DRDGOLD Ltd (DRD) 2005 Q4 法說會逐字稿

Good afternoon and welcome. This is the presentation of DRDGOLD's operating activity report for the period to June 30, the last quarter and the last six months. Many of you will have astutely missed that that does not include the financial statements. These have been delayed because of the Emperor transaction. Emperor is still to announce its financial results for the period. And so we are waiting for that to happen and then DRDGOLD will announce the final financial statements on September 21.

However we would like to take this opportunity to review the results and I'm joined today by several of my colleagues, particularly our Non-Executive Chairman, Mr. Geoffrey Campbell. Geoff has been Chairman since 2002 but I think this is only the second presentation we've been able to hold here in Johannesburg.

So a very good welcome to Geoff. To Geoff's right we have two new CEOs. Hopefully these two new CEOs are going to make my life a lot easier. The first to do that is Mr. Niel Pretorius who has now taken over as CEO of DRD SA and DRD SA is our BEE South African entity in partnership with KBH.

To Niel's right is a new appointment in the Emperor Mines, Mr. Brad Gordon, CEO of Emperor. And Brad will do his own introduction but Brad's claim to fame is not only as a mining engineer from the Kalgoorlie School of Mines, but he actually has operated and worked with two of the assets that now form the portfolio for Emperor Mines. So welcome to Johannesburg Brad and we will hear more about Australia from Brad in a minute.

To the right of Brad, Mr. John Sayers, our CFO and that concludes the team. However in the audience I would also like to welcome Advocate Palesa Ncholo representing KBH, our partners in our South African operation DRDSA. So welcome to you as well Palesa.

I will now pass over to Geoff to introduce the results and then we will go through the rest of the presentation with you and hopefully give you a fuller idea of what we've achieved and what we're planning to achieve in the very near future. Geoff.

Thank you Mark. Good morning everybody. Can you hear me clearly? Good. Right, I'm going to just do a quick introduction here. I presume I just press the button. Has everyone read that? Good, okay. The picture really paints a thousand words and following the Emperor transaction this is how the Group looks. The DRDGOLD here at the top, our South African assets in DRDGOLD South Africa with our partners Khumo Gold. And what's happened as a result of the Emperor transaction, as I say, is we now have a subsidiary Emperor Mines Limited, which is 79% owned by DRDGOLD. And herein resides the Australasian assets.

Emperor of course is a listed company on the Australian Stock Exchange so that gives some transparency on the valuation. And I am the Chairman of DRDGOLD and Emperor. And that gives us an important strategic link between those two companies.

Just some key features for the quarter. I'm sure you're probably aware, gold price up $632 per ounce. Of course that's terrible news for those who forward sold. Now DRD has long had a hedging of -- a policy of no hedging, no forward selling. But I can tell you there are a lot of smiles on the faces of people at DRDGOLD. The production story is steady. We've had some improvement in South Africa. There's some issues we've had in the Australasian assets, mainly at Porgera which is managed by Barrick. They've had a West Wall failure which has now been largely fixed. And Vatukoula, that mine has been on care and maintenance for three months following a restructuring, which we will cover later.

Not only has the gold price gone up, but costs have come down. So all in all things are really looking quite rosy at the moment. And this is exactly the sort of situation that gold miners dream of. It comes around every so often and when it does it's very good. But the lifeblood of the Company is the reserves and we've had a 35% increase in attributable reserves. And of course that's partly a function of the higher gold price.

As we've already said we've got -- the Boards of Emperor and DRDGOLD South Africa have been put in place to make them effective and appropriate for the areas that they are -- the regions in which they operate. The Emperor transaction is closed and as I've already mentioned, DRDGOLD now owns 79% of Emperor.

Okay and with that I'll hand back to Mark.

Thank you Geoff. I would now like to take the opportunity to step back a little bit. As Geoff said, in the short term we're actually on the sweet spot and I think that spot will just get sweeter. But I think there's some background as to why we are now in a good position to enjoy that continued enhancement of our margins.

DRDGOLD now, looking as a gold miner, but as a strategic gold investor with its underlying investments in Emperor and DRD SA, as a provider of capital to those businesses, but also looking to add value. And I've mentioned hub and spoke a little bit earlier on. We're very, very conscious that DRDGOLD should not look like a holding company. We know the demise of the South African mining houses. And we're looking for a model whereby the strategic advantages of the Group can be retained but still add value without producing a pyramid structure.

And to do that we see the real value add is adding the synergies across the functions. Both so that we've got sufficient skills and expertise to really focus on our areas of competitive advantage, where we can add the most value to our shareholders. But also to stay regionally focused in a fit for purpose manner both in South Africa and Australia and into any other regions that we will step.

But within that there are certain culture setting points, particularly as Geoff has just mentioned, with regard to our policy towards hedging and obviously a very strong corporate governance alignment that as you know I've learned in the school of hard knocks here in South Africa some time ago.

We have used this slide in presentations for some time. I'll make no apologies for having put it up again because for all the supposed restructuring and realignment and repositioning, we have actually analyzed this as being honest and true to our original strategy, particularly in South Africa where we -- our assets were at the older end of the spectrum, Blyvoor, ERPM. And in Australasia we added assets that were also pre-owned, where other operators either hadn't seen the value, or hadn't seen the opportunity, or had failed to actually maximize their ore bodies.

And Vatukoula is going through that same realignment. We took over the management of the Vatukoula mine in July last year and since then the restructuring, the new plan for Vatukoula, has been worked on. And I think I'd like to emphasize that this shutdown for care and maintenance was a planned shutdown. It was a planned transition against knowledge of what we needed to do with the infrastructure and the ore body and the grades. When you look at the ore reserves you will see Vatukoula has now more ounces at a higher grade. And Brad will explain a little bit more about how that's going to be put into effect.

But this area of mine extension, particularly in the rising gold price, particularly unhedged, so the upside flows through to our shareholders, is a competitive advantage. We saw that that opportunity with Porgera with the underground potential. It's extending its life and we were able to capitalize on that.

What probably has changed in this spectrum is that there is more activity at the front end. Somebody once said to me that he didn't want to join DRD as a geologist because we didn't have any geology. Well that has changed fundamentally. The springboard for a lot of that change actually was in Australia because in Tolukuma we had to learn a lot about geology - structural geology, geological controls. And indeed the recent discovery of the Zine Vein again is not just an accidental hit. It was the work -- it was the product of a lot of detailed analysis and work and it's really going to hold out a completely new future for the Tolukuma mine as well.

But in South Africa we're also beginning to get the drills turning. To the east of ERPM, an area called ERPM extension we're now exploring through that block of ground that was formerly called Sallies. And some of those early results are beginning to show that that pay channel and that opportunity extends well beyond the boundary.

We are also -- have our Argonaut permit and some time in the next couple of years we will drill that deep hole that will give us the information we will need to be able to make a thorough assessment of Argonaut.

There is also drilling activity happening at Blyvoor.

But what is happening is with the Group is that our skills and our expertise are clearly concentrated in areas of maximizing value to shareholders. You will notice there is nothing in that middle box. And there's a very good reason for that because we believe AngloGold and Barrick and Consolidated Majors are very good at operating in that area of the market. And we see our opportunity -- we see the opportunity that we can add the most value as a very clever mid-camp company is to focus our concentration on areas where we have the experience, we have the track record and the competition is a little bit stiff.

