DRDGOLD Ltd (DRD) 2017 Q4 法說會逐字稿

Good morning, everybody. Thank you very much for attending our results presentation. Thank you for all the familiar faces that are here. Thank you also to my colleagues who've joined me here today.

Just for the record, you'll see that there are a whole host of DRDGOLD employees, members of senior management and executives sitting here. If you have questions for them afterwards, that's why they're here is to answer those questions. I don't know everything that happens in the organization. I try to know as much as I possibly can, but there are a whole host of questions that I don't have the answers for, so please feel free to ask them whatever you want following this presentation.

Riaan and I will again be taking you through some of the numbers, and then there'll be an opportunity to ask questions afterwards. We're following the familiar format of taking you through some of the highlights once you've studied our disclaimer, if I may click on to the highlights for the year and then, following that, some of the events that informed operational performance. He will again take you through the financial numbers and the cash flow and so forth. And then I'll just wrap it up with some of the other capital value-add initiatives that we have and also the looking-forward initiatives.

I think one of the highlights this year, which we probably didn't emphasize enough or we don't emphasize enough, is the fact that we managed to take our mineral reserve from 1.8 million ounces to 3 million ounces. And admittedly, maybe the story in South African gold mining has changed a little bit. In the past, it was all about that resource-reserve conversion and the rewards that you would get in the market, in the gold auction market, so to speak, in the days when resource stocks were the only volatile stocks. Now the blue chips are volatile as well, so maybe that's not such a big story. What makes it big for us, though, is that these are ounces there are actually destined to find their way through our plot, through the Ergo plot. It adds to our life of mine. It adds to the longer-term sustainability of the business. And it enables us to achieve the objective that we have set out to achieve, and that is to mine as much of our resource as we possibly can. You'll know that our resource consists mainly of -- solely, in fact, insofar as the surface operations are concerned, tailings dams. These tailings dams are scattered in and around the Johannesburg landscape. There were initially 300 of them. I think they're now down to, what, 150, 180 -- sorry...

180.

About 180. So more than 100 tailings dams that used to exist in and around Johannesburg have been moved through the combined efforts of ourselves and some of the players in the past that used to be part of this type of mining. And we're very excited about this.

Our operating profit this year was lower than last year, came in at just under -- or just over ZAR 0.25 billion. And this was during a year where there was a lot of focus on activities that cost money this year, wasn't generating income, but that was going to put us on a much enhanced platform going forward. So we're quite pleased that in a year like the one that we've had, that there was still a positive operating profit that came through.

The all-in sustaining costs margin, which Riaan will take you through, decreased to 3.2%. And we reported positive earnings per share, ZAR 0.02 (sic) [ZAR 0.002] per share. And Riaan will give you some of those numbers as well.

Free cash flow for the year was negative ZAR 45 million. You'll see that there's a fairly large number on both the -- or a large impact rather on both the current liabilities and the current assets, and Riaan will provide you with some color on that cash flow number as well. Notwithstanding the fact that there was a reduction in the free cash flow, we're still in a position to declare a dividend. And this would be, I think, a decade of paying dividends. I don't know if there are other gold mining companies in South Africa that's managed to pay dividends uninterrupted over a period of 10 years, but we hope to maintain this track record.

Very importantly, on the environmental management side and on the sustainability side, you'll see that one of the longer-term objectives that we'd set ourselves a few years ago of reducing the amount of potable water that we use, that is finally coming through. Potable water in our system has been reduced by 26%, and total water usage has reduced by 8%. And this is because of changes that we've made in infrastructure. We now have a very sophisticated and effective closed water management system. Everything goes to the central water management facility, ERPM. For the first time, we're also introducing AMD, treated AMD, into the mix. And that, of course, is assisting in reducing both the cost burden of water and also the environmental burden in that we're not competing with users for potable water: very little drinking water or reduced drinking water going into our system. And then dust exceedances decreased to 0.44%. And what that basically means is that we take roughly 1,400 measurements every year of dust coming off our operations. We've spoken about the measures that we take to reduce dust emissions off our tailings dams. We set ourselves the target, in the last 10 years, of every year reducing dust emissions by at least a half. And out of the 1,400 readings that we took this year, less than 0.5% of those readings exceeded the statutory limit that's set for the size and also the quantity of dust in the atmosphere in the vicinity of the tailings dams. I'll speak a little bit more about the dust coming off tailings dams and the dust problem generally in Johannesburg. You will have been made aware of the Bench Mark Foundation's (sic) [Bench Marks Foundation's]report that came out earlier this week; and that whilst there's a lot of information in that report, which we think is good information and creating good awareness of the extent of the problem, there are also a number of issues where we don't agree with their approach. And I'll spend a little bit of time towards the end discussing that.

I'm going to take you briefly through the operating trends and maybe, just before I do this, give you a bit of background on what it is that we decided to do this year.

So 2016 was a -- probably one of the best years in the last 10 years of operating and financial performance for DRDGOLD. You'll see in the financial summary later on, when Riaan takes you through that, that we made a lot of money during 2016. We produced a lot of gold. The gold price was really high, especially in the third quarter of the 2016 year. I think free cash for that quarter alone was in the region of ZAR 170 million. So that enabled us to pay a very attractive dividend. It obviously supported the share price quite a bit as well. Share price turned at just over ZAR 12 to the share, up from ZAR 1.80 a few months earlier in September or October of that year. So it was a really very good year for shareholders and for the operations alike.

