DRDGOLD Ltd (DRD) 2008 Q4 法說會逐字稿

Good afternoon everybody. Welcome to DRD's presentation for its year to the end of June. We're very pleased to see you all. I'll start with a brief overview and then hand over to Craig Barnes for the numbers and then our new CEO designate, Niel, for the operational details. The normal disclaimer, necessary I'm afraid.

What have been the key features of the year? Our behavioral based safety initiative is being rolled out to all operations. This is the result of a survey in terms of the reasons for the accidents we've been having, or have had in the mines. And we have found that by far the majority of them are due to behavioral issues with individuals. Therefore, we have developed a training program to focus into that very issue, safety being of vital importance to us.

We've declared a dividend of ZAR0.10 per share. Our attributable reserves are up 25% to 7.9 million ounces. Net profit after tax from our continuing operations for the year is up from ZAR3.1 million to ZAR154.4 million.

Our balance sheet remains strong, and I want to come back to that with the next slide, and we've got cash equivalent of ZAR2.25 a share of our balance sheet.

Our adjusted headline earnings per share from continuing operations for the year are up from ZAR0.038 per share to ZAR0.649 per share. We are proud of what we've achieved this year.

Operational review. The one point I want to make on this is you can see the capital that we've spent on our operations, ZAR29 million Blyvoor, ZAR36 million Crown, ERPM ZAR9 million and today it's ZAR76 million on Ergo the JV.

Blyvoor is showing steady performance and Niel will take you through that in more detail. Crown is stable, one could almost say a jewel in the crown. Restructuring at ERPM has been completed, with some considerable changes both in headcount and certain costs, such as pumping costs. And Ergo is very much on track for the first production in October '08.

The one point I want to make is, all of this capital expenditure has been covered by the cash flows from the South African operations. So we are in a strong, stable position with that respect. Right now, I'll hand over to Craig to just deal with the two financials and then Niel will take you through the operations.

Thank you John. Good afternoon ladies and gentlemen. Just a couple of numbers that I'd like to highlight on our income statement. You can see that our revenue was up -- I mean down 1% for the quarter to ZAR495.4 million and that was mainly as a result of the lower gold price received in the fourth quarter, it was around 2% down in rand terms.

Our cash operating costs of ZAR383.2 million were down -- were up for the quarter by 7.5% and that was mainly as a result of we're still in our winter tariffs as far as electricity goes, and on top of that, we had a 14% increase in our electricity prices in April. And the other contributor to the higher cash operating costs is our consumables, which increased quite a bit in the fourth quarter. There's a major pressure on steel prices at the moment, as well as the other consumables.

The investment income number that we have on our income statement includes ZAR29 million of interest received for the quarter. In the impairment line there's a ZAR69 million impairment of ERPM's underground operations, there was a partial impairment of the underground assets as well as some reversals of impairments which set that number off relating to some loans.

The net loss on financial liabilities of ZAR88.5 million for the quarter is basically the write-up of our preference shares which are owing to Khumo Gold, our BEE partner as well as the DRD SA Empowerment Trust that we've set up. So we had a loss before tax of ZAR52 million and it's mainly as a result of that impairment and the net loss on financial liabilities compared to ZAR117.9 million in the previous quarter.

The taxation line there includes a deferred tax asset, which was raised in all three of our operations, and that's why you're seeing that coming through as a credit for the quarter. That left us with a profit after tax of ZAR33.4 million compared to the ZAR104.3 million in the previous quarter. Net profits of ZAR44.5 million for the quarter, compared to ZAR132 million in the prior quarter.

The year-to-date numbers, the revenue line increased by 20% to ZAR1.8 billion from the ZAR1.5 billion in the previous year and obviously that was as a result of the higher gold price.

Our cash operating costs increased by 13.6% for the year, to almost ZAR1.5 billion from ZAR1.3 billion in the previous year, and that left us with a cash operating profit of ZAR364.3 million which was 57% up on the previous year.

