DRDGOLD Ltd (DRD) 2011 Q4 法說會逐字稿

Good morning, everybody. Thank you very much for taking the time to attend our results presentation for the quarter and for the year. As usual, Craig will join me in presenting the numbers and also the operational performance.

I think the focus points for this presentation are going to be, obviously, the highlights, then the production trend. I'll take you through those. Craig will take you through the financial numbers and the trends there. And then, something that we decided to include this year are the initiatives around sustainable development; delivering into the five types of capital that have now been articulated as being the objective for corporates around sustainable development; and then, also just some very brief discussion on the way forward and where we see ourselves going forward, where our strategic focus is.

So, going straight into the disclaimer; I think that you've seen a few times. There are going to be some target numbers here, so we ask you just to take due regard to this disclaimer.

The key features for this year are pretty encouraging. I think I mentioned in earlier presentations that this was a big year operationally for our business. We were going to spend ZAR350 million on a big pipeline initiative to consolidate our Eastern Central Rand operations into the Ergo operations. We were going to start phasing out some of the older plants, namely the Crown Central plant and the City Deep plant. Some of our more lucrative reclamation sites also were reaching the end of their life, most notably Top Star.

So there were a lot of things changing. We were commissioning two new reclamation sites as well. A lot of things were going to change during the course of the year, operationally. And I think we did mention to the market previously that we anticipated a measure of volatility and also a degree of uncertainty as to whether we were going to be able to deliver into the targets that we had set for ourselves.

So, being able to report these numbers, these financial numbers, coming out of a year where all of these operational changes were happening is very encouraging for the management of DRDGOLD. So you can look through those.

We are again declaring a dividend. It's our fifth one, five years in a row. I think we did set out to establish ourselves as a dividend-paying company, and every year we've been able to increase our dividend. If you were to add the dividend of ZAR0.10 to the amount of money that we reinvested in our own stock, I think it's just shy of about ZAR100 million, and that amounts roughly to 5% of market cap. So the return -- or the funds reinvested return to shareholders for the year was just on 5% of market cap.

We saw a 53% increase in operating profit. Some of that, obviously, was with the assistance of a very good last over from Blyvoor, just before we disposed of it. But it did assist in pushing up our earnings up to -- or rather, sorry, this is from continuing operations. Blyvoor did return quite a handsome number in its final innings, and I think Craig will spend some time on that.

From continuing operations, we did manage to again achieve roughly one-third of market cap in operating profit. Last year, you will recall that operating profit, I think, was ZAR438 million, if I'm not mistaken, which was more or less one-third of market cap at the time. This time, with the market cap up substantially from last year, we managed to achieve that once again.

Headline earnings up quite nicely to ZAR0.61. There is a tax impact -- or a deferred tax benefit that play a role in that, and Craig will talk a little bit about the normalized number. But it is a good number to return at the end of the year.

This is the one that really means everything to me on gauging the performance -- the next one on gauging the performance of the business. I don't understand enough of accountancy to really reflect on these other numbers, but this cash flow number, what flows out of the bank and what comes back into the bank account, I think that ultimately is the true measure of the success of a venture. And this number, I think, I find extremely encouraging, taking into account the operational changes in the last year, ZAR619 million.

We are, at this stage, confident that we are trending quite nicely along the project timeline for Ergo. We did bring some additional skills into our organization in the last year that's assisting greatly around the planning aspects of that. The engineering skills have been there. The execution skills have always been there. Now, also around the coordination and planning, I think we now have a formidable team that -- who's confident that they can deliver into this timeline of February 2013.

We've completed the restructuring of the surface operations. We now have a far more simple structure with Ergo Mining Operations, EMO, having replaced the former DRD SA; and with a direct BEE holding of 26% into that structure. And Craig would be able to answer some of the questions on the financial implications of that transaction as well.

But I think it's a target that we'd set ourselves to achieve the BEE ownership requirement as soon as we can, and to deliver into what I think is a justifiable expectation on the reorganization of equity ownership in South Africa, and I'm pleased that we're able to do this.

Our BBE Holdings in DRD, in our subsidiaries cluster where we accommodate BEE in the Ergo Mining or EMO, is unencumbered. Our BEE partners have paid what they owed on their ownership in these subsidiaries in full.

I think on the employee trust there's still a small number outstanding, if I'm not mistaken, but the big 20% holding, which was the initial investment taken up by entities under control of the Ncholo family, that has been paid in full over the last four or five years, and that was paid with earnings from these operations.

So while all these restructurings were taking place, and with Blyvoor were slipping in and out of judicial management and business risk, and so forth and so forth, the business returned enough for our BEE partners to now hold their percentage -- the target percentage, as set in the mining target, unencumbered and that with earnings from the operations.

And then, of course, the Blyvoor disposal has also completed. We are very pleased with the way that this disposal went. We received several offers for the mine, and I think, on balance, selling it to Village Main Reef, with Mr. Bernard Swanepoel at the helm, and the team -- the formidable team that he managed to assemble over time; we think that there's no-one better equipped in our mining industry to be looking after an asset of this nature. And we do think that there's still some headroom in the performance of the Village share price and, hence, we will, for the foreseeable future, be hanging on to the, 9%-odd that we now own in Village Main Reef.

Then moving on to the Ergo trends, I'm going to be talking about the production trends and Craig will take you through some of the financial trends.