However, in order for us to continue to mine this ore body and in order for us to give effect to our long-term objective of optimizing the exploitation of our ore body, it is necessary for us from time to time to just bring about a small reconfiguration of the operations. And we spoke about that as we went along through the year. And 2 items, I think, that featured quite prominently in these discussions were the cleanup of some of the legacy sites in the Far West Rand, the closure of the Crown plant; and the second one, the commissioning of a whole range of new sites in the Central and the East Rand. So that was something that we decided we were going to do. The ability for us to clean up these legacy sites affordably and the cheapest way for us to do that was to almost make that part of the mining of the resource. So once the infrastructure was removed, it was going to become very, very expensive, maybe too expensive for our organization to do that. So they've been lingering issues. One of them had been there for probably 10, 15 years, if not more, maybe 20 years; and the other one was a more recent legacy issue.

So we decided to knuckle down and get through these and move as much of that material as we possibly could; and then just leave it in a state where, through negligible mechanical movement of material, we could finally close them off. And that's exactly what we did. That's where we took it to. In addition to that, we also closed the Crown plant. It's in the process of being rehabilitated. That rehabilitation program will be finished by the end of this year. And then our presence in the West Rand, with the exception of ongoing environmental management of now decommissioned deposition sites, will effectively have come to an end. The net effect of this on total cost or the actual saving in real money that we won't be spending next year is just over ZAR 70 million, as you'll see in the writeup to these results.

So that's the one aspect that really impacted on our operating results. Second one was the commissioning of these new sites. Most of these sites need between 1 and 3 months to really settle in. You've got to remove the overburden. You've got to open up a slot where you could mine them, et cetera, et cetera. So the first 9 months of the year were going to be tough, and we were hoping to start reporting benefits flowing from these initiatives from about July of this year. As it turned out, things -- the tide turned for us in the last 3 months, the last quarter of the year. We had a very good fourth quarter. We established good momentum that is taking us into the new year, but just on a comparison year-on-year, you can see the effect, especially in the first 6 months, on yields of mining inferior materials coming out of the west, the effect that diluting the materials into the plant to a lower-than-required density had on both production and on recovery and also the impact that it had on volume throughput. So all in all, for the last 6 months, 12 million tons coming through the plant, recoveries recovering marginally from 0.166 to 0.176 on the whole for the 2 circuits. And you could see also the trending on production side quarter-on-quarter mostly attributable to the last quarter, half year-on-half year, and mostly attributable to numbers coming out of the last quarter on the gold production as well.

So the guidance, I think, that we're giving in the writeup is north of 138,000 ounces for the year. Production this year was just on 137,000 ounces.

Riaan, if you want to take us through the numbers, please.

Thank you very much, Niël. Good morning, ladies and gentlemen.

Again, my privilege to take you through the financial information. I want to start off, as always, to just looking at 4 high-level financial trends to set the scene, but then I want to go into some detail in 3 of our primary statements, being the statement of profit or loss; statement of financial position; and Niël alluded to the cash flow statement. And just provide some color and comparatively in this year that Niël has set the scene for us what it was all about.

So the 4 financial trends that I want to kick off with is the first one being the operating margin. Obviously, the 2 factors that play a role here is revenue. Unfortunately, revenue was down by 4% for the year. And then the other one is cash operating cost, which was only up by 4%, which again is, I believe, a very good achievement, taking into account that we maintain our volume throughput of just under 25 million tonnes for the whole year. Obviously, the big impact between the 2 half years, obviously going from a very high gold price in the second half of financial 2016 and then tapering down. So the differences in gold price between those 2 half years, roughly ZAR 50,000 per kilogram, obviously has a direct impact on the operating margin; and also that the slightly lower gold production in the cleanup year that Niël described for us.

All-in sustaining cost margin then. As you would now, take cash operating cost as a starting point and add other measures based on World Gold Council standards, things like sustaining capital expenditure, administration and general costs and also a big unwinding of our rehabilitation provision, almost ZAR 47 million. Again, a big positive for me is that year-on-year the all-in sustaining costs stayed fairly flat. So in a big cleanup year, Niël alluded to some costs, some costly cleanup, the all-in sustaining costs stayed flat. Obviously, the all-in sustaining cost per kilogram was down by 6% but as a result of the slightly lower gold production.

What I take as encouragement from this are really 3 things. We've rigorously addressed costs going forward in our model. And costs were fairly well managed even for this past financial year, so we're confident that costs going forward are stable and that it is under control. The second encouragement for me is the recent lift in the gold price, which obviously has a huge impact. As you would see, in the second half, it will have a big impact on margin for us. And thirdly, as Niël alluded to it, we had a very good fourth quarter actually in 2017. And I believe that sets up well. We were able to actually meet our production targets in those 3 months, so that gives us a lot of encouragement for the year going forward.

Free cash flow, Niël alluded to, so obviously the total of those 2 is the negative ZAR 45.1 million for the full year, obviously impacted on lower -- by lower profits as a result of slightly lower gold production and, year-on-year, the average gold price that stayed fairly flat overall at just under ZAR 550,000 per kilogram; and then obviously fell more in the last 6 months, as I've mentioned, with an even lower relative gold price to the first 6 months. I want to provide some further color as I talk through the cash flow statement a bit later on, but just for now, to give you context: So it's lower profits overall and actually a loss; and then a massive investment for this in working capital, some relating to pure cutoff issues but really, a big investment that I will highlight as I talk through the cash flow statement.