Again the interest line there for the year includes roughly [ZAR70 million] worth of interest received on our cash, which you'll see just now on our balance sheet and again, the impairment included that ZAR69 million impairment of ERPM's underground operations for the year.

The net loss and financial liabilities, we've already discussed. It relates to the preference shares. That left us with a profit before tax of ZAR86.1 million compared to ZAR3.8 million in the prior year. And the taxation line, again the credit coming through from a deferred tax asset that we raised in the last quarter, which was set off by tax which is owing by Crown of roughly ZAR13 million for the year.

Profit after tax, ZAR154.4 million compared to ZAR3.1 million in the prior year. The discontinued operations line, that ZAR1 billion profit, is mainly the profit on the disposal of Porgera and also a small profit on the disposal of Emperor. There was also another very small profit which we realized on one of our other subsidiaries NetGold. That left us with a net profit of ZAR1.2 billion compared to a loss in the prior year of ZAR1.2 billion.

On the balance sheet, just a couple of numbers I'd like to highlight here. Obviously the cash and cash equivalents of roughly ZAR840 million -- ZAR846 million, basically relating to the cash that we bought back from the disposal of Porgera and eventually the disposal of Emperor and the capital distribution that we received from Emperor.

In other current assets is an amount of roughly ZAR83 million which relates to the final portion of that cash which had to come back from Emperor that they held back on a potential withholding tax liability. And that money we've actually received in our bank account, sitting at debtors at the end of the year, but we've actually got that cash [in]. So that would effectively take our cash up to around about ZAR930 million.

Just some other items to highlight on the balance sheet, our long term liabilities increased and that was mainly as a result again of the preference share which we wrote up, relating to Khumo Gold and the DRD SA Empowerment Trust. Also included in liabilities are environmental liabilities of roughly ZAR380 million. Because we are now proportionally consolidating Ergo, there is also an increase in the [rehab] liabilities that come from that operation.

And then the last number just to highlight is our current ratio, which is still quite strong at 2.9. I'll now hand over to Niel to take you through his part of the presentation. Thank you.

Hi good morning everybody and thank you very much for your attendance. I'd like to first go through our attributable reserves. There's been a significant move in our attributable reserves mainly because of some additional ounces that we are recognizing at ERPM, roughly 1.7 million ounces coming out of the Elsburg dump which is going to be mined by Ergo. And then about another 1 million which we recognize by virtue of the fact that we have been given permission to mine into the Sallies 1 exploration area.

It's an overstoping indulgence, their government has -- or DME is allowing in order to de-stress our exploration drive into Sallies 1. There are mineable or attributable resources which stayed pretty steady, a slight increase from 54 million ounces to just under 55 million ounces.

And talking about Blyvoor, Blyvoor had a very good safety run. It didn't have any fatalities for a period of approximately nine months. It also achieved 1 million fatality free shifts. It also, once again, was the winner of the Waste Land Mine Manager's Association safety award for the mines in that area.

Unfortunately, like many of these good trends, it also came to an end, and we had a fatality on Saturday. One of our colleagues died when he was in a seismic event, a fall of rock. It was the first event of this nature in two years where we lost a colleague because of seismicity or a fall of rock.

And the head of our underground operations and myself had a discussion this morning and we calculated the probability of being seriously injured because of seismicity, and I think the probability percentage is 0.1% if I'm not mistaken. So there's a 0.1%, on a purely statistical model, probability of an employee being seriously injured because of seismicity at Blyvoor.

And unfortunately these things do seem to come in pairs. This morning, one of our colleagues collapsed. We do not know if it was mining related or whether it was because of illness, also at Blyvoor, and the autopsy that will be performed on this gentleman will tell us exactly what happened.

But yes, Blyvoor has shown that it does have the ability to, for long periods of time, go without fatalities and serious injuries and hopefully it could once again clock at least 1 million shifts without a fatality.

On the operational side, Blyvoor's production increased slightly this year. It was from a slightly better performance from underground and a steady performance from the surface.

