DRDGOLD Ltd (DRD) 2011 Q1 法說會逐字稿

Good morning, everybody. And thank you very much for taking the time to attend the presentation of our results for the first quarter of this current financial year.

We're going to be spending most of the presentation on explaining the headlines or the highlights for the quarter. I'll be doing most of that, and then Craig, will take you through the operational performance and also the financial performance.

So, straight into the highlights. Fold production was up 1% for the quarter and we are quite pleased with this number, because we were a little nervous about the effects that the change over from -- to the old reclamation sites at Crown to two new reclamation sites was going to have on Crown's production.

And in the middle of the quarter, there was a bit of volatility in production. But that came back quite nicely towards the end of the quarter. So we saw less of the volatility that we anticipated -- associated with this turnover with change over rather than what we feared.

Obviously, we are not quite there yet, there's still a few months to go through to December to the full integration of the Crown and Ergo circuits where there is two central plants. So, we'll just have to watch this space and see exactly what the effects are going to be.

But we are pleased with the volume runs -- the volume flows from the new sites, and things seemed to be going according to plan.

Revenue was up quite nicely 28% to just over ZAR800 million, and that is off of much high gold price obviously. Operating profit also surged nicely by 82% to ZAR202 million; I think that's just over 10% of our market cap.

Headline earnings per share up 150% to $0.20; I think we beat the consensus view by just -- just under $0.04. We were very pleased with that as well.

And net cash inflow from operations up 14% to ZAR117 million. The reason why this is also a particularly pleasing number is the fact that we had to repay ZAR80 million of the loan note that Ergo took out. And as these numbers suggest, enough cash was generated in this quarter to pay that entire obligation. And that was duly done in October of this year, earlier this month.

We also received a number of offers for Blyvoor. I am not going to divulge much detail on that because we are right in the middle of the process. But we have targeted December to announce a transaction and we think we are well on track to announce that transaction. We're very pleased also with the type of office that we got, right.

The next few slides explain the headlines and way the trends are, what impacted on those movements? As you could see underground gold production was up quite a bit, that's at Blyvoor, to 21,500oz. And this was off the back Blyvoor returning to the explosives that they used up until earlier this year, May, I think it was when the supplier had a little incident at their factory. There was an explosion at the explosives factory, and they lost one of their wings, and that wing was in fact the wing that provided Blyvoor with the type of explosive that they used.

Market plan had a bit of a negative impact on this fraction size of the blasts or the (inaudible) that they blasted. And we saw a drop of 25% in yield; it's clawed its way back up again. Then again, I think also there's been a very determined drive towards higher volumes and restoring volumes at Blyvoor. And we are seeing that come through.

Blyvoor is maintaining its safety record, the principle of safety over profit. It's long been established there. And I think it was two days ago that they achieved 6 million fatality-free shifts associated with fall of rock and seismicity, is that correct?

Yes.

So it's definitely a mine that is clearly taking safety very, very seriously and we are seeing it in the numbers.

Surface gold production in total was down 3%, and I think this to a logic [thing] was as a consequence of the change over from two sites in and around Central Johannesburg. Top Star, for example, is now fully mined out, and moving into a sand dump not far from the soccer stadium, just off the highway, the Western bypass. Initially, in accessing this dump, there were a few issues in getting the overburden sorted out and the size sorted out. But we're seeing nice volume flows, consistent volume flows coming out that site as well.

I think, Crown has treated the better part of 24 dumps in and around Johannesburg now over the last 30 odd years of its existence.

And there is always that initial period, the three, four month period when you access a new dump where they have to sort out the mortality, they have to sort out the flow rates, the densities, et cetera, et cetera.

And this time around, I think we'll be pleased that it took them less than a month to sort those out. So whilst there was a slight drop in production associated with this changeover, the volatility we expected is less than what in fact happened.

But then we've also got comparisons, first quarter comparisons for the last three years, first quarter for 2010, first quarter for 2011, and then first quarter also for this current financial year. And there you could see how Crown and Ergo, rather Blyvoor and Ergo have performed over the last three years.

The numbers that you see in this presentation for the first time when we talk about Ergo is in fact the consolidated Crown/Ergo footprint. We are -- we've operationally reconsolidating those operations financially from a financial reporting perspective, we're consolidating those operations.

Obviously, it's a business that grew as we went along; first one plant, then two plants, then a third, and eventually the Ergo plant. And there was a bit of an add-on structure associated with Crown. It was very well managed through a very well-established management structure with the small-business units and so forth and so forth.

But I think the time has now come where we are consolidating the entire footprint into one center of gravity where the management structure is going to be sitting. And we also want to be reporting the numbers in such a way that Ergo is a consolidated or unified entity representing the aggregates of our total surface recycling exposure in and around the [Rand].