Headline earnings per share. Niël mentioned in the key features for the year ZAR 0.002 per share, again, impacted by lower profit before tax, actually a loss before tax, in comparison to the previous period; and then reduced slightly by a positive deferred tax rate adjustment, which I will also expand on as I talk through the statement of profit or loss. So overall for the year, ZAR 0.002. Obviously, we could have done nothing wrong in that second half of financial year 2016.

Okay, statement of profit or loss. So as I've mentioned, revenue down by 4% year-on-year as a result of gold sold being down by 4%. So that simply means that the rand gold price overall for the 2 years stayed fairly flat at just under ZAR 550,000 per kilogram. As I've mentioned, we're very encouraged by cost of sales overall only increasing by 3%, with us maintaining volume throughput just under 25 million tonnes for the year. And that also includes a retrenchment cost one-off of ZAR 23 million in that line item. That resulted in gross profit from operating activities only ending up at ZAR 32 million for the year.

Administration expenses and general costs, down by almost 20%, mainly driven again by our long-term incentive scheme charge that sits in that line. And that's driven mainly by our share price that came off from around ZAR 8 end of June 2016 to just over ZAR 4 June 2017. Obviously, that has a direct impact on that line. Other administration and general costs, fairly flat year-on-year.

Finance income and finance expenses increased by 9%, 10% year-on-year. That very much -- the majority of that, you see it in cash which you'll see on the cash flow statement. The bulk of that ZAR 52.2 million already alluded to is the unwinding of the environmental liability expense, so it's almost in effect just taking inflation on a yearly basis into account, almost ZAR 47 million for the group. So only a very small portion of that in actual cash. And that left us with a loss before tax of ZAR 36.7 million. And you can see almost a ZAR 145 million swing in that line year-on-year.

The positive deferred tax impact that I mentioned when I talked about headline earnings per share, what is that? As you would know, gold mining companies do not pay tax at a standard rate; other companies at 28%, which other companies do, but it's a formula-driven rate. And your future taxable profits, taxable income, actually has a direct impact on how much tax you pay. So in a year that we looked at the calculation and obviously, because of the gold price impact, that's off a slightly lower base than last year, we decreased that rate from 23.1% in the June 2016 year to 18.6% in this year. And that had an impact of almost ZAR 40 million just on this year's income statement. So that's a positive impact because, from a deferred tax point of view, you will pay less tax in the future. So that's why it actually reduces that loss or turns that loss around into a profit for the year of just under ZAR 14 million. Obviously noncash as well, deferred tax. That's all around your future taxable profits -- obviously, all belonging to the equity owners of the parent, no noncontrolling interest in the DRDGOLD group.

Okay, on the statement of financial position, I just want to color this in. The movement in property, plant and equipment simply boiling down to a capital expenditure of ZAR 116 million. And I want to elaborate a little bit on that as I talk through the statement of cash flows. And that's why we're also encouraged by this. We didn't hold back on any sustaining or growth capital spend. We continued to spend in a year that was challenging, and I believe that sets us up very well for the future. So a ZAR 116 million increase, then depreciation coming off there of about ZAR 180 million. And then there was also an impact, a reduction, a decrease in the rehab liability of about ZAR 34 million that was actually credited to property, plant and equipment, which leaves us at just under ZAR 1.5 billion.

Noncurrent investments and other assets, majority of those represent our investment in rehabilitation funding. And that showed a growth of approximately ZAR 25 million year-on-year. The small deferred tax assets sitting in DRDGOLD Limited, the company, but relatively small to the rest, that almost ZAR 90 million, almost ZAR 100 million move, I'll explain carefully in the cash flow statement on the next slide. Niël alluded to this also on liabilities, a very large investment per se; and if you call it investment, for the accountants in the room, very much a cutoff issue. As you know, 30 June is a snapshot at a point in time. So at that point in time, there was a gold debtor sitting there from Rand Refinery which obviously, we received very shortly after year-end. And there was also a VAT amount of ZAR 23 million which we did not receive from source based on the normal VAT cycle, which obviously pushes up our investment at that point in time, at 30 June, in trade and other receivables. But obviously, it's all cash locked up at that point in time.

Equity move, which you'll again see in the statement of changes in equity. And maybe I'll just mention: Obviously, we only go as -- on a highlighted basis. There's a lot more detail in the provisional results that Niël already alluded to as well for you to have a look at. So that simply is the profit for the year of ZAR 14 million that goes through there, less the dividend that we paid of ZAR 50 million. But you'll see it on the cash flow statement as well.

Provision for environmental rehabilitation

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Thank you. I was saying on the provision for environmental rehabilitation, so just the unwinding of ZAR 47 million. You would have expected that as an increase. There was only an increase of about ZAR 9 million, so that ZAR 45 million increase is actually offset by a change in estimate relating to the method how we do rehabilitation and also an impact of the extension of the life of mine that Niël already alluded to as a result of our increase in reserves which had a decrease impact on that liability of ZAR 34 million. So I've mentioned that the credit of that sits in property, plant and equipment. And then very importantly, we continue to spend money, so there was ZAR 20 million reduction as well in that liability. So I want to remind everyone that I don't think many other mining companies do that as they continue mining. So every year, we actually go and settle a portion of that liability. So there's a liability to vegetate the Crown Tailings Complex. We actually go and settle that liability. And in this year, it was ZAR 20 million just on reducing that liability, which I think is a positive thing. And again, even in a challenging year, we didn't stop doing that.

The deferred tax liability. Obviously, you saw the credit in the income statement of that. This is the opposite reduction in the deferred tax liability number.