Going into the next period, the Way Ahead Project that we've been talking about for a long period of time, that's finally kicking in and we'll see subtle changes in the recovered grade at Blyvoor over the next few quarters when more and more of these answers start coming into our production profile.

Then at Six Shaft, the 15/29 Incline Project, that's on schedule. This essentially is a project aimed at reducing [framing] time, framing distance rather from 2.4 kilometers to about 700 meters and it also incidentally provides access to an area of about 180,000 ounces, a resource of 180,000 ounces which we could mine at a cost of ZAR185 thousand per kilo. The main objective of this though was enhanced efficiencies and the reduction of framing time.

The numbers there give a pretty good indication of where Blyvoor is at. I think the trending in costs is what we expected in the last quarter when many of the increases come through and also electricity, winter rates and electricity, and of course, the training in production is very encouraging as well.

This is notwithstanding the fact that there was an illegal stay away during this period. But what Blyvoor is increasingly demonstrating is that if there is no interference in Blyvoor's activities, it does manage to achieve [goal]. But I think this bears testimony to the efforts of their team trying to bring about a measure of consistency, a measure of stability in its production profile.

Right, this we've shown on a number of occasions. These are the areas that are targeted through the WAP Project. It's all in Five Shaft. It's fairly large blocks so you can see that the values there are pretty encouraging, we have a 9.9 there, 7.2, 7.2, and 5.4 and that performs the -- this is going to form the backbone of production coming out of Five Shaft which, additionally, is the high yielding shaft at Blyvoor for the foreseeable future.

ERPM. Key features at ERPM. We get asked many questions about ERPM. When's enough, enough? When are you going to stop? I think if anything we now have a pretty good understanding of what ERPM is all about.

We've been talking about what we're trying to achieve there over time, and really we wanted to, over a period of 18 months, beginning of July of 2006 through to December of 2007, we wanted to introduce capital into our underground operations and to achieve a measure of stability.

Now whilst we, I think pretty much achieved what we set out to do at Blyvoor, ERPM turned out to be a slightly more challenging mine than what we first thought it would be. And whilst the management team there and the production team there have been pretty diligent in pursing what, at times, presented a fairly steep challenge, we did not really achieve by December what we had hoped to achieve.

So we set out earlier this year with a very clear set of questions in our mind and that was, does ERPM in its current state present a sustainable option in the long term? We're talking about specifically ERPM underground. And if not, if it's not a sustainable operation, if we simply continue to do what we've been doing up until now, is there an alternative? And we believe that there is an alternative. We've had some consultants come in and assess this for us, Turgis Consulting and I'll take you through some of those. But in order to pursue their alternative, if it does turn out to be feasible, obviously you need to limit the damage and you need to manage the [over rate] and the extent to which this ore body presents a risk to the rest of the operations.

So what we really decided to do was for the interim period, while we consider the options, or the one option at ERPM, and do the verifications of the essential drivers of this project, we need to limit costs as far as possible. So we dropped the volume there, we pulled out of the lower yielding areas, which brought about the impairment that Craig was talking about. We reduced our number of employees by 239 at a cost of just over ZAR5 million, which we incurred during the quarter on which we are reporting, so that obviously also had an impact on our numbers. And then we also entered into a discussion and reached an interim arrangement with the surrounding mines, or entities that have interests in surrounding mines.

ERPM in order to keep its ore body dry had been pumping water from one of its underground shafts for as long as it's been around. It embarked upon a plugging project in terms of which or through which it managed to isolate its existing ore body from the rest of the Central Rand Basin. That plugging project has now been completed and for all intents and purposes, ERPM no longer needs to pump underground water. That represents a saving per annum of about ZAR49 million on the numbers for the year -- the budget year going forward. And that more or less were the numbers that it had been spending in the past to keep this ore body dry.

We don't want to simply abandon that, the pumping infrastructure, because there is strategic value for ourselves in that Ergo could draw water from this facility in future. And at the same time also, we were reluctant to simply stop pumping and then flood our neighbors when they themselves have been investing substantial amounts of capital into developing those ore bodies further upstream.

