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Issue 2003	DRD Annual Results • 30 June 2003 JHB: DUR NY: DROOY Sydney: DRD
Home Corporate profile Financial highlights Chairman’s statement Directorate & management Directors’ report Corporate governance statement Statement of reserves & resources Exploration Management discussion and analysis Statement of responsibility by the board of directors Company secretary’s report Report of the independent auditors Annual financial statements: Income statements Balance sheets Statements of shareholders’ equity Cash flow statements Notes to the cash flow statements Notes to the annual financial statements Condensed consolidated financial statements - US GAAP Notice to shareholders Shareholder analysis Shareholders’ diary Conversion table Glossary of terms Form of proxy Notes to proxy Notice of direction Contacts	Directors’ report   Nature of business The company was incorporated on February 16, 1895 and operates gold mines in South Africa and Papua New Guinea. The company does not have a major or controlling shareholder and is managed by its directors on behalf of its shareholders. The company is listed on the Johannesburg Securities Exchange in South Africa as well as on NASDAQ, the London Stock Exchange, the Paris Bourse, the Brussels Bourse, the Australian Stock Exchange, the OTC Market in Berlin and Stuttgart and the Regulated Unofficial Market on the Frankfurt Stock Exchange.   Mining rights and property A schedule detailing the company’s mining rights and property is available from the company’s registered address.   Share capital Full details of authorised, issued and unissued share capital of the company as at June 30, 2003 are set out in the notes to the financial statements. The control over the unissued shares of the company is vested in the directors, in specific terms as regards allotments in terms of the Durban Roodepoort Deep (1996) Share Option Scheme, as amended, and the allotment for shares for cash and in general terms as regards all other allotments. The authorities granted to directors in respect of control over unissued shares expire on the date of the annual general meeting of members to be held on November 28, 2003. Members, therefore, will be requested to consider resolutions at the forthcoming annual general meeting, placing under the control of the directors the then remaining unissued ordinary shares not required for purposes of the share option scheme. During the financial year, a total of 2 253 699 new ordinary no par value shares were issued as a result of employees exercising their options under the Durban Roodepoort Deep (1996) Share Option Scheme.   Shares issued for cash The following ordinary no par value shares were issued for cash under the general authority granted to directors: Date of issue Number of shares Issue price Issued to July 2, 2002 4 794 889 R14.19 Khumo Bathong Holdings (Pty) Ltd   As at June 30, 2003, there was no shareholder who held a beneficial interest (in excess of 5%) of the company’s issued share capital.   Directorate The following changes have been made to the board of directors since July 1, 2002:   Appointments Date JH Dissel January 29, 2003 DT van der Mescht June 30, 2003 A Lubbe June 30, 2003     Resignations Date FC Coetzee April 24, 2003 JH Dissel June 30, 2003 N Goodwin January 29, 2003   In accordance with the provisions of the company’s articles of association, Messrs MM Wellesley-Wood, IL Murray and RP Hume retire at the forthcoming annual general meeting. They are eligible and have offered themselves for re-election.   Details of directors’ service contracts       Director Date of appointment Unexpired term of directors’ service contract MM Wellesley-Wood 2000 4 months IL Murray 2000 15 months RP Hume 2001 16 months DC Baker 2002 19 months GC Campbell 2002 24 months MP Ncholo 2002 21 months There were no conflicting interests of the directors during the year and up to the date of notice of the annual general meeting. Directors’ emoluments are listed below.   