I will give you an opportunity just to look at those pictures. This is what mining, in the context of what DRD now looks like, the picture on the left-hand side. That's our chap standing there with his monitor gun and I think there are two of them on the Ergo tailings dam. Between the two of them they move about 20,000 tons each per day; 40,000 tons per day is moved.

I remember when we owned ERPM and we were doing about 25,000 tons a month; we employed, what, 1,600 employees. So these two chaps are moving per day more, almost twice as much as 1,600 employees used to move within the context of underground mining. Obviously, there are a whole lot of other support staff and so forth to assist this process, but this really -- this is our rock drill operator; we have two. I don't know what an aggressive strike by two of these guys is going to look like. I don't think it will resemble what we saw recently in our newspapers. Anyway, let's move on.

The tons comparison; what we do. What we did on this slide here was to compare the tons delivering to a Crown plant in the last two years. You see there, the legend at the bottom; the actual in 2011, the actual in 2012 and the target for 2013.

Now, we still talk about the four plants, because, although Crown has been decommissioned, it's now being used as a milling site. City is still doing some cleanup work and Knight is still fully in production. But it's more really to identify the reclamation sites; the resources that we associate with a particular plant in the past, so it's the geographical location of that. And you could see, basically, how these have trended and the reason why they've trended the way that they have -- that they did rather.

Top Star was depleted late last year. The 3A2 dump has now come on line. That is the JCC dump, that's the one not too far from the soccer stadium. It's the last remaining sand dump on the western part of Johannesburg.

And, as with all of the other 25-odd dumps that we've commissioned in the past, this one too had its share of interesting surprises. I think this one we had to re-establish the actual face where we were reclaiming material, because the cladding over this dump was done very properly with topsoil and rock that initially inhibited volume flows.

Moving across to City Deep. There you can see there was a nice surge in volume, and this is because the City line into Ergo was completed in September of last year already and, as a consequence, we could take full advantage of this pipeline flowing into Ergo and, hence, the significant increase in volume.

What you will increasingly see in our trending are slightly lower grades, obviously, because we are now moving into the slime reclamation phase of this organization, where most of the material that we reclaim is from slimes, but, obviously, with the benefit of higher volumes. And our engineering design and construction are such that we can accommodate these higher volumes.

And there you could see what the gold content of the 3L42 slime plant; that's the one just on the western side of Johannesburg, more or less the [Murray Street], Essex Street off-ramp, or thereabouts. Further down towards, is it -- what's that lake on the other side of -- I beg your pardon. [Winapen]. It's not far from Winapen this is where reclamation -- just behind the City Deep -- the old City Deep plant.

Then moving across to Ergo. There you could see that we're targeting a slight increase also for Ergo, to get us closer to the 1.8 million tons going into Ergo for this calendar year. And this we can do, because all of the support pipelines, the lines there or the lines back, the water balance pipelines, all of those have either been fully completed, or are in the final phases of completion and, hence, all of these lines can now run at full capacity, which is basically what we require in order to get within the vicinity of that volume target.

Moving across to gold; gold production year on year and then also the target for the next year. There you could see just how lucrative an asset Top Star really was; it was a phenomenal asset. I think that, but for the fact that we have managed to eventually get the license to mine Top Star, at the time when we did there was a two year delay, which, of course, gave the gold price an opportunity to, I think, go up by 2.5 times what it was when we initially applied for that license.

The cash flows from that side really supported all of our capital reinvestment initiatives over the two years that we mined it, and it did contribute significantly to establishing what we have now; a higher volume, lower grade circuit and lay-out. And there you could see exactly how much gold we did recover from that.

Obviously, coming off Top Star, and then commissioning a new site, you saw a dip of roughly about 480 -- 450 to 480 kilos of gold flowing through the Crown plant, and, obviously, the objective now is to, by way of increased volumes, which, as I said earlier, our pipeline circuits are more than adequate to support and accommodate to get back to those levels. Crown won't deliver the same sort of gold that it did in the past with Top Star in its circuit, but the aggregate of all of these reclamation areas combined should take us to the lower end of our targeted ounces in the not too distant future.

Right there you could also see City. City surged quite nicely, and that was a combination of the higher volumes and also some of the higher grade cleanup sites that City is busy with, the final phase cleanup.

Knights; Knights is -- well, the legend moves straight across, but I think I should reflect just briefly on Knights. That is what a stable circuit really looks like. It's been doing exactly the same for the last few years and we're targeting more or less the same also for the next year.

And then both the volume increase and just the beginning of the fine-grind circuit should then also push up the Ergo production numbers up slightly towards the end of this financial year. Just as we go into April, May and June of next year, some of that should start trickling into the circuit.

Maybe just reflecting a little bit on the Crown numbers as well; we did close Crown probably about six weeks earlier than we had anticipated and that had an impact on production right at the end. I think there was about a 70 kilo sacrifice of gold, because of the decision to close Crown slightly earlier.

We had planned to basically decommission it slightly more gradually and to allow our loaded carbon inventory at Ergo to build up, to have a somewhat more seamless transition from Crown into Ergo, but Crown had very much reached its sell-by date.

Clearly, with all of our focus moving across into Ergo, the sort of maintenance required to keep Crown where it was, with the recovery efficiencies that it managed to achieve while we were still mining Top Star. Those started coming down, right towards the end, quite sharply and we took the decision. We said, all right, we can either try and impress the market by extending for another four to six weeks and then cutting off Crown or we could just stop the bleed now.