I mentioned something called hub and spoke which is something that people in organizational design refer to. Although this is schematic I would like to say that the hub is a lot smaller than it's shown there. I think at the moment the hub is about four people including me. And the concept of having focused regional companies, having cross-functional links that include expertise such as geology, metallurgy, all the areas that we've just been discussing, allows us to continue to expand the Company, both at lower risk because we have the expertise to do so, but also allows you to multiply without actually adding to that killer they call the overheads, the corporate costs. So we are looking for a structure that multiplies very easily, can be regionally focused for competitive advantage but can still provide the benefits of the skills of a larger group.

And here is an example that we did earlier. You will gather from these results that -- not that Vatukoula’ turnaround is vital to I think Brad's strategy, but it has been a challenge that DRD took on. In terms of value in ounces, obviously there are other drivers in the Group that are more important. But in terms of future opportunity Vatukoula represents one of the greatest turnarounds that the Emperor team will be taking on.

And we looked at a lot of parallels to what happened at ERPM because ERPM's turnaround which we had the support of KBH and for that time with Paseka's vision, it wasn't at all clear three or four years ago how ERPM was going to develop. Indeed the burning platform scenario was never truer than ERPM because at one stage those former contractors actually did burn the mine down. So it literally was a burning platform.

For Vatukoula the burning platform occurred about 18 months ago, as I said when we were forced to take over the management of the financial responsibility for Emperor and develop a new plan. So new strategies were developed, all centered around ore body optimization. ERPM's grades, Vatukoula's grades now at Philip Shaft all higher than they were mining previously, changing the infrastructure, closing low margin shafts and spending capital on infrastructure. Infrastructure at ERPM largely with the pumping and the new equipment and at Vatukoula heavy vehicles etc. you can't dig yourself out of a problem without spending money.

Increases in leadership capacity, Brad will describe his new team for Vatukoula. But the same thing has happened at ERPM. Fixing some of the highest costs is also affected by the strategy, and having a plan that everybody buys into and the buy-in not only of the people in the workforce but also the other stakeholders. The South African government supported ERPM with assistance on a pumping subsidy. And in Fiji, the government in Fiji made contributions to the Workers' Relief Fund; all therefore giving support to the management team's efforts.

And excess plant capacity can be used. At ERPM that meant mining the case and dump on surface. In Vatukoula it's something that we will examine as to whether some of those surface sources can be mined profitably and that's under investigation and then the normal business realignment of the non-core assets.

So this program, this process has already seen considerable results at ERPM and is now being implemented by the Emperor team at Vatukoula.

Now that little roll of the dice, I'll take you some time to think what on earth this is all about. It's actually about the last five years at DRDGOLD. And during that time we've slid down some snakes and we've climbed up some ladders. And it's quite an interesting observation of looking at the historical map as to the things that went well and the things that held us back. And I'll simplify it by going through the flash.

So five years ago the Company had a market value of $90m. It made no money it all. In fact, it was probably negative. Although it produced a gold of 1m ounces, it had a hedge book of equivalent of ZAR65,000 a kilogram deliveries. And I'll let you work out what the negative mark to market that that was on. But it would probably make Ashanti look a bit of a tea party really.

And then we had the snakes. You can see the first snake was at Kebble. The second snake was the hedge banks. And Mother Nature contributed a major snake with the earthquake that caused North West operations to go. And then the currency markets intervened with a strong Rand, moved our dollar per ounce costs by nearly 50%.

So those were the challenges and the snakes we've had to slither. But fortunately there were more ladders than snakes. And looking at the ladders, the completion of Dome was actually -- that was Tolukuma. And in all the trials and tribulations in Australia, our Australasian strategy wouldn't have worked without Tolukuma. ERPM, I mentioned as a very value-added acquisition which we've been able to do with KBH.

And the Porgera acquisition. We bought Porgera for 72. I won't tell you what I think it's in our books at at the moment, but it's probably equivalent to the market capital of the entire Emperor Mines at the moment. I think let Brad comment a little bit more on that.

We're very pleased to have consolidated a partnership with KBH in South Africa, not because we had to do a BEE but because we've been working with Paseka and Palesa and their colleagues for nearly four, five years. And we've been bloodied in battle together and I think we can go on and enjoy some of the fruits very shortly.

And we've created an Australian listed company which has added considerable value by valuation transparency on the ASX, which in itself represents the birth of a new company within the Group as well. So we've been able to be a midwife as well as dealing with slithering down snakes and climbing up ladders.

So today this is where we've got to. We produced less gold as a Group, which is unfortunate. Some of that was the loss of North West. So we haven't been able to replace all our production. But as somebody said, it's not the ounces it's the quality of the ounces that matters. And the fact is that we might do three-quarters of the gold, but we're doing it with a $200 an ounce margin. You will see when you see the financial figures that we are generating cash well above our capital. And the turnaround in South Africa looks as though we will have cash that will further enable us to expand the business even further. So there is a reasonable prospect with a fairly clean balance sheet and with that sort of margin that we would be in a position to add more valuable ounces to our portfolio.

I'll turn now to the current quarter. And you can see here the summary of the quarter-on-quarter changes. Seemingly Porgera's costs have fallen but I will warn you that that is a change of accounting policy, of capitalization of stripping costs, and that may not be indicative as you'll see from the six months and from the year figures of the true cost of Porgera. Don't ask me why accountants keep changing all these policies all the time, but unfortunately they have an affect.

Where it says productions recovering, obviously production will recover far more than that and again Brad will cover that in his part of the presentation.

Tolukuma has been disappointing again. Landslides water everywhere and they have really not recovered from that period of disruption. However the Zine Vein is significant and again I won't spoil the thunder on that one, but it really represents a repeat of the Tolukuma structure and therefore a completely new Tolukuma in theory.

As I said, Vatukoula on a planned care and maintenance. We took a positive decision to incur these costs and to approach the new Vatukoula in the way that we did. So we only had a couple of thousand ounces out of Vatukoula.

So from Australia it's all up from here because all three operations for one reason or another were affected by events, non-repeatable events.

South Africa, Blyvoor's volume ramp-up is showing now some improvements in the Rand per ton and those costs are beginning to come down to where we hoped they would be. But as Niel will describe, unfortunately there are things that get in the way of these developments and I think there has been damage to infrastructure at Six Shaft which needs to be fixed and again we're not going to do a short-term fix, we're actually going to replace a lot of the shaft infrastructure at the same time.

Crown is pulling back up again. The mills at Knights are now turning. That's going to produce higher recoveries and more gold. And as I said at ERPM the really exciting part about it and [Mani] our GM is in the back row there, you can speak to him afterwards. They're all walking round very tall and proud at the moment and that's going through into the Sallies lease area adjacent to ERPM.

