 000 t and a 2% decline in yield to 5.15 g/t reflect the
underground operation"s planned shift to higher volumes and lower grade,
volume ramp-up has been slower than expected due both to essential winder
repairs and repairs to No 6 Shaft damaged when a water column was dislodged as
a result of a Escom power failure. Opening up and development associated with
the ramp-up proceeded on schedule and the 70 000 t per month target is now
expected to be achieved in January 2007.
Drilling continued on the Alpha Dyke to determine its extent and geological
structure.
Higher surface gold production was primarily the result of a 5% increase in
throughput from the slimes dam project to 966 000 t following the successful
relocation of a pump station. Yield was unchanged at 0.33 g/t.
Total cash operating costs were 3% higher at US$542/oz, mainly as a
consequence of higher winter power tariffs and No 6 Shaft repairs. Underground
cash operating costs rose by 3% to US$627/oz while those for the surface
operations were 6% higher at US$293/oz.
Crown Quarter Quarter % Quarter
100% consolidated from Sep 06 Jun 06 Change Sep 05
1 Dec 2005(Previously
40% attributable)
Ore milled t"000 2 056 2 070 (1) 894
Yield g/t 0.42 0.36 17 0.43
Gold produced oz 27 521 23 823 16 12 288
kg 856 741 16 382
Cash operating costs #
US$/oz 423 489 13 373
ZAR/kg 97 453 101 456 4 78 248
ZAR/t 41 36 (12) 33
Cash operating profit #
US$ m 5.5 3.5 57 2.0
ZAR m 39.1 22.6 73 12.8
Cash operating profit
attributable to DRDGOLD
US$ m 5.5 3.5 57 -
ZAR m 39.1 22.6 73 -
Capital expenditure (net) #
US$ m 1.0 1.6 38 0.5
ZAR m 7.1 10.6 33 3.1
Capital expenditure (net)
attributable to DRDGOLD
US$ m 1.0 1.6 38 -
ZAR m 7.1 10.6 33 -
#Represents total operation
A 17% increase in yield to 0.42 g/t resulted in a 16% increase in gold
production to 27 521oz. Ore milled was stable at 2 056 000 t.
Higher production resulted in a 13% decline in cash operating costs to
US$423/oz.
Work to upgrade both the residue and CMR pipelines was completed on schedule
and on budget during the quarter. The upgrades are expected to result in
increased tonnages due to improved availability and considerably reduced
spillage-associated environmental risk.
ERPM Quarter Quarter % Quarter
100% consolidated from Sep 06 Jun 06 Change Sep 05
1 Dec 2005(Previously 40%
attributable)
Ore milled
Underground t"000 76 77 (1) 34
Surface t"000 435 474 (8) 206
Total t"000 511 551 (7) 240
Yield
Underground g/t 7.49 8.17 (8) 7.88
Surface g/t 0.36 0.41 (12) 0.43
Total g/t 1.42 1.49 (5) 1.50
Gold produced
Underground oz 18 325 20 223 (9) 8 719
kg 570 629 (9) 271
Surface oz 5 016 6 205 (19) 2 881
kg 156 193 (19) 90
Total oz 23 341 26 428 (12) 11 600
kg 726 822 (12) 361
Cash operating costs#
Underground US$/oz 510 479 (6) 400
ZAR/kg 117 481 99 514 (18) 83 755
ZAR/t 880 813 (8) 660
Surface US$/oz 599 537 (12) 449
ZAR/kg 137 949 111 451 (24) 94 080
ZAR/t 49 45 (9) 41
Total US$/oz 529 493 (7) 412
ZAR/kg 121 879 102 316 (19) 86 319
ZAR/t 173 153 (13) 130
Cash operating profit #
US$ m 2.1 3.7 (43) 0.7
ZAR m 15.1 23.6 (36) 4.9
Cash operating profit
attributable to DRDGOLD
US$ m 2.1 3.7 (43) -
ZAR m 15.1 23.6 (36) -
Capital expenditure (net) #
US$ m 1.1 0.7 (57) -
ZAR m 8.1 4.8 (69) 0.2
Capital expenditure (net)
attributable to DRDGOLD
US$ m 1.1 0.7 (57) -
ZAR m 8.1 4.8 (69) -
# Represents total operation.
Total gold production was 12% lower at 23 341oz, reflecting a 9% decrease in
gold produced from underground to 18 325 oz and a 19% decrease in gold
produced from the Cason surface operation to 5 016 oz respectively.