Share option scheme The Durban Roodepoort Deep (1996) Share Option Scheme (“ the Scheme”) is used as an incentive tool for 111 executive and senior employees whose skills and experience are recognised as being essential to the company’s performance. The number of issued and exercisable share options is approximately 3.4% of the issued ordinary share capital which is within the international accepted guideline of 3 – 5% for such schemes. In addition, the participants in the Scheme are fully taxed at their maximum marginal tax rate on any gains realised on the exercise of their options. In the past financial year, the directors have exercised 795 268 share options. Details of share options held by directors are listed on below. Over the same period the directors’ share option gains were R17.6 million, compared to R59.5 million in the previous financial year. The directors have issued options in terms of the Durban Roodepoort Deep (1996) Share Option Scheme. The following summary is included in this report as required in terms of the rules of the Scheme:         2003  2002  Balance of options available for allocation as at the beginning of the financial year 20 025 871  10 678 707  Number of options granted during the current financial year (3 113 500) (4 678 370) Number of options lapsed during the financial year 1 303 566  710 266  Additional options available as a result of an increase in issued share capital during the current financial year 848 331  2 648 236  Number of options exercised during the current financial year and available for re-allotment 2  292 361  10 667 032  Balance and options available for allocation as at the end of the financial year 21 356 629  20 025 871    Share option gains Executive directors   MM Wellesley-Wood IL Murray FC Coetzee JH Dissel Opening balance             Number     905 309 677 671 297 789 135 696 Ave strike price (R per share)     12.53 12.08 12.57 17.34 Granted during the year             Number     423 600 242 900 180 600 64 600 Ave strike price (R per share)     23.01 23.22 23.54 19.05 Exercised during the year             Number     395 244 270 500 25 000 30 524 Ave strike price (R per share)     10.42 9.45 7.26 13.26 Pre-tax gain at date of exercise             – R’000 value     7 913 6 688 361 534 – Ave price exercised (R per share)     30.44 34.17 21.86 31.00 Lapsed during the year             Number     – – – – Ave strike price (R per share)     – – – – Held as at June 30, 2003             Number     933 665 650 071 453 389 169 772 Ave strike price (R per share)     18.30 17.34 17.23 18.13               Non-executive directors DC Baker GC Campbell N Goodwin RP Hume MP Ncholo Senior* management Opening balance             Number 60 000 20 000 155 000 48 750 20 000 513 182 Ave strike price (R per share) 14.05 18.61 8.29 12.52 18.61 10.58 Granted during the year             Number 21 800 22 900 10 700 23 900 18 500 317 900 Ave strike price (R per share) 23.01 22.82 29.10 23.55 23.72 22.52 Exercised during the year             Number – – 70 000 4 000 – 139 998 Ave strike price (R per share) – – 7.49 7.26 – 10.01 Pre-tax gain at date of exercise             – R’000 value – – 2 042 104 – 3 636 – Ave price exercised (R per share) – – 36.84 33.25 – 36.23 Lapsed during the year             Number – – 95 700 – – – Ave strike price (R per share) – – 11.21 – – – Held as at June 30, 2003             Number 81 800 42 900 – 68 650 38 500 691 084 Ave strike price (R per share) 16.44 20.86 – 16.67 21.07 16.18 * Senior management comprises the five most highly remunerated senior employees.   