And there basically you could see what the production of the various components of our business has been over the last three years. And the contribution that Ergo -- combined Ergo and Crown has made towards that production also in the first quarter of every year.

The reason why we do it quarter by quarter is South African does have the peculiarity of cyclical cost -- cost cycles, almost seasonal cost cycles. Over winter time we pay much more for electricity than at start of winter time. And I think in order to give investors in the market a view as to the comparing apples with apples, we've decided to show you what we do comparative quarter on comparative quarter. And this is basically where this comes from.

And also revenues over that same period of time, revenue for this quarter compared to the comparative quarter in the previous financial year is up 29% to ZAR806 million. This is on the back of a 30% increase in gold price. Slightly less gold was sold in this quarter but the gold prices really assisted us and it surged quite nicely.

Operating profit, quarter-on-quarter just under 200% increase in operating profit. I've always had this target of ZAR100 million cash operating profit per quarter, that takes us to ZAR400 million for the year, and of course with the gold price and the increased consistencies that we are seeing out of the surface recycling business that target is being shifted for me. And it looks as though we are now going to be targeting ZAR200 million per quarter. So that's where we are now.

Headline earnings per share, also up quite nicely from a negative number in the previous comparative quarter to $0.20. And the net cash inflow from operations, quarter on quarter, last year to this year up just over 400% to ZAR117 million.

And this of course provides a bit of a comfort for maybe future funding, if the other projects, and we're going to be talking a little bit about some of those other projects at Crown in particular, towards the further optimization of the recoveries, the extraction efficiencies at Ergo. And potentially also byproducts or byproduct development, the fact that these are the numbers coming out at the current gold price, thus provide us with the opportunity to self-fund those developments.

Cash operating costs and gold price, you could see how all of the operations in the last quarter, including Blyvoor, with its significant swing in production are now all in -- there is some clear daylight between the revenue line and the cost line.

And this enables us to -- or enabled us to attract the quality bidder that we had hoped to attract through the bidding process for Blyvoor.

And then, operating margin analysis, it's in the last quarter, the total margin -- Group margin was 25% with 34% Ergo and 13% coming out of Blyvoor.

Capital expenditure, it has been a year of significant capital reinvestment into the operations. I think ZAR320 million in total just on Crown and Ergo, and Blyvoor managed to maintain its capital reinvestment program with money that it made by all by itself, it hasn't had any support from DRD for quite a number of months now.

And there you could see what the capital reinvestment numbers also look like.

All right. Craig will take you through the operational review for Ergo, Crown, and then also the financial review, thank you.

Thanks, Niel. Good morning ladies and gentlemen. So, firstly, on Ergo, as Niel said, we've now consolidated Crown and Ergo and we report these numbers as a consolidated set of numbers from this quarter onwards.

Production at Ergo was down 1%, and that was largely driven by grades. Grade at Crown in particular was down due to top stock coming to an end, and grade overall, if you're looking at the consolidated Ergo's business unit, was down 5%. This was slightly offset by volumes, which were up 3%.

Cash operating unit costs were up 13% and that was driven by obviously the decrease in production, the electricity tariff increases of 25% per annum from April, which kicked in and in also provision for wage increases of roughly 8%.

And operating profit ended up 137% up at Ergo and that -- you can see the gearing to the gold price. That was largely driven by the 37% increase in the gold price. Even though costs increased we saw that margin over that operating profit margin opening.

On the Crown/Ergo pipeline project -- I'm just going to click this on; it's just the progress with regard today. You can see the red line basically represents the 50 kilometer pipeline between the Ergo plant and Crown plant. The green line represents the steel pipe that has been installed for 44 kilometers of the pipeline or 88% complete, and the plastic lining which has been installed. Also 44 kilometers of plastic lining been installed or 88% complete, and that takes us up to City Deep Plant, and from now on material will be pumped from the City Deep Plant through to the Ergo Plant for processing.

Just in terms of that project and what remains on the capital, Niel mentioned ZAR320 million spent in last year, I think the total project was ZAR340 million, which included some portion from the previous financial year. We are looking at roughly ZAR50 million -- approximately ZAR50 million of that project -- of the capital spent on that project remaining should be spent from October to March next year and with a large capital being spent in March.

I think most of that is probably on the Brakpan tailings facility, the upgrading of the tailings facility to take 150 million tons additional tonnage.

On Blyvoor, the operational review for Blyvoor, production was down 4% when compared to the first quarter of 2011. And that was largely driven by the decrease in production from underground. You can see it was down 11%, when compared to the first quarter of 2011. And surface production actually offset some of the decrease with a 23% increase in production from surface.