Lower underground gold production resulted primarily from an 8% decline in
underground yield to 7.49 g/t. This was as a consequence of a reduction in the
rate of extraction from the seismicity-affected, high-grade western longwalls
in the interests of safety and a commensurate increase in volumes mined from
the lower-grade, opened-up areas above 70 level.
Work to install a second compressor at Far East Vertical ("FEV") Shaft, at a
cost of R5.8 million, is scheduled to begin in November, significantly
reducing the current risk associated with dependence on a single compressor.
The underground plugging project to isolate current mining operations from
rising water levels is on schedule and should be completed during June 2007.
Lower gold production from the Cason surface operation resulted from an 8%
decline in surface ore milled to 435 000 t and a 12% decline in surface yield
to 0.36 g/t. Lower throughput was as a consequence of the impact on milling
circuit optimisation of ancillary equipment failure - subsequently addressed -
that followed commissioning of two new mills at the Knights plant.
Total cash operating costs rose by 7% to US$529/oz. Underground cash operating
costs were 6% higher at US$510/oz and surface cash operating costs 12% higher
at US$599/oz.
CASH OPERATING COSTS RECONCILIATION
AUSTRALASIAN OPERATIONS (R000 unless otherwise stated)
Vatukoula Tolukuma Porgera Total
JV (20%)
Total cash costs
Sep 06 Qtr 95 607 72 686 84 853 253 146
Jun 06 Qtr 64 962 74 853 63 648 203 463
Sep 05 Qtr 79 029 45 508 68 750 193 287
Movement in gold in process
Sep 06 Qtr (3 215) 11 241 3 968 11 994
Jun 06 Qtr 7 288 5 961 (13 802) (553)
Sep 05 Qtr 2 696 349 17 374 20 419
Less: Exploration, production
taxes, rehabilitation and other
Sep 06 Qtr - 4 437 1 325 5 762
Jun 06 Qtr 51 897 6 908 3 343 62 148
Sep 05 Qtr (61) 1 617 1 727 3 283
Less: Retrenchment costs
Sep 06 Qtr (1 009) - - (1 009)
Jun 06 Qtr 4 644 - - 4 644
Sep 05 Qtr - - - -
Less: Corporate and general
administration costs
Sep 06 Qtr 13 626 6 867 3 008 23 501
Jun 06 Qtr 8 523 12 976 15 878 37 377
Sep 05 Qtr 2 085 3 370 9 630 15 085
Cash operating costs
Sep 06 Qtr 79 775 72 623 84 488 236 886
Jun 06 Qtr 7 186 60 930 30 625 98 741
Sep 05 Qtr 79 701 40 870 74 767 195 338
Gold produced (kgs)
Sep 06 Qtr 539 377 913 1 829
Jun 06 Qtr 64 386 846 1 296
Sep 05 Qtr 709 442 1 350 2 501
Cash operating costs (R/kg)
Sep 06 Qtr 148 006 192 634 92 539 129 517
Jun 06 Qtr 112 281 157 850 36 200 76 189
Sep 05 Qtr 112 413 92 466 55 383 78 104
Cash operating costs (US$/oz)
Sep 06 Qtr 642 835 401 562
Jun 06 Qtr 515 761 173 365
Sep 05 Qtr 536 441 264 411
SOUTH AFRICAN OPERATIONS(R000 unless otherwise stated)
Crown ERPM Blyvoor Total
Total cash costs
Sep 06 Qtr 89 650 94 418 162 201 346 269
Jun 06 Qtr 79 710 91 670 142 808 314 188
Sep 05 Qtr 78 816 83 332 118 269 280 417
Movement in gold in process
Sep 06 Qtr 241 (38) 587 790
Jun 06 Qtr 1 589 (947) (1 851) (1 209)
Sep 05 Qtr 66 477 547 1 090
Less: Exploration, production
taxes, rehabilitation and other
Sep 06 Qtr 2 643 1 960 1 374 5 977
Jun 06 Qtr 2 036 1 774 1 129 4 939
Sep 05 Qtr 729 2 291 4 411 7 431
Less: Retrenchment costs
Sep 06 Qtr - - - -
Jun 06 Qtr - - - -
Sep 05 Qtr - - - -
Less: Corporate and general
administration costs
Sep 06 Qtr 3 828 3 936 4 270 12 034
Jun 06 Qtr 4 084 4 845 4 258 13 187
Sep 05 Qtr 3 426 3 658 3 647 10 731
Cash operating costs
Sep 06 Qtr 83 420 88 484 157 144 329 048
Jun 06 Qtr 75 179 84 104 135 570 294 853
Sep 05 Qtr 74 727 77 860 110 758 263 345