Directors’ interest in shares The interest of the directors in the ordinary share capital of the company at June 30, 2003 was as follows:                   June 30, 2003   June 30, 2002   Beneficial Direct Indirect Non- beneficial   Beneficial Direct Indirect Non- beneficial Executive directors               MM Wellesley-Wood 200 244 – –   105 000 – – IL Murray 531 808 – –   306 308 – – FH Coetzee         297 789 – –   732 052 – –   709 097 – – Non-executive directors               MP Ncholo – 4 794 889 –   – – – RP Hume – 4 000 –   – – – DC Baker – 900 000 –   60 000 1 450 000 – GC Campbell – – –   – – – N Goodwin         569 – –   – 5 698 889 –   60 569 1 450 000 – Alternate directors               DT van der Mescht – – –   – – – A Lubbe – – –   – – – Total 732 052 5 698 889 –   769 666 1 450 000 –   Directors’ emoluments                   Board fees Salary Bonuses and performance related payments Pension/ provident scheme contributions Restraint of trade amortisation Retirement package Total   R’000 R’000 R’000 R’000 R’000 R’000 R’000 Executive directors               MM Wellesley-Wood – 4 631 1 563 – – – 6 194 IL Murray – 2 133 1 082 505 85 – 3 805 FC Coetzee (resigned) – 2 090 256 – – 3 410 5 756 JH Dissel (resigned) – 635 – 29 – – 664   – 9 489 2 901 534 85 3 410 16 419 Non-executive               N Goodwin (resigned) 145 – – – – – 145 RP Hume 223 – – – – – 223 DC Baker 198 – – – – – 198 GC Campbell 227 – – – – – 227 MP Ncholo 150 – – – – – 150   943 – – – – – 943   Subsidiaries The following information relates to the company’s financial interest in its subsidiaries:             Issued ordinary share capital Shares at cost less provisions Effective date of acquisition Indebtedness  net of  provisions    No of shares % held R'000   R'000  South Africa           Argonaut Financial Services (Pty) Ltd 100 100 – 01 Oct 1997 (689) Blyvooruitzicht Gold Mining Company Ltd 50 772 971 100 120 587 15 Sep 1997 52 119  Buffelsfontein Gold Mines Ltd 13 000 360 100 285 854 15 Sep 1997 117 062  Crown Consolidated Gold Recoveries Ltd 51 300 000 100 – 14 Sep 1998 (167 519) East Champ d’Or Gold Mine Ltd 7 100 – 1 Apr 1996 –  Rand Leases (Vogelstruisfontein)           Gold Mining Company Ltd 2 963 000 100 – 01 Jan 1996 (42 092) Roodepoort Gold Mine (Pty) Ltd 1 100 – 01 Jan 1996 –  Stand 752 Parktown Extension (Pty) Ltd 10 100 1 150 01 Nov 1998 4 819  West Witwatersrand Gold Holdings Ltd 99 900 000 100 – 01 Apr 1996 (27 111) Australasia/International           Dome Resources NL 142 619 074 100 84 000 01 Apr 2000 23 859  DRD Australasia (Pty) Ltd 100 100 – 15 Nov 1999 –  DRD International APS 125 100 – 28 Apr 1999 –  DRD Australia APS 130 100 – 26 Jan 1999 –  DRD (Isle of Man) Ltd 1 601 100 51 950 05 Mar 1999 85 046  Total     543 541   45 494    Financial statements and results Financial figures presented in the directors’ report are stated in South African rands and to the nearest R1 000. The consolidated financial statements include the results and financial position of the company and its subsidiaries since the effective dates of acquisition. The financial position, results of operations and cash flow information of the company are presented in the attached financial statements. The annual financial statements have been prepared by management in accordance with South African Statements of Generally Accepted Accounting Practice (“SA GAAP”). They are based on appropriate accounting policies which have been consistently applied except for the adoption of AC133 during the year, and which are supported by reasonable and prudent judgement and estimates. The annual financial statements have been prepared on a going concern basis and the directors are of the opinion that the company’s assets will realise at least the values at which they are stated in the balance sheet.   Overall performance The group recorded an operating profit from gold of R91.9 million for the financial year. Total attributable gold production was down 15% to 27 067 kilograms (870 235 ounces). This is mainly due to the sale of 60% of Crown Gold Recoveries (Pty) Ltd (“CGR”) to Khumo Bathong Holdings (Pty) Ltd on July 1, 2002. The dollar gold price traded between US$302 and US$382 per ounce during the financial year. This, together with the appreciation of the rand in the second half of the financial year, significantly reduced the price of gold in rand terms from a high of R109 948 per kilogram to a low of R76 950 per kilogram during the year. Unit cost of sales, comprised of cash cost, depreciation of assets, retrenchment cost, provision for rehabilitation cost and changes in gold inventory, increased from R73 876 per kilogram (US$226 per ounce) to R93 926 per kilogram (US$323 per ounce). The directors continually re-appraise the carrying value of the group’s assets and make the appropriate adjustments as required. In the current year, the company raised an impairment charge against the open-pit at North West operations (R11.9 million), the assets at Duff Scott Hospital (R0.6 million), the No. 6 Shaft at the North West operation (R35.5 million) and certain loans to CGR of R85.0 million.   