Other noncurrent liabilities, a small finance lease that we use -- that we bought our generator sets at Ergo to maintain critical areas of the plant of about ZAR 17 million. And the rest of that balance is the long-term incentive scheme, the phantom scheme, of ZAR 39 million.

And then the current liabilities, yes, a reduction from last year, which again, in cash flow terms, means an investment in working capital. So we've settled more creditors. There was also a ZAR 35 million incentive payment from the previous year which we settled in that line item. And then I believe that Niël alluded to the ZAR 72 million cost saving as a result of taking Crown out of the system. I believe some of those are also coming through, and we're seeing some reduction in those creditors. And the rest is just cutoff again, as I've alluded to, the debtors' balance.

Sorry, and just a very healthy current ratio still of 2:1.

Okay, ending off with the statement of cash flows. Obviously, that line item stands out as quite a significant reduction from the cash flow from operations. So as I've mentioned, one big impact there is the lower profitability. So the ZAR 145 million swing in the profit or loss before tax line directly impacts the operational cash flow, but the other item that impacts that directly is the working capital change. And we'll -- you'll see in the results, if you work through the document, that last year there was a positive ZAR 80 million inflow for working capital for the 30 June, 2016 year, where 30 June, 2017 had a ZAR 120 million outflow. So if you just look at this at full swing then, between the years in working capital, it's a ZAR 200 million investment.

I've already alluded to debtors, what that was. 2016 already had the first sale of the gold debtor in 2015 in there. So this year, we have a gold debtor, plus VAT. So just that on its own in working capital is close to ZAR 100 million locked up for it.

On the creditor side, I've already mentioned the incentives that was paid. And then just general earlier settlement of creditors, so cutoff issues there, issues just cutoff at 30 June; and then just lower payable balances at that point in time. So a large chunk of that relating to working capital movements.

Interest received is a big part of what's on the income statement in cash; obviously, interest paid, as I've mentioned, only a small portion of that in actual cash. Tax refunded of ZAR 10 million, which gives us a negative net cash outflow from investing -- sorry, positive ZAR 51.6 million, with the investing activities ZAR 96.7 million, which I've mentioned there's additions to property, plant and equipment still of ZAR 110 million. The cash outflow on the balance sheet, you would see a ZAR 116 million increase.

I want to pause on this just for one moment. So of that, the ZAR 116 million total spend, ZAR 110 million in cash, we spent ZAR 43 million on growth capital. Niël already alluded to the water -- centralized water treatment facility. Obviously, that costs money to install and to make sure that, that operates as intended, but the benefit of that is lower water usage, as Niël alluded to, external potable water, overall decrease in water. And going forward, we've set that up so that we can ensure cost saving from that system of around ZAR 24 million a year. So again, for me, a classic overlap of sustainable development and spend in line with your capital. So we didn't stop spending on those projects, kept on spending and set the business up so, firstly, we can save money from a water point of view going forward; more importantly, we can use less potable water in a country that is water scare. So again, a classic example of sustainable development in action for us. And then on other important projects like exploration. So the mineral reserves and the increase in measured mineral resource, that didn't just happen. There's a lot of work that has gone into it at a cost. And obviously, our work on the extension of the Brakpan/Withok's, the tailings deposition facility is also continuing and embodied in that spend.

Proceeds on disposal of property, plant and equipment for the year, ZAR 20 million there, payments. Just to note as well that our total cash spent on environmental rehabilitation was over ZAR 40 million for the year. It's about settlement of liabilities and also ongoing cash spent on rehabilitation. I want to emphasize that.

Loans and borrowings, pretty much nonexistent. That was, at the beginning of the 2016 year, the last borrowing that we settled; some finance leases there; and the ZAR 50 million dividend that I alluded to. So if you then analyze, as I've mentioned, the full ZAR 98 million move for the year in cash and cash equivalents, roughly ZAR 50 million of that went to dividend. And if you just take out the last VAT payment that was outstanding and the gold debtor, close to ZAR 60 million already came in through the cutoff balance sheet just after 30 June, which would have pushed that number up again. So we're not worried about the working capital investment. We manage that, but very much a cutoff. And again, that cash position and also the position shortly after year-end enabled us to declare that ZAR 0.05 per share dividend that Niël already alluded to.

Thank you. Mr. Pretorius?

I've mentioned a number of times that our strategy is informed by the objective to create value on a broad base. And sustainable development and integrated thinking is what guide us in how we allocate resources and capital.

So just very briefly, some of the highlights this year in creating and unlocking human capital. You will have seen that there's a 2% growth in HDSAs in management, and these are in core and critical skills. And these are mostly also from candidates, from employees that were made part of development programs and that have been brought up the ladder into management positions.

Our labor force now consists 20% of women -- or 20% of the labor force, rather, is made up of women, of whom 11% are in core positions. So this core position thing, I think is also something that we -- it's maybe a little bit opaque as to what a core position is if you have to deliver into a triple bottom line and there are 5 components of sustainable development and really know if there's anything in a business that's no longer core, but yes, I suppose the definitions are what they are. Then we also put just over 1,200 candidates through training, our training courses. This is through EBDA and this came at a cost of just over ZAR 11 million.

This is important. I think there's a critical shortage of skills in South Africa. And these individual training courses that we're offering, coupled with the roughly 700-odd candidates that have taken advantage or have made use of the opportunity to gain extra exposure to mathematics and science and accountancy now also out of 7 schools, this hopefully will assist in creating a better future for South Africa for the next generation.