And it's not a bleed in the sense of not making money; it's a bleed in the sense of high-grade material goes through the Crown circuit and then ends up on the tailings facility with far more gold in those tails than what we would have deposited had we sent it through the Ergo plant.

So there was a very deliberate decision taken to switch the circuit off and start pushing materials down into the Ergo plant at a time when there was very little room for recovery, because it was with the end of the financial year very much in sight; I think it was about four or five weeks before the end of the financial year.

And we decided let's just take the hit now. The financial numbers are looking okay. We're not going to be declaring a lower dividend as a consequence or earning on the whole less than what we had planned and now's as good a time as ever to not just put a good quality high-grade product through a plant that is simply no longer capable of returning the sort of yields that we want to achieve.

All right, having said that, Craig, if you will take us then through some of the Group trends.

Thanks, Niel. Good morning, everyone. I've decided to focus on four key trends, which really illustrate for me the improvement in the profitability of the Company. These key trends that I'm going to show on the next four slides reflect the continuing operation, so the impact that Ergo has had on the business.

Firstly, the operation margins; you can see that our operating margins have increased significantly year on year to 35%. So the first two bars, the black bar is obviously 2011 and the gray is 2012; and then I've just split it up by quarters, so you can see the margins that we achieved per quarter. Obviously, last quarter's margins were impacted by the 8% decrease in production.

EBITDA, which is our earnings before interest, tax, depreciation and amortization, you can see there's also a very significant increase, 63% up to ZAR346.9 million for the year. Again, the last quarter would have been impacted, obviously, by the 8% decrease in production.

Headline earnings per share; now, this slide for me really shows or reflects the gearing of our Company to the gold price. You can see a very significant increase of 259% to ZAR0.61 per share in headline earnings. And you can see the impact per quarter as well in the next -- in the gold bars.

Free cash flow; to me, as Niel said, it's a very important indicator of how well our business is doing. So free cash flow being our operating cash flow after the capital that we spend in the business and, again, a significant increase in free cash flow to ZAR207.9 million from a negative ZAR11.2 million in the previous year.

On to the income statement, our revenue from continuing operations was up 28%, and that was largely due to the 36% increase in the rand gold price.

Our net operating costs were up 17%, but they would have been impacted, obviously, by the higher volumes, first of all, that we achieved this year, as well as the above-inflation increases in electricity costs, as well as wage costs.

Again, you can see the gearing in the operating profit number. So even though the gold price went up 36%, our operating profit went up 53% to ZAR622.2 million for the year.

Depreciation, obviously, we were expecting that to increase because we're spending more money on various infrastructure. We completed the Crown/Ergo pipeline, that ZAR350 million project and that -- those assets started depreciating in the current year, so therefore, depreciation went up.

Our movement in our environmental rehab provision also increased, and this was expected because of the new infrastructure and the larger footprint that we're managing at Ergo.

Environmental rehab costs that we expensed during the year were up 27%. A large amount of that was, obviously, spent on the Crown tailings facility. Because we have decommissioned that tailings facility, we obviously have to spend a lot of money on grassing and other environmental costs at that site.

Other income and costs also went up 24%. In that number, there's obviously a loss on sale of various properties that came through which would have impacted that, and also an increase in care and maintenance costs at ERPM. We are spending some money at the Cason shaft, so those costs would have come through there as well.

Net finance income, that was up 49%. That was largely due to the decrease in interest charges as we repaid a large portion of our loan notes in October 2011. And, as you'll see when I get to the balance sheet, there's only a small amount that was outstanding on those loan notes.

Profit before tax, again illustrating the gearing of our Company to the gold price, was up 131% to ZAR261 million.

Taxation; the taxation number was lower and it was largely as a result of a deferred tax credit which came through. The deferred tax credit really came about -- well, there was a couple of issues that impacted that, but the main reason for that was our restructuring of our surface operations into Ergo. Previously, there were tax losses that we hadn't recognized the deferred tax asset for and, because of the restructuring and the fact that Ergo would now be generating revenue going forward, obviously, we could recognize those deferred tax assets.

There was also a reduction in the effective tax rate, which would have also impacted deferred tax and resulted in a credit coming through the income statement. So our effective tax rate that we're now using in our 10-year life of mine, I think, comes in at just over 15% -- 15.5% I think is the number.

Profit after tax was up 203% to ZAR253 million.

Discontinued operation, you can see a significant increase in the profitability of Blyvoor. Obviously, in the previous year's numbers, there was quite a large impairment of the mining assets of Blyvoor, which resulted in net loss in the previous year. But, as Niel said, Blyvoor actually achieved some decent profits in the 11 months that we consolidated it. Also, in that number is obviously a loss on disposal of Blyvoor. So we ended up with a net profit of ZAR377 million.

Our headline earnings per share, as I said, increased significantly to ZAR0.61. In that number, the deferred tax credit was about ZAR0.16; it had a ZAR0.16 impact on that number. Headline earnings per share from total operations, up 207% to ZAR0.86 per share.

On the balance sheet, you would see that our non-current investments and other assets on the second line increased to ZAR176.1 million. Obviously, that's mainly due to the Village shares, which we are now accounting for on our balance sheet, and that was about ZAR151.3 million of that number as at year end.