The underground circuit at Blyvoor, there was a 5% decrease in volumes, as well as a 7% decrease in grade whilst at surface we saw a 3% increase in volume, and 20% increase in grades.

Cash operating unit costs were up 19%. Obviously, that's as a result of the lower production largely. But then, also the 25% increase in electricity tariffs year-on-year, and Blyvoor managed and we announced that they managed to conclude a three-year wage agreement with the lower categories getting a 7% increase and the higher categories getting a 6% increase. On average that -- or that average out to around about 6.5%, which is in the numbers.

Operating profit at Blyvoor increased to ZAR46 million from the previous ZAR3.4 million in the first quarter of 2011. And also largely driven by the 37% increase in the gold price.

Okay, on the income statement. Just an extract of our income statement, you can see that, as Niel said, our revenue up 29% again due to the higher rand gold price received. Our costs rollup 9% and again electricity price increases and labor cost increases, which were above inflation have contributed to that 9% increase.

This resulted in operating profit of ZAR202.5 million for the quarter, and that's up 192% on the first quarter of 2011. And you can see obviously the effect of the gearing of our Company to the gold price.

Net finance income, as you can see, was down from ZAR1.7 million to ZAR0.5 million, and that's largely due to -- the first quarter of 2011, we didn't have the loan note. Obviously, in this quarter, the most recent quarter we had the interest charges on that loan note. So obviously decreased net finance income.

Our profit before tax, we saw a swing in that by almost ZAR127 million, from a loss of ZAR3 million to almost ZAR124 million. Taxation, the biggest component of the ZAR40 million there is deferred tax charges. Obviously, that deferred tax charges increase as the Company becomes more profitable. So, it's largely what drove that high tax charge as you see in the income statement. And again, ZAR91 million swing in profit or net profit from a loss of ZAR8.3 million in the first quarter of 2011 to ZAR83 million in the current quarter.

And that obviously had an impact on our headline earnings, up significantly from a loss of $0.01 in the first quarter of 2011 to $0.20 in the current quarter. Just interestingly, that's more than 70% of our headline earnings for the whole of fiscal 2011, and that's achieved in one quarter.

Our balance sheet, just a couple of things to note. Obviously, our cash has moved up and that's standing effect that we've still been spending capital on the Crown/Ergo pipeline project. As Niel mentioned, if you look at the current liability number, that includes ZAR80.7 million of loan notes, which were due in October 2011 and which were repaid. So obviously, that comes out of the cash resources in the next quarter.

In addition to that sitting on the creditors was the accrual of the dividend. Approximately, ZAR31 million with STC, sitting in that number, which also flowed out in October 2011.

You can see that our current ratio has improved and it will continue improving as long as we're generating these cash flows from our operations.

I'll hand you back to Niel to conclude the rest of the presentation. Thank you.

Thank you, Craig. Just insofar as the Zimbabwean situation is concerned, in the two months since our previous quarterly report we've been doing much of the same. We haven't added anything in the last quarter. Our footprint remains just over 20,000 hectares or 21,000 hectares. The total spend to-date is $2.5 million.

And what we'd be basically doing at the moment, as you can see from some of those pictures is that following the -- at this stage still erratic typical Greenstone range to see if there is a concentration of gold in any of those profits. We've also ordered a diamond drill to start drilling 40 meter holes in and around those areas where we do pick up the range.

There's also a very nice little alluvial site further to the south which we are scoping at this stage to see whether we want to bring some alluvial material in through the appropriate technology. So very much at this stage a matter of securing assets, consolidating it and positioning it for future development.

And looking ahead, I think our statement of strategic growth is well known to the market of reducing risk, managing margin, reducing costs and cautious growth. Insofar as reducing risk is concerned, we are now at that stage where, I think, most of the shareholders who invest in DRDGOLD invest in DRDGOLD because of the exposure to the recycling part of the business.

And we are now in a position to responsibly hand over Blyvoor into a safe pair of hands, which would obviously I think de-risk the risk profile of DRDGOLD price significantly.

From the perspective of exposure to labor volatility, exposure to challenge and safety environment, exposure to all sorts of other little mishaps, regulatory interventions and so forth, interruption which from time-to-time occur within the South African gold mining landscape or mining landscape.

And insofar as cautious growth is concerned, ERPM Extension 1 and 2. This is a resource that we don't talk about a lot, but it's in fact an isolated pocket, isolated resource away from any of the current water cavities, underground water cavities. The work that we've done up until now suggests that there is a resource of approximately 18 million ounces and an in situ grade of around 9 grams a ton. It's a new order exploration right that we've secured over the area, all but is situated between 700 and 1200 meters underground roughly.