On the social capital side, just over ZAR 14 million spent on community and skills development programs. We're the only mining company in Johannesburg, in our area of influence, that actually does this sort of thing. There's nobody else spending money on the development of social capital. And I encourage you to just page through our integrated report, have a look at the agriculture initiative that we launched initially with a target takeup of 250 and it's now in excess of 700, maybe pushing against 800; and some of these farmers that are now starting to become entrepreneurs in selling their surplus. These are families that didn't have anything and that now have both food and, in some instances, income.

Then on nature capital or natural capital, as I'm told, just over 35 hectares of tailings dams were vegetated. And this was during a year where a lot of historic environmental cleanup measures were being taken and that cost, the budgets cost of ZAR 70 million, we actually managed to come in at about ZAR 39 million cash outflow associated with those because of slightly higher yields. That did not impact, though, at -- on the rate at which we've been maintaining the vegetation of these dams. It's something that we, unfortunately, have to emphasize in our limited audience here. It is not widely disseminated by the popular media. And it's not getting any recognition from institutions who profess to be campaigning for the interests of the disenfranchised. We can talk a little bit more about that later on.

I spoke about the exceedances earlier. And on water, I think I covered most of the issues on water as well. It was one of the driest years in the history of South Africa, and we did not lose 1 second of production as a consequence of water shortage. None of our vegetation on our dams, tailings dams, went into distress because of lack of water. So I think the way in which we manage water sustainably in our organization is intelligent and very efficient.

Then on the land side, I spoken earlier about the land that's been cleared on the Johannesburg landscape where previously, there used to be mining dumps or tailings dams. 90 hectares were restored last year following reclamation. That's on top of the 60-odd hectares in the year before, so it's 150 hectares that previously were sterilized and that's now been opened up and restored; and not just sterilized for development but also potentially a source of nuisance and health issues associated with living either next to, on top of mine dumps, as we find in certain instances with informal settlements.

And now before this could be restored, obviously these pieces of land have to be released by the NNR, the nuclear regulator, and they've done so. In fact, what's also happened is that the Crown Tailings Complex was released from the standards of compliance enforced by the NNR, which basically means that there is a 0 risk of radon contamination associated with these dumps. Our workers work on these dumps on a daily basis. They carry these little devices that indicate what the level of radiation is on the dumps. And consistently, these levels have been so low that it's now no longer what's referred to as a nuclear site, which basically means that they no longer have to go to a change house and get out of their clothes, wash and then put on other clothes before they go home. They're working there as though they're working anywhere else on the mine. And remarkably, some of the disease that's been attributed to being in close proximity of these mine dumps, you won't see among our workers. They're very healthy currently, to the point where mine dumps don't affect them.

Right, so the "where to next" aspect of the business. You're familiar with our strategy, if you read our integrated report. The optimal exploitation of our ore body still remains paramount. That's how we make money. That's how we fund both interests in our business and the further expansion of the business and also pay for the other capitals in which we invest in order to both create value there and create value overlap between all of the capitals.

Nothing has changed with regards our approach to costs. Riaan mentioned the ZAR 24 million-odd that we'll be saving out of low water consumption. We managed to mention the ZAR 72 million saving after pulling out of the West Rand. On top of that, there's also a saving on reagents. We can be now far more precise in our dosage of reagents in the plant because of the manner in which plant parameters are being monitored on an ongoing basis. It's a very effective program that was implemented this year. And that has just made information associated with the plant so much more transparent and so much more accessible, about ZAR 1 million a month just on cyanide.

Continuous technologies that enhance operating efficiencies. There are a few technology changes that will take place this year; also capital enhancements, capital infrastructure enhancements. We're moving molds across to the Ergo plant.

On the nature capital, the 90 hectares that's been restored, this is in Johannesburg. This is developable land in Johannesburg that was previously sterilized. And of course, our stated strategy remains to limit the burden that we place on the environment. The 25% reduction in water usage, potable water usage, is testimony, best testimony, to that, as is the fact that we are consistently reducing the impact of our footprint on surrounding communities.

Social capital: It's important to stay between the lines when it comes to defining our objectives for social capital because this is what we dedicated resources to or what we do continue to dedicate resources to. It's all about poverty alleviation for us and youth education. Integrated report gives you a lot of information on that.

And then on the human capital side, we don't want any of our employees to have garnishee orders, so financial literacy is a priority for us. And these programs are ongoing. We're increasingly and consistently working towards a knowledge-based workforce, using mind and not so much your muscle power; and then employee wellness through both counseling and access to independent, anonymous counseling.

So going forward. So a year ago, we had just had one of our best years. We decided to embark on this initiative of cleaning up and repositioning for the future, and we're very pleased with where we are. I think we would have wanted to get to where we are a little bit better. Maybe we would have wanted to manage expectations a little bit better, but we're very well positioned for the future. The last quarter indicated that we are on a healthy platform. And I think the trends that we're seeing emerging out of the operations from the first 2 months of this new financial year, certainly taking those forward.

The operational center of gravity is now firmly towards the Central and East Rand where it belongs and where we have a vast resource of accessible gold ounces.

Reclamation sites are now fully operational. They're running where they're supposed to. And there's a fourth one that's going to be online in the first quarter of the -- first calendar quarter of 2018. Now these make a big difference just in how we can maintain stability in the plant. So it's easier to maintain volume throughput. It's easier to maintain quality of material in the sense that densities are easier to manage, material coming off these. The plans that we have put in place that inform the rate at which we mine these sites; the gold content of these sites; how they look like at different stages of reclamation in order to make sure that once they're mined, we don't create another legacy issue for the next guys, that's being carefully monitored. So altogether, I think a far more organized approach to reclamation.