The environmental rehab trust funds and guarantees also increased quite significantly, to ZAR165.6 million, and that's as we put more money into our guard risk insurance held captive, which is effectively a vehicle that we use to provide rehab guarantees to the DMR on some of our rehab liabilities.

You can see that our cash and cash equivalents are still just under ZAR300 million, so from a Group perspective we have quite a strong cash position.

Under long-term liabilities, the ZAR6 million there is basically all post-retirement medical liability provision, so there's no long-term loans and borrowings in that number. You'll see lower down, under current liabilities, we have under current loans and borrowings, a number of ZAR30.7 million. That's the last amount owing on our previous issue of our loan notes, which we will repay in October of this year.

Can see also from a balance sheet perspective our current ratio has improved significantly, as a result of the profitability of the business.

I'll hand you back now to Niel, to take you through the rest.

Thanks, Craig. Now moving on to the -- this is our fine-grind schedule. You could see our target date for commissioning, halfway through the page, installing the equipment and then plant commissioning; and also progress made to date.

I think the next very important target for this year is to get those mills shipped here from Canada. And three of our Senior Management team members will be travelling to Canada in the next month, where they will look at the fully-assembled plant, and then also look at the plant being packed for shipping, disassembled and packed for shipping, to make sure that when this LEGO set arrives in South Africa that half the nuts and bolts aren't left behind in Canada.

So we're confident that we're on track to achieve this; civils are very much ongoing. And I think we have one bank of the flotation circuit already completed, if I'm not mistaken. We visited that late last week, when our Board was here, and that certainly looked like a very busy site at this stage.

Also the Blyvoor countdown, I think most of the hard work has been done as far as Blyvoor was concerned. I think the most important hurdle for us was competition commission, because that was the trigger for transfer of control, management control, and the benefit of risk and -- the benefit and risk of profit and loss that then transferred to Village, so they now have full Management control over the business.

The next phase, and that's when we will receive the balance of the 86 million shares that they are paying for this asset, that is when we get, in terms of the current contractual arrangement, when we get Section 11 transfer, or consent for Section 11 transfer, in terms of the MPRDA.

We've taken legal advice from Professor Michael Dell, who holds a slightly different view, and we'll be canvassing that with Village Management over the next few weeks, with regard -- with -- regarding the -- with regards the requirement to actually have a Section 11 consent. Considering that Blyvoor is a separately registered entity, it's a private -- it's not a Pty; it's a limited, but it does have separate legal personality. And we might be able to anticipate this target date somewhat, but that's very much up to whether or not they want to collaborate on this particular issue, and whether they share the view that Professor Dell has on this particular requirement.

And then just on the Zimbabwe, what we decided to do for purposes of this presentation, show you the various sites where we currently are busy with exploration work, and where we're planning to do some drilling.

Now, you will recall that our initial objective, insofar as Zimbabwe was concerned, was to find assets that are near surface, and where we could by way of almost a -- not almost, by way of a mechanized process, move large quantities of material to a plant. And this is what our drilling program has to yield over the next few weeks or the next few months.

If we do not achieve a stated resource, based on drilling results before February of this year (sic), and we've set a certain target for us, which is an internal target, if we don't achieve that by February of next year, of this financial year, then we will revisit our presence in Zimbabwe. We're not going to go into deep-level stuff here. It was very much intended to be a project for shallow mining, and from surface by way of a mechanized process.

So our drilling program over the next few months will determine whether or not there will be a continued presence in Zimbabwe. We have started with a bit of reclamation work on our alluvial deposit, which is near Gweru, and we should be able to tell you more about that come the October set of results.

But now, sustainable development; it's on everybody's lips, and it's something that we do take seriously at DRDGOLD. We have divided our various parts of capital up in the five categories of capital that the Rio+20 conference, I think, have now -- has now endorsed; namely, financial capital, social capital, manufactured capital, nature capital and -- what's the other one? Special capital, yes, the most important one.

So there you could cast your eye over what an asset we are distributing into this economy, based on last year's numbers, ZAR1.4 billion, distributed, reinvested. And if you work on the assumption that every rand that is invested gets spent seven times, then I think our contribution into local economy, into the national economy is not insignificant. And it's certainly something that we would want to continue to improve, going forward.

Intellectual manufactured capital; what we're trying to achieve with this, having now brought everything under a single roof, or most of our operations under a single roof, and also with the design of both our pumps, our pipelines and our internal circuit, is to do this in such a way that it delivers optimally, or strikes the optimal balance, between manufactured capital and all the other capitals.

So it's got to be designed in such a way that you can still give the optimal return to your shareholder, without exploiting nature beyond its capacity; and still delivering into the objects that we'd set ourselves on the natural capital side. And I'll elaborate a little bit more on that.

But one of the things, for example, that we did manage to achieve was just the simple design of our pipelines and the materials that we use has had the effect that we require 25% less energy, electricity, to move our materials. And, increasingly, these are the sort of planning parameters that I think will flow through in the way that we construct, build, our manufactured capital.

Also the flotation and fine-grind process, the material's going to be delivered. It will put a demand on nature. It will put a demand on human capital. It will put a demand on the circuit itself, the manufactured capital. Flotation process will increase, optimize, the yield coming out of the material that's going to be delivered regardless, and so forth.