We have come to an interim arrangement that will apply over the next six months, in terms of which the various interested parties would proportionately contribute and also see if they could come to an arrangement going forward, for a permanent cost sharing arrangement. And this would knock off about ZAR40 million per annum off ERPM's fixed overheads associated with pumping costs.

So we're paying about ZAR2 million a month less now on wages and about the same amount less per month on pumping costs. And that would place ERPM in a situation where it is going to get very close to breakeven after CapEx for the foreseeable future, until such time as we've had an opportunity to consider the -- let's call it the East Decline Project.

The numbers that you see on production obviously, also affected by the four days interruption in production because of the violence that occurred associated with the xenophobia earlier this year. A lot of our employees ended up living in informal settlements around the mine. And when the xenophobic attacks commenced, they were targeted and we subsequently had to move them into own accommodation.

So there was that interruption and then, of course, ERPM also has a surface circuit, which we don't independently report on regularly because it's managed by the Crown team. That surface circuit in the last quarter was one of the main reasons why ERPM recorded an ZAR18 million profit for that quarter.

It's also a circuit that's been very effective and very well managed over the last few years. Since September of 2006, it habitually recorded increases in production and profit of up to 34%, 26% I think the one quarter.

This quarter, it transpired that one of the concrete platforms on which it [moves] -- it's (inaudible) are built that those platforms were showing signs of failure and stress. So we decided to, well first fix the one that was showing obvious signs of stress, and then also proactively reinforce the remainder of these platforms. And that had an impact on ERPM's surface circuit, the so-called [casing] circuit. And that of course also impacted on the total production numbers.

Going forward though, the plan for ERPM -- we asked you just to have a look at what we refer to as a pay-as-you-go system of developing into the ore body. The problem with ERPM is a simple economies of scale problem. It's not producing enough tons at the potential yield of its ore body to cover its overhead and also yield -- the required margin that I think it's capable of.

So what we envisage doing there is a pay-as-you-go decline and, as the sketch further on would indicate to you, it's very much an extension of existing footprint. It will, in its final format, provide an opportunity to mine the same ore body of three different points of attack, and that too will become clear when I take you through some of the sketches.

It will also mean that more than half ultimately of ERPM's production would be outside of the challenges or free of the challenges that we have to deal with, with the existing incline belt. Our existing incline runs at a 14% angle. 14% apparently, according to modern wisdom or modern technology, is just a little bit too steep. You shouldn't go steeper than 10%.

So this one runs at 14%. That means that there's a huge amount of stress on that belt. It also means that when there's water on the belt, which happens from time to time as well, a lot of your [finds] get washed out. So it's an inefficient piece of technology and infrastructure, and this development would be -- would circumvent that particular part of the decline.

Our existing decline has also shown that you put more than 25,000 tons a month onto that belt and it's going to break. You will have unscheduled maintenance on it, which means two days interruption every time.

And then, of course, this technology is also a technology that's been used safely and effectively in other mines. We had a site visit, myself and Collie Russouw who heads up our underground operations, at Evander earlier this year. We went underground at their mine and where we walked the incline and we rode down their little chairlifts. Everybody had a good chuckle because I was the only one who didn't know exactly how to get onto one and I was swinging around like I was on a merry-go-round. But it works very well. It's very quiet, it's very efficient, it's very safe.

This is basically what ERPM's existing layout looks like. It's everything over there. And the incline that we're proposing to do is this bit over there. At 70 level, a high speed twin haulage through to a new platform, roughly 70 meters into the face or through the face, and then dipping down at ten degrees, [tracking] the reef horizon.

Here's another sketch that shows you exactly how that's done, facial crosscut at 70 level. This is where we'll establish and then we follow the contours of the reef horizon. Up until there, the -- this is where the upfront capital would have to be spent. But from that point onwards, you're basically on a pay-as-you go basis, as I will demonstrate a little bit later on.

And you can see how we would be able to attack the same ore body off three different points of attack. This is where we're currently mining, 66 through to 72 level. That's how long we'll -- be.