So overall that was a summary of the mines. Six months makes slightly more boring reading and I'll do this a little bit more quickly. Porgera is 60% complete so we're looking more to the upside, the downside now on the West all. If it ever stops pouring with rain in Papua New Guinea and landsliding, Tolukuma can get back on track but it's going to do that new with the new Zine ounces. Vatukoula's on track for where we thought it would be on its planned turnaround. Blyvoor is still targeting its volume-placed plan and has -- will be delivering on that. Crown's infrastructure, pipes, mills etc. continue to save us kilograms and continue to grow the kilo profile, very good leverage to the gold price. And as I said, at ERPM the story just gets better and better and fasten your seatbelts for quite an exciting ride at ERPM would be my judgment on that.

Geoff mentioned the margin. You will see it's not very often in DRD's history that as soon as we get a margin somebody comes along and takes it away. We started off with no margin and a write-off. We had to close out the hedge book which we did just in time, so we kept that margin. The Rand strengthened, so we had to get the margin back because we had to restructure and recost. And I think Porgera came in there, the North West incident. Margins back. We've been working on the Australasian assets and now we've got the SA turnaround.

If you combine SA turnaround now with the turnaround in Australia, in the next six months you can understand our confidence that we've got something now which is going to be more sustainable and is actually going to regenerate very good profits for the Group in the next 12 months.

The backbone of the Group, the reserves and resources, as you now we have these independently audited by RSG and this year there was an increase of approximately 35%. You can see that South Africa still dominates the reserves and within South Africa Blyvoor dominates South Africa. And this is really what's driving our constant repositioning of the Blyvoor asset to ensure that this access to this large reserve optionality can be preserved at a good margin.

Australasia is growing its reserves as well. Porgera will be able to increase its reserves in December when Barrick announce their December 30 results. I'm reasonably confident on that. I said Tolukuma will add from Zine. ERPM will add from Sallie’s extension. So they've all got reserve growth on them with the exception of Crown but Crown has that attraction now of being the only reprocessing plant standing in South Africa both in terms of its network, its plant. And providing it can get deposition sites it can actually grow but in a slightly different strategy.

And of course the large potential for resource reserve conversion. You can see that there are excess resources for all the mines in different ratios. And as pay limits and gold prices improve, that again is still the biggest driver for value and the biggest challenge for us as a management team.

Now in those resources we haven't -- there's nothing in there for Argonaut which is potentially 9m and ERPM extension Sallies the 2m weren't included. I certainly would hope that some of that Sallies and ERPM ground would come into resources or maybe close enough to be into reserves at next year's statement.

So there's plenty of opportunity both to adding to both those pies, by organic growth and transferring resources into reserves to create more value for the business as a whole.

I would now like to invite Niel to take us through the DRDGOLD SA part of the presentation. So, Niel, over to you.

Thank you Mark. Hello everyone. We deemed it appropriate that before we take you -- before we took you through the last quarter that we talk a little bit about the recent parts of DRD SA, all the assets that make up DRD SA. The last three years have been particularly challenging. The three or four years that I've been involved with DRD were -- we had constant retrenchments as a result of having to realign our assets to changing conditions in the market, the ever fluctuating gold price and always seemingly fluctuating in the wrong direction. And therefore the fact that we haven't had any cutbacks or realignments, restructurings in our operation for the last 12 months is particularly pleasing. There's nothing nice about the retrenchment because the people who are affected are people who have their positions terminated through no fault of their own. More often than not people have invested a lifetime into the company's fortunes and are the victim of circumstances over which we have very little control. So this is a particularly pleasing item to talk about, the fact that we haven't had any retrenchments in the last year at the operations.

The cutbacks also occurred at corporate level. It was an honest process. It's not only the operational people who are affected by these adjustments. And our corporate office is significantly smaller now than what it was 18 months ago.

The closure of North West operations was something which at the time was particularly challenging. North West made up a large portion of our weight in ounces and a lot of investment had gone into North West to continuously position it, to take advantage of a changing market, changing gold price environment. But the events that led to the closure and ultimate sale of the North West operations occurred sooner than we had -- before we could take advantage of the better gold price.

It was also a very challenging time for the remaining employees of DRDGOLD. There were a number of challenges from surrounding mines who considered our actions or conduct at the time inappropriate. The fact that there was a cessation of pumping operations in a while and which resulted in AngloGold Ashanti initiating legal proceedings against us. The Department of Water Affairs and Forestry initiated a relatively hostile position. Ultimately that changed and they became a partner in finding a permanent solution. But these were difficult times.

So the last three years, trading in the band in which we are, our sustainability band, having to react to an ever-changing environment, gold price environment has not always been pleasant, it hasn't always been easy. In fact more often than not it was extremely difficult and certainly not always nice. But that is the philosophy of the Company. We don't hedge and therefore we do have to realign our operations when circumstances change. And hopefully now we are in a position where those circumstances have changed on a more enduring basis where we can take advantage of a better gold price.

The first item here, support investing in business. This is an important component of our management philosophy. We don't hedge and therefore we need to position our companies in such a way, our operations in such a way that as and when circumstances change we can take full advantage of improved or better circumstances. And I think you will see that, particularly in the numbers of Crown and ERPM. The capital that we've invested, sustenance capital more often than not, has been money well spent and therefore we do see the improved margin at particularly those two operations. And the same dynamics and the same philosophy that drives the investment policies at Crown and ERPM apply at Blyvoor. It simply just has a different sustainability threshold, one which is well within current gold price levels. But there is a bit of a lag there, one that we hope we will catch up with in the next few months.

We've invested in a very dynamic group of leaders. We have relatively young General Managers with exceptional expertise and years of experience on both sides of the General Manager, both on the regional structure with our Chief Operating Officer and his Regional General Managers and also immediately below the General Managers where we have experienced Production Managers. So we can release these young guns with their dynamic thinking towards growth and then support them on both sides, both on regional level and on operational level.

We've had to maintain development rate. That is also part of our philosophy, to make sure that we can position our operations to take full advantage of a better gold price. And Blyvoor in particular -- Blyvoor went through a difficult time since October of last year or November of last year when we had to systematically stop withdrawing from the hydrate areas and we became -- we had to become less reliant on grade mix and more reliant on a consistently yielding ore body. And then it would have been the easy way out to do what we did in the past and drop volumes and pursue higher grades. But that asset simply won't allow that philosophy anymore and therefore we had to maintain development rates before the gold price started doing what it's doing now. But that is what its position has -- or positioned Blyvoor at least to where it is now and hopefully to also follow the trend that we see out of ERPM and Crown.

In fact the development rates have been very aggressive at Blyvoor and we believe that once the infrastructural issue at Six Shaft has been fully sorted out, which we believe will be at the end of this month, that it does have sufficient face length to achieve the volumes that have been planned for Blyvoor.

The opportunities that we have going forward. The ERPM extension is a topic that you'll hear on a more regular basis from now on because we have drilled some holes and those results are very exciting. [Bill Endsley] is here and I'm sure that he'd be very excited to answer your questions on some of those results.

Top Star, which is a very important part of our Crown group of assets, hopefully will come on line. There were a number of internal structuring issues that we had to deal with and we should -- we will probably make an announcement in this regard sooner rather than later. Involving the extent of our partnership relationship with KBH, a very exciting prospect because it brings us a lot closer to the levels of BEE participation that we seek and changes the face of DRD SA to resemble a company which visibly embraces the political morality of our country. That's around the corner. And that of course is just accelerating these or finally accelerating this project. It places Crown in a position to continue to play the role as the cash enabler, the short-term cash enabler which is a very important strategic role, particularly in a volatile gold price environment.