Moving on to human capital, this is something that I think internally we also take very seriously. We want to make sure, and this is a standing invitation to every single employee in DRDGOLD, that the only thing standing between yourself and optimal development in your professional life is your opinion of yourself. The opportunities will be provided for you to develop, and to make the transition from being a laborer to being an operator; from being an operator to be somebody in a supervisory position. And we have some of those stories within our organization.

This is what our current complement, what it looks like. Several twos of people currently involved in our operations, just over 2,200. Of those, just under 800 are permanent employees, and you could also see what the numbers look like on HDSA in our management setup.

We haven't had any industrial action. We haven't had any -- it hasn't been necessary for the DMR to serve stoppages related to safety that we're very grateful for. But we also worked very hard towards safety standards and we are spending a lot of money on employee training and development, and I'll talk a little bit more about that later on as well.

The industrial action part is something, obviously, that our HR department has to work really hard in order to achieve, to address concerns that employees may have with regards income, sharing in the upside, and so forth, and so forth. And it is a combination of personal development and also being paid a decent salary.

And I think one of the things that we managed to implement quite successfully is that although we settled our wages at a certain percentage, I think it was 8% or 8.5% in the last year and it's going to go up by 7% now in October, we have a two-year wage cycle.

Our employees do have the ability to earn slightly more on their salary and to earn an increase compared to last year of up to 15% in any given month, and that's all to do about how much more we make above costs, and I think it's increment linked to ZAR5,000 per kilo of gold produced.

So every additional ZAR5,000 per kilo of gold produced that we actually earn, money going into the bank, not any accounting adjustment, actual funds, something that you can buy bread and milk with and [pipes]. If we achieve those then the employees earn slightly more on their salary, and they can earn up to 15% more than what they earned in the previous year.

And this seems to be working quite well, because our employees now also have some skins in the game. They also have exposure; how well or how badly the business performs can have an impact on how much money they take back home. And most of our permanent employees have made the transition from being laborers through to being operators.

They don't just move stuff with their hands, they actually move -- operate equipment and so forth, a value-add type of work. And, as a consequence, the incomes that they earn are slightly higher and they have real ongoing commitments, like accommodation, like children going to school, like saving, and so forth and so forth, a lot of focus on that as well.

And I think once you're an employer, once your labor force reaches that level of sophistication then the opportunity to disrupt that with MRP-type labor initiatives, I think that risk is diminished. You're not immune to it, but if you focus on that then maybe you can reduce the risk of exposure.

Going into natural capital, I think there are two areas in particular where our operations can play a significant role in making sure that the next generation will not have any -- will not want anything because of what we did and would also have the benefit of a slightly better environment.

The first thing obviously is the amount of water that we consume; we have to be clever in how we go about with our water consumption. Now, as a consequence, a lot of the water that we use is recycled, it's been stored or it's been harvested from reservoirs that form part of our circuit.

We are in the final stages of also completing our water balance circuit, which is basically an internal reticulation system which keeps every drop of water that goes into the process within that circuit and it gets used over and over again. And, as a consequence, the amount of top-up water that you have to pull in on a monthly basis is reduced as well.

Now we're sitting on a vast amount of water that is rising slowly underneath our feet in and around the Johannesburg area, and we have been very involved in finding a solution for that problem. Now, here is very much part of that solution; it's bringing some of that into our circuits. And we are in ongoing discussions, regardless of what's been said about us in Parliament from time to time, we have been in good faith discussions and negotiations with the Department of Water Affairs now for a very long time.

Sometimes it is necessary to draw a line in the sand and say that these are our conditions and then stick to those. But there are also times when you've got to be sensible and compromise and, I think, we are very close to that point where a sensible compromise on how we deal with the rising acid lake beneath our feet, how that's going to be solved. And as I said earlier, this is very much part of that problem, that and maybe one or two other initiatives as well.

We want to make absolutely certain that the taps don't run dry in 20 or 40 or 50 years in Johannesburg, because Ergo was irresponsible in the way that it consumed water. We want to do the exact opposite.

I think another area where we can play a significant role in a better environment going forward, is how we deal with the legacy issues associated with tailings dams.

Now we set out six years ago, and it was the first time ever that we actually had this as a budget item, I think that first budget, Henry, that you brought was ZAR16 million for the rehabilitation of our tailings dams. And, truly, we're seeing that -- slowly and surely we're seeing the benefit of that coming through as well, with the best suppressing mechanisms and so forth and so forth.

Now there's never going to be a 100% solution for the dust in and around the Johannesburg area, because it is an arid area. But I tell you what, we are moving to that point where we're going to be capturing most of the dust on top of those dams through a very deliberate and a very focused program of vegetation and dust trapping. But I think this is world leading quality stuff that our guys are busy dealing with.

ZAR116 million is not to be sneezed at, and that was what went into our dump rehabilitation in the last financial year. And we'll continue to do that, because we think it's important that people in and around Johannesburg breathe clean air going forward.

We're also increasingly by the removal of all of these dumps that in the old days were built mostly in lower lying areas and that, as a consequence, contaminated some of the wetlands in and around the Johannesburg area; those are being moved to the Ergo Tailings Dam which is, in my view, world class.

There's some photos on this one as well, in so far as managing water on top of the dam is concerned and also dust; land is being opened up and dumps -- controversial dumps that have been a nuisance in and around Johannesburg for many, many decades are slowly being moved away. So nature capital is most certainly something that we take very seriously.

Social capital, now this is also something that I think became part of our thinking and part of our planning long before it became fashionable to be saying things about social capital.