We're very happy with where the Ergo plant is. And I've alluded to the -- I think the right description for what we've done is a throughput risk information management system, and it's working wonderfully with 24/7 monitoring of all key drivers.

I spoke about the increase in our mineral resource and the mineral reserve that provide us with a very solid platform going forward.

I do want to maybe pause just very briefly on the reports that have been published with regards the dust emissions and the effect that our operations are having on surrounding communities. I've expressed my personal disappointment in the fact that the Bench Mark Foundation (sic) [Bench Marks Foundation] did not consult us prior to the publication of what -- of their report. Having listened to their lead investigator or researcher, David van Wyk, last week when he explained his approach and what they found during the 3 years of research, it struck me that very little of what he said he found, insofar as the encroachment of communities and the effect of dumps are concerned and what needs to be done and what we are doing, were at odds. We seem to have a similar objective, but somehow, we're unable to find each other and in collaborating both with regards resources and also sharing information to achieve these objectives. What they unfortunately completely left out of their report are the following, and I'll just touch on the key issues.

Point number one is, in the 1940s, the Chamber of Mines gave guidance as to where communities should be or where residential development ought to take place. They announced a safe buffer zone around tailings dams. And we've been mining tailings dams now for the last 30-odd years. And every single one that we mine, there's a whole lot of other burden, vegetation, herbicides, et cetera, that need to be moved before we can actually get to the juicy bit of this tailings dam. So tailings dams have been rehabilitated in and around Johannesburg for as long as they've been around, at least as long as modern rehabilitation standards have applied.

However, most of these tailings dams which existed prior to the 1940s and were simply just getting bigger beyond that point were rehabilitated to a standard that was quite obviously adequate at the time when the buffer zones were being observed. But now the buffer zones have been infringed, both by previous government who between 1950 and 1994 took the number of families, for example, that lived in close proximity to our dumps within the proclaimed buffer zone or the recommended buffer zone from fewer -- there were fewer than 300 families in the 1950s living around these tailings dams where we were depositing the main ones, to upward of 90,000 families. And even post 1994, new areas were being proclaimed and getting ever closer and closer and closer to these tailings dams.

The rehabilitation, the historic rehabilitation measures on those, what's now being referred to as abandoned mines, well, they're not abandoned mine. They are closed mines. All of those tailings dams were closed, but the rehabilitation standards to which they were rehabilitated in those days were not designed to cater for families and for residential areas within 50 and sometimes 80 meters -- or 80 and sometimes even 50 meters away from these tailings dams. They are wholly inadequate. That is the reality, something that was pointed out, but maybe the context within which it was pointed out was lacking.

I think the second point that we didn't see coming through adequately is the fact that DRDGOLD has managed to not only cover more than 300 hectares of its permanent tailings deposition facilities in vegetation in the last 300 years but has also managed to very significantly reduce dust emissions to the point where, unless the wind is pumping at 50 knots from the southeast, there's hardly any dust coming off these tailings dams. So the extent and the degree to which they may have been a nuisance in the past has been and is continually being reduced by the efforts of our organization.

These dams, these tailings dams, and I'm talking specifically about the ones in the Crown area, were also rehabilitated to a standard that many, many years ago was adequate. It became quite clear that those standards were inadequate. And as a consequence -- remember the first capital vote that [Henry] first brought to me in 2007, ZAR 16 million to upgrade the vegetation around those dams. And there has been consistent work on an ongoing basis, to the point where, on some of these areas, especially if you're driving in from the south and they're beautifully framed by that flyover right next to Soweto to the south of Soweto you see it; and unless it's been burned down since yesterday, and so many of these slopes are being burned down for no apparent reason, you could see something that resembles a pasture. It is a 100% covered area of vegetation on the southern and the western slope of those tailings dams. And that happens on an ongoing basis.

I don't understand why there's a reluctance on the part of the Bench Mark Foundation (sic) Bench Marks Foundation to talk to us. I don't understand why they refuse to come and look at our information. I don't understand why they are reluctant to engage with us to see what it is that we're doing and what we're going to be doing. And I'm perplexed by their position because of the following: There's only one institution -- I'm talking about government, private, mining, NGO. There's only one institution in Johannesburg at this point in time that is spending money and dedicating resources towards either the removal of tailings dams or the vegetation of tailings dams. DRDGOLD had spent more money on vegetating tailings dams in the last 10 years than it did in paying dividends. And it will continue to do so until we have finished our rehabilitation program.

I fail to understand, I fail to see the downside on the part of an NGO to come and talk to us. I really do. And the invitation is there, invitation, open invitation to government, local, provincial; open invitation to any of these NGOs to come and talk to us and say, "These are our concerns, and we believe that you are doing some work. What is it that you're doing? And how can we make it better? And by the way, this is information that we managed to get. This is the source of that information. Do you want to test that? Do you want to do something about that?" And we'll share some of our information, all of our information insofar as pertaining to that with them as well.

