Media releases

Group net operating profit up 6%, cash costs held steady

Details

Published: Thursday, 23 February 2006 02:00

DRDGOLD today reported that group net operating profit for the six months ended 31 December 2005 increased by 6% to R41.7 million
Johannesburg, South Africa. 23 February, 2006. DRDGOLD Limited (JSE: DRD; NASDAQ: DROOY; ASX: DRD; POM SoX: DRD) today reported that group net operating profit for the six months ended 31 December 2005 increased by 6% to R41.7 million compared with the previous six months, while group cash operating costs were held steady, rising by less than 1% to US$375 per ounce (oz).

Group attributable gold production was 18% lower at 265 887 oz, reflecting both the discontinuation of the North West Operations in South Africa and a 17% decline in production from the Australasian operations to 126 770 oz. Gold production from the South African operations rose by 11% to 139 117 oz.

Corporate developments

Reporting on recent corporate developments, Chief Executive Officer Mark Wellesley-Wood said shareholders in DRDGOLD and Emperor Mines Limited (Emperor) had approved proposals to vend DRDGOLD’s offshore assets into Emperor.

“This creates the third-largest gold producer listed on the Australian Stock Exchange; on completion of the transaction, DRDGOLD will have an approximate 88% stake in Emperor and receive US$30 million in cash,” Wellesley-Wood said.

In South Africa, the conclusion of a transaction during the second quarter between DRDGOLD and Khumo Gold SPV (Pty) Limited (Khumo Gold), in terms of which Khumo Gold acquired a 15% stake in DRDGOLD South African Operations (Pty) Limited (DRDGOLD SA), means that DRDGOLD complies with the Black Economic Empowerment (BEE) ownership requirement of the South African Mining Charter.

“We have made good progress in creating two stand-alone units, one in Australasia and the other in South Africa,” Wellesley-Wood said.

“With Emperor now in a position to access capital outside of South Africa, it has the capacity to grow; the South African operations have been stabilised and a platform established for growth into Africa.”

Exploration: SA and Australasia

Wellesley-Wood said that the South African Government’s recent granting of new order prospecting rights to DRDGOLD SA in respect of the Sallies (ERPM Extension) and Argonaut lease areas could increase the company’s resource base by 11 million oz – 2 million oz at the former and 9 million oz at the latter.

“There is every reason to believe that the very good grades being experienced currently at ERPM will continue into the neighbouring Sallies lease area and, given that Argonaut is contiguous to the east with the western portion of the ERPM lease area, we believe there is even further potential upside.”

Exploration expenditure in the Australasian region over the next two years will total A$15 million – A$7 million in Papua New Guinea (PNG), A$4 million on the Tuvatu project in Fiji and A$4 million on Basala, an inferred resource at the bottom of the Philip Shaft at Emperor’s Vatukoula Mine in Fiji, Wellesley-Wood said.

South Africa

While total underground production from Blyvooruitzicht and ERPM was 5% lower at 105 165 oz, that from these operations’ surface sources – together with that from Crown – rose by 14 % to 80 763 oz.

“This demonstrates DRDGOLD’s pre-eminent role in surface retreatment and the growing contribution of the surface operations to the company’s South African business.

“While underground cash operating costs were 12% higher at US$461/oz, surface cash operating costs were 6% lower at US$366/oz, again demonstrating the value-add to the South African business of the surface operations, particularly in a rising gold price scenario.”

Now the world’s largest surface retreatment operation, Crown was poised to retreat the Top Star dump in central Johannesburg, acquisition of which from AngloGold Ashanti had been reached in principle, Wellesley-Wood said.

Australasia

Tolukuma began turning the corner during the second quarter, increasing both volumes and grade through escalating development and improved management of underground grade, Wellesley-Wood said, while at Emperor, infrastructural improvements and development to access higher grade mining areas at Philip Shaft in particular are expected to contribute towards better results.

At Porgera, where lower production contributed to the 27% increase in cash operating costs for the Australasian region as a whole to US$323/oz, progression of the West Wall cutback and a shift in mining to the Stage Five open pit is expected to result in improvements in both volume and grade.

To reduce the impact of fuel price increases – another driver of the rise in cash operating costs – a feasibility study for the installation of a second hydro-power generation facility at Tolukuma was under way, while at Emperor, bio-fuel options were being investigated, Wellesley-Wood said.

Queries:

South Africa
Investor and Media Relations
Ilja Graulich, DRDGOLD
+27 11 219 8707(office)
+27 83 604 0820 (mobile)

James Duncan, Russell & Associates
+27 11 880 3924 (office)
+27 82 892 8052 (mobile)

North America
Investor and Media Relations
Barbara Cano, Breakstone Group International
+1 646 452 2334 (office)

Australasia
Investor and Media Relations
Paul Downie, Porter Novelli
+61 893 861 233 (office)
+61 414 947 129 (mobile)

United Kingdom/Europe
Investor and Media Relations
Phil Dexter, St James's Corporate Services
+44 20 7499 3916 (office)
+44 779 863 4398

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DRDGOLD is an intermediate unhedged gold producer with mines in South Africa as well as Australasia. The company’s production profile is split equally between its highly leveraged SA operations and its low cost, cash generative offshore mines.

DRDGOLD has primary listings on the Johannesburg (JSE:DRD) and Australian (ASX:DRD) stock exchanges and secondary listings on NASDAQ (DROOY), the London and Port Moresby stock exchanges and the Paris and Brussels Bourses. Its shares are also traded on the regulated unofficial market of the Frankfurt Stock Exchange and the Berlin OTC Market.

For more information, please visit www.drdgold.com

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Disclaimer:
Many factors could cause the actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, adverse changes or uncertainties in general economic conditions in the markets we serve, a drop in the gold price, a continuing strengthening of the rand against the dollar, regulatory developments adverse to DRDGOLD or difficulties in maintaining necessary licences or other governmental approvals, changes in DRDGOLD's competitive position, changes in business strategy, any major disruption in production at key facilities or adverse changes in foreign exchange rates and various other factors.

These risks include, without limitation, those described in the section entitled "Risk Factors" included in our annual report for the fiscal year ended 30 June 2005, which we filed with the United States Securities and Exchange Commission on 15 December 2005 on Form 20-F. You should not place undue reliance on these forward-looking statements, which speak only as of the date thereof. We do not undertake any obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after the date of this report or to the occurrence of unanticipated events.