A few years ago the DRDGOLD share price completely flat-lined. It almost looked as though nobody wanted to do anything with us any more, there was a transition or a changeover in who held our shares, and so forth and so forth. And the management of DRDGOLD had to take a decision as to whether it was really worth going on, because this business is not there just for the employees; business is not there just to serve our own purpose; it does have to have some sort of purpose. And I think becoming socially relevant internally and also in so far as surrounding communities are concerned has been a very important consideration for our business.

We haven't been talking much about it, it's been pretty much under the radar, but we have probably spent just under ZAR100 million over the last five years in establishing and building the capacity of what is referred to here as the Ekurhuleni Business Development Academy that we've now rebranded, or that we're in the process of rebranding, as the Ergo Business Development Academy.

And our objective is not to build hospitals, and schools and so forth. Our objective is to go there where people are at the most disenfranchised; those communities that actually squat on old mine land. If that is your best option, if that is the only place that you can build a little shelter for yourself, then you are in a desperate state. And those are the people that we target through our social investment initiatives.

And you can see there that just more than 5,500 people -- or just under 5,500 people have actually gone through our EBDA Training Center. Over and above that there are also a whole host of socio-economic development projects that our people are delivering into.

This involves better facilities for schools. It involves an Entrepreneur Club. We've got about 30-odd high school children from in and around the Benoni Springs area that are involved in a three year program to teach them how to become entrepreneurs. We're not teaching people how to wave flags; we're teaching people how to look after themselves.

We think it is much better to achieve than it is to receive, and that's the philosophy that we want to take into these young children and into their mindsets, and empower them for the future. If we're going to be a society that just waits for the next handout, and to empower ourselves by way of just being at the right time, at the right place to take advantage of some sort of a tender scam, we are going absolutely nowhere. These young kids will be different in how they approach life.

And then, of course, internally as well; our own employees, through Vuselela, which was a company values initiative and Best Life which is -- Best Life is to empower employees to, with what they earn, make sure that they don't end up on a social list after employment, but they actually have decent income; that they have some savings; that they have a roof over their head; and that the next generation is better positioned with a value-add position that's slightly higher up in the cycle.

So this is something that, as I said earlier, has been very important. We launched it five years ago when the markets lost interest in what we do. Hopefully, having paid dividends now for five years running, and with the financial returns that we've been able to achieve on top of having spent all of this money on these initiatives that will increasingly change. But it will continue to play a very important role in our thinking and how we position the business going forward, and also how we allocate resources.

Right, so looking ahead, back to the operational side; the business of reclamation, the way that we've positioned it now with a central integrated plant that relies heavily on ultra-volume flow, is very dependent on volume, like any other old mine. But with the low grades that we're delivering to that plant, volume flow is, in fact, a key priority for us. So for us going forward, making sure that we achieve volume every month without interruption, without fail, is going to be a very important focus area for us.

And for the first time ever, delivering volumes to ton is no longer the responsibility of the small business unit manager the way that we had it in the past. We, in fact, now have a dedicated team whose job is to do one thing and one thing only, and that's to make sure that we deliver volume to plant.

General Manager or the Managing Director of Ergo is no longer going to be driving around looking for tons, he can expect those tons to come through the fence, he doesn't have to look any further than that. And hopefully we've got the right team in place to do that for you, Henry.

Completion of the flotation fine-grind for a variety of reasons, not only to make more money, but also to delivering to the sustainable development objects that we have. If we're going to be delivering 1.8 million tons of material into that plant, we want to make sure that we optimize it, because more than one type of capital is affected by that.

We'll also continue with research and development. Although we are very pleased that we now have this mechanized process capable of delivering vast volumes of material into a plant, I think the vulnerability still lies in volume. All the big vulnerability, the new vulnerability for us lies in volume.

We've got to do one thing I think a little bit better and make sure that we continue to improve on that, and that is our research and development into recoveries. We're still putting, even after the fine-grind, way too much gold and other minerals on top of our tailings dams, and the technology to find it is out there. And hopefully we'll be the first to discover it and to implement it.

We'll also continue to progress our sustainable development initiatives. We do want to make sure that, within the foreseeable future, at least before the end of this calendar year, we have an agreement in place with the agents for the Department of Water Affairs on asset mine drainage; one that can serve both their purpose of intercepting water coming down into our water basin, and our purpose of having a sustainable source of water for our operations. A reduced carbon footprint is always going to be a very important consideration for us.

And then as I said earlier, a real human social capital, none of this charity stuff. We want to make sure that the people who are affected by DRDGOLD can actually contribute towards a much better future for our children. And then also explore the expansion into other reclamation and recovery areas.

I think we've now built up over the last few decades a skillset that has shown itself capable of moving vast quantities of material over long distances, and in complicated areas. We're pumping the better part of 2 million tons of material along the highways, and the railways and the waterways of Johannesburg, and you don't even notice it. Many of you went to the soccer World Cup final, when was it, the year before last, and you walked over our pipelines and probably never even knew that they were there. And I think this skillset can be applied somewhere else.

Also, the ability to squeeze out that extra 0.001 gram per ton, in this ultra-volume kind of environment that can make a big difference.

And the other materials; gold is not the only product out there capable of being recovered and treated with the technology and the skillset that we have at our disposal. And I think we will most definitely start looking for ways and means of extending our reach, or the reach of our technology.