The Blyvoor number Two Shaft ore body, that is a project that we've spoken to you about in the past. The Two Shaft project. We've taken a different view on how to access this ore body, one that will bring about a significant saving without sacrificing on efficiencies. We intend to access this ore body in two phases over two years through the existing Six Shaft infrastructure as opposed to refurbishing the number Two Shaft, which means our footprint remains manageable. It doesn't add to our fixed costs. It contributes towards increased flexibility and we still have access to the same ore body which we had initially planned into the Blyvoor production profile.

And then of course there is the Argonaut drilling that's about to take place as well within the foreseeable future and which Mark has spoken about and which is also an exciting exploration initiative.

This graph plots the cost trends of DRD SA in Rand terms over the last few years. 2002-2003 quite a significant increase and that's where the cost really followed the gold price, more robust planning, more aggressive development and so forth and also a dropping in the pay grade. Costs unfortunately never followed the gold price back down again and therefore you see a relatively flat line after that and then a slight increase in the last year mostly because we can now plan at lower grades and reposition our assets to take full advantage of the better gold price.

Our volumes incidentally are to a large extent determined currently by our infrastructure. By no means are the volumes that we are mining an indication of total capacity of these operations at which they can produce. But as we systematically improve infrastructure you would see an increase in volumes as well.

Right, here you see the cost trends in dollar terms, which is also a fairly self-explanatory graph. Also being a price taker of course we find ourselves right at the end of any dynamic or factor which impacts on the cost of supplies and the cost of services. We don't determine our own margin. But to the extent that some of our suppliers and service providers' margins are affected by the changing environment, that cost goes on to us. And managing those becomes our problem.

The key features looking at Blyvoor, we were to all intents and purposes compelled after October of last year when the systematic withdrawal from the V5A area commenced as a result of seismocity patterns that we experienced there. We've had to focus on producing higher volumes at a lower grade, grades of about 5.2 as opposed to 7.2, 7.5 which we had planned in them last year. And that volume-based plan continues. We've opened up enough face to produce the volumes that we plan, but we've had to deal with an infrastructural issue at the number Six Shaft.

We did some work in anticipation of additional volumes coming through Six Shaft by refurbishing the hoist, but shortly after the hoist had been finished and as it was ready to take up the additional volume and the shift of focus from Five Shaft to Six Shaft, we had a power failure and a pipe column came loose in the shaft. The pipe had to be replaced and we had to do some remedial work to some of the steelwork in the shaft as well. It could have been done in a relatively short period of time, which incidentally occurred on June 27. We took the conscious decision though to look at a more extensive refurbishment program of the shaft and also infrastructure on top since it's going to be the focus of volume production going forward.

So if nothing else breaks, we should be on track with a lag of about a month and a half to two months once Six Shaft is fully fixed up.

Here you can see the production ounces going forward. There's a slight drop in ounces. Notwithstanding the fact that our tons have gone up and that is a function of the lower grades that we need to plan. Incidentally because of the changes in the gold price, the improvements in the gold price Blyvoor for a change came upwards instead of downwards. In the past where there have been changes invariably we had to drop volumes and increase grades. The opposite is happening now and we've in fact increased our labor force in order to assist the development. We're seeing more of these also coming into production. Previously in the development phase they were mostly deployed in opening up and development. And that is a nice indication of where the cash operating profit of Blyvoor has gone to. It's just about at a point where it is self-sustainable also in so far as its capital is concerned, which is really exciting.

Crown, our strategic enabler with its flat cost curves and relatively predictable production costs and yield. I just need to qualify this graph. Up until there you see 40% of production being brought into the DRD numbers. From January onwards it's fully consolidated. So that's a fully consolidated number and so are those two. With Crown being the type of operation that it is, reacted immediately to the better gold price environment. It sent us a message in the third quarter that it needed some repairs in pipe columns. We also did some mills and we’ve seen the result of that coming through now, especially in the last few months.

European key features, European, here we can still run at relatively modern -- modest volumes, because of the high grade. We’ve got an exceptional ore body here of continuous face lengths. You’ve seen a consistent rate. And this is where our focus -- our growth focus point is. Its volumes are being kept modest at this point in time because there are a number of infrastructural issues that we have dealt with in the past and that we may have to deal with in future. We did an extensive risk analysis of the European infrastructure in the last three months and before we become too robust on volume, we want to make sure that we derisk some of those.

It too in the third quarter sent us a message, when it’s in in-time conveyor system became unreliable and we dedicated or focused our resources towards fixing that and ever since it has been consistent. But there are a number of other items, like compressors, the ice plant and so forth, which we want to invest some more money in before we lift those tons.

So, that’s it. Thank you, Mark.

Thank you Niel. Just by way of introduction, I thought it’s probably worth me explaining some of my background to you here this afternoon.

Most recently I was Managing Director of the Papua New Guinea operations for Placer Dome and prior to that I was General Manager of Porgera. So, I understand the Porgera asset probably as well as most people do in this world. And in a much -- in two or three previous lives, I was Operations Manager of Vatukoula for a period of about five years. So, when I got the call from Mark suggesting that I come and be CEO of Emperor there’s probably no-one else that knows these assets as well I do.

I have been asked several times, why did you take this challenge up? And the answer is that. All three of these operations are performing poorly. There’s an obvious ideal opportunity to turn them around. We don’t manage Porgera, but we’ve managed Tolukuma and Vatukoula. Now, I know the assets well, I know the people well and I can see the significant opportunity that exists within Emperor. So, all three of these operations are having their worst years in their collective histories. So, there’s only one way to go.

We’ve created a new Executive team with Emperor. I’ve mentioned my background. Clyde Moore is our new CFO. Clyde has a background with ANZ. He was brought into ANZ Bank by McFarlane, who is a CEO. And he created a new division in that bank. And Clyde has extensive investment banking and mining deal experience. He’s probably done 100 deals in his career. And Clyde’s skills will come into their own once we’ve turned the operations around.

Geoff is our new Chairman and Chairs DRD as well. And we have Rob McDonald as a non-Executive Director. Rob has previously been Managing Director of Rothschild Australia. So, Rob’s very well connected in the industry as well. And currently we’re searching for two additional non-Executive Directors, number six and number seven.

We have a new operational management team in place. We’ve got a new GM for Vatukoula, a gentleman called Frazier Bouchier. Frazier is without doubt, from my experience, one of the best GMs going around. He has some experience in South Africa. He spent five years with South East with Placer Dome.

And we have a new GM for PNG called Brad Sampson. And Brad Sampson will run Tolukuma, as well as look after our 20% interest in Porgera. And Brad is an Australian. Brad worked here in his early 30s as GM at Kloof the goldfield. So, Brad has extensive operating experience as well.

So, yes, we’ve been able to attract some pretty good people to a Company that’s obviously not doing well. And I think there’s good reason for that as I’ll go through the presentation now.