So, it is definitely something that we want to position in such a way that we can at least get some value recognition for it. We have made an appointment of an executive into the organization.

One of the -- we actually managed to get into the organization by saying that there are going to be four components to these portfolio, I think he since realized it is closer to 40, but this is number one on the list. He has to optimize this as it can take it up the value curve.

And we want to be in a position in February to say to the market, this is how we are going to be positioning the asset.

Of course, we get the question, but you are moving out of deep level underground into recycling, what are you doing with this? The fact is government gave us this license a few years ago, we have to take it up the value curve and then position it for unlocking a value.

We won't have the expertise I believe to really develop a new underground mine in South Africa, but we certainly do have the expertise to at least say to the market this is how much we think is worth and do you want to come in, participate in the assets and run with it?

The Ergo integration is scheduled for the end of the year for December. And then, as you saw in Craig's slide, we will have a fully consolidated or a footprint that is linked all the way from the far west of Johannesburg through to the far east of Johannesburg, which basically means that we have access to just about every single remaining mine dump and slimes dam in and around the Johannesburg area.

And if you then read the next line, R&D feasibility due in December 2011, we spoke a little bit about last quarter about the fact that we believe a combination of a flotation circuit and a fine grinding circuit could unlock an additional 25% of gold currently not responding to our metallurgical process, it just introduces such a new horizon of opportunities if we do in fact manage to get that up and running.

In addition to that feasibility study or in addition to the unlocking of additional gold in the (inaudible) mine, we do believe that we also reduce the -- or increase the concentration of uranium in that float, in that mass pool of about 5%.

And we want to do some tests. Uranium is something that we put on the backburner. We continue to test for uranium and see where it is and how much of it there is. There is a certain cutoff that you have to achieve before you could realistically consider extracting uranium from your material.

And it does seem as though this flotation process may get us to within reach of that cutoff. And that is probably something that we will talk a little bit about in the March quarter.

So, the optimization of the existing structure or the existing circuit plus the potential of unlocking some byproduct potential.

And then, also we have within our organization an individual person who is from Mozambique, and who in fact represents most of the miners, Mozambican miners in South Africa. Regularly gives reports to the department in Mozambique on the plights of Mozambican miners here in South Africa, and as a consequence is very close to where the administrative action is in Mozambique.

And he has been asked on a number of occasions well why don't you start looking at opportunities in Mozambique? And we decided to do that. So he has had his first trip into some of the gold producing areas in Mozambique to see what is up there, what potential is out there.

True to our philosophy or our strategy of cautious growth, we are not writing out any checks to sites that other people discovered or where there were handed concessions.

We are really looking at it from the perspective of the primary concession holder and the government is saying this is what we can bring to the region, see what we did in Zimbabwe where we established a venture on a 50-50 basis with the local Zimbabwean.

So, we tailor our structure and our way of going about the business in accordance with the environment and the climate in the jurisdiction, and I think we are capable and certainly willing to do something similar in Mozambique provided that the opportunities are there and that they are attractive enough and we will see what they feel.

So, we would be going back there a few times more over the next few months and see what concessions are available, are they in areas where there is good gold prospect, and see where that takes us.

Basically what this video showed you was where the pipeline starts with the [cell 42] at the time when it was taken obviously it extends another six odd kilometers further towards the west, right through to Crown.

The little site that you saw there right at the beginning checked with the water-jet, that cavity that opened, that was opened up, that channel that had been mined to open was roughly three weeks work. So, these guys move a lot of material over really a short period of time.

And then, of course, I think something that is probably not spoken about often, but which deserves some attention is that this Ergo Brakpan tailing stand facility, which has a circumference of 20 kilometers odd is fully clad all around the sides of the dam, the top soil and natural vegetation is securing that.

So, what you basically see happening in and around Johannesburg now is that materials being moved from low lying areas predominantly wetlands, recycled and then deposited on to a deposition facility, which I can only describe as world class insofar as environmental management is concerned.

So, we are very excited about it. I think the business is increasingly starting to look like a business. And hopefully we can start delivering into the expectations that we have created with the market.

We did say a few years back that we want to start becoming a dividend paying company, we want to reward shareholders for buying our shares and holding our stock. We have done that now for four years in a row, and certainly with the current gold price we will be able to maintain that and potentially even increase the yield that we offer on our shares.

Craig and I will be taking your answers -- your questions rather and most of our management personnel is here as well, so they would chip-in whenever necessary. Thank you, Steve.

This is Steven Shepherd, JP Morgan. I have got three questions, if I may please, Neil. And well done indeed for doing what it says on the [TIM] by the way, makes a nice change to see it.

Yes.

I will start with -- a fairly boring question to, maybe Craig. Could you just give us the quarter two and quarter three CapEx breakdown please?