So I'm perplexed by the position that they've taken. I hope that they change it. I do believe that because of changed circumstances, of standards that were designed for one scenario that have turned out now to be inadequate because of changes in the -- in where we live and where we develop residential areas that, that will bring parties together to collaborate going forward. At this point in time, we're the only entity that actually brings cash to the table. Everybody else only brings ideas to the table, and unfortunately, most of those ideas are ideas about us that are somewhat distorted. But I do believe that if we want to bring about a permanent solution for the environmental impacts of mining in and around the Johannesburg area, then we are going to be -- have to be more collaborative in our approach and maybe form a joint consensus. And maybe those who are at the receiving end of these settlement initiatives and a touch of development initiatives, they might actually see some actual benefit and a real improvement in their quality of life.

This is what we strive towards. It's the one photo. So these are people vegetating. There you could see the picture at the bottom. This is what they all should look like eventually. And maybe the other one too, near top start. I just want to skip quickly to that one. There we go. So that's the sort of vegetation that we're establishing around the side slopes and around areas that are exposed through our activities. And you put fire to that, you set fire to that, then all of that vegetation is gone. And we cannot figure out why people want to do that for any reason other than want to look at fire. So we're really hoping that communities would be a little bit more disciplined about giving guidance to those members who do this sort of thing. And if it's not malicious, at the very least, it's careless. Maybe they can stop being careless. We certainly are.

So that is our position. We're very happy with where we are going forward. We think that we've set a good platform going forward. We think that we understand the workings of our plant well enough to maybe start thinking about transplanting our idea to other footprints. Maybe the time has come for a consolidation of tailings reclamation in South Africa. Maybe the time has come for better collaboration between mining companies in South Africa. And so we certainly have the team and the intellectual capital to do something about that and maybe manage tailings and tailings reclamation in South Africa just a little bit better.

Ladies and gents, that's our story for the year. Thank you for attending. And we'd be happy to take your questions.

Two questions. What sort of yields did you see in the last quarter when things were, well, as expected, I suppose?

Between 0.17 and just over 0.18, around about in that range. Remember, for us, if you multiply everything by 2, if you manage a 0.01 higher than in the past, it's a -- what's that, a 20 -- so 20-kilo swing, yes.

And secondly, the CapEx of ZAR 116 million, sort of more medium term, what sort of CapEx do you need just to keep the operations going where they are? Just a guidance on that.

We -- yes. So the guidance going forward, we're expecting to spend in the region of ZAR 100 million in the next year, of which ZAR 60 million is strategic; and ZAR 40 million is then sort of the normal run-of-the-mill ongoing or sustaining CapEx. Depending on where the gold price goes and where revenues take us, it might be slightly more, but our budget proposal to the board was 100 -- just over ZAR 100 million. That's right.

Niël, with the commissioning of your new tailings, what should we expect in terms of [rents] and also your yields?

We're hoping to maintain where it was below 1-7-5. We're hoping to get it to higher than 0.175, so the upper range of the 0.17s. And then what was the second question, the production numbers?

Yes.

Okay. So we -- I think the guidance that we give in our booklet is between 138,000 and 145,000 ounces. Over there.

Niël, you had a bullet points showing that you're using treated acid mine drainage water for the first time. Where is that water coming from? And can you step up the usage of it in the future?

That, the centralized water management facility, TCTA is pumping water from our previous -- the central shaft, the ERPM central shaft. That's where they've got their treatment facility. And they take it to a standard where we can introduce it into our process without ill effects. We just need to be careful about scaling. And it's from that facility that we're getting this water. It's about [8 mg], if I'm not mistaken. Is that right? About 8 mg , that we're getting from them, which is roughly the same amount of water that we're getting from the sewerage treatment plant. And yes, you can push it up, but it's not quite the same quality as the water that we harvest or the water that comes from the sewerage facility because the reagents in the water can give effect to some scaling in our pipelines. So it's good for us, and we're happy that we can use it, but we've got to just be clever about how much of it we put into our system.

And, Niël, second question. Last year, you took the highly unusual step for a CEO of warning investors against investing in your company at the elevated share levels that the share got to. And we could, please God, be entering a situation where South African gold shares could be about to run again. I mean, yesterday, your share price went up 11%. Do you have any advice for investors in DRDGOLD looking ahead?

Yes, I think, look, thank goodness I'm part of the management of the gold mine and I'm not managing other people's wealth because I don't think I would be very good at that. I think what made me uncomfortable last year is that if you just look at the forward-looking cash flow model of our business, the gap between what we can sustain and what the market thought we were worth, I thought that gap had just become too wide. I'm not uncomfortable with the range within which we're trading now because the cash flow model suggests that, to an extent, it does support it. Whether the market really, whether the investment market really pays attention to that sort of thing, sometimes I get a sense that they just trade the gold price because our share is so liquid and because it responds so sharply to movements in the gold price. Having said that, though, all of those movements take place within a certain range, and I'm comfortable with the current range. The -- I don't think the share's overvalued. Does that answer your question?

Niël, Leon here. Just curious. Your reserve statement, what is your average grade on that? Sorry. I can go and check that, but I thought you might know.

That's about 0.26, if I'm not mistaken, or 0.25.

0.28.

0.28 gram a tonne.

Sorry, what does that imply in terms of a recovery grade or a yield?

We did about 50% [out]. And it's 0.28 -- actually, a little bit more than 50%...

So you're talking 0.14...

0.14, 0.15, yes, thereabouts out of that particular source.

Okay. So that, what is it, 0.02 decline from where you are now, that's quite significant given your low margins. When do we see a shift towards the lower grades then?

Well, I think the -- there are 2 -- there's a watershed point that we need to plan towards for the closure of Knights or when once Knights -- the Knights plant runs out of its own reserves. Because those are of a higher grade. And you're seeing that grade coming through in the consolidated numbers. And in anticipation of that, it's one of the reasons why we're moving the molds to Ergo. Because there's quite a bit of third-party sand material that we can insource into our operations that could top up and support the recoveries going forward. And it's remarkable how big a difference just a small amount of higher-grade material makes in that.