We've been talking about the fault -- 15 meter up throw fault that runs along the ore body, by developing through it obviously you don't have to mine through it, which provides some additional comfort going forward that you won't have the significant dilution of grade associated with my having to mine through that fault. Going through the fault, negotiating the fault and then developing the incline set-up.

But there you can see what the costs look like. So just sort of assume a pretty conservative approach to capital and also 25% contingency. But capital up to there and from that point onwards, pay-as-you-go.

Now these numbers are pretty much within our existing financial reach. We've considered several options. Amongst those, surface shaft or another vertical shaft and all of those are projects with long lead times. They might be very efficient but it's long lead times and it's huge capital.

This one we could have in production 18 months after approval of the feasibility or approval of the project and you could see that the CapEx numbers are fairly modest compared to what we looked at within the context of our available and existing resources.

Right, moving on to Crown. Crown saw a slight reduction in volume this quarter but a very nice improvement in grade. And as usual, it was a pretty steady performance. Very difficult to talk about Crown because it's the same message every quarter, Crown did well, Crown made a nice profit, Crown has its costs under control. And other than bits and pieces of maintenance and small capital expenditure, it's very much on a straight line.

We've been talking about Top Star for quite some time. When you say the Top Star mining right is imminent, I think we are in a position to finally say that it is, in fact, imminent. We've received written confirmation from DME that we are in compliance with all of the conditions required to be issued with a mining right.

The local office of the Department of Minerals and Energy require a ZAR1.9 million financial guarantee. We obtained that guarantee and we've filed it with the DME and within days, maybe within a day, we might be issued with that mining right. But that is -- that was communicated to us as being the remaining outstanding requirement to be issued with a mining right.

But there you can see, even without Top Star and mining into what was really a stopgap resource for the time being pending Top Star, Crown's actually been doing pretty okay.

Crown has had to cut back on volume though during the course of the quarter in order to do some maintenance work to its tailings deposition facility. And this is the sort of thing that I think we would see more and more while we go towards the end of Crown's life of mine. These dams are getting higher and the deposition area is getting smaller and I think we would more and more see the sort of situation where we can't continue to deposit at the full 560,000 tons per month but maybe drop it down over time, periods of time while we do maintenance.

Obviously with Top Star coming online, we would now prioritize our reclamation strategy in such a way that we could give preeminence to Top Star and have the full benefit of what is a fairly lucrative resource with a pretty good NPV.

Right then, the Project at East, which we started with about two years ago and which is really the natural progression of the strategy to maintain a good and a healthy balance mixed between our surface operations and our underground operations. This is Ergo and we took some pictures to show to you the work that's going on there. I think some of you have actually been there. It's high quality work, it's being very well executed. It is online to come online in October.

We are engaging DME on a regular basis to make sure that the licensing process also enables this. In fact, I think we're making a bit of a nuisance of ourselves just to keep the pressure up.

We also [went through] some recent changes in the local office of the DME, we're also informing their replacements of exactly what this Ergo project's all about. And it's significant I think within the greater picture of South Africa and South Africa being an attractive investment target, since so many of our equities have been losing a bit of traction over the last few months, local South African companies.

We thought that we'd put in some of the high line detail. On the Ergo project, total CapEx, this is ours and Mintails combined, ZAR611 million. Our contribution is ZAR275 million. The balance or the reason why Mintails is contributing more is they undertook to bring a fully refurbished plant into the Ergo line. It will have two distinct streams from which we will retain, which provides a measure of optionality. You do really want to have two streams feeding into the same plant. One is the Benoni tailings dam, and this is the first one which is closest to the Brakpan plant and which we're targeting for October of this year. You can see the size of the resource and the gold content. Elsewhere, these have been sampled and confirmed.

The -- also the extraction characteristics of this material has been verified at our laboratories in the Elsburg Tailings Complex. Elsburg is the one that belongs to ERPM and which will ultimately be the primary reclamation source, with a life of roughly 12 years and what the gold content is in there. Operating cost, which we're targeting from October through to June when only the Benoni line will be running, is ZAR30 a ton and we're targeting from June next year onwards ZAR23 a ton.