DRDGOLD has very much become, I think, a dividend play, a margin play. We're no longer a miner. We're really just refuse people. We find stuff that's been thrown away and we put it through the right technology and we make more money than most other mine companies in South Africa doing that. So there's got to be other ways -- or other products that we can do, that we can access to do the same thing.

Right, so I think with this late (inaudible), Craig and I will take your questions for the next few minutes. Thank you very much for attending.

It's Allan Cooke from JPMorgan. Niel and Craig, just two quick questions; you have given some of it in the slides, but if you could just remind us of your production guidance. Last quarter, you spoke to operating guidance in terms of what you're looking to produce in financial '13, some indication of costs, rand per ton perhaps, and what sort of CapEx you have for the remainder of the year, as you finish the fine-grind at Ergo?

And then also if you could talk, again, to dividend policy, which has obviously been impacted in financial '12 with the share buybacks. But do you still have that ZAR100 million set aside for working capital purposes and plan to pay out the rest over and above your CapEx? Is that -- should we use that as guidance, or should we use something else, please?

Okay. Let's start with the first question that is our production guidance for the next financial year. I think we came in about 3% below what the lower end of our guidance -- our steady-state guidance, was. And I think what we want to achieve first and foremost is to penetrate that lower end of our steady-state guidance. And I don't really want to go much beyond that.

I think indicators are, or trending are such -- trending that we're seeing is such that we should comfortably get to the lower end of our steady-state guidance in the next financial year. If there's going to be a big swing, and, obviously, this is something that one can anticipate, because you see these trends develop long in advance, there's some good lead indicators as to whether there's going to be a significant swing, then we'll make -- we'll alert the market.

Going forward this year, we don't really have the various changeovers that we had in the last year. So although we were trying to get to steady state in the previous financial year, we were very much not there. But all of the big changes have taken place. We're off all the old sites and we're onto the new sites. The pipelines have all been commissioned. The water-balance circuit is just about finished.

So everything that we need to have in place in order to get to steady state is now in place. And, hence, steady-state target is pretty much what we have in mind for the next year. But I think it'll be towards the lower end of steady state.

In so far as our costs are concerned, I don't think there's much change in our unit cost guidance. Of course, there have been fluctuations in the currency exchange rate, which might look the dollar -- it might make the dollar numbers look a little bit better. I think our guidance on that is between $1,000 and $1,100 per ounce. We came in slightly higher than that in the last quarter, but I think that's still very much what we have in mind.

The ongoing CapEx, is, what's our guidance there, Craig? $42 an ounce for sustainable CapEx; I'm not talking about the project.

Yes, that's maintenance CapEx. Then we've got about ZAR230-odd million -- or, sorry, we spent ZAR40 million on the flotation and milling circuit this year, so it's about ZAR210 million, then still the balance of that to come in this next financial year.

In so far as the dividend policy's concerned, yes, we want to maintain that buffer. I'll have to look at the numbers and give you a more intelligent answer, with actual reference to the numbers to tell you exactly where we are with the buffer and how much of the available cash we've distributed. We did distribute close on ZAR100 million, if you were to also count the share buyback.

But I do think that for the foreseeable future -- we spent a lot of capital in the last few years; we probably spent more than ZAR1 billion in capital in the last few years. And I think there comes a time for every business where it needs to put away the checkbook and start using the deposit book a little bit.

And so whilst revenues and profits are not going to show the same sort of trends that we saw in the last few years. We had some magnificent trends in the last few years. James was putting together my presentation for the Denver Gold Conference, of trends in the last two years. We've had 500% increase here, and 150% increase there, and so forth and so forth. Those were very aggressive trends, at some point in time they're going to normalize.

But I think the benefit for shareholders going forward is that certainly this big CapEx spend is going to moderate at some point or another, and that's been very much a talking point in our meetings; that we're not just going to be chasing mindlessly after a bigger footprint, more tons, larger capacity and so forth. It's time to make a bit of money off what we currently have, and maybe just get more intelligent with the actual technology -- recovery technology that we use. And then perhaps we can put a bit more money into our shareholders' pockets that previously we had used for capital projects.

Obviously, with one caveat and that is if our flotation circuit works, if our flotation circuit does, in fact, manage to retrieve the percentage of pyrite that we, at this stage, forecast for purposes of our capital spend then we would want to take a very serious look at building that uranium circuit, because that, in the long term, would obviously have a significant impact on our production costs.

I think we said that it will be up to an 8% saving on unit cost for -- on the gold circuit. So that might be one big capital item that's still outstanding. But other than that, as I said, I think it's time for the deposit book to be pulled out of the drawer and for that to be used for a while.

Just the CapEx on the uranium circuit, was that ZAR150 million?

ZAR150 million, yes.

Adrian Hammond, BNP Cadiz. Just wonder if you could talk briefly a bit about Crown and what you're doing there in terms of rehabilitating. I've been there and it appears that it's quite far from being vegetated; in fact, the sand there, the dust is quite bad. What have you budgeted there in terms of rehab? What have you spent to date? And do you think you've perhaps under-budgeted?

No, not at all. I think I need to take you there again. I think that you -- when last were you there?

About a week ago.

No, no. I think that you probably were taken to the wrong spot. Who was in charge of that visit? We need to take him to the right spot. No, there's a lot of money going into that with ZAR116 million in the last year.