The quarter two and quarter three kind of looking-forward?

Yes.

I don't know if I have got to that here.

I will come back to that.

But I'll have to -- I can send it to you.

But it's ZAR50 million all together right?

The ZAR50 million that I talked about when I was up there was the remaining capital spend on Crown/Ergo, and that's basically from October through to March. But if you want us to send you a detailed breakdown of capital, I'm sure we can.

I might need -- if you are kind enough of to do that, could you just give us an idea what your sustaining CapEx would look like going forward?

Okay.

To Ergo and Blyvoor separately please?

Okay.

And then, could you perhaps just give us an indication, remind us, what you believe the steady state production will be for Ergo once the projects are commissioned?

At the moment, we are doing about 365 kilos to 380 kilos per month. I think a nice number to be able to report would be around 400, and that's what we are targeting. I see my colleagues are sitting there in agony that I -- but that's it for us.

Or rather us -- (laughter).

But Steve that's what we -- that would be a nice number. And certainly we are putting enough volume through the plant to do that; hopefully efficiencies can take us through that number.

With 500 kilograms a month is that right?

Four, four.

Got it.

That's the target; whether we will get there, I'm not sure, but we are certainly stretching ourselves towards that target.

Thank you, very much. And now, you have mentioned this, but I really want to press you on this because a lot of the people I speak to are disillusioned with gold shares because they are full of growth and there is no dividend return. Investors therefore would rather own ETF, which is outperformed the gold shares. And the argument would be the only way you could differentiate your share from the ETF is by offering a yield which generally an ETF cannot do.

Could you talk to us about your dividend policy going forward? You were obviously going to generate huge cash flow of ZAR425,000 a kilo, which is what the gold price looks like its going to average with the current quarter. Please could you explain to us carefully what your approach to dividends would be?

Our dividend policy is to pay a dividend at the end of each year. Obviously, a topic that is now starting to also appear on the agenda under any other business, I might add, is special dividends, and share buybacks and so forth. What we can't do at this stage really is to get overly ambitious in the distribution of our available funds. For the simple reason that there is another project ahead, we do want to take a serious look at the flotation plant and the fine grinding circuit. And we would like to do that without having to dilute shareholders and potentially not raising too much in the way of loans, and then maybe I may just give a little bit of perspective on that.

We established this loan facility, this loan note facility, the ZAR500 million loan note facility in DRD, SA or Ergo mining operations as we call it now. And we made use of that earlier this year or late last year in order to part fund the Ergo consolidation process. I think we probably have enough in the bank to cover the future expansion or optimization project as well.

But we do live in a time of extreme volatility when it comes to the prices of bulk commodities and so forth. So, these loan notes provide us with an opportunity to raise a bit of money and fix the price of the equipment and so forth that we bring into that. Whilst the cash flows put us in a position where without too much hassle we can repay those, as we had now demonstrated in the last quarter. So, we've got that on the agenda and we don't want to be paying out dividends and then in the next week raising ZAR150 million in loan notes. This is just so, I think, a wrong message that comes out of that.

In addition to that, we are increasingly looking at maybe self-funding some of the rehabilitation guarantees that we are required to provide to government. The market in providing insurance products, as far as I'm concerned seems to be a bit of an exploitative monopoly at this stage. And in order to get those guarantees in place, and honestly I hope, I am not putting you in an awkward spot when you got to talk those insurance, but this is my message to them.

In order to -- those instruments are becoming very expensive because you pay a fee on the exposure that they take. And at this stage there is very little risk associated with that. So, we are increasingly looking at the possibility of maybe just putting over the money into bank account earning interest on that and then using that as security to cover some of the premature closure liabilities.

We will cover for those liabilities required by government before the issue with the mining license. So, this is a very long winded way of answering your question, Steve, but it's very much a matter of, let's see whether we are going to go the self-funding route insofar as rehab guarantees are concerned and let's see how much of the upfront capital required for the upgrade. We can cover by ourselves before we start raising loan notes. And then, in February, we will take a look at that if there is a room for a special dividend we will declare one.

I'm sorry, I need to press you a bit harder on this. If we go back to the disposal of Porgera and some of the offshore assets, a lot of money was realized for DRD at that time. That money wasn't returned to the shareholders and it was spent. Now, when one looks at the rating on your share, you can kind of understand why it's rated like that.

Yes.

So, looking at the present, if you were to sell Blyvooruitzicht for an amount or cash, could you offer the shareholders that money back?

Yes. Whatever we get out of Blyvoor is certainly not factored into any of the future reinvestment plans that we have. So yes, very much.

So, you would pay that money to shareholders as a special dividend?

If -- I will.

After, no, no this is important.