Now Crown's performance cost wise has been pretty steady. We don't see double-digit increases in costs there, so we believe that these numbers are fairly reliable and these are the assumptions that we've accepted for purposes of justifying the capital expenditure. The life of the project, as I said earlier, is 12 years and 600,000 tons initially, ramping up to 1.2 million tons once Elsburg comes on line as well. John, I think that's your slide the next one.

I think just to wrap up, we have reached stability. I think the performance in the second half of the year has indicated that. We have reached sustainability, which is what we said we would wish to do at the beginning of the year. We have a platform for organic growth and we have the capacity to fund that growth. And the target that management has set is that from the existing assets, including Ergo of course, our target would be 400,000 plus safe ounces made at a profit and our target to do that is by 2011.

So I think what you've got is two quarters of sustained performance and I think what we have now is a business with a very sound platform for growth. Now I think we have a short video on Blyvoor and after that we'll look for questions.

(Video playing)

(technical difficulty) questions. Yes. Well if there are no questions, thank you very much for attending. Yes, we've got a question.

Hi, it's Charlotte Matthews from Business Day. Could you explain the issues around Wonderfonteinspruit and what your potential liability would be there?

Niel, do you want to pick that up?

Yes, yes certainly. Let me see if I can find an answer without putting you to sleep. There are two very distinct, I think, sets of expectations insofar as dealing with the Wonderfonteinspruit which is concerned. There's obviously, on the one part, action groups who want to see that something is done immediately, that sediment that's accumulated at the bottom of the Wonderfonteinspruit in the catchment areas in Wonderfontein, that sediment's lifted immediately.

And then I think there is a slightly more cautious and conservative approach has been adopted by the mines in the area, and we're supported by some pretty good scientific data that this is not an improper approach, mainly that we need to see exactly what the impact would be if we just went ahead and started lifting the sediment from the bottom of the stream. How much is going to be released into the natural stream if we just clean the bottom.

So what the mines have done, and I think this is probably the step in the right direction, where you have a consolidated effort, is we've established an action group, the MIG, I've forgotten what "I" stands for --

Mining Interest Group.

Yes. I want to call it the Mine Action Group, it's in fact the Mine Interest Group, MIG. And this group has set aside quite a bit of funding, our own contribution is ZAR300,000 and ours is the most modest of the lot, to do a proper scientific study with reputable independent consultants and experts, to tell us what exactly the appropriate and responsible long term sustainable solution for this problem is going to be.

In addition to that, Blyvoor itself has started a program to do a bit of a clean-up in and around areas where there have been slimes run offs over time. John, how much did we spend last year, about ZAR400,000 on that? About ZAR4 million, okay. I don't think I saw those numbers, [has it] been that much?

So it's about ZAR4 million that we spent on slimes clean ups and then also we have a constant monitoring process where, on a monthly basis, we report the quality of the water that we in fact discharge out of Blayvoor into the Wonderfontein system. That gets sent to the Potchefstroom Municipal Council or local council. We have in fact written confirmation from them that our water quality complies with the standards.

So we're not adding to the problem. But then of course there's the historical legacy that we need to deal with. In that regard, as I say, we're doing the in-situ clean ups and we're participating in the MIG.

Niel, can you identify the people who are sharing the pumping costs at ERPM? And is the government coming to the party with a pumping subsidy at all?

Well the government has been helping in contributing to pumping costs now for several years. They never give a firm commitment in advance. What they do entertain though is representations, and then more often than not they do in fact come to the party. Last year I think their contribution was about ZAR9 million.

Over ZAR12 million.

I think about ZAR12 million. In addition to that they also made a contribution towards plugging costs; the cost of building these plugs. The minds that have come together, or the group of entities that have come together to try and find an integrated solution for ourselves, ERPM, Central Rand Gold, (inaudible) Mining, that is the Australian entity that took over the old Durban deep mine. And then also, parties that may be affected by the pumping. Most notably Ergo. Ergo obviously also wants to play a role in the long-term to see if they could -- or to ensure that we could draw water from this shaft.