Gold produced (kgs)
Sep 06 Qtr 856 726 1 259 2 841
Jun 06 Qtr 741 822 1 242 2 805
Sep 05 Qtr 955 902 1 363 3 220
Cash operating costs (R/kg)
Sep 06 Qtr 97 453 121 879 124 817 115 821
Jun 06 Qtr 101 456 102 316 109 155 105 117
Sep 05 Qtr 78 248 86 319 81 260 81 784
Cash operating costs (US$/oz)
Sep 06 Qtr 423 529 542 503
Jun 06 Qtr 489 493 526 507
Sep 05 Qtr 373 412 387 444
EXPLORATION AND DEVELOPMENT
AUSTRALASIAN OPERATIONS
FIJI
Vatukoula
Underground exploration was concentrated at the Philip Shaft section which is
now the main focus of current operations under the new "Accelerated
development and training plan". Exploration continued to focus on the Basala
project, testing for ore bodies in the footwall of Prince William flatmake.
This work had previously defined 2 new structures to date, the Prince William
Footwall ("PW HW") and Basala #1 flatmakes ("FM"). Down-dip and strike
extensions are currently being tested.
Fiji Regional
No regional exploration work was carried out elsewhere in Fiji. A re-
assessment of feasibility of the Tuvatu Resource area is being undertaken and
an aggressive new regional programme for both Tuvatu and Vanua Levu is under
review.
PAPUA NEW GUINEA
Tolukuma
Exploration in the quarter has focused on the continued delineation of the
Zine structure and drilling in the Fundoot area. Ridge and spur sampling and
trenching has also been completed to generate targets to the south and west of
the Degot/Fundoot area. Drilling has continued to intersect encouraging
results from both the Fundoot and Zine areas.
Exploration activities in the October to December quarter will continue to
focus on delineation of the Zine and Fundoot structures. Minor work will be
completed on defining further anomalism encountered to the south of Fundoot
and several holes will target the Triple M structure east of the Zine and
Gulbadi Red structures
Zine Exploration & Underground Development
Exploration at Zine has continued in an effort to define the lateral and
vertical extent of mineralisation on the Zine Mid North pod. Drilling has also
been completed on the Zine far North pod however results have not been as
encouraging from this area. Work has yet to commence on the Zine south pod, as
the D2 decline has had limited access to this area, whilst safety and refuge
chambers are installed at the 1385 and 1395 levels
Zine Drilling
Drill results from Zine have intersected broader lower levels of
mineralisation at the bottom of the Zine structure between 1350 and 1330 RL.
This represents the coalescence of the PK and Zine structures and shows that
the PK structure is also continuous for at least 200m vertical.
ZINE DRILL RESULTS FROM JULY-SEPTEMBER*
Hole No Intersection Comments RL Recovery %
TU073 2.9m @ 21.2 g/t Au Zine Mid North 1362 100
and 51.9 g/t Ag
TU074 1.4m @ 0,86 g/t Au Zine Mid North 1486 55
and 8.6 g/t Ag
TU075 2.0m @ 12.51 g/t Au Zine Mid Area 1419 82
and 38.7 g/t Ag
TU076 4.0m @ 1.96 g/t Au Zine Mid North 1322 100
and 27 g/t Ag
TU077 No significant results Zine Mid North 1543 92
TU078 0.9m @ 2.7 g/t Au Barren Zone 1374 100
and 2.0 g/t Ag
TU079 6.6m @ 5.1 g/t Au Zine and PK 1390 94
and 24.8 g/t Ag intersect
TU080 3.5m @ 2.9 g/t Au Zine Mid North 1322 100
and 6.4 g/t Ag
TU081 1.3m @ 4.0 g/t Au Zine Mid North 1459 68
and 27.6 g/t Ag
TU082 1.7m @ 10.8 g/t Au Zine Mid North 1347 100
and 30.9 g/t Ag
TU083 No significant results Zine Far North 1421 100
* Assay results are uncut; Intersection width is not true width.