We have a three mine strategy now in place. The $237m acquisition of Porgera and Tolukuma was completed on April 6. We still have the turnaround at Vatukoula. One thing that many people don’t realize is Porgera is two-thirds of the value of Emperor and granted, there’s a lot of attention focused on what we’re doing at Vatukoula and rightly so, because there has been many men before me come and claim that they’re going to turn Vatukoula around and haven’t been successful. And we expect and enjoy the scrutiny. But six months time we’re confident that Vatukoula will be cash positive. So, we can do that while we have the cash flow coming from Porgera and while we’re sorting out the right size for Tolukuma.

We’ve got a growing reserve platform of 2.1m ounces for these three operations. And as Mark said, if you look at the value curve and where DRD is placing itself strategically, we want to be in exploration. And with the biggest land holding in Papua New Guinea and with the best ground in Fiji then we’re confident that when we spend the AUD15m over the next two years then we’ll meet with some success.

At Tolukuma, I’ve mentioned Brad Sampson, who’s the new GM. Tolukuma is a unique operation. If any of you have ever visited Tolukuma it’s something you won’t forget. Every single nut, every single bolt, every person has to be flown in by chopper. So, the two largest costs, or the most significant cost at Tolukuma, is paying for choppers and it’s a third of the operating cost is in that.

So, what are we doing about it? We are looking at creating an opportunity for a fixed wing airstrip about 10 kilometers from the mine. Now, this is in very mountainous country. So, it’s something that hasn’t been achieved before, but it’s something that we’re going to do. So, we’ll fly in fixed wing rather than choppers into a place called Woitaipe and that’ll reduce our logistics cost significantly.

The other thing that we’ll do is install a second hydro plant. Obviously, if your -- if your generating power with diesel, just the cost of taking the diesel up the mountain accounts for 46% of your -- of the costs for that fuel. So, putting a second hydro plant in will reduce our demands for diesel back to only our underground heavy vehicle.

So, those two cost initiatives over the next 12 months will significantly reduce the Tolukuma cost profile.

The other thing if you go to Tolukuma, and I hope may be some day you do, that the overriding impression you have when you have a look at this place is it should be producing more gold. We’ve recently had the Zine discovery. We’re only just now starting to bring some of that into reserve. But Zine will be the lifeblood for Tolukuma for the next couple of years.

Tolukuma normally should be producing about 70,000 to 80,000 ounces per year. And I apologize if I don’t talk in kilograms, because ounces is what I understand. It’s done less than that in the year we’ve just finished. But if you look at the geometry of the ore body and look at what a narrow vein operation should produce and plot it on a linear relationship with other similar mines in that part of the world, Tolukuma should be sitting at least 120,000 to 130,000 ounces a year.

So if there is one message that you should take away this morning about Tolukuma, is that when we right size this operation, it’s going to be significantly larger. And obviously, with exploration success it could even have a brighter future. So Tolukuma needs to sweat more than it’s been made to sweat in the past.

Vatukoula’s a different story, completely the opposite. Vatukoula’s been doing it tough for the last 10 years. And all we’re trying to do at Vatukoula is return it to what it achieved in the mid 90s when I was there. And we -- in six months we produced 75,000 ounces. It was the best it’s ever done. So, it’s only just pulling it back to where it’s been in the past. So, people say Vatukoula can’t be turned around. It can. And none of you will believe this, but when I come back in 12 months time I hope to be standing here saying, well, we did it.

But the strategy at Vatukoula has changed from one that is fill the mill, get all the tons we can, operate all four shafts to really focus on value and focus on margin. So, already Smith Shaft has been closed. And Smith Shaft was where historically a lot of the investment has taken place over the last 10 years. And over the next 12 months we’ll be closing two of the other three shafts, both R1-Cayzer and the Decline.

So, we’ll be left with Phillip shaft. Now, Phillip shaft just happens to be the most modern. It happens to be the shaft with the best exploration potential. And it happens also to be the shaft with the highest margin. The average grades at Philip shaft are higher than the average grades for the rest of Vatukoula.

So, we’re -- we’ve restarted again where we produced almost no gold in the June quarter. We had people back underground. And we’re building Vatukoula up, but have some patience. The first good results you will see will come out of the March quarter.

The workforce optimization is important. The two significant -- the two most significant costs at Vatukoula are people and power. And they account for about 35% each. Now, when we took over management at Vatukoula there were 2,500 people there. There’s now 1,800. And ultimately the number will be less than that. And on the power side, we’re looking at opportunities to get away from diesel fired power to the gas fired power. Fiji has a significant sugar industry.

So, the take-away message for Vatukoula is quite the opposite to Tolukuma. It’s let’s not make Vatukoula sweat. Let’s bring it back to something meaningful. And let’s just concentrate on value rather than volume, and you’ll see Vatukoula perform better in Q3 next year.

The upside of Vatukoula is important. If you look at -- it’s an ancient volcano. It’s a collapsed caldera. And you look at the size of that caldera and you compare it to the size of [Lahera] or the size of Porgera, who are very similar style gold depositions and it’s exactly the same size. And what we have done is really only concentrate our activities in about 25% -- 20 to 25% of that caldera. Now, the operating area is really just in this little corner here. So, there’s still huge potential to extend the reserve and resource base at Vatukoula. And, as you know, Porgera and [Lahera] are world class.

The other geological model that has changed recently with some new eyes and new people at Vatukoula is that the direction that the gold has come from has changed from -- Smith shaft was always out to the north here. And all of the exploration focus over the last 10 years has been focused out towards this area, [Jeruselami] and [Waikatakata]. The new interpretation of these detailed magnetics combined with looking at the detailed mineralogy of each of the shafts and each of these ore bodies and it’s -- there are 300 different structures at Vatukoula. It’s a complex system.

It shows that the younger material is down this side, near Phillip shaft. And on the opposite side of Phillip shaft is an area called [Nosomo], which we, for land owner reasons, have been unable to get into forever in Vatukoula’s 80 year history. So, we now have an agreement with the land owners in this part of Fiji and it’s very exciting for Vatukoula’s future.

Porgera, Porgera is Porgera. Porgera’s been a great contributor for Placer Dome for many years, since 1990. And when I took over as GM at Porgera 2002, I think, or something around there, it didn’t have much mine life left. And it became obvious pretty quickly that it had much -- a much greater future than what was previously thought.

The -- only 18 months ago Porgera was producing 1m ounces at 192 cash cost, 192 U.S. It suffered some poor performance recently with the West Wall falling in. But -- now that -- the remediation work on that is 60% complete. There are now no mud and screed coming down that wall. And the Stage 5 cut back is back into what is medium to high grade ore. So, you’re going to see Porgera improving quarter on quarter. Next year, calendar 2007, we still won't get Porgera back to its 850,000 plus ounces a year. 2008 onwards Porgera is just going to continue to be one of the world’s best gold mines.

There is more and more underground success with reserve increases. Year on year Porgera has been adding more reserves than it depletes. And for a mine that does up to 1m ounces a year that’s a significant achievement for a mine that four or five years ago was looking at being a sunset operation. Barrick have even said recently that they rank Porgera as one of their best exploration plays anywhere in the world. So, it has a great future. Great to have 20% of it. Love to have more.

And Stage 6 which is now being contemplated at Porgera by Barrick, they should be hopefully through that feasibility study by early next year and we’ll see what comes out of that. But I think Porgera just continues to perform and the current issues with Porgera are short lived.