I will make the recommendation -- I would personally be very much in favor of that. I'm in favor of maintaining not more than what we really need from a buffer perspective and giving the rest to shareholders. Especially, there is going to be volatility in the rand; the rand at this stage is what at ZAR780 . It could be at nine in a year from now. It makes no sense to deny your US shareholders access to those funds and just sit on it if it's going to diminish in value, if it's going to weaken. So as the money comes in and we don't need it, we want to give it to shareholders. But we have to be cautious as well, because I don't quite know Steve, if our capital raising ability by just issuing shares is right where it needs to be just yet.

But let me leave you with a rhetorical question that you don't have to answer.

Certainly.

If you were investing in gold and you're promised growth year after year after year, which doesn't materialize, and this is a generic question?

Yes.

What would you buy? Would you buy a gold share or an ETF, if you don't get any cash back? And that's a rhetorical question, which requires no response.

Can I give you a response, can I give you a short response to that. My DRD shares are up 46% this morning, so I would buy DRD -- (laughter).

It can come down --

Of course it can, but hopefully I would anticipate that and sell in time. Thank you, sir.

Niel, Brendan Ryan, MiningMX. You said you didn't want to say too much about Blyvoor, but I'm going to ask anyway.

Yes.

How many offers have you had? Are they cash or are they shares? And what is your strategy here? Do you want out? Do you want to take the money and run or do you want to hang in there in some way for exposure to that exit down the line?

Brendan, I think what I'm going to say at this stage is the number of offers that we got, but I'm not going to say what kind of offers they are. We got four offers. And we are happy with the quality of the offers because I think we've been consistent in saying that we are not going to just ditch Blyvoor; it's got to be handed over to a safe pair of hands. And yes, what I must also say to you is that the offers at this stage that offer us some measure of potential participation and future upside are the offers that we are favoring more than the others.

So you want to retain some kind of stake?

No, not necessarily a stake, but some exposure to future upside.

How do you get that other than keeping a share and then --

Well, that's the way that you basically structure the transaction. Its -- do you -- I suppose by trying to explain that I'm probably exciting dangerously close to saying to you what the nature of the offers are that we are getting.

Go for it?

And I'm sure you'd be happy for me to do that. We are not looking at retaining a stake in Blyvoor, that much I can say to you. But what we do want is an instrument or a mechanism in terms of which if the gold price does go up, like we're not locked in in a very conservative number, that there is some upside for shareholder, because remember the DRDGOLD shareholders, they had invested a better part of ZAR450 odd million over the last decade in Blyvoor. And to just toss it overboard and say, all right, well, [c'est la vie] and good luck.

I think that too may be not entirely fair to the shareholders. So, we want to be fair to the employees who have invested their lives basically into this business, by not just dumping it. At same time we want to make sure that our shareholders see something for having supported this business for so long. So a safe pair of hands that offers us some future whilst at the same time looking properly after the asset and its employees and that we've been consistent in that regard.

So that would be some kind of structure where you agree a price and then you agree that the gold does -- if the gold goes to whatever over some period you get enough as gold.

It may very well be something like that; remember, you write that down -- (laughter).

And then Niel also one other follow-up question. Could you please elaborate on what you mean by safe pair of hands?

Its going to be something -- we are not handing it over to somebody who has to go and find investors and find management skill and find whatever is necessary to run a mine. We've got a fairly solid balance sheet, so are we not moving this into something with an inferior balance sheet, first and foremost. And we would like to see some management debt, and we'd also like to see some exposure because it's a challenging environment; deep level gold mining is not for the --

Faint heart --

Faint hearted -- yes, thanks.

But clearly you are worried about some kind of come back on you after you saw that the things go sour. I mean what's the issue?

Well, I've have had two experiences in the past, when it comes to closure of mines. I had one experience when I was legal advisor of this Company where people ended up in lines asking for food coupons and parcels.

That obviously made an impression I think on this entire management team; it was something that we wanted to avoid.

And then, we had another experience where we closed the mine and we had enough money to pay everybody a decent retrenchment package and re-skill them. And that was also -- I think that was where we had developed to as a business.

Blyvoor is not being closed because I think, there are people out there, who actually know how to run these mines really well and could make full use of the expertise and commitment of the existing management team, because they are in my view the best underground managers in the industry in South Africa, their safety record tells the story.

And I think the way that they've managed to keep this asset with zero external capital going for so long and position it in such a way that we can in fact get proper offers for it, I think that speaks a lot for that management team.

So, to come back to myself personally, it's not really a big consideration, but dealing with it in a responsible way, both from -- in respect of the people who work there and also its neighbors for the DRDGOLD team as a whole. I think that was a very important consideration.

Thanks.

Thanks.