In the West Rand, a company called WUC, Western Utilities Corporation, was established. This is a company that is headed up by Jaco Schoeman. He managed to get some funding from offshore. The purpose being to treat the water and then to sell it for profit to bulk users. And that same structure -- we participated in that initiative as well. And we're trying to replicate that exact same structure. This one is called Central Basin Utilities, [CBU]. And that entity would then take charge and coordinate the collective efforts of the participants to see if there again we could have a long-term sustainable solution.

If you just leave it to the mines and say you must continue pumping, the mines will continue pumping as long as they're in operation. What you want to establish is an entity that is self-sustainable. And the Department of Water Affairs and Forestry have come to the party and they are now allowing the establishment of independent vehicles that could put together a business plan with a commercial objective, and then recover the water treated and sell it for a profit. Yes sir? Certainly. There was a hand here.

Good day it's [Gaea] from the Sunday Times. You will correct me if I'm wrong, but I learned that in your restructuring process, maybe I do not see (inaudible). Now I would like to ask that this ZAR0.10 dividend, why didn't you maybe consider saving jobs and not giving a dividend?

Certainly, I think that's a valid question. Look, I think as management we need to try -- we need to maintain a balance between the interests of three distinct groups. Those are our shareholders, our employees and the communities that are affected by our activities or society.

Our shareholders have been investing a lot of money into our operations, a huge amount of capital had been paid into our operations to stabilize them and also to optimize our operations. And employees and surrounding communities have had the benefit of that, because obviously the more you capitalize these operations, the more opportunities you can create. But at the same time I think to expect the shareholders to subsidize non-pay areas and to keep people employed simply because we can and not because there's a commercial justification and a long-term plan, I think that could be unreasonable towards the shareholders.

So a lot of money had gone into (inaudible) over a long period of time in order to take it to where it is now, where we have a pretty good idea of where it can go. But now I think it's also maybe the turn of the shareholders to see the slight swing of the balance in their favor. What we did try to soften the blow for employees obviously is they have a first quarter [comeback]. So if and when we do run with this project to once again up the volume at ERPM, through the organized labor structure, those employees affected by this initiative, they get a first call, they get the opportunity to be re-employed first. And then in addition to that, we also have a program to assist them in their re-integration in life after the mining industry, so there are programs for re-skilling, re-training and so forth.

Mr. Andrew Weir, who heads up the Human Resources Department, he's here as well and he could give you some detail into that. So I can assure you that we look at it with a sensitive eye, we're not indifferent to the plights of our employees. But at the same time, we do have to maintain a balance.

We've got one question from the web if there are no other questions here. It's from Leon Esterhuizen. The question is, a fair chunk of your reserve and resource sits in ERPM, an operation that has constantly battled to make money. What gold price and mining costs have been assumed to determine these numbers, and what are the chances of ERPM achieving these costs and when?

I don't think we can give exact gold price and cost assumptions, but what we can do is firstly, we need to remind everybody of the strategic importance of ERPM in terms of water for the surface operations, in terms of the Elsburg site which is owned by ERPM which is an integral part of the surface operations. And we need to also bear in mind ERPM1 which we are reviewing and a feasibility study will be available at the end of this year.

As far as the existing ERPM operations are concerned, the existing operations, the two main thrusts this year have been our review of labor resulting in just under 300 people being retrenched and apportioning the water pumping costs at ERPM. And we think that at the existing rand gold price, and with those cost reductions, we expect and our target is to manage ERPM to be breakeven on cash after CapEx. Now that is our target for the existing operation. We think that, that then means that the strategic value of ERPM will be seen in other areas of the operation such as the surface circuit. And we believe in the existing market conditions we have and the cost conditions we have, we can achieve that for the year 2008/2009.

Are there any other questions? Thank you very much indeed. Thank you everybody.