So, the new Emperor is much different to the old Emperor. The old Emperor was a $40m market cap company. We’re now a $300m company. And where people need to have some patience so that we can turn these operations around, but where ultimately Emperor will be, will be a 350,000 ounce producer at a cost of about $350 per ounce and from that we can grow Emperor into a much more significant gold mining company based in Australia, even though we have no gold mines in Australia.

So, if you look at the future for Emperor the story is one of turnaround, profitability and then growth. These people -- these good people we’ve been able to attract in a much more competitive environment than exists in South Africa today, or exists in North America today, they have joined for a reason. They can see the potential that exists in these assets. They’re going to have some fun and enjoy the challenges in turning them around. And they’re going to look forward to us becoming a very profitable country -- Company, sorry. We can transform Emperor into a highly rated growth stock. And there’s opportunity to place ourselves in the Australian market up in -- up at the top end of that.

Thanks very much.

Okay, thank you Brad. It just leaves me now to summarize.

And I’m very pleased we could do this in a very summarized three bullet points.

I know looking at the figures and looking at the Group over the last 12, 18 months as we’ve been reacting to events, it’s very difficult to support the trends in each of the operations. The equity ownerships have changed. There’s been a lot of change. But now we can say we have got to a point. Two fit for purpose, self sufficient mining business are being presented to you today by their two CEOs.

There’s a clear plan now for Emperor’s growth and turnaround. And that is now going to come through and provide the growth for 2007. And our South African mines are back in the margin and now will only be able to improve their relative competitive position to sustain those lives and to be our backbone of the future of this business.

What we’re going to do now looking ahead, we’ll replace some of that production we lost always with better quality ounces. We’ll continue to diversify that reserve base, reduce the risk of our shareholders. And as I think we made this commitment in this room 12 months ago, we still see Africa as part of our strategy. But I think now we have the balance sheet, the people and the experience to move on to establish another spoke in our hub successfully. And I look forward to reporting to you all shortly about developments in that regard.

That concludes our presentation today. Thank you very much for your attention. We’re now open for questions and questions to any of my colleagues. Mr. Shepherd?

It’s Steve Shepherd, JP Morgan. It’s -- Brad, I really appreciate the explanation you’ve given us on these Australasian assets. And I don’t think we’ll get too much chance to see you, so perhaps one could press you on the outlook there.

I’m just looking at the new Emperor slide that you’ve shown us. You’re -- well, you’ll do well to -- could you tell us, you’re -- in 2006 Vatukoula produced 28,000 ounces I think, if I’ve understood the accounts properly, which possibly I haven’t and I’ll get to that in a minute. But that’s a huge increase that you’re offering us there. Could you give us a bit of guidance as to the timing? Is it like two years time do you think? I know it’s difficult, but could you do that?

And then could you please try and make some sense out of these costs that you’ve reported, because I can’t?

Yes, look, Vatukoula historically has delivered between 100,000 and 130,000 ounces a year. And it’s done that consistently over its life. What you see here is the equity answers for DRD for the year, remembering that for the last three months Vatukoula has been closed down.

So, the plan going forward is to produce 110,000 to 120,000 ounces a year out of Vatukoula. And it’ll do that comfortably. And as I’ve said we don’t want to push Vatukoula too hard. I think it’s been pushed too hard in the past.

The issue on the costs, the costs only reflect the 2,000 ounces that were produced in the fourth quarter. There was a small -- only a small production during the quarter, because for the vast majority of the quarter the operation was shut down. So, we’re spending quite a lot of money on capital. But the operating costs attached to that 2,000 ounces was your -- gives you your $333 an ounce, I think it was.

The CapEx isn’t that high is it compared to the March quarter?

No, most of -- the higher CapEx cost you’ll see coming in the next six months. And we have committed to a recapitalization of Vatukoula which will cost us about AUD20m. And a lot of that will be spent in the next nine months.

Sorry, just in terms of the question I asked you, the new Emperor timing was what I was really trying to --

Sure, okay. The three -- when I’m talking about 350,000 ounces obviously we’re not going to do that this financial year. But when you look at the improving performance quarter by quarter during a year, we have quite a difficult first half, followed by a much better second half. And if you look at the second half and annualize those numbers you get close to 350,000 at $350.

In -- from January to June 2007 if you annualize those numbers you’ll get pretty close to the target that we have, which is a 350,000 ounce Company at $350 per ounce. But that’s not something that we’ll achieve on an annual basis.

Okay. Sorry, I need to press somebody on these costs here, because they’re totally confusing the way they’ve been reported here. They’re meaningless as far as I can see. And I’m also not clear on whether Tolukuma’s production was up or down, because there’s a contradiction in the text there. According to this you show production up at Tolukuma, 6% in the table in your results piece that you published this morning and yet in the text it says gold production was down 6%. Now, I don’t know what to make out of that.

Sorry, can I just add -- give something to the question. There is a typo in the flyer.

But it’s the logic that goes with the argument that’s a concern really.

We will apologize for that. You just take that one away. I think Brad has answered the question about the Vatukoula cost.

Yes.

In as much that the cost for the 2,000 ounces, which I think was basically development, or were ascribed to those ounces. I don’t think it was on shut down.

The other issue that you raised was actually to do with the equity ounces. Remember DRDGOLD had 40% of Vatukoula before and now it has 80% and Brad’s talked about Emperor Mines 100% consolidated. You do have to look at it just in terms of equity. And those -- just for the benefit of everybody in the room, those are the percentage.

On Porgera, the other costs that you’ll see, I have said there is an issue about the policy for the stripping. And I don’t know Brad whether you want to address that as a separate issue now and we can have a discussion about that.

Yes, the costs reported for both Vatukoula and Porgera for the quarter are abnormal. And they’re not the costs that you would expect going forward and obviously not costs that we’ve seen in the past.

The issue at Porgera is that the accounting treatment for deferred stripping has changed. There has been a change in policy and the ratios that we used for deferred stripping in the previous months were too conservative. And what we’ve done now is to back out some of that and capitalize those costs which were previously operating costs.

So, the number you see for Porgera is not a number you can expect going forward either. If I had to put a number on Porgera going forward and Vatukoula going forward, Vatukoula’s going to be sub $400 per ounce when we get it fixed. And Porgera will be sitting at $300 plus going forward once Porgera returns to normal operating levels.

Okay. When we see the full accounts we’ll be able to match things up a little bit better hopefully, will we?

Don’t ask me why accountants change accounting policy for deferred stripping or [industry] as well.

But that’s something -- another question perhaps?

Hello, thanks gentlemen for a very thorough presentation. Just you’ve given us some production and cost targets for the Australasian assets. Could you perhaps give us some guidance for the South African assets in terms of production? What you’re seeing or planning for 2007 in terms of costs and ounces? That’s one question.

And then just if you could talk briefly, you haven’t covered this in the results, but how’s it going with the bond -- rolling the bond -- the convertible bond? And what will happen in November when that bond falls due for redemption?

If you have the financials you will see that we have got cash on hand equivalent to about just under ZAR500m, as a round figure. John, we have facility for another $35m.

Yes, that’s correct, Mark, yes.