Fundoot
The upper Fundoot zone has been the target of drilling since July 2006.
Fundoot is located approximately 100m south of the Degot portal at the end of
the current pit workings which exist at Tolukuma. Trenching in the area has
exposed several of these veins which have returned results up to 404g/t Au
from isolated rock chip samples. Sporadic high grades and visible gold have
been commonly noted. Drilling during the quarter has intersected encouraging
grades of mineralization in a number of holes:
PNG: Regional Programme
The company maintains eleven Exploration Licenses ("EL") with seven tenements
granted, namely EL683, 1297, 1379, 1284, 1271, 1352 and 1366; and four
tenements, EL580, 894, 1264 and 1327 awaiting renewal. A major technical
review of all exploration tenements was completed last quarter. The review
has highlighted and ranked over 30 separate prospects with several key
prospects at an advanced stage requiring major drilling and exploration. Field
work in EL1352 and EL580 commenced during this quarter. Weather problem and
the unavailability of helicopters greatly restricted the scope of work however
exploration conducted to date consisted of 9,600m of creek mapping, soil and
rock chip sampling. A three month work program was completed at EL1284 last
quarter. Data interpretation is in progress.
Porgera Joint Venture
The Stage Six program was completed last quarter and work continued on
modeling the Stage 6 data and preliminary estimation work was also conducted.
The Porgera Deeps drilling programme is in progress.
Regionally, drilling planned at Tupagai is awaiting finalisation of the drill
contract. Landowner clearances for drill pads and access tracks were obtained
during July. Assays from earlier rock chip sampling at Tupagai returned some
significant values. Target areas have now been identified for further
assessment. Results of earlier field work at Liawin area have also been
encouraging.
Elsewhere, three target areas have been identified and follow-up field work
has commenced. The targets identified were based on coincident geochemical and
geophysical anomalies in favourable litho structural positions within the
Porgera Transfer Zone.
SOUTH AFRICAN OPERATIONS
ERPM
ERPM Extension 1 (Sallies)
The first exploration borehole was completed and surveyed to assist with
geological interpretation. The borehole was sampled under the supervision of
an external geological consultant and assayed at an independent laboratory
with check assays conducted at a second laboratory. The hole assayed at 26.7
g/t / 162 (4324cmgt) over full channel width. A second borehole intersected
reef, but still requires to be sampled and surveyed.
ERPM Extension No. 2
A Public Participation meeting was held on the 4th August and the
Environmental Management Programme ("EMP") has been completed and submitted to
the DME on 22nd August 2006. The DME has 120 days to approve or reject the
application from date of EMP submission which equates to 20th December 2006.
BLYVOORUITZICHT
Savuka Exploration - Alpha Dyke
Drilling of the hole has encountered numerous problems cumulating in the drill
bit being lost in the hole resulting in the hole being severely deflected
(determined by a down the hole survey). This has necessitated the re-drilling
of the hole.
ARGONAUT
A Public Participation meeting for the Argonaut extension was held on the 28th
July 2006. The EMP has been completed and submitted to the DME on 22nd August
2006. The DME has until 20th December 2006 to approve or reject the
application.
INVESTOR RELATIONS
DIRECTORS - (*British)(**Australian)(***American)
Executives:
MM Wellesley-Wood (Chief Executive Officer)*
JWC Sayers (Chief Financial Officer)
Non-executives:
J Turk ***
Independent non-executives:
DJM Blackmur** (Senior Non-Executive Director); GC Campbell*(Non-Executive
Chairman); RP Hume
Group Company Secretary:
TJ Gwebu
INVESTOR RELATIONS
For further information, contact Ilja Graulich at:
Tel: (+27-11) 219-8700, Fax: (+27-11) 476-2637,
e-mail: ilja.graulich@za.drdgold.com,
website: http://www.drdgold.com
Ebsco House 4, 299 Pendoring Avenue,
Blackheath, Randburg, South Africa.
PO Box 390,
Maraisburg, 1700,
South Africa.
2 November 2006
Johannesburg
Date: 02/11/2006 08:00:26 AM Produced by the JSE SENS Department