Changes in business During the year DRD sold 60% of CGR to Khumo Bathong Holdings (Pty) Ltd with effect from July 1, 2002. DRD also entered into an agreement to sell the assets of West Witwatersrand Gold Mines Limited to Mogale Gold (Pty) Ltd. The sale of these assets was effective from July 21, 2003. An agreement between DRD and New Era Diggers (Pty) Ltd was also concluded on June 12, 2003 for the sale of the unused mining assets of the old DRD section.   Capital expenditure Capital expenditure for the financial year amounted to R121 million compared to R83 million the previous year. Assets which do not conform to the company’s core business were disposed of and cash of R17 million (2002: R14 million) was generated through this. During the year the company raised US$66 million for its growth initiative, Project Boost, by issuing US$66 million of 6% senior convertible loan notes due in 2006. The notes will be converted into (i) ordinary shares or (ii) in specified circumstances, American Depository Shares (“ADSs”) representing ordinary shares, initially at an exchange ratio equal to one ADS per ordinary share. Each US$1 000 principal amount of notes may be converted into 266.6667 ordinary shares, subject to adjustment upon the occurrence of specified events.         Gold production (Imperial) Durban Roodepoort Deep operations   Year ended June 2003 Year ended June 2002 South Africa       Underground       Ore milled – t’000 3 743 3 347 Gold produced – troy ounces 587 296 637 035 Yield – ounces/ton 0.157 0.190 Surface treatment       Ore milled – t’000 8 962 11 512 Gold produced – troy ounces 137 604 179 785 Yield – ounces/ton 0.015 0.016 Papua New Guinea       Ore milled – t’000 177 184 Gold produced – troy ounces 68 096 71 955 Yield – ounces/ton 0.385 0.391 Total       Ore milled – t’000 12 882 15 043 Gold produced – troy ounces 792 996 888 775 Yield – ounces/ton 0.062 0.059 Attributable production       Crown Gold Recoveries (1)       Ore milled – t’000 4 884 12 297 Gold produced – troy ounces 77 239 138 665 Yield – ounces/ton 0.016 0.011 Total attributable       Ore milled – t’000 17 766 27 340 Gold produced – troy ounces 870 235 1 027 440 Yield – ounces/ton 0.049 0.036         Gold production (Metric) Durban Roodepoort Deep operations       South Africa       Underground       Ore milled – t’000 3 396 3 039 Gold produced – kg 18 267 19 814 Yield – g/tonne 5.38 6.52 Surface treatment       Ore milled – t’000 8 133 10 444 Gold produced – kg 4 280 5 592 Yield – g/tonne 0.53 0.54 Papua New Guinea       Ore milled – t’000 162 165 Gold produced – kg 2 118 2 238 Yield – g/tonne 13.07 13.56 Total               Ore milled – t’000 11 691 13 648 Gold produced – kg 24 665 27 644 Yield – g/tonne 2.11 2.03 Attributable production       Crown Gold Recoveries (1)       Ore milled – t’000 4 431 11 157 Gold produced – kg 2 402 4 313 Yield – g/tonne 0.54 0.39 Total attributable       Ore milled – t’000 16 122 24 805 Gold produced – kg 27 067 31 957 Yield – g/tonne 1.68 1.29 (1) Durban Roodepoort Deep, Limited sold 60% of CGR on July 1, 2002 and manages the operations on behalf of the shareholders. CGR included ERPM production with effect from November 1, 2002.   During the period December 2002 to January 2003, DRD acquired 19.81% in Emperor Mines Limited. On an annualised basis, DRD attributable gold production from investments would be:             Year ended June 2003 Year ended June 2002 Metric       Ore milled – t’000 16 227 24 805 Gold produced – kg 27 773 31 957 Yield – g/tonne 1.71 1.29         Imperial       Ore milled – t’000 17 861 27 340 Gold produced – oz 892 934 1 027 440 Yield – ounces/ton 0.05 0.036   Events after balance sheet We refer you to Note 24.