Look, the fact of the matter is that something -- a dam that was established over several decades, and that's as big as this one, you're going to fix that in one month. You're not going to fix that in one year. You probably going to take the better part of four/five years to do that, because you're taking it hectare by hectare.

And if you went to the Homestead dam, that one is virtually covered with dust, nets, and vegetation, and so forth. That's what it's going to look like eventually. And we might have a photograph here of what it looks like now, and that's ultimately the objective.

And you know what? We've got to pace ourselves, because you obviously have to balance your expenditure going forward. And we're making -- I'm personally confident and comfortable that the amount that we set aside for that is more than adequate to ultimately achieve a very solid closure.

There's going to be for -- every year for the next few years during the dry time of the season, this dry time of the year, with the high winds and depending with where the wind blows from, there will be dust. And it'll be dust that will actually be of -- there will be a nuisance involved for the surrounding areas, because of the amount of dust. But there's going to become a day where we will look at this dump and say, all right, well, that seems to be working.

What we are seeing is that most of the dust is coming off the roads, going up and down those tailings dams, and the buttresses, the side walls. It's not so much coming off the tops anymore, because that's where the focus has been, on getting those rehabilitation measures put in place. And what's that, about ZAR60 million, that we set aside this year? How much is going to --?

We're going to be spending next year about ZAR57 million. But it's not just Crown, it's on other dumps as well.

Dumps as well.

Thanks. And just the same question, if I may. The -- your interest in Village, do you have any plans on what you plan on doing with that?

It's just volatile currency at this stage. And we'll hold onto it until such time as it's worth our while to exit the stock, but we think it's a better currency than rand, because we think the gold price is going to go up and they're going to make lots of money.

Thanks.

Chris Nicholson at RMB Morgan Stanley. Just following with Allan's question, just to deal quickly or delve a little bit deeper into the yields and the grades, obviously we have been expecting them to drop as you guys have moved off the Top Star dump onto the other ones, what are we looking for sustainable level to go forward?

Is reaching kind of your middle or your bottom of your steady state dependent on about 0.18 grams per ton? Or do we need to see the uplift from the fine-grind and more circuit to kind of get to that level? Thanks.

We're putting higher grade material into the circuit now from the JCC dump, for example, and also from the city circuit. Now, while we're doing that, we're also opening up a new area on the Elsburg Tailings, which is again a slightly lower grade. So there is always a bit of give and take, until such time as we go into the second and third, and ultimately even fourth, cut on those Elsburg Tailings.

But what it is that we are relying on? It's about 0.19 at this stage? Yes, about 0.19/0.2. I think 0.2 is a good target for us to try and achieve. Whether we'll actually get there, with floats coming in from different sites, I think time will tell. At this stage, we're trying to achieve steady state; we're not quite there. And what I've come to realize with this kind of business is you know how much gold you're going to produce when you produce it.

But the margin fluctuation is not big. So about 0.19/0.2, I think, will be initial steady state. And then, of course, the find-grind will kick in and give us a little bit more.

Sorry, yes, there's some -- what do you pay your [two truck] drivers? We pay our -- yes, our rock drill operators. We pay our --

Actually, contractors.

Contractor, who pay them. We'll make sure that they pay them, and I'll find out from Fraser Alexander what they get paid.

And then I'm writing from the US, but you're concerned by the proposal to tax at 50% or return on equity over 15%? Windfall tax, yes. He's concerned about windfall tax; are you concerned about windfall tax?

Well, there's a lot of uncertainty. We don't know whether that's even going to come in, so I don't think we can comment on that.

At least not for the next 12 months; that I can assure you, John. You're the analysts, are you concerned about windfall tax?

Yes.

You are. Near term, long term? It seems we --

Medium term.

Even if we tried, we couldn't render some, I'd put it, less competitive, although --

[Our] pure strategy sales.

You know what would be good, though, for our industry is that, you talk about the Australian shareholders and, yes, they're concerned about taxes, and so forth, but they pay the tax and that's it.

I think a bigger concern, from where I'm sitting, is the fact that a whole lot of the social obligations around housing, and health, and education, and so forth are being transferred from the actual custodian of those obligations, government, into the mines as a condition to their licenses. And that's almost a hidden tax.

And it's also a counter-productive tax as far as I'm concerned because the more you've got to spend on that the fewer people you would want to employ. So you're certainly not going to be creating more and more jobs if you're going to have to deliver into all of these obligations in order to keep your license. So I think that's probably a bigger concern.

It's that as government finds itself less and less capable of delivering into some of these social imperatives, which is what's keeping them re-elected, getting them re-elected, and they try to transfer more and more of those into the lap of the private sector, that we could become less competitive internationally.

And one of the platinum producers actually, I think, made a very apposite comment the last week when they reported their results around the whole issue of accommodation; said that they paid ZAR400 million in royalties and surely a portion of that should go into improving the social circumstances of many of these.

I drove through that part of Pretoria where Iscor was established many, many years ago and you can actually see these scheme houses. You could see those houses that were brought in those days, where people working in Iscor in those days were accommodated. Iscor didn't build those houses; Iscor established a business, they made profits, all right, government played a role in that, paid taxes, and those taxes were used to build accommodation for employees.

So I'd rather just call it a tax and put us in a position where we can measure that tax, as opposed to have a fuzzy indeterminable social obligation that puts your license at risk. That's where I'm coming from.

All right, that seems to be it. Thank you very much, everybody, for attending our presentation.