Media releases

Continued ‘de-risking’ delivers substantial increase in after-tax profit

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Published: Thursday, 26 August 2010 02:00

DRDGOLD Limited reported a substantial increase in net profit after tax for the quarter ended 30 June 2010 to R247.9 million from the previous quarter’s R12.9 million, reflecting the impact of continuing steps by the company – in line with stated strategy – to de-risk its business.

Final dividend of 5cps declared

Johannesburg, South Africa. 26 August 2010. DRDGOLD Limited reported a substantial increase in net profit after tax for the quarter ended 30 June 2010 to R247.9 million from the previous quarter’s R12.9 million, reflecting the impact of continuing steps by the company – in line with stated strategy – to de-risk its business.

These steps included:

• transfer of environmental rehabilitation liabilities following disposal of the Durban Roodepoort Deep and West Wits mining licences, resulting in a credit of R110.9 million; and
• the voluntary liquidation of offshore subsidiaries, resulting in the foreign translation reserve of R156.7 million, accumulated over their lives, being realised.

Headline earnings per share for the quarter thus increased substantially to 23.9 South African cents from 0.4 South African cents in the previous quarter.

The company has declared a final dividend of 5 South African cents per share for the second successive year.

While gold production was 1% lower at 61 632oz, reflecting lower gold production from Blyvooruitzicht (partially offset by an 11% increase in gold production from Ergo), an 8% increase in the average rand gold price received to R292 769/kg meant that total revenue was virtually unchanged at R521.7 million.

CEO Niël Pretorius says that Blyvoor, hit by seismic damage in the previous financial year, continued to trend towards stability during the quarter and that, in the year ahead, the focus will be on improving key sustainability drivers such as face length, face advance and productivity in terms of square metres per total employee costed (m/tec), and managing ore ‘mix’.

At the Ergo surface retreatment operation, now wholly owned by the DRDGOLD Group, higher volumes and lower costs achieved during the quarter delivered a margin of around US$400/oz. Looking ahead, Pretorius says, the Ergo plan is to maintain healthy margins with steady volumes and target-beating costs. Longer term, improvement in recovered grade is expected to flow from on-going pilot plant work and other research and development initiatives.

On Crown, the company’s other low-risk, low-cost, high-margin surface retreatment operation, Pretorius says a new pipeline now under construction – by providing two of Crown’s plants with access to Ergo’s Brakpan tailings deposition site – will allow Crown to restore its maximum deposition capacity to 600 000tpm.

Crown’s deposition capacity was reduced to 400 000tpm in the previous financial year due to capacity constraints at its Nasrec deposition site. Restored deposition will provide the operation with the opportunity to bring to account potential new resources on the Western and Central Witwatersrand, thus increasing production and extending its life.

The Crown/Ergo pipeline is targeted for completion by the fourth quarter of calendar 2011.

In Zimbabwe, where DRDGOLD is a 50% partner with Zimbabwe-owned Chizim Investments (Pvt) Limited in a new gold exploration and mining company to be known as Chizim gold (Pvt) Limited, the number of claims at Leny on the Zimbabwe Greenstone Belt has been increased from 16 (covering 253ha) to 46 (covering 454ha).

A magnetic survey has been completed and an induced polarisation survey is currently under way across the entire area of the claims. Anomalies from these surveys will be used to plan a drilling programme. So far, three target areas have been identified and a drill rig is on site to start the first phase of core drilling. Some plant and equipment for gold recovery during the exploration phase have been delivered to site and regulatory approval of a site of works plan, an environmental plan and water rights are pending.

Pretorius says that, while DRDGOLD is still of the view that the current fundamentals for gold remain solid, the company will continue to gauge capital investment feasibility against current Rand gold price levels, and will not rely too much on a weakening of the local currency.

Queries:

South Africa & North America

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

United Kingdom/Europe

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

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 2009, which we filed with the United States Securities and Exchange Commission 27 November 2009 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.