Hi, Niel. Adrian Hammond from [BNPKDs]. Three questions for you from me. Firstly, now that you've processed most of the dumps in the west, are there any vacant dumps that you own surface rights to, and if so is that sitting on your books?

And secondly, now with the Crown deposition site at full capacity what are -- how are you going to rehabilitate that in terms of controlling the dust and how much is that going to cost?

And thirdly, what is the status of converting your money (inaudible) systems?

Yes, certainly. Looking so far as your first question that's on the properties. I think the only property at this stage that is going to be cleared in the near term that we actually carry -- that we own is the Top Star site, we have a 50% interest in that.

The rest of those are mostly properties that belong to property companies like [Front Leases] and iProp and so forth. And where we gave undertakings to clear the land and rehabilitate the land so they can develop. The entire Elsburg site, which is about 120 hectares on the one side, and got another 80 on the other side of the highway, if I am not mistaken.

But several 100 hectares, that belongs to DRDGOLD, obviously or to Ergo, and that will be cleared in the next decade. So obviously, there would be some value in that regard, and it's very well situated.

We don't recognize any value in respect to those properties though. But I think that's one of the things that (inaudible) to the market makes the modeling of this almost like an annuity with a bit of a bubble at the end or rather balloon at the end, not a bubble, balloon at the end.

So, you invest your money, you can pretty much twitch out the bubbles, if you want to avoid -- isn't it Steve. So, what we want to do is say, this is the amount of capital that you invest, this is the return over 10 or 15 years, and this is the balloon when we liquidate the property, and we put the property into the market. That's the first one.

Insofar as the conversion of applications are concerned, I think I missed the second question, you may have to repeat that, but the conversion application, sorry.

Crown deposition site --

Oh, yes, yes. Look the first, I will tell you what the -- when Craig and I were appointed head of the DRD SA assets, and that was roughly five, six years ago.

I think for the first time we invited a -- in the budget, specific provision for ongoing rehabilitation and management of the tailings there.

And I remember that first budget that was ZAR16 million, I was horrified. But it was ZAR16 million, we approved it and from that point onwards this every single year there has been a specific budget allocation towards the treatment of those dumps.

And in fact, last year there was a World Cup tournament held right next to it, and many people didn't even know that they were there. And there were two bits of green in that entire area, it was the pitch where the soccer was played and the size of the tailings there.

So, to answer your question, we will continue what we are doing, what we've been doing for the last five years to rehabilitate and manage dust.

I challenge that we'll have to face, in the next few years, as the dump -- as the dump progressively starts trying out. Because obviously it liberates some of the finer dust. But there we are looking at new technologies both to suppress the dust, also to catch the dust. If you were to drive past it now, you will see those zig zag kind of dust catches that we're putting onto the areas that haven't been vegetated just yet. But there is very much a program in place for that.

And then, in respect of the conversion applications, they're all in. I think they are -- the Group has a total of 13 applications that had been submitted of which how many is yours, [Henry], 11, 12, 11 of 12, conversion applications --

Six.

Six are yours, okay, okay. So, we have got a total of six; they have all been submitted. And I think we are in compliance with all the conditions required to have them done.

We decided to follow the conversion route. There is a school of thought that dumps are excluded or fall outside of the jurisdiction of the Department of Mineral.

But we decided that probably know more about the management of the environmental aspects in particular of mining than anybody else, and are likely to be least -- less disruptive and more understanding as to what it is that we are doing. So, we submitted all of our applications and they are all pending.

Thanks.

So, there is another one here.

Just a couple of quick ones. That Top Star land, you own that land, do you?

That's correct, yes.

That must be worth quite a lot of money.

Yes.

What do your estate agents tell you?

Well, I think before we get to the estate agents, we did make -- I think we created some expectations when we submitted the application for a new order mining right, for a list of what we were going to do.

I think whatever the estate agents say would have to be aligned with the expectations that we had created.

You can't share evaluation opinion with --

It's very difficult to say what the evaluation is.

The next question. Your flotation and ancillary plant for byproducts. I am scared to ask you what CapEx you are scoping on that at the moment?

I am in fact, I've specifically postponed that presentation to next Wednesday. That's when, Mr. Ebel, who is sitting right there will present his plan.

Well, this is a public forum. Can you share with us what the scoping numbers for the CapEx are?

It's about ZAR250 million is what we anticipate.

All in, ZAR250 million.

Yes.

Well, that's not too bad. Thank you.

I am just seeing if another one of my senior colleagues is not wincing there, I got a thumbs up for that one. (Laughter) -- right, yes, no, no, right, yes.

Sorry, Charlotte Mathews from the Financial Mail. One more question on the land. Is it actually worth anything? Is it not all tainted with radioactivity and uranium?