And so, we really take the view, and we have taken the view, that if there is no response to a roll over on reasonable terms, which we have offered to the note holders, then we will redeem the note. That’s the plan and that’s what we’ve said. And that’s what we can do.

Clearly, it’s all a cost of capital and value calculation. There’s a price at which we’d rolled over, which is fair to shareholders and there is a price at which we would redeem, but we could now take either option either way. So, there is a neutrality in that position. But again as we have seen from these figures we’re cash positive. We have structured the balance sheet, which has no debt. And we have many opportunities now to use our new structure advantageously to enable the business, to support the business and deal with a debenture.

I don’t know if you want to add anything to John?

Absolutely great, Mark.

Absolutely clear, right.

Prices in South African cost and South African production, gosh, I wish I had a crystal ball. Looking at -- our trends in rand per kilogram it’s fair to say we’ve been below the CPI. And I would expect -- we have a wage agreement in the next year. I don’t know if I’m missing anything here.

I don’t think there’ll be any shocks. I think it will just be the normal CPI increases in rand per kilogram as a forecast.

Yes.

The rest of it, of course, as you know, is exchange rate. And I think Niel alluded to it and probably showed the long term trend in rand per kilogram. Remember when the rand devalued. Then as it was strengthening we were capturing the costs that were imported, that were hitting and wiping the margin out.

We seem to be in a relative sweet spot where exchange rates have been stable for a while and the dollar per ounce and the -- kept the rand per kilo fairly stable, as you know, in a range ZAR135 to ZAR145 a kilogram. And that I think is helping our planning and our approach to the business. But I don’t think the threat’s there on the cost side.

In terms of production, I think it’s fair to say that in top level ounces we’re looking fairly flat.

Fairly flat, yes, that’s correct. There’s a slight ramp up, but for the record it’s relatively flat.

Now, beyond that we do -- we’d like to see what size we could right size play for at, because there’s spare capacity. We are looking at other expansion opportunities for Crown which we’d add in quite quickly, constraint being pipe working and the depositions and so on.

And, as we said at ERPM, there’s now a big opportunity we believe sitting next to ERPM. And we’ve got to take a view as to the appropriate infrastructure with constraint because we’ve got three -- the tertiary shaft system at the moment and we have various alignment structures that we can get to try and get more quality gold out of that mine. But those I think will all go through planning and studies over the next six months. I think we’ll come back with something a little bit more firm before, I think, the details of that.

[That’s great, thanks for that].

Morning -- sorry, afternoon, [Walid Ishmal] from Deutsche Bank, two questions. The first one, are we going to have a sustainable effort with regards to the accounting? This is the tail wagging the dog with Emperor waiting for Emperor’s results to come through and then we see financials. It really does make the job difficult. And a lot of clients have been complaining about the fact that you guys put out a trading statement, we’re looking for the earnings numbers and nothing comes up. So, maybe if you can give us an idea, because this has been a problem that’s come up before.

Well, it hasn’t come up before, because we haven’t had the situation of consolidating Emperor. The Emperor transaction, as we’ve slowly [before] it was called in reverse. It’s quite a complicated reverse takeover. So, it’s quite a complicated transaction. And obviously we’ve got two sets of auditors.

And I don’t want to blame the auditors, but I might as well, because they’re not here. We can’t get PWC and KPMG to align. KPMG -- South Africa’s been ready for months. But we can’t get Emperor’s auditors to get to a position where they’re comfortable that our auditors can start. So, that is an issue.

What’s going to be done, and I will give you three pieces of good news, because you’re right, this ain’t going to happen again. So, let’s get it absolutely sorted. Number one, we will have one firm of auditors for both companies. Because now we own 80% of Emperor we will have the Group auditor doing Emperor as ourselves. That’s going to be harmonious. So, it can’t happen again from that point of view.

Number two, John Sayers and Clive Moore are working on integrating all our management systems. You know what it’s like when you put two businesses together. You’ve got to get the computers to talk to each other, Hyperion software which basically locks all the financial management data on to the same database. So, that’s issue number two.

Issue number three, we hear you. We hear you. We hear you. The good news is we’re going to start quarterly reporting next year, because we will have all those systems in place. It will be in lock set and so we’re going to respond to some of you who have criticized us for not quarterly reporting. The Board this week has agreed that we will return to quarterly reporting. So, you will get better numbers. You will get them more often and you will get them consistently.

That might bad news, because we’ve all adjusted our models to interims.

But it starts putting that add column, add rows function back in your spreadsheets.

So, to add to that Mark.

Sorry, John, would you like to?

I think as analysts you’re going to have to get used to numbers changing all the time, because the accounting professionals, the standards body, are bringing out different standards. And, for example, this particular issue at Emperor is because the new standards created a thing called a reverse acquisition, which nobody has accounted for yet. And PWC changed their opinion on the accounting methodology twice before they came up with a third version.

So, there is nothing we can do about it because we are compelled to comply with the standards and you will have numbers changing. Your models are going to have to be adjusted, or you’re going to have to employ a department of IFRS specialists.

And then the bad news is there’s a convergence program to bring IFRS into -- up to American standards. And that’s also changing standards because IFRS is eventually moving towards American standard.

So, Mark’s answer is completely correct. Clearly, we’re working on it. But as an objective process, there is no way we can stop changes in numbers, because if you take the change in the capitalization or the stripping costs at Porgera that’s a new IFRS standard. And when it comes out you have to comply with it. So, what we’re trying to do, Mark, is to make the process smoother, better, more complete.

And we will go to quarterly reporting, which will give you the numbers up front. But if a standard comes in between two quarters and it changes the numbers, there’ll be a change in the numbers. We can’t not do that. If I don’t do that, I get hauled up in front of the Accounting Board and we go the JSE Standards Committee. So, I’m sorry but your models are going to have to change occasionally, alright? Thanks Mark.

Can I ask a second question? May be it’s controversial as well. It’s -- Brad, not to put you on the spot or anything, but may be directing it towards Geoff and Mark, with regard to remuneration on the Emperor management. You’ve got a good team in there. I know some of the guys. They’re decent GMs. And these guys obviously you had to bring them in when there are other lucrative opportunities out there for these characters. How are we rewarding these guys? What is their remuneration and what’s it based on to get these assets right, because as Brad’s pointed out, lots of guys have tried to turn these assets around and they’ve just disappointed every time.

I can answer that one, Mark, if you like. We -- these guys are obviously good performers. If you know them you know that. They're already well remunerated in their previous roles. We’ve been able to secure them for about the same as what they were earning in their previous roles.

Now, if you do a survey on what people want in a company, I think salary comes in at about number six or seven, depending on which research you read. They came to this Company, not because I offered them $0.5m each, but because we were able to address some of their family needs. We we’re able to be entrepreneurial about how we structure packages, whereas the majors don’t get into that. So, we look at where their wife -- what their wife is doing, what their kids are doing and we structure it accordingly. And they appreciate that.

But the other issue is they like working for a company that has some challenges. They’re going to get much more fun and excitement out of that than working in an operation that just continually churns out cash with no challenges. They’ve seen collectively the quality of people that we have attracted to this Company and being part of a really good team. And I would -- I haven’t seen a better team in the Australasian part of the world if put those guys together. And there’s some other people that we haven’t spoken about today who have come on board.

