DRDGOLD LTD — Interim / Quarterly Report 2014

Sep 2, 2014

6-K 1 drdreport.htm HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" Page 1 SECURITIES AND EXCHANGE COMMISSION

SHAREHOLDERS

FOR THE FOURTH QUARTER AND YEAR ENDED 30 JUNE 2014

DEARSHAREHOLDER

While the company’s results for FY2014 reflect the negative impact of previously reported problems experienced during the year relating to the integration of Ergo’s new High Grade Section and existing Low Grade Section, it is very pleasing to report that, in the final quarter of the year, a significant increase in production and revenue, quarter on quarter, was recorded.

These improvements flowed both from improved volume throughput and a significant improvement in metallurgical efficiencies. The response of the Low Grade Section was immediate following the suspension of the High Grade Section; carbon efficiencies and dissolved losses returned to former steady state levels and, in the month of June, gold production was the highest achieved for the 12-month period, at 388kg.

We previously reported a small number of planned engineering upgrades to the High Grade Section, mainly to mitigate the effect of potential power interruptions and to better manage the water balance in the event of a higher than normal influx of rainwater. These are all on schedule and ready for test work to begin. We also reconfigured the plant to allow one third of total throughput to be separately leached, loaded and eluted. This will be the base case against which the impact of the Flotation and Fine-grind (“FFG”) section will be tested.

Initially, we planned to begin test work in September so as not to incur the cost of power utility Eskom’s winter tariff; however, the June quarter’s improved production and cashflow meant we were able to start in the middle of August.

RESERVES AND RESOURCES DRDGOLD’s total attributable mineral reserves were 12% lower in 2014 at 1.5Moz while total attributable mineral resources were down less than 1% at 37.04Moz.
Q4 FY2014 V Q3 FY2014 OPERATING REVIEW Gold produced was 13% higher quarter on quarter at 34 143oz, reflecting improvements both in throughput and average yield. A 5% increase in throughput to 6 131 000t resulted from fewer power- and weather-related stoppages than were experienced in the previous quarter. These factors, together with improvements in loaded carbon efficiencies, also contributed to improved plant operating conditions, leading to a 7% rise in the average yield to 0.173g/t. Gold sold was 9% higher at 32 857oz, a consequence of higher gold production. Cash operating costs were 8% lower at R379 039/kg, due also to the increase in gold production. All-in sustaining cash costs were 27% lower at R339 315/kg. Capital expenditure was 30% lower at R20.2 million, reflecting completion of the FFG capital project.The FY2014 reserve and resource information was prepared in compliance with the South African Code for Reporting Exploration Results, Mineral resource and Mineral reserves (“SAMREC”) by DRDGOLD’s designated competent person, Mr V Labuschagne, who is an employee of DRDGOLD.

CORPORATE ACTIVITY After year-end, DRDGOLD shareholders were informed that the company had entered into a R220 million agreement to dispose of the underground mining and prospecting rights held by East Rand Proprietary Mines Limited (“ERPM”), and certain other assets and liabilities in the related mining areas with a carrying value of (R11.6 million), to ERPM South Africa Holdings Proprietary Limited, a company nominated by Walcot Capital.

FINANCIAL REVIEW Higher production and sales offset the impact of a 4% decline in the average Rand gold price received to R437 770/kg and, as a result, revenue increased by 5% quarter on quarter to R447.4 million. After accounting for a 5% rise in net operating costs to R394.8 million, due mainly to the processing of sand material through the City Deep plant and the effectWith a view to right-sizing the corporate footprint, and also with a view to reducing costs, we have been engaged in recent months in an exercise to restructure the executive and senior management. The corporate complement has now been reduced by 26%, and we expect to realise

2 DRDGOLD LIMITED REPORT TO SHAREHOLDERS FOR THE FOURTH QUARTER AND YEAR ENDED 30 JUNE 2014

The management and staff of DRDGOLD did not earn any performance bonuses at financial year-end.

The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports and the requirements of the Companies Act of South Africa. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the condensed consolidated financial statements are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements, except for the adoption of applicable revised and/or new standards issued by the International Accounting Board (refer note 2). The condensed consolidated financial statements of DRDGOLD Limited for the year ended 30 June 2014 have been reviewed by Mr J Le Roux of KPMG Inc, the group’s auditor. In their review report dated 2 September 2014, which is available for inspection at the Company’s Registered Office, KPMG Inc state that their review was conducted in accordance with the International Standard of Review Engagements 2410, Review of Interim Information Performed by the Independent Auditor of the Entity, which applies to a review of consolidated preliminary financial information, and have expressed an unmodified conclusion on the condensed consolidated financial statements.

i)The Group has adopted the new standard IFRS11 – Joint Arrangements. The Group previously applied proportionate consolidation for investmenting joint arrangements and applied equity accounting from 1 July 2013.

( C O N T I N U E D )

The Group recorded an impairment of R56.6 million for the year consisting of:– R5.3 million against the investment in Village Main Reef Limited.– R12.4 million against property plant and equipment.– R2.7 million impairment reversal against the investment in West Wits Mining South Africa Proprietary Limited.– R1.4 million against the investment in West Wits Mining Limited– R40.2 million against the investment in Rand Refinery Proprietary Limited (refer below).

LEVEL 3

R’000

These risks include, without limitation, those described in the section entitled “Risk Factors” included in our annual report for the fiscal year ended 30 June 2013, which we filed with the United States Securities and Exchange Commission on 25 October 2013 on Form 20-F. You should not place undue reliance on these forward-looking statements, which speak only as of the date thereof. We do 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. Any forward-looking statement included in this report have not been reviewed and reported on by DRDGOLD’s auditors.

RESULTS The condensed consolidated financial statements of DRDGOLD Limited for the year ended 30 June 2014 are available on the DRDGOLD Limited website as well as at the Company’s registered office.

12 DRDGOLD LIMITED REPORT TO SHAREHOLDERS FOR THE FOURTH QUARTER AND YEAR ENDED 30 JUNE 2014