No, no, that's not. And in fact, we managed to clean it up and if you were to -- in the first site, and this was my first introduction to surface recycling as well in 1985 when I was driving to Pretoria from my national service.

The first site was right next to [Edcadale]. That's the first site that John and his team treated, and there you could see this whole lot of development that's taking place. [Edcadale] and several other places.

I know it gets cleaned up to the point where you can actually develop it. A lot of land is being cleaned up that way.

Sorry, hi, [Liam from Business Homes]. I was just wondering what the Blyvoor offers, all these local offers, are we also seeing some offers from overseas?

Yes.

Oh, they are, okay -- (laughter). Have you engaged with the unions about these offers, are you guys speaking to them?

Yes, we are definitely speaking to them. Obviously, we want to have a smooth transfer, not just the unions, but also our labors.

Niel, the ERPM extensions, the 18 million ounces. I mean, if I understood what you were telling us, you are looking for somebody else to go in there and develop a mine to get at those results?

We are looking at a variety of options and I think that my mandate has been to present something at the February Board Meeting, what's going to be the best. Should we list it, or should we just get in a private equity partner, what will unlock the most? It's -- for me personally, it's a matter of unlocking value for shareholders. Its ounces that receive no recognition at this stage in the market.

And I think, unless you separate it out and there is a separate line where you can account for it by way of an external indicator or a benchmark, where the market in fact says we think it's worth that much, you don't unlock that value.

But you are talking, aren't you, like another Wits Gold or Goliath Gold situation. I mean, quite frankly, you in the right mind is going to go and sit a -- sink a brand new gold mine to get at that stuff?

Well, Wits Gold is doing it now, with --

Well, they are saying they are going to do it, but I believe it when it happens.

Brendan, this may be not the right question to ask. But five years from now, South Africa will, I think, be -- we will know where South Africa is and what South Africa offers. At this stage, because we have, because we are a democracy, because we have freedom of speech, because people can say what they believe periodically and organize themselves in a certain way.

I think we've now convinced ourselves that we pose a bigger sovereign risk than many other countries where billions of dollars are being spent. And you know what? You go to many of those countries and you see that they are perceived as investor friendly jurisdictions, but no freedom of press, they don't have constitutional protection, they don't have 20 years of sorting itself out, having -- being the young democracies. And I'm not convinced that those jurisdictions are necessarily superior.

In fact, I do think that ultimately people will go where the quality ounces are. And they will go where they are given a measure of assurance that they can invest their money and it will be safe for the investment horizon period, five years, eight years, 12 years and so forth.

South Africa at this point in time has to deal with a number of issues. Most important one being the fact that we have been incapable of providing adequate education and job opportunities for a very large percentage of our population.

If you look at Europe, the biggest risk to Europe at this stage is the fact that they know young people, have a very top heavy social structure and they don't have young people coming through the ranks. We have an oversupply of young people, but we're neglecting them. And in fact, we have an education system that's betraying them or that's betraying their dreams.

We have to do something to position our biggest asset, our young people to in fact deliver into that potential, and we're not doing that. I think we are going to increasingly start doing that because it's not just government's job. We've been around since 1994 knowing full well what's going on out there. And I think government and the corporates have to increasingly start working together, look after the enablers. The enablers being the tax base and the educators, private and those working for public.

We need more people like [Jannie Mouton] who built affordable private schools. We need more corporates, who are willing to in fact assist their employees to go to those private schools. And then, maybe five years from now, when we have another look at the so called sovereign risk of South Africa, it's a completely different kettle of fish.

And while that is -- and I think we will hopefully be a better prospect, while the rest of these other funny jurisdictions are waking up to all sorts of or showing their true colors, showing their true colors and having now made full use of the inflow of capital or doing the things that countries sometimes do.

Whether -- that's what I believe. So to say there is a riot, and there is an uprising and there's nationalization and so forth and therefore we are just going to ignore those assets. I don't think one should do that. We've been given custodianship of those answers by government and we need to do something with it and we need to make sure that it's done in such a way that the future potential of that asset is preserved.

Thank you.

Sorry, I didn't want to do a political speech but that's what I believe. That's why we're not walking away from it.

I hope you are right.

Sorry, thank you.

Hi, Niel, [Sawdle Dewette from Davy Stockbroking]. Just a little quick question. I see the production from Blyvoor in total is about 29,000 ounces for the quarter, and from underground about 21,500. Are you going to sell Blyvoor with its dump material?

Oh, yes.

So, the old stock is sold. So, that's got 7,500 ounces that's out from it. Okay, thank you very much.

Thank you, everybody. Is there anything from the lines?

We don't have any questions from the conference call.