So, they know what a team it is. They’re looking forward to working in what will be a fantastic, dynamic team. And so it’s the leadership. It’s a -- it’s supportive of the leadership that we have in place. It’s supportive of the type of company we’re trying to create and it’s supportive of where they think we can take this Company. And they want to have that on their CVs, because the industry is going to stand up and take notice very soon.

[Inaudible].

Well, they’re measured on my KPIs as well. I push them down as far as I can go.

And where -- the obvious imperatives in the short term are the turnaround and we have said that we’ve got certain milestones that have to be met by the end of the year. We’ve got certain milestones that have to be met by the end of the financial year. So, there’s -- we’re measuring them on those. And we’re measuring them on adding -- value adding to the Company as well. And all three operations that I have talked about, if we leave Porgera aside for the moment, say that we can add significant value to our businesses. And they have to be achieving some of that value as well.

Tolukuma, I think, must be much larger. So, we’re holding them to account on that. And Vatukoula there’s obviously some opportunities on the exploration front and with Tuvatu which we didn’t talk about. It’s a 0.5m ounce resource that I think we can bring into production fairly quickly. We’ve got a mill that’s only operating for 4.5 days a week.

So, they’re being held accountable on those issues as well.

I should also add we’ve added a GM for Blyvoor as well. So, this war for talent that’s on for skill, we are actually well prepared for and so far the score cards have been quite favorable for the reasons Brad’s given out.

But we’re going to -- it’s a conscious decision. I call it bespoke rather than off the peg. In other words, we build career opportunities and skills and packages around the individual. We don’t go and take them off the peg like you get a suit from Woolworths that doesn’t fit properly. So, we can personalize and be a boutique player rather than working for one of the large companies.

Yes?

Peter Townsend, Arnold Jacobs [analyst]. Firstly, perhaps a e question for Niel. On the technical side at Blyvoor what -- you’ve given an indication of the tonnage you hope to produce from the mine. What grade and what rand per ton costs are you hoping for?

We’re hoping to produce in the region of 70,000 tons a month -- of underground tons a month. The grade that we’re planning to produce is at just over ZAR5.1 per ton. And our costs, depending whether it’s winter or summer, per ton hover around between ZAR775 and ZAR675 per ton.

And then perhaps a question for Brad. You pointed out mining has been taking place at Vatukoula for around 80 years. You say Vatukoula has been poorly explored. I find that difficult to believe, because I don’t think the old timers were necessarily poor geologists. They didn’t have the same technique perhaps. I have to believe that over a period of 80 years that ground has been hacked over fairly extensively. Why are you so upbeat on the potential there? Is it -- what’s changed?

Well, if you look at where the exploration has been done, the exploration has only been done in 25% of the caldera and similar rocks, similar geology, there’s no reason that we can’t have success elsewhere.

But the most important point is in terms of potential going forward is this new geological model that’s been put forward by one of our new geologists, which is saying that we should be looking south rather than north. And south has been tied up under land owners who weren’t prepared to cooperate before now. So, we’re only now going in there and doing initial stages of Greenfield exploration on that area. It’s really brand new ground that we need to attack. And everything that this geological model says is that that’s where the best grades and the best gold will come from is south, not north.

So -- and even within Vatukoula itself there’s 300 different ore bodies. There’s about a 1,000 kilometers of development that has been done over the years. And part of Vatukoula’s success is that it continues to add new structures, extensive new structures, from existing workings. And we think there’s a lot of potential at Phillip Shaft itself, but deeper on the two main ore bodies there which are the Prince Dolphin and the Prince William. So, there’s lots more gold to be found at Vatukoula I’m quite confident of that.

Perhaps finally then, Vatukoula has also been through a number of capital restructurings and capital injections, most recently in the nine months preceding closing the mine down. And that recapitalization, restructuring plan obviously fell flat on its face. Now, this is clearly a aggressive capital program that you mentioned today, AUD90m, or AUD60m I think it was over nine months.

AUD20m.

Was it AUD20m, okay, I beg your pardon. What is fundamentally different about the approach that you’re taking this time? And also, is there potential that Emperor shareholders will be called on for capital again?

Well, what’s different, as I tried to explain earlier, is we’re moving away from throwing everything into the mill and going for volume and tons to really just focusing on the best parts of the ore body with less people, with less infrastructure and with less power. So, there’s 180 degree turn from what was previously the strategy in place at Vatukoula.

And I think it’s fair to say not all that money was invested. The phase two, as it was called, we’re talking about the old Emperor plan, not all that money was committed. And indeed, two-thirds of it was spent at Smith shaft, which as Brad said, was completely the wrong direction. So, as soon as we discovered that, that’s was a burning platform issue for Vatukoula. And that’s why we took over the management and then developed the new plan.

But some of that capital has already been saved. The dewatering program, the -- some of your heavy vehicles it’s in. So, you can’t say, well, that’s all part of the equation. That was changed over a year ago and I’m afraid what was sunk at Smith Shaft and all the rest of it, that’s just gone. There’s really no value.

Are there likely to be further calls on shareholders?

No.

So you can fund this all internally?

So far everything is funded internally.

Everything is -- the current program is fully funded. And once we get through this next 12 months, Vatukoula will return to sustaining capital unless we find something big, which is always a chance.

One of the -- one thing we need to appreciate about Vatukoula is it’s bloody hot. You’re in an old volcano. And Geoff and I were underground there last week, sitting in a stoke that was running at 34 to 35 degrees [inaudible]. There’s some real opportunities and part of that capital that we’re spending is in lowering their working temperatures.

Exactly.

If you were in South Africa you wouldn’t be working. And we need to drop those temperatures by at least 2 degrees. And then watch out. I think the productivity will improve significantly. And Vatukoula’s never operated with what you would call in South Africa normal operating conditions.

And that has never been a part of previous turnarounds at Vatukoula. The working conditions --

In fact, they were positively ignored.

They were ignored. So, that’s something that’s peculiar about the way we’re attacking it this time as well.

[Inaudible].

Well, yes, I know the Fijian people well. And they’re tough, but we’re all human. It’d be nice to be a couple of degrees cooler.

Are there any further questions [inaudible] behind [Pete]?

It’s Simon Kendall at UBS. You gave a cost guidance a couple of weeks ago. Is that likely to have changed with this bulletin?

No. I should say we’ve issued guidance and we see it fit not to change the guidance. But perhaps, John, you’d like to?

Yes, Mark, I don’t think we’re in a position to change the guidance until we finalize the numbers. But then the numbers will come out almost simultaneously. When you’ve got two sets of auditors bickering over a ZAR1.5b deal it’s very difficult to take a view and the Directors have to be reasonably certain of the position. So, we’ve got to wait for our audited numbers to come through for EML first, before we recheck that guidance.

Any further questions from anybody or any -- I think that’s been quite a full exposition. I hope it’s give you a much clearer view of why we’ve been doing what we’re doing and where we’re going. We will now break for some lunch. And please feel free to ask any questions you’d like of any member of the team, or indeed any of the other DRDGOLD management team who comprise the entire back row of the presentation.

Thank you very much for your interest and thank you for coming.