So can I take from that, that we're fairly stable for at least the next sort of 3 years?

Yes, I think we are in stable waters for the next 3 years or so. So it's not to say that we're not planning towards the declining grade, to replenish that and to find ways and -- ways and means of either topping it up with externally sourced materials and improved efficiencies, but we've positioned ourselves well for the next 3 years, I believe.

Good. Just on that aspect. As you move eastwards or away from the west, I think as you put it, what you're feeding the plant should be -- okay, it's a bit different grade but okay. What about the recovery? And how will that -- what will change as you change -- I mean that's a material distance. If you had 2 gold mines here and there, they would have different characteristics about the metallurgy.

Really no. We're finding that it's fairly consistent, the qualities of the material that we're mining, the slimes material. And so those qualities are fairly consistent. What was a big challenge for us in the last year was the (inaudible) cleanup materials coming through where you would have organic material or you would have slightly coarser material coming through and so forth and so forth. But the sites that we're mining now are, by and large, consistent in quality, metallurgical quality.

It's Charlotte Mathews from Financial Mail. Have you heard anything more about the levy, the AMD levy, that the Department of Water Affairs wanted to apply to all the mines? Can you tell us how many people you retrenched? And is there any chance of you acquiring more sites, say, high-grade material?

Yes. On the AMD, no. I don't have an answer for you on the AMD, but what we do have, though, is a -- it's called a provision in the kitty. It doesn't appear anywhere on the financials, but it was part of the arrangement that we entered into with TCTA, the government when we placed our infrastructure at their disposal. Remember they deposit on our tailings dams. So we have a ZAR 250 million credit which is to be applied in the event that there is a financial burden brought about within the context of the treatments of AMD. With the closure of plant -- of Crown, there were a number of retrenchments. Wilhelm, you'll have to help me with these numbers...

The people who were retrenched...

And these were voluntaries, mostly.

(inaudible) it was in a different report.

Okay. So 54 voluntaries -- 54 in total, of which 11 were forced retrenchments. And how many people did we redeploy in the rest of the ops?

We had 104 individuals that were down operations [that were] so it was 4.

Were deployed into -- in the rest of the operations, okay. So 11 people left, who didn't want to go, basically as a consequence of the closure. And then what was the last one, Charlotte?

Acquiring more sites preferably with higher-grade material.

Yes, well, we won't be buying the sites, but we're open for business insofar as introducing material into our business is concerned. There are many of the landowners, historic, old landowners, especially towards the East. They want to clear their sites for development, and they're looking for places to take it to. And we're obviously -- we're offering that opportunity. At the moment, we're insourcing about 100,000 tonnes a month of material like that from the East Rand.

So I've got a question here that came through on the podcast: "What grades can one expect from the reconfigured operation?" So I think we've answered that. We're targeting a recovery going forward of north of the 0.175 number per tonne of recovered gold. And then there's also a question, "Can you provide some guidance on the potential silicosis liability, assuming similar assumptions used by the South African gold mines?" So you will have seen in the press that the other gold mines have made provision for a potential settlement of the silicosis class action, and they determined to settle that claim for various reasons. And those are good reasons. We're no longer a member of the silicosis working group, but from what I can gather, the reason why these provisions are being made is that majority of the companies that are part of the silicosis working group are determined to settle this. There's just too much uncertainty, balance sheet uncertainty; access to capital; maybe in position of levies that are disproportionately high; and so forth and so forth. So they've taken the view that the risks associated with having this overhang, this liability overhang is such that it's better to just deal with it and to maintain control of where it goes. Our position is different in the sense that -- I'd love to say that these strategic issues don't apply insofar as we're concerned, but we've taken a different perspective as to whether or not we should be considering settlement right now. And so our approach really is, one, is there a basis for liability in law? And that's a downside of having, I suppose, an attorney as part of your senior management or 2 -- or many attorneys in the same management team. And what's quite apparent is that there are a whole host of legal principles informing liability, civil liability and third-party liability would have to be developed, would have to be changed before a claim based on legal principle could be sustained. And we haven't seen that. In fact, there hasn't been a summons in this matter. The summons hasn't been issued. There's been an application for the certification of the claim. The parameters that have been approved are subject to appeal at this stage. That's because once one sees a summons and you're required to plead, you'll be in a better position to determine whether the legal principles are such that there's a real risk that needs to be contained by way of a settlement proposal. And I think once that summons is also issued, one will be able to form a better opinion or better view based on researches to the number of people in the industry that actually would want to bring a claim against DRDGOLD. Also, considering that the whole idea of judicial independence -- or not judicial independence, legal independence, rather, of subsidiaries, that of independent entities, that the whole idea would also have to be almost disregarded and for reasons other than those that are currently contained in the Corporations Act, the Companies Act. At this stage, a parent can only be held accountable or liable for the debts of a subsidiary if the independent legal personality of the subsidiary is used as a means of almost deceiving people that it does business with. So that would have to change. And we don't know how many people are out there. So as a consequence, we decided not to, at this stage, provide for a settlement. We're not contemplating settlement at this stage. It could change once we have more information, but there's not enough information for us, at this stage, to take that decision.

Yes. All right. Well, thank you so much, everyone, for your time. We really appreciate the fact that you'd take